Waltz, $treet! Perish, People!

SOCIETY DETERIORATING, PLUTOCRACY THRIVING

Abstract: According to The Economist, by the most important measure, money laundering and hiding profits, through shell companies,  the USA is the world’s most corrupt country.

Meanwhile life expectancy is dropping spectacularly for the poorest USA citizens. The plan? More of the same! In the USA, economic professors describing themselves as left wing democrats embrace printing money for the worst banks, the ones which have disconnected from civilization, while plutocrats feast and the poor starve. Yet I have long explained, as in 4% Inflation Best, that deep, planet saving reasons, exist to get inflation restarted. There are encouraging signs this way:

Inflation is pulling out of the deflationary channel from 1990

The Federal Reserve has joined my point of view that unemployment ought to be targeted, not inflation. (So now the Fed is engaging into QE3, to get money to the economy, no matter what!)

However the full reality is worrisome. We are not getting the right inflation. A careful study of this graph, (and other graphs!) show that it is oil and disasters which are pressing inflation up (although the two peaks of QE are clearly visible!). The deflationary channel itself is due to that uncontrolled colonization called globalization. 

What to do to get the right inflation? Massive governmental stimulus, impecably targetted (Saving GM, not investing in Solyandra!). Paradoxically rising world taxes, from Added Value, to taxing carbon and other pollutions, is (part of) the way to do it. Once Chinese goods will  cost what they really cost to the planet, and civilization, things will change. Not that it is China that is really at fault.

Apple’s iphone5 contains for $207 of components’ cost, while manufacturing (China) is only $8 (yes, eight dollars). The Chinese are excellent slaves. So far, so good. Yet most of the $400 that Apple then gets, per single iphone, are ferried through shell companies and tax heavens (see below). So, truly, the Chinese are exploited like slaves, while the plutocrats shelter most of their income from all taxation. All politicians know this, but the world’s political system is a pecking order that takes all its orders from The Blob in Washington (Blob is a technical term, see below).

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TELLING THE TRUTH: A RISK OBAMA CAN AFFORD:

Meanwhile Obama concentrates on what he knows, the tone in Washington. Banks, Obama likes, very much, but the tone in Washington, he does not like, and, like Jesus, wants to change. Obama gave a whole little speech during “60 minutes“, about the bad tone, complete with sad eyes. Surrealistic diversion. Does he crave to be called:”Your Majesty?” Would that improve “the tone” of the opposition? It has been tried before. Augustus was against it, but, three centuries later, emperor Diocletian imposed it. It was soon followed by evoking god all the time.

However Obama got hold of himself, and made a very good United Nations speech, contradicting the grotesque and debasing  Salafist supporting notions, of his own, despicable spokesman, the week before. I did not see an obvious lie in Obama’s speech, a significant improvement. That, telling the truth, in the USA, is a major risk for a politician to take. Not lying jingoistically is pretty heroic, in a country where 63% of registered republicans (and one democrat out of 6) believe that weapons of mass destruction were found in Iraq. When lying is expected to be the truth, plutocratic propaganda dominates. Looking forward, no matter what, the best Obama can do is keep the spirit of his UN speech, and make a habit of telling the truth. (Of course he has to find out what that is first!) And Obama ought to leverage the electoral campaign he is sure to win, by dissecting the  financial corpses of insolently naked plutocrats such as the impudent Romney.

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PLUTOCRATIZATION AND SENILITY ARE US(A?):

The wizened 60 Minutes interviewer was blunt:“You [Obama] gave the banks a bail-out, the homeowners did not get one.” (Obama gave the usual canned red herring retort:“We helped, blah blah blah.” Since when is “helping” homeowners a quid pro quo for bailing out criminals?)

It is even worse than that. Under the Bush-Obama administration, the particular bankers who caused the greatest financial fraud ever, were treated more than well. Obama sang the praises of several of the fraudsters; still does. Obama was very close to Mr. Wolf, head of USA UBS, subsidiary of the largest Swiss Bank. UBS was convicted of massive criminal activities in the USA.

UBS, afraid of being accused of conspiracy with the government of the USA, fired Mr. Wolf. One of the worst of the worse, Warren Buffet, owner of everything and its opposite, the world’s plutocratic godfather, seems to have replaced his father in Obama’s fertile imagination. (See my “Sage Of Obama“.) Everybody wants a dad, and it’s tempting to go for the mightiest dad. Upon this flaw much of the aweful seduction of, and abandonment to, plutocracy and fascism rest.

The general principle was this: just like merchants give money to the mafia that steals them, government officials gave money to the largest mafia ever, that of the biggest banks. With two spicy new twists: what the officials gave was not their own money, but public money, and they get paid for these transfers, by joining the financial mafia. When giving money to the Sicilian mafia, merchants become victims. By giving money to the global financial mafia, politicians turn into criminals.

The biggest bankers were given money  publicly corresponding to what they had stolen privately. And not one string was attached to this gift of public money to compensate them for what they, and associates, had stolen. Basically the People paid for their mansions, jets and private islands. Twice. And then Obama goes around with the Gates to tell us, not that they are the gates of hell, but the gates to public education. Thanks to propaganda, this astounding transfer of public assets to the richest people was never discussed. History, someday, will discuss it. Meanwhile, Krugman and his kind sings on all roofs that doing it much more will save the economy.

What we are facing is something that happened to Rome before: as plutocratization, a form of collective brain sclerosis, a fruit of the propaganda of the richest, proceeds, the world is getting old.

Inflation, including food and energy shows that we seem to be entering an inflationary upswing, after a multi decadal disinflation. This is a gift, but a poisonous one. A gift, because it could foster more sustainable energy technologies (among other technologies).

As the collapse of life expectancy of less educated Americans shows (life expectancy for women in the USA is now the lowest of developed nations.) Russia went through a similar phenomenon, the same cause, the capture of the state by the few, having the same effect (people die).

The best reason for the reappearance of inflation would be a rise in median income. But that keeps on sinking. Inflation is reappearing for the worst reason imaginable.

The world is getting old (as the Romans used to say). Climate change and the finite nature of the ground make the prices of oil, energy and food enter a secular upswing.

So it is not reasonable to exclude food and energy from the computation of inflation. Food and energy are the two most important factors in sustaining life. After all the Arab spring started in Tunisia because of the exploding cost of winter wheat in the USA. (I am not trying to insinuate that was a bad thing, but lots of people died, and the miscreants who jumped the wheat price can do the same, anytime, and cause the failure of revolutions.)

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DROWNING GOLDMAN IN MONEY: KRUGMAN STYLE SOCIALISM!

Paul Krugman’s was aghast when a student at the London School of Economics asked him why he never, ever, mentioned the Fractional Reserve System (FRS). A livid, baffled, Krugman mumbled that serious economists did not question, nor worry about, FRS. It’s not something done among the worthy.

Yet, Fractional Reserve System is how money is created. It’s not a detail. And the particular FRS we have now is a particular choice, and the master director of all and any economic activity (for example, Switzerland operates with a significantly tweaked FRS from the rest of the West, and banks whoring to the People, were the main drivers of the crisis in the USA, Spain, Ireland). If one does NOT want to focus on the Fractional Reserve System, one cannot even pretend to be the most serious type of macro economist. Krugman suspects this, so he could not wait for the embarrassment to go away.

In the Fractional Reserve System, banks create money out of thin air, through the extension of credit. Notice that banks do not have to be private, for a FRS to work. The banks themselves get seed money (so called “monetary base“) from so called central banks. The nature of central banks varies considerably in various countries. All countries have a central banks, except for the Euro Zone countries, whose impotent central banks are dominated by a common, supra national central bank, the European Central Bank, ECB.

Central banks ought to make sure that enough money is provided to banks to run all the transactions the economy requires. But not so much that it would cause run-away inflation (that latter point ought to be secondary; however it is viewed as primary, especially in the ECB mandate).

As I explained, the Roman empire’s economy ran out of currency in the Third Century. What was needed was a Fiat Currency. This was done by debasing the coins. However, the emperors did not have enough military power, and law enforcement, inside the empire to impose the value of these coins (all the more as coinage was in competition with a bartering system imposed by the government, to preserve the essential part of the economy).

Later the Franks reintroduced Fiat coinage, successfully backed by the law that faux-moneyeurs were to be boiled alive, very slowly. Boiling those who made their own fake coins was essential to the soundness of Frankish Fiat money (similar severity was exerted in China, to impose Chinese Fiat Currency).

Printing money, and giving it to banks, is now called “Quantitative Easing”, QE. it’s the financial equivalent of shark baiting. The great advantage of these obscure semantics, “QE”, is that commoners do not know what “QE” is about. If it was described for what it is, feeding the sharks, people would ask:”What is the idea?”

Quantitative Easing is all what conventional economists have been thinking about. It’s their ubiquitous panacea. In the USA, the left is, weirdly, for it. It is weird, because, in a way, Krugman, supposedly a liberal (meaning left wing in the USA), is begging to send more money to the likes of Goldman Sachs.  It’s a bit as if a would be Karl Marx would beg us to send more money to Carnegie (the USA’s first mega billionaire). Except that Carnegie, a civilized man, had a social conscience, and Goldman, at any given time, a network of hundreds of plutocrats, does not. 

The right in the USA, is, even more curiously, against Quantitative Easing. Does that mean that the right is against bankers? Hardly. It’s just a question of identifying an issue where it could oppose Obama, and be right. (So now Romney can only attack Obama on his left, an impossible task, which makes him toast.)

Europe resisted QE, for the obvious reason that QE gives more ammunition (“monetary base”) to the serial killers, the private banks, that caused the 2008 crash. Finally it engaged in it at the last moment, to “save the Euro” (meaning some Euro Zone country had not enough money for their economy).

Also, whereas the USA engaged in a Federal economic stimulus, Federal European institutions did not do such a thing.

The combination of lack of QE and lack of Federal stimulus starved the European economy of money, and job creation (it’s mostly new small companies, which are credit dependent, that create new employment).

This threatened to explode the Euro Zone, and it brought a more severe downswing of GDP and employment in some countries that what happened in the so called “Great Depression” of the 1930s (examples are: Great Britain, Spain, Greece).  

Finally, Draghi, head of the ECB, supported by all on his board, but for a couple of obdurate Germans, engaged in Quantitative Easing (although probably just 20% of the one in the USA). That did not respect the charter of the ECB, but never mind.

The Fractional Reserve System is an indirect system, and therein its Achilles heel. The central banks print money, and give it to the banks. However the banks are private, and under the influence of the meta mood that greed knows best, they came to be motivated exclusively by the profit motive.
QE explained in 2010 in this (it has got a bit more twisted since).

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BIG PRIVATE BANKERS DECIDES WHO AND WHAT IS WORTHY, WHAT COULD GO WRONG?

To make money available for the real economy, one has to force the biggest banks to lend to the real economy. Giving more and more money to the big banks, no strings attached, the Krugman plan, has been tried for more than a decade, and it’s only deepening this Greater Depression, because it augments wealth inequality.

The money is not getting to the real economy, because the banks are unwilling to lend. Reminder: what’s the size of the derivatives’ market? 750 trillion dollars. Remind me: what’s the size of world’s GDP? 50 trillion dollars, roughly 6% of the total derivatives’ market. Is it not then the case that banks are playing with money in a parallel universe, with each other, thus sure to win?

An example of this is the futures’ markets on food and its indexes. Founded by Goldman Sachs, the indexes have become a speculative toy geared to profits, and so hundreds of million people starve. The revolution in  Tunisia was directly caused by a speculative ramp up of the future market on winter wheat; it caused an explosion of the price of bread worldwide. There are no regulations, so organized crime, from the world’s largest corporations, mightier than most countries, is rampant.

The reason being that their careers were entangled, infused with the system that has created the planetary emergency. If you touch the system conceptually, you compromise their glory. People look for glory and righteousness, these are evolutionary values.

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WORLD NUMBER ONE SHELL GAME TAX HEAVEN? THE USA!

Cheating R US! Hiding profits in the USA is apparently of the essence: the USA is the best place for establishing shell companies:

Fewer Approaches = More Corrupt

Only ten out of 1,722 providers in America required notarized documents in line with the (International, mandated) FATF standard. This is just an indication that the number one generator of tax heavens in the world, in sheer volume, is the USA itself. That puts a singular light on Hillary Clinton’s statement about the rich (see below).

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THE “BLOB”, OMNIPOTENT INCESTUAL FINANCIAL CONSPIRACY IN WASHINGTON:

Obama is just a lawyer, by cognitive formation, he has to do what the economic elite and financial intelligentsia tell him to do… even if he suspected that the economic advice he got  is erroneous, he cannot go against it… Except of course if he engaged in a public debate about it, but would that admission of ignorance on the part of both Obama and the elites be viewed as cool? Time to remember Socrates’ main teaching: the person of wisdom, confronted to ignorance, is not afraid to admit it, first, to clear the air, and then debate it, to enrich and deepen the logic.

Fads such as “Occupy Waltz Street” failed because it had no theoretical leadership, but for waltzing in the streets. Basically, it made light of the situation. As Matt Taibbi puts it in A Rare Look At Why The Government Won’t Fight Wall Street:

“The great mystery story in American politics these days is why, over the course of two presidential administrations (one from each party), there’s been no serious federal criminal investigation of Wall Street during a period of what appears to be epic corruption. People on the outside have speculated and come up with dozens of possible reasons, some plausible, some tending toward the conspiratorial – but there have been very few who’ve come at the issue from the inside. We get one of those rare inside accounts in The Payoff: Why Wall Street Always Wins, a new book by Jeff Connaughton, the former aide to Senators Ted Kaufman and Joe Biden.”

Another “mystery” is why Rome got ever more corrupt for five centuries, until it imploded. Actually it’s no mystery at all, except for those who learned by rote plutocratic propaganda. The Roman Republic went down, for the same reason as we are going down: corruption, like gangrene, once deep down inside, is hard to stop.

And then the book Taibbi talks about explains it’s not JUST a conspiracy. It is more than a conspiracy. In a conspiracy, people together-breathe (con-spirare”). As  Matt Taibbi puts it: “There are some damning revelations in this book, and overall it’s not a flattering portrait of key Obama administration officials like SEC enforcement chief Robert Khuzami, Department of Justice honchos Eric Holder (who once worked at the same law firm, Covington and Burling, as Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.

Most damningly, Connaughton writes about something he calls “The Blob,” a kind of catchall term describing an oozy pile of Hill insiders who are all incestuously interconnected, sometimes by financial or political ties, sometimes by marriage, sometimes by all three. And what Connaughton and Kaufman found is that taking on Wall Street even with the aim of imposing simple, logical fixes often inspired immediate hostile responses from The Blob; you’d never know where it was coming from.”

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SO CALLED REPRESENTATIVE DEMOCRACY IS NOT DEMOCRACY:

Politics, the way we have it in so called “representative democracy” now, tends to select those among the crabs who have the highest propensity to get to the top of the basket. Thus the crabs who pinch the most get to the top. It’s not about brains, or morality. Disingenuously, or idiotically (take your pick!), Obama keeps on saying he wants “to change the tone in Washington”. Of course, it cannot, ever, be done. Some individuals close to the Obama campaign have confessed that “it is just a matter of showing up, things fall in place, people applaud, it’s not about ideas.”

The very nature of Washington, by putting so much power, in the hands of so few, unsupervised by the People, thanks to lack of transparency, is anti-democratic. (The same holds for the system in other Republics, by the way; the less undemocratic republic is Switzerland. Even bankers are on a much tighter leash there, with enormous reserve rquirements: 20%!)

Let me explain this slowly to Obama: the present system vests giant powers in a few people, for inordinately long periods of time. It’s not democracy. To ask the crabs with the biggest pincers, and the greediest, to change tone, is beyond naive, it’s taking peopple for fools.

The mediocre Geithner, for example, has been in charge of the financial sector of the USA for more than 6 years. Nobody knows what he does, but for comforting an entanglement of the richest and most powerful individuals in the world, under the claim that he, the unelected, unexplained Geithner, somehow represents the People. The ancient Greeks would have screamed if proposed to be ruled that way. it’s completely clear, from his history and background, that Geithner is a (well paid, very obedient) puppet. He is where he is, because of the powers that be, Obama has litle to do with it.

Examples abound, and the story is always the same: a few oligarchs, closely entangled to plutocrats, take the most important decisions for 7 billion people. And that includes killing the biosphere. And the People is not privy to the decision process, just invited to watch some sort of Kabuki theater.

In the “60 Minutes” interview, Obama, said that, in the first two years, when he had a supermajority, he should have involved the People in his decisions. Yes, transparency was the plan, part of his electoral platform. But Obama had no idea what he was supposed to decide about, he could not even organize a debate. The only thing he knew is that all he talked about during his campaign was not a social contract, it was not pragmatic, except as a way to get elected. If he wanted to nationalize a bank for real, not just give it enough money to buy it ten times over, with public money, he was confronted with the likes of thousands Krugmans and crude men, who have never seen a bank or Wall Street they did not love beyond any examination.  

To parody Socrates’ point about life and examination, common people are finding out that the unexamined life means only the worthy have it.

So Obama decided to embark on a red herring expedition, something fundamentally apolitical, something political he could angle into, a mission from his god, a robbing of his electorate, namely making politicians polite (!). He whined about that a lot. But, on the important things, things he understood nothing about, Obama did not engage in any public debate. Too afraid to flaunt his ignorance, and that of the elite which made him.

For example Obama’s tripling of the force in Afghanistan was a giant blunder. Cancer research, let alone NASA, are paying for it. And the small detail of life expectancy. And it’s not Obamacare that will change the run down in life expectancy, because it will prove too onerous.

As I wrote at the time: “Afghanistan, No You Can’t“. Afghanistan was a blunder for most People, but it was heavens for the Military Industrial Complex, and for the plutocrats in general.

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RICH PEOPLE EVERYWHERE BUT THE POOR HAVE ONLY HILLARY!

Six years ago, I supported Obama, for personal reasons, but also because I detested what I viewed as Bill Clinton’s hypocritical and disastrous record, the fruit of putting Robert Rubin of Goldman Sachs in command, and his henchmen, such as Summers, Larry. I was afraid Hillary would put them back in power. Obama though, did exactly that, in most part because the intelligentsia of the democratic party is roughly as efficient as the French High Command in May 1940.

It may have been unfair to paint faithful and wise Hillary with the same big brush as dishonorable, “I-don’t-know-that-woman” Bill (who is now doing his best to make amends from the top of his financial wealth)

However, here is Hillary now:

“There are rich people all over the world, in every country. And you know what? They don’t contribute to the growth of their own countries. “

What might have been?

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CATASTROPHES ARE OUR FRIENDS:

Plutocrats love war, because war calls onto the fascist instinct… That’s why they had their servants spent 200 times more on (otherwise useless) wars in the Middle East than they spent on cancer research, in 2008 alone.

Indeed the fascist instinct, in turn, calls to be ruled by the few. Naturally, the plutocrats are in the best position to be precisely those few… And in any case, the call of wanting, emotionally, to be ruled by the few justifies the principle of the rule of the plutocrats. That’s why Hitler himself was played like a violin by all sorts of plutocrats, such as Thyssen (remorseful author of: “I paid Hitler”) to Watson of IBM, and countless other influential rich USA citizens.

Thyssen even hedged, telling of his son to be pro-Hitler, inside Germany, while the other, in England, would pose as anti-Hitler. This way the Thyssen family was sure to win.

Hedge fund managers will recognize a “butterfly” strategy: if losses are bounded on the downside, and the up side, one can take opposite positions (properly leveraged puts and calls). Now, of course such investments, as a butterfly strategy don’t profit to the real economy, and depends, to be successful, upon catastrophe. So the existence of the possibility of such investments, by the individuals and institutions which have the most money, favor catastrophes, and robs the real economy.

This is exactly the sort of things we are enjoying nowadays, in this Greatest Depression. As potential catastrophes pile up, don’t forget: they are not really happening by accident. Some very powerful people know that they will profit, if they hedge themselves well.

In France, in the Middle Ages, the Devil was called “Le Malin” (“the crafty one”). The only way to defeat evil is thus not by imagining oneself to be good, and acting accordingly: most people do this already, and it does not work. What works for the best, is to be smarter than evil.

Economists have systematically minimized the gravity of the planetary emergency we are in. If he gets smarter, and should he accept the mission, Obama may start to understand that it is the real economy that counts, not what the present generation of completely corrupt financial types say about it. And that the economy also means research, of the fundamental type, the one with no probable short term profit, that no market agent can engage in. Research, for example on cancer, that is now increasingly starved from funding.  

Greed, the profit motive is not the noblest of emotions. Nor is it the most powerful. Thus not the one that brings the deepest insights. Nor is greed something that insures survival. Quite the opposite is true. So forget the banksters, and let’s have a world again.

It starts with banks that create enough money to run the economy at its full potential. While keeping in mind that thinking, studying, is the core activity of man. The free market, and, a fortiori finance, is just oil in an engine. It is not the engine. The primordial economic engine is the government. Always has been, always will be.

In a democracy, the government is by the People, for the People. Not by greed, for greed. Government by greed, for greed is what Rome increasingly got… Until it became so dysfunctional that it had to be replaced by the only army that was left, that of the Franks.

Government by greed, for greed, is what the servants of plutocracy, from Reagan to Romney have proposed always more of. Like clocks indicating the same time always.  Meanwhile, even life expectancy is crashing, as the health care system of the USA seems to be following that of the Soviet Union. And what’s the plan? Always more greed? Self declared “Conscience of a Liberal” Krugman, proposing always more money for Goldman Sachs and JP Morgan, in the apparent naivety that banksters will suddenly see civilization as a beacon?

Greed as panacea is also the mood Obama should try to get rid of in the next four years, starting with this electoral campaign. Should he desire to be more than the addendum to Bush he would otherwise become.

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Patrice Ayme