Posts Tagged ‘U6’

Bonded To Wall Street.

November 23, 2009



The unflappable Larry Summers, Obama’s evil adviser, the Obama administration’s highest-ranking economist, has spoken again. We had Bush, with his "Mission Accomplished", now we have Summers, and he is accomplishing his mission:


(Bureau of Labor Statistics.)

Barring the Great Depression, this is an unprecedented catastrophe, for the people, and an incomparable success, for Wall Street, and Obama is directly responsible. Hiding behind the Bush does not hold water anymore, because he, and his Summers are doing nothing to stop the disaster for the people, and the windfall, for Wall Street.

Patronizes Summers: “It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.” True. But look at the graph. Congress and the administration do not seem willing to spend enough on stimulating the real economy to change that graph.

What is going on? Oh, simply just as a body cannot work if blood does not circulate, a free economy cannot work if capital does not circulate. What happened to capital? It is not circulating in the real economy. Where did it go?

The Bank Of England (BOE) just came out with a scathing report on the cruel and slightly demented shenanigans of Summers and his ilk. It’s entitled "BANKING ON THE STATE".

Says the BOE in November 2009: "…the scale of intervention to support the banks in the UK, US and the euro-area during the current crisis [is baffling]. This totals over $14 trillion or almost a quarter of global GDP. It dwarfs any previous state support of the banking system. These interventions have been as imaginative as they are large, including liquidity and capital injections, debt guarantees, deposit insurance and asset purchase.

The costs of this intervention is already being felt. As in the Middle Ages, perceived risks from lending to the state are larger than to some corporations. The price of default insurance is higher for some G7 governments than for McDonalds or the Campbell Soup Company.

Yet there is one key difference between the situation today and that in the Middle Ages. Then, the biggest risk to the banks was from the sovereign. Today, perhaps the biggest risk to the sovereign comes from the banks. Causality has reversed."

Causality has reversed? What else has reversed? Democracy? Let’s put in a few clear words what the BOE is saying: the greatest risk to the "sovereign", Obama, is from the banks. Obama is not really the sovereign, he just plays one on TV. In truth, he is at risk, he is a scared rabbit, and he sure talks like one (see below).

The bankers are now sovereign, says the BOE. In other words, we have devolved since the Middle Ages. In the Middle Ages, the sovereigns, representing the peoples, ordered the bankers around. Now, it’s the other way.

Unelected individuals, of proven incompetence, the connected bankers, representing only themselves, are ordering everybody else around.

Socrates pointed out that electing someone did not make that someone competent, and therein the problem with Athenian democracy.

So Athens’ fledgling democracy, just recovering from a holocaust of its own hubristic making, where half of its population had died in a horrendously incompetently led war, had Socrates summarily executed. Interestingly, the war had started because the Athenian oligarchy stole some considerable amount of capital. Socrates, full of contempt, made the point that the haughty integrity of his philosophical superiority was worth more than his life.

(This lousy attempt at hiding the short coming of democracy, Athenian style, did not bear fruit, because next Macedonia submitted Greece, and after defeating that fascist regime with the help of Rome, 2 centuries later, Rome’s plutocracy turned on its democratic allies and submitted them in turn to its imperial power. Athens would have to wait for the European Union, 24 centuries later, to know democracy and freedom again!)

Now, what the Bank Of England is saying is that BANKERS, WHO ARE UNELECTED and have demonstrated cosmic INCOMPETENCE, RULE. People, where is your democracy? Inside Summers’ ample pants?

The workings of the Obama administration are becoming ever more of the same old same old. Strong forces explain this.

First of all, the past has shown up again, with the same crew in control, the Goldman Sachs/Rubin/Summers/Geithner crowd. Ironically, many voted for Obama, and against Clinton, precisely because they felt that the Clintons had compromised themselves with the Rich (this is also a pun: Holder, Obama’s Attorney General, forgave Mr. Rich, a multi-billionaire, in the last hours of Clinton. That was for massive tax evasion, and fleeing to the canton of Zug, south of Zurich. As long as the Riches kept on sending their riches to the Clinton crowd, they were exonerated by the Clinton crowd, for not paying gigantic taxes they owed to the U.S. Treasury; it all makes sense: the republic has become the private garden of the Rich. So Rich built Clinton’s library.)

Remember that under Clinton, the "Banking Act of 1933" was dismantled, under Summers’ competent plutocratic hands. That made the crazy world of derivatives fully open to all the capital big banks could lay their hands on (some capital came from individuals, some came at 5 am in the morning, secretly, from the Fed, the central bank of the USA, by the billions, that is why the Fed does not want the people to look at its books. Ron Paul is trying to change this.)

Simultaneously, Clinton and his genius of a treasury secretary, Summers, were saving money for the next republican administration to spend, letting the direction-less economy go whichever direction Wall Street wanted it to go. Mr. Obama is kindly repeating the same scheme, maybe with President Palin’s administration in mind, next.

Indeed, fast forward to November 2009. Paul Krugman said it very kindly, so I am just going to quote him, because I do not feel as kind:

"President Obama and his inner circle have been intimidated by scare stories from Wall Street.

Consider the contrast between what Mr. Obama’s advisers were saying on the eve of his inauguration, and what he himself is saying now.

In December 2008 Lawrence Summers, soon to become the administration’s highest-ranking economist, called for decisive action. “Many experts,” he warned, “believe that unemployment could reach 10 percent by the end of next year.” In the face of that prospect, he continued, “doing too little poses a greater threat than doing too much.”

Ten months later unemployment reached 10.2 percent, suggesting that despite his warning the administration hadn’t done enough to create jobs. You might have expected, then, a determination to do more.

But in a recent interview with Fox News, the president sounded diffident and nervous about his economic policy. He spoke vaguely about possible tax incentives for job creation. But “it is important though to recognize,” he went on, “that if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession.”

What? Huh?

Most economists I talk to believe that the big risk to recovery comes from the inadequacy of government efforts: the stimulus was too small, and it will fade out next year, while high unemployment is undermining both consumer and business confidence.

Now, it’s politically difficult for the Obama administration to enact a full-scale second stimulus. Still, he should be trying to push through as much aid to the economy as possible. And remember, Mr. Obama has the bully pulpit; it’s his job to persuade America to do what needs to be done. "

Apparently, once again, what Mr. Obama thinks needs to be done, is to give free rein and domination to his handlers on Wall Street.

This is really pathetic for the USA, and grandiose for Obama. By comparison, the governments of China, Germany and France are really governing their economies: they saw the writing on the wall of climate change, and they are driving their economies that way, towards renewables and conservation. Germany intends to be 40% below 1990 CO2 emissions by 2020. France has a huge number of projects in various states of implementation or planning (some all the way to 2030). China intends to become number one in renewables, ahead of Germany, it grandly announced, throwing down the gauntlet.

What China, Germany, France, the EU, and many others are doing is change one can believe in.

Once again, here is the change we can see in the USA:
Labor force status:  Unemployment rate
Type of data:        Percent or rate
Age:                 16 years and over.


(Bureau of Labor Statistics; graph goes from 1999 on the left to 2009, on the right. Somehow, it refuses to copy correctly from the BLS.)

The beginning of the rise in unemployment above, in 2001, can be attributed to the effect of the Clinton-Summers policy, just prior (as you can see, sort of, it’s 50%, because it rose from about 4% to 6%!).

The colossal rise on the right is the fruit of the Bush-Geithner policy. After all, Geithner, ex associate of Summers, was head of the New York Fed, thus "overviewed" what the nuts on Wall Street were doing (supposedly overviewing independently, that is). Anyway, Obama selected those worthies, Summers and Geithner, and transferred national assets to private individuals without counterparties (that’s acquisition of national riches, mafia style). Hence the sudden rise at the very right of the graph: the national economy, starved of capital, is suddenly out of gas.

To give free reins to imaginary bond vigilantes is the old change that was already seen under Clinton, when Wall Street increased power by leaps and bonds (bonding the U.S. government to Wall Street that is). So now Clinton is immensely rich, several times richer than the immensely rich Tony Blair, the invader of Iraq, who had certified Iraq was going to nuke us.

In a way, this clinging to the past is understandable: the USA had it good, and many of its leaders imagine that, by clinging desperately to old tricks, they will have it good some more. So, as the world tries to change for the better, the USA tries to change for the older, and that is the worse, as far as the rest of the world is concerned.

So what is this bond market problem? First there are short bonds (also called "bills"), and then there are long term bonds. There ought to be no contradiction between rewarding savers, by having higher short term rates, and low long term bond yields. Indeed, this has long been going on in the Eurozone.

All the problems in the USA arise from considerable leaks of capital in the extraneous dimension of crazy “derivatives”, thus robbing the real economy of energy. The Obama administration obviously does not want to understand this. Because, if it did, it could kiss Wall Street campaign contributions, and future lucrative speech compensations, good bye. Nor is it part of conventional economic theory, being a new development (Summers’ nefarious work, under Clinton, is only a decade old, and the economy exploded last year).

Wall Street makes money from sending as much capital as possible to the fake casino in the sky of derivatives. But capital, even leveraged capital, is finite, so Wall Street wants to divert as little capital as possible to Main Street, which it sees as a losing proposition. This is Wall Street’s first reason to have its servants expressing itself thus, against spending on the real economy. Wall Street’s position regarding the evolution of the society of the USA, although overall respecting its obsession with profits, is new and forward looking.

For the real economy, Wall street has its servants in China, making stuff. Wall Street does not want real people in a real economy, and thus with real power, really close to home.

Verily, an important danger, as far as Wall Street is concerned, is that, if real people in the USA get real jobs, in a real economy, they may feel important, and will have their hands on some power, and they may try to disrupt the casino of derivatives in the sky that feed Wall Street so wonderfully, with diverted people’s money. So long term unemployment at 17.5% (for U6, a record) as we have now, viewed that way, is very good news, as far as Wall Street in concerned: the less jobs, the less power to the people. Maybe Wall Street and his Obama minions can reach sometimes soon the record long term unemployment of the Great Depression (which was around 25%: just another effort, Summers and Geithner can do it!)

Summers and Obama are preparing for their lucrative jobs tomorrow, telling that tale, that Wall Street and its bond vigilantes are the real economy, and how to foster it more, while couching it for the opposite of what it is.

What will "progressives" say when Obama gets $500,000 per speech, the way Clinton does, telling the world’s richest individuals how to put societies to sleep with lies about hope and change, while delivering more of the same deterioration?

Some will say that I mean, that Obama and Summers could not possibly be like that. But history has thousands of more egregious cases (remember that Mussolini, Stalin and Hitler were self described socialists, with the interests’ of their people at heart, and elected accordingly, in the case of Benito and Adolf; Stalin had fooled Lenin and Trotsky). When one has eliminated all other causes of people’s behavior, if horror is all what is left, horror is all what it is.

And so it goes, all the way to oblivion. Many cultures and societies have gone thus, following their oligarchies all the way down the path of extermination. Still, they do not go down without fighting: as trust gets violated, the economy, and then the society, stop functioning. The Maya, Greeks, or Romans knew massive civil wars, as trust got violated (Athens, a democracy, violated trust by confiscating the treasury set aside to fight Persia; after that it was all the way downhill to near annihilation of Athens, 40 years later; so the theft of trillions by Wall Street, with the help of its White House servants, may take decades before it brings down the USA into flame and gore).

It is entirely obvious that trust was violated by the Clinton-Bush-Obama Wall Street managed administration. But trust is how the economy works. Money represents trust, symbolically. Not more than that.

A sound economy is billions of trillions of contracts, all believed to be sound. That’s trust at work. When that belief evaporates, anything can happen: the German government’s behavior around 1923 is an example: that government claimed to be a republic, but it did plenty of things contrary to that, and contrary to what it professed, in general. Thus people came to realize they were led by liars. Trust evaporated. Result: hyperinflation, with prices of basic goods such as meat, changing drastically several times a day.

The corruption between sovereigns and bankers was in full swing by the time Francois I and Charles Quint were using bankers in Italy and Germany to multiply their power, with the present, still in force, fractional banking system, as they fought each other. Nowadays, it looks grotesque: Francois, the self proclaimed French, and Charles, the Bourguignon, were both native French speakers, born a few miles apart. Countless died, and the economies got on a war footing: that particular war between Spain and France lasted much more than a century.

Now the situation has reversed, as the report from the Bank Of England, "Banking On The State", points out. The bankers use the sovereigns, the likes of Obama, to multiply their power. The boss is not the old boss, he does not wear a crown, he hides in the shadows. For now.

Clearly, the republic is at risk. Its key functions are breaking down: see the financial violation of the purpose of the University Of California (set up to be a free public university, now with a $10,300 tuition for Californian students).

The economy is also at risk, because, meanwhile, the diversion of capital towards the fake world of derivatives has not been stopped, and the real economy gets no capital.

At this point, a solidly erroneous thought system is implanted in the USA, according to which the Rich are way too powerful and revered. When a thought system is that wrong, it takes drama to get out of it. So don’t expect "No Drama Obama" to go anywhere. Expect bigger checks from the likes of Goldman Sachs in the future, though, to the people who are taking the decisions now. A man has to take care of his family, when he can’t see any further.

It is difficult to think, even more difficult to revolt. It’s easier for oligarchs to follow the essence of Mr. Obama’s value system, navigating for oneself. This was the essence of Ayn Rand’s message. But only the small inner circle around Obama, and the plutocracy known as Wall Street can afford to do so. The rest will have to sink with USS America. This is navigation at its best, guided by Mr. Obama’s star. After me, the wreck.

The policies proposed by the White House depend upon the good pleasure of the plutocrats. I do not mean that this necessarily bad; they should be used, if they can be of any use. But the bottom line of an active economy should be deep intelligence, not the invisible hands of plutocrats who earn more by exiting the real world of the real economy of the USA, all together. After all, eco-nomy means house-MANAGEMENT.

So let’s manage. Just wrecking the real economy to save the plutocrats will not do, in the fullness of time.


Patrice Ayme


P/S: Ergo, the best policy is to have a measure of CENTRAL PLANNING, as China, France and Germany have. And that does not mean just getting out of carbon, but putting taxes on wall Street’s manipulations.