Get Your Ornery Bastard Here!

This guy not only rocks hard against the forces of evil (in this case the sublimely stoopid next Rethugli-Con hero, Bobby Jizzdal), he actually does some good down and dirty work(s) too. (H/t to Driftglass.) Enjoy!

After watching President Obama address the nation in a fairly forthright way, not all of it,by any stretch of the imagination,I am now watching Bobby Jindal try and rebut that and it is FAIL, 1.0. . . . The little . . . twit got his panties in a twist because there is some money in the fiasco for volcano monitoring and he just cannot see the wisdom of that and was OPENLY derisive of that funding. . . . Mt. St. Helens? Let me refresh your memory. . . . Just for your information, the ash from that little fire cracker shut down the Columbia River, the largest River in the Pacific Northwest, killed over 50 people and destroyed a few towns, wiped out a few hundred square miles of forest,killed thousands of animals, sterilized a couple of lakes full of trout and wiped out an entire salmon run, choked every river around it for miles and cost hundreds of millions of FEDERAL DOLLARS just to re open the biggest water way for traffic involving four states and parts of Canada. The ash from that eruption went all the way around the world. Guess what, Mr. I don't want to pay for monitoring? I busted my narrow ass as part of a massive dredging project cleaning that mess enough to get the Columbia open AND the Cowlitz river too. The area is still to this day completely . . . up and the ash from that eruption is still everywhere. There are still giant mountains of ash and artificial islands a mile long, twenty nine . . . years later. Damn, I certainly would hate for your ass to pay one . . . nickel for any monitoring, ya know.

I don't believe any commentator has been this eloquent yet. Suzan __________________________

Casinos Rule

One more tribute to Delaney Bramlett and his friends: Ralph Nader nails them again (and how many still laugh when he speaks?):

While the reckless giant banks are shattering like an over-heated glacier day by day, the nation's credit unions are a relative island of calm largely apart from the vortex of casino capitalism. Eighty five million Americans belong to credit unions which are not-for-profit cooperatives owned by their members who are depositors and borrowers. Your neighborhood or workplace credit union did not invest in these notorious speculative derivatives nor did they offer people "teaser rates" to sign on for a home mortgage they could not afford. Ninety one percent of the 8,000 credit unions are reporting greater overall growth in mortgage lending than any other kinds of consumer loans they are extending. They are federally insured by the National Credit Union Administration (NCUA) for up to $250,000 per account, such as the FDIC does for depositors in commercial banks. They are well-capitalized because of regulation and because they do not have an incentive to go for high-risk, highly leveraged speculation to increase stock values and the value of the bosses? stock options as do the commercial banks. Credit Unions have no shareholders nor stock nor stock options; they are responsible to their owner-members who are their customers. There are even some special low-income credit unions, though not nearly enough to stimulate economic activities in these communities and to provide "banking" services in areas where poor people can't afford or are not provided services by commercial banks. According to Mike Schenk, an economist with the Credit Union National Association, there is another reason why credit unions avoided the mortgage debacle that is consuming the big banks. Credit Unions, Schenk says, are "portfolio lenders. That means they hold in their portfolios most of the loans they originate instead of selling them to investors, so they care about the financial performance of those loans." Mr. Schenk allowed that with the deepening recession, credit unions are not making as much surplus and "their asset quality has deteriorated a bit. But that's the beauty of the credit union model. Credit unions can live with those conditions without suffering dire consequences," he asserted. His use of the word "model" is instructive. In recent decades, credit unions sometimes leaned toward commercial bank practices instead of strict cooperative principles. They developed a penchant for mergers into larger and larger credit unions. Some even toyed with converting out of the cooperative model into the shareholder model the way insurance and bank mutuals have done. The cooperative model, whether in finance, food, housing or any other sector of the economy,does best when the owner-cooperators are active in the general operations and directions of their co-op. Passive owners allow managers to stray or contemplate straying from cooperative practices. The one area that is now spelling some trouble for retail cooperatives comes from the so-called "corporate credit unions", a terrible nomenclature, which were established to provide liquidity for the retail credit unions. These large wholesale credit unions are not exactly infused with the cooperative philosophy. Some of them gravitate toward the corporate banking model. They invested in those risky mortgage securities with the money from the retail credit unions. These "toxic assets" have fallen $14 billion among the 28 corporate credit unions involved. So the National Credit Union Administration is expanding its lending programs to these corporate credit unions to a maximum capacity of $41.5 billion. NCUA also wants to have retail credit unions qualified for the TARP rescue program just to provide a level playing field with the commercial banks. Becoming more like investment banks the wholesale credit unions wanted to attract, with ever higher riskier yields, more of the retail credit union deposits. This set the stage for the one major blemish of imprudence on the credit union subeconomy. There are very contemporary lessons to be learned from the successes of the credit union model such as being responsive to consumer loan needs and down to earth with their portfolios. Yet in all the massive media coverage of the Wall Street barons and their lethal financial escapades, crimes and frauds, little is being written about how the regulation, philosophy and behavior of the credit unions largely escaped this catastrophe. There is, moreover, a lesson for retail credit unions. Beware and avoid the seepage or supremacy of the corporate financial model which, in its present degraded overly complex and abstract form, has become what one prosecutor called "lying, cheating and stealing" in fancy clothing.

Robert Scheer finds the silver lining:

We are lucky to have Barack Obama as president. I write that even though I believe the content of his Tuesday evening speech deserved no more than a B+ / A-, for its failure to seriously address the origins of the banking crisis and for only hinting at the severe military budget cuts required to get close to his goal of reducing the federal deficit by the end of his first term. But first the positives, which were stunning, and I am not referring only to his superb delivery, which thankfully is logical and informed and inspires without pandering. The one truly memorable, historically significant line-unfortunately desperately needed because of the shameful actions of his predecessor-was: ". I can stand here tonight and say without exception or equivocation that the United States does not torture." That simple declarative sentence justifies my vote for the man, no matter my disagreements with him. It is recognition of the essential vitality of a free society as defined by our Founders through the protections they wrote into the Constitution and which George W. Bush so casually demolished. As Obama put it, ". living our values doesn't make us weaker, it makes us safer and it makes us stronger." Another gift of this speech is the reassertion that government exists to redress our grievances rather than exacerbate them. His is a bold reincarnation of the wisdom of Franklin Delano Roosevelt that the Democratic Party had all but abandoned. Obama's insistence that government rather than just the "free market" should set needed priorities is refreshing and important, particularly in light of his emphasizing the changes needed in education, health care and energy efficiency-the three areas that a short-term view of economic growth systematically neglected since the New Deal. So, he was great, and when I was just listening to the speech, I was quite enthralled, as were those around me. But on reading his remarks, I have questions.

Read them here. Noam Chomsky says (again) that American was not "Intended to be a Democracy." And two more "money managers" (can we seriously say these two words together anymore?) on Wall Street are exposed - but like Madoff they won't have to go to jail. Richard Cook says that "The U.S. Economy" is "Designed to Fail." Why oh why does he have such good arguments? One final note of low hilarity:

The government has asked the former chief executive of Royal Bank of Scotland, Sir Fred Goodwin, to forgo some of his pension. Chancellor Alistair Darling told the BBC of the government's approach after it emerged that Sir Fred is drawing a pension of £650,000 a year. Although he is only 50, he is entitled to the payment for life, with a pension pot worth £16m. "You cannot justify these excesses," Mr Darling told the BBC's Today programme. “ Failure should not be rewarded. Practices are coming to light that have got to be dealt with ”

! Take me down (again) Suzan _______________________

The Abyss Stares Back And Doesn't Smirk

I've always thought Jim Kunstler had a firm grip on reality, but I hate to admit he's this right (although he undoubtedly is).

The public perception of the ongoing fiasco in governance has moved from sheer, mute incomprehension to goggle-eyed panic as the scrims of unreality peel away revealing something like a national death-watch scene in history's intensive care unit. Is the USA in recession, depression, or collapse? People are at least beginning to ask. Nature's way of hinting that something truly creepy may be up is when both Paul Volcker and George Soros both declare on the same day that the economic landscape is looking darker than the Great Depression. Those tuned into the media-waves were enchanted, in a related instance, by Rick Santelli's grand moment of theater in the Chicago trader's pit last week when he seemed to ignite the first spark of revolution by demonstrating that bail-out fatigue had morphed into high emotion -- and that the emotion could be marshaled against public policy. The traders in the pit on-screen seemed to color up and buzz loudly, like ordinary grasshoppers turning into angry locusts preparing to ravage a waiting valley. "Are you listening, President Obama?" Mr. Santelli asked portentously. In the broad blogging margins of the web that orbit the mainstream media like the rings of Saturn, an awful lot of reasonable people have begun to ask whether President Obama is a stooge of whatever remains of Wall Street, with Citigroup and Goldman Sachs's puppeteer, Robert Rubin, pulling strings behind an arras in the Oval Office. Personally, I doubt it, but it is still a little hard to understand what the President is up to. For one thing, the stimulus package, so-called, looks more and more like national sub-prime mortgage itself, a bad bargain made under less-than-realistic terms, with future obligations fobbed onto whoever inhabits this corner of the world for the next seven hundred years -- and all to pay for a bunch of granite counter-tops and flat-screen TVs. I suppose Mr. Obama is burdened with the knowledge that the economic truth is so much worse than he imagined back in November that there is simply nothing to do at this point except pretend to serve up a "tasting menu" of rescue plans in the hope that markets and mechanisms might be conned back into compliance with our wish keep getting something-for-nothing forever. FDR already used the fear of fear itself trope, so Mr. O is left with little more than displaying pluck and confidence in the face of overwhelming bad news. The sad truth is that banking has become a Chinese fire drill -- a frantic act of futility -- as insolvent companies persist in covering up their losses in order to avoid the counter-party hell of credit default swaps that would ring the world's "game over" bell. This can only go on so long. All the chatter about "nationalizing" the banks really boils down to what kind of bankruptcy work-out will they be put through, how destructive will the process be, and how much of the pain can be shoved forward in time to people now in diapers and their descendants. Among the questions that disturb the sleep of many casual observers is how come Mr. O doesn't get that the conventional process of economic growth - based, as it was, on industrial expansion via revolving credit in a cheap-energy-resource era - is over, and why does he keep invoking it at the podium? Dear Mr. President, you are presiding over an epochal contraction, not a pause in the growth epic. Your assignment is to manage that contraction in a way that does not lead to world war, civil disorder or both. Among other things, contraction means that all the activities of everyday life need to be downscaled including standards of living, ranges of commerce, and levels of governance. "Consumerism" is dead. Revolving credit is dead - at least at the scale that became normal the last thirty years. The wealth of several future generations has already been spent and there is no equity left there to re-finance. If contraction and downscaling are indeed the case, then the better question is: why don't we get started on it right away instead of flogging rescue plans to restart something that is DOA? Downscaling the price of over-priced houses would be a good place to start. This gets to the heart of Rick Santelli's crowd-stirring moment. Let the chumps and weasels who over-reached take their lumps and move into rentals. Let the bankers who parlayed these fraudulent mortgages into investment swindles lose their jobs, surrender their perqs, and maybe even go to jail (if attorney general Eric Holder can be induced to investigate their deeds). No good will come of propping up the false values of mis-priced things. Read the rest here.

Jon Ronnquist thinks that our "Economic Freefall" is a "Blessing in Disguise." He's got several ideas on how to reconstitute a fairer economy if we make it that far "after the deluge." (Some editing was necessary and emphasis marks were inserted - Ed.)

One thing we should not overlook when taking in the impact of the current economic situation is that it is both inevitable and invaluable in equal measure. That there was no escaping the consequences we are now facing has been a well known fact among those in the know for many years. If anything, it is amazing that we have staved it off for so long. For this we have the hard working men and women of the real world to thank, who toiled on in the name of pride, dignity and responsibility until the burden of debt simply became to great to bear. A cursory understanding of the “pre-collapse” financial system and the inescapable debt trap it lays in the path of the majority who seek to survive within it, points clearly to the end we have now met. And while it is indeed tragic on an individual level, for the world at large this may well be a blessing of unprecedented proportions. As economies stagnate and the production level of superfluous commodities shrinks, so too does the havoc that this reeks on the environment through unsustainable consumption of natural resources and heavy pollution. Whether we like to admit it to ourselves or not, prior to this forced deceleration there was no real hope of any timely or significant solution to the problem. Nothing short of a decrease in demand was going to interfere with the reckless consumer frenzy and the deadly impact it was having on the planet we call home. We were borrowing the earth into oblivion and neither conscience nor understanding looked likely to force an end to it. To say that a million unemployed Chinese is a tragedy when their entire activity consisted of flooding the world with cheap useless toys, is exactly the kind of short sighted and blinkered view that got us into this mess in the first place. I suppose we could have waited for the oil to run out, and judging by the way we were prepared for the money to run out, it really would have been a case of oil one day and none the next. Luckily money, unlike oil, is relatively easy to replace or replenish. A savvy economist, of which there are sadly still none at the reigns, could reconstruct the monetary system in such a way as to make it more useful and user friendly than that which we are burdened with today. The real tragedies which loom on the horizon are the artificial cost this economic situation will have on the lives of real people and the dangerous possibility that we will not take advantage of this opportunity to restructure not only the monetary system, but the entire economy, its infrastructure, energy needs and sustainability. The plague has effectively run its course, run out of steam if you like. What we are faced with now is a genuine opportunity for convalescence. Even in this age of extensive corruption of government, this chance is surely not entirely lost. We can clearly see the old school fighting to hold on despite the impotency of their efforts to borrow the economy out of debt. This idea is so fundamentally flawed that it is hard to see how the affected populations stand by and watch as the new US administration sells their children and grandchildren to the Federal Reserve. Read the rest here.

Danny Schechter has my vote in every coming election. (Emphasis marks were inserted - Ed.)

As New Scammers Emerge, Is It Jailout Time Yet? The Right Mobilizes Against The Stimulus While We Sign Petitions Judging by my in-box, there seem to be no shortage of organizations and individuals obsessed with an image: Dick Cheney and George Bush in prison, and Karl Rove in the next cell. Never mind that Congress doesn’t have the guts or the President the gumption to go after those responsible for the gutting of the Constitution. Nevertheless, there are many campaigns and calls to hold the last Administration accountable for its crimes. At the same time, as we watch an economy in free fall, there seems to a lot less agitation for a serious investigation of those responsible for this collapse. Evan as you overhear conversations in every bar and union hall that begins with “those bastards should be in jail,” few progressives are leading the charge to demand a Jail-Out alongside those stimulus bailouts. It’s as if economic crimes provoke a ho-hum reaction among activists. Oddly, some corporate media are more sensitive to the seething mass public outrage. Time did a spread on the 25 individuals responsible for the crisis including politicians and CEO’s. They ran a photo spread with their images against the background of police line-up. CNN has profiled corporate criminals. CNBC is running a series on “American Greed” - mostly of small time con men. Of course the Madoff case stays in the news even as he stays in his fancy apartment. The investigators have now determined that he never made any trades with the money investors trusted him with. Tom Lindmark seemed shocked to hear this on the Seeking Alpha financial blog:

“…it now turns out that Mr. Madoff may not have traded any securities for the past thirteen years. You heard that right. The guy just ran his Ponzi scheme. No extra complications. All of which begs the question of what were his employees doing? Did they just show up, surf the Internet and text friends for all those years? If it’s this easy to get away with things, evade arrest and live the good life, why are all of us walking on the right side of the line? Who are the fools?”

There is a deeper problem, of course. How did he get away with it? Lawyer John Coffee of the Columbia Law School addressed that question in an interview:

“I think our regulatory system failed and failed badly over basically the last six or seven years in failing to spot a Mr. Madeoff. Although in fairness Mr. Madeoff has been a crook for almost 20 or 25 years and we can't just pick on the last couple of years there. But I think that regulatory system allowed these offerings when there was evidence that lending standards were being relaxed at the mortgage loan originator stage, when the underwriting standards were being relaxed and in which credit rating agencies were becoming so conflicted that the really sophisticated person no longer believe their ratings.”

Three new crime stores came to light this past week.

•There’s Texan Alan Stanford, another billion-dollar fraudster, who we were told was arrested, but wasn’t. •Then there’s evidence that as many as 52,000 Americans dodged taxes with secret accounts in the Swiss bank UBS, which was also deeply invested in worthless subprime securities. •On Friday, the NY Times reported the arrest of mortgage scammers who recruited prisoners to apply for subprime loans, a mere $10 million case. They were busted by the DA’s office in Manhattan.

Who is going to prosecute these and other new cases popping up every day? The FBI told Congress it is investigating 500 White Collar crime cases, 39 connected with the financial crisis. Earlier, they said they were looking into 27 companies. At the same time they admitted that a large number of their trained corporate crime investigators had been reassigned after 9/11. Many had been ordered to chase terrorists even after the FBI and CIA, which had knowledge of Al Qaeda pilots in the country, failed to stop them. Take a look at what’s happening now with financial institutions, known as “Zombie banks” that everyone realizes are insolvent. No wonder there are increasing calls or nationalizing them — to save the system. Two members of our feared Republican Guard, Alan “Maestro” Greenspan and Senator Lindsay Graham (along with Democrats Chris Dodd and Chuck Schumer) have said it might not be a bad idea. That same notion, so far scotched by the Obama Administration, drove the markets to new lows. The Wall Street Journal reported: “The White House, meanwhile, reiterated that it "continues to strongly believe that the privately held banking system is the correct way to go." Of course, this may just be a rhetorical ploy, since publicly admitting it was considering nationalization would depress stocks even further.” Some on the left are quietly launching pro-nationalization on-line petitions while the right is fighting loudly with anti Obama TV ads appropriating words like “fiscal responsibility” and “accountability” and organizing vigils in the streets with placards against the stimulus. They are ridiculing Obama as a “savior” and the “Messiah” while carrying signs like like “Stimulate the Economy, Give Me a Tummy Tuck.” They are playing down and dirty with protest techniques once exclusive to activists while those of us who realize more radical measures are needed are, once again, mostly on the sidelines. The right has found a new Joe the Plumber-like loudmouth demagogue in CNBC’s Rick Santelli whose rants were challenged by the White House. That attention is likely to encourage him more and make him a martyr if the network shuts off his mike. (Controversies like this are great for ratings.) So Obama the centrist is under attack by the right with progressives mostly passive even as the public demands action against corporate criminals and their enablers. (Yes, that cartoon in the NY Post was offensive but is that what angry activists should be focusing on?) Knock, Knock, is anyone listening?

And Danny's commenters are always worth a meditative read:

Catherine Austin Fitts (solaris) has written extensively about TRILLIONS of dollars missing from various Federal agencies, including Housing & Urban Development and Defense. She has also chronicled much about the Enron scam. There is enough money that's been pilfered for every working American to have been given an economic stimulus of at least $100,000. Now THAT would have been a boost to the economy. Instead, it is lost money and a select group of thieves are living large off other people's sweat equity. Most Americans don't know about this though, and they seemingly don't really care. If you try to tell them, most just can't bring themselves to believe it, or investigate it. Some day when they realize they are in prison by their own will, they might just want to escape to another reality. Perhaps then, some heads will roll as it will be time to bring the guillotine out of mothballs! You French got any leftovers for sale? Doug Girard

Interesting idea. Suzan __________________________

Apocalypse N O W?

When I was young and used to dream of a world-changing career in journalism, alerting readers to situations that would only need to be publicized in order to be addressed and corrected (because I lived in La La Land where everyone was ready to right wrongs, end oppression, pay people decently for doing a good job, etc. (you're getting the drift now aren't you?), it never occurred to me that something as obvious as an economic system that led to the impoverishment of the onlooking, mindlessly applauding population would be the main topic requiring coverage. And yet. It is. Michael Parenti, author of 20 books, who somehow received a Ph.D. in political science from Yale University without joining the CIA in order to visit murder and mayhem on the helpless of the world for the benefit of a few already very rich people, is compelling in his argument below. (Please visit his website if you have a spare moment http://michaelparenti.org.) And exactly who are the winners (again)? Oh yes, UBS, Phil Gramm's vehicle for mayhem against his beloved country, agreed on Wednesday to (h/t to Susie at C&L):

divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes. The bank admitted conspiring to defraud the Internal Revenue Service and agreed to pay $780 million to settle a sweeping federal investigation into its activities. It is unclear how many of its clients’ names UBS will divulge. Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers. But to some, turning over any names at all heralds the end of the secret Swiss bank account, whose traditions date to the Middle Ages. “The Swiss are saying that this is the end of Swiss banking as they knew it,” said Jack Blum, an offshore tax specialist. “Nobody will trust the security of the Swiss bank account.” As part of the settlement, UBS agreed to cooperate with a broad summons issued by the Justice Department to turn over the names. Under the terms of a so-called deferred prosecution agreement, the bank and its executives could be indicted if UBS didn’t identify the customers. [...] Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.

Such a sad story. . . "the end of Swiss banking?" Well, boo-fng-hoo, and after the requisite sobbing, it'll be back (I'm taking bets again) to business (as usual). Why do I keep thinking of what became of Wonder Woman's husband after the demise of Clark Clifford and BCCI? (Like a recurring nightmare.)(Emphasis marks were inserted - Ed.)

Capitalism’s Self-inflicted Apocalypse By Michael Parenti February 10, 2009 Information Clearinghouse After the overthrow of communist governments in Eastern Europe, capitalism was paraded as the indomitable system that brings prosperity and democracy, the system that would prevail unto the end of history. The present economic crisis, however, has convinced even some prominent free-marketeers that something is gravely amiss. Truth be told, capitalism has yet to come to terms with several historical forces that cause it endless trouble: democracy, prosperity, and capitalism itself, the very entities that capitalist rulers claim to be fostering. Plutocracy vs. Democracy Let us consider democracy first. In the United States we hear that capitalism is wedded to democracy, hence the phrase, “capitalist democracies.” In fact, throughout our history there has been a largely antagonistic relationship between democracy and capital concentration. Some eighty years ago Supreme Court Justice Louis Brandeis commented, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Moneyed interests have been opponents not proponents of democracy. The Constitution itself was fashioned by affluent gentlemen who gathered in Philadelphia in 1787 to repeatedly warn of the baneful and dangerous leveling effects of democracy. The document they cobbled together was far from democratic, being shackled with checks, vetoes, and requirements for artificial super majorities, a system designed to blunt the impact of popular demands. In the early days of the Republic the rich and well-born imposed property qualifications for voting and officeholding. They opposed the direct election of candidates (note, their Electoral College is still with us). And for decades they resisted extending the franchise to less favored groups such as propertyless working men, immigrants, racial minorities, and women. Today conservative forces continue to reject more equitable electoral features such as proportional representation, instant runoff, and publicly funded campaigns. They continue to create barriers to voting, be it through overly severe registration requirements, voter roll purges, inadequate polling accommodations, and electronic voting machines that consistently “malfunction” to the benefit of the more conservative candidates. At times ruling interests have suppressed radical publications and public protests, resorting to police raids, arrests, and jailings—applied most recently with full force against demonstrators in St. Paul, Minnesota, during the 2008 Republican National Convention. The conservative plutocracy also seeks to rollback democracy’s social gains, such as public education, affordable housing, health care, collective bargaining, a living wage, safe work conditions, a non-toxic sustainable environment; the right to privacy, the separation of church and state, freedom from compulsory pregnancy, and the right to marry any consenting adult of one’s own choosing. About a century ago, US labor leader Eugene Victor Debs was thrown into jail during a strike. Sitting in his cell he could not escape the conclusion that in disputes between two private interests, capital and labor, the state was not a neutral arbiter. The force of the state--with its police, militia, courts, and laws—was unequivocally on the side of the company bosses. From this, Debs concluded that capitalism was not just an economic system but an entire social order, one that rigged the rules of democracy to favor the moneybags. Capitalist rulers continue to pose as the progenitors of democracy even as they subvert it, not only at home but throughout Latin America, Africa, Asia, and the Middle East. Any nation that is not “investor friendly,” that attempts to use its land, labor, capital, natural resources, and markets in a self-developing manner, outside the dominion of transnational corporate hegemony, runs the risk of being demonized and targeted as “a threat to U.S. national security.” Democracy becomes a problem for corporate America not when it fails to work but when it works too well, helping the populace move toward a more equitable and livable social order, narrowing the gap, however modestly, between the superrich and the rest of us. So democracy must be diluted and subverted, smothered with disinformation, media puffery, and mountains of campaign costs; with rigged electoral contests and partially disfranchised publics, bringing faux victories to more or less politically safe major-party candidates. Capitalism vs. Prosperity The corporate capitalists no more encourage prosperity than do they propagate democracy. Most of the world is capitalist, and most of the world is neither prosperous nor particularly democratic. One need only think of capitalist Nigeria, capitalist Indonesia, capitalist Thailand, capitalist Haiti, capitalist Colombia, capitalist Pakistan, capitalist South Africa, capitalist Latvia, and various other members of the Free World = more accurately, the Free Market World. A prosperous, politically literate populace with high expectations about its standard of living and a keen sense of entitlement, pushing for continually better social conditions, is not the plutocracy’s notion of an ideal workforce and a properly pliant polity. Corporate investors prefer poor populations. The poorer you are, the harder you will work—for less. The poorer you are, the less equipped you are to defend yourself against the abuses of wealth. In the corporate world of “free-trade,” the number of billionaires is increasing faster than ever while the number of people living in poverty is growing at a faster rate than the world’s population. Poverty spreads as wealth accumulates. Consider the United States. In the last eight years alone, while vast fortunes accrued at record rates, an additional six million Americans sank below the poverty level; median family income declined by over $2,000; consumer debt more than doubled; over seven million Americans lost their health insurance, and more than four million lost their pensions; meanwhile homelessness increased and housing foreclosures reached pandemic levels. It is only in countries where capitalism has been reined in to some degree by social democracy that the populace has been able to secure a measure of prosperity; northern European nations such as Sweden, Norway, Finland, and Denmark come to mind. But even in these social democracies popular gains are always at risk of being rolled back. It is ironic to credit capitalism with the genius of economic prosperity when most attempts at material betterment have been vehemently and sometimes violently resisted by the capitalist class. The history of labor struggle provides endless illustration of this. To the extent that life is bearable under the present U.S. economic order, it is because millions of people have waged bitter class struggles to advance their living standards and their rights as citizens, bringing some measure of humanity to an otherwise heartless politico-economic order. A Self-devouring Beast The capitalist state has two roles long recognized by political thinkers. First, like any state it must provide services that cannot be reliably developed through private means, such as public safety and orderly traffic. Second, the capitalist state protects the haves from the have-nots, securing the process of capital accumulation to benefit the moneyed interests, while heavily circumscribing the demands of the working populace, as Debs observed from his jail cell. There is a third function of the capitalist state seldom mentioned. It consists of preventing the capitalist system from devouring itself. Consider the core contradiction Karl Marx pointed to: the tendency toward overproduction and market crisis. An economy dedicated to speedups and wage cuts, to making workers produce more and more for less and less, is always in danger of a crash. To maximize profits, wages must be kept down. But someone has to buy the goods and services being produced. For that, wages must be kept up. There is a chronic tendency — as we are seeing today — toward overproduction of private sector goods and services and underconsumption of necessities by the working populace. In addition, there is the frequently overlooked self-destruction created by the moneyed players themselves. If left completely unsupervised, the more active command component of the financial system begins to devour less organized sources of wealth. Instead of trying to make money by the arduous task of producing and marketing goods and services, the marauders tap directly into the money streams of the economy itself. During the 1990s we witnessed the collapse of an entire economy in Argentina when unchecked free marketeers stripped enterprises, pocketed vast sums, and left the country’s productive capacity in shambles. The Argentine state, gorged on a heavy diet of free-market ideology, faltered in its function of saving capitalism from the capitalists. Some years later, in the United States, came the multi-billion-dollar plunder perpetrated by corporate conspirators at Enron, WorldCom, Harkin, Adelphia, and a dozen other major companies. Inside players like Ken Lay turned successful corporate enterprises into sheer wreckage, wiping out the jobs and life savings of thousands of employees in order to pocket billions. These thieves were caught and convicted. Does that not show capitalism’s self-correcting capacity? Not really. The prosecution of such malfeasance — in any case coming too late — was a product of democracy’s accountability and transparency, not capitalism’s. Of itself the free market is an amoral system, with no strictures save caveat emptor. In the meltdown of 2008-09 the mounting financial surplus created a problem for the moneyed class: there were not enough opportunities to invest. With more money than they knew what to do with, big investors poured immense sums into nonexistent housing markets and other dodgy ventures, a legerdemain of hedge funds, derivatives, high leveraging, credit default swaps, predatory lending, and whatever else. Among the victims were other capitalists, small investors, and the many workers who lost billions of dollars in savings and pensions. Perhaps the premiere brigand was Bernard Madoff. Described as “a longstanding leader in the financial services industry,” Madoff ran a fraudulent fund that raked in $50 billion from wealthy investors, paying them back “with money that wasn’t there,” as he himself put it. The plutocracy devours its own children. In the midst of the meltdown, at an October 2008 congressional hearing, former chair of the Federal Reserve and orthodox free-market devotee Alan Greenspan confessed that he had been mistaken to expect moneyed interests - groaning under an immense accumulation of capital that needs to be invested somewhere - to suddenly exercise self-restraint. The classic laissez-faire theory is even more preposterous than Greenspan made it. In fact, the theory claims that everyone should pursue their own selfish interests without restraint. This unbridled competition supposedly will produce maximum benefits for all because the free market is governed by a miraculously benign “invisible hand” that optimizes collective outputs. (“Greed is good.”) Is the crisis of 2008-09 caused by a chronic tendency toward overproduction and hyper-financial accumulation, as Marx would have it? Or is it the outcome of the personal avarice of people like Bernard Madoff? In other words, is the problem systemic or individual? In fact, the two are not mutually exclusive. Capitalism breeds the venal perpetrators, and rewards the most unscrupulous among them. The crimes and crises are not irrational departures from a rational system, but the converse: they are the rational outcomes of a basically irrational and amoral system. Worse still, the ensuing multi-billion dollar government bailouts are themselves being turned into an opportunity for pillage. Not only does the state fail to regulate, it becomes itself a source of plunder, pulling vast sums from the federal money machine, leaving the taxpayers to bleed. Those who scold us for “running to the government for a handout” are themselves running to the government for a handout. Corporate America has always enjoyed grants-in-aid, loan guarantees, and other state and federal subventions. But the 2008-09 “rescue operation” offered a record feed at the public trough. More than $350 billion was dished out by a right-wing lame-duck Secretary of the Treasury to the biggest banks and financial houses without oversight - not to mention the more than $4 trillion that has come from the Federal Reserve. Most of the banks, including JPMorgan Chase and Bank of New York Mellon, stated that they had no intention of letting anyone know where the money was going. The big bankers used some of the bailout, we do know, to buy up smaller banks and prop up banks overseas. CEOs and other top banking executives are spending bailout funds on fabulous bonuses and lavish corporate spa retreats. Meanwhile, big bailout beneficiaries like Citigroup and Bank of America laid off tens of thousands of employees, inviting the question: why were they given all that money in the first place? While hundreds of billions were being doled out to the very people who had caused the catastrophe, the housing market continued to wilt, credit remained paralyzed, unemployment worsened, and consumer spending sank to record lows. In sum, free-market corporate capitalism is by its nature a disaster waiting to happen. Its essence is the transformation of living nature into mountains of commodities and commodities into heaps of dead capital. When left entirely to its own devices, capitalism foists its diseconomies and toxicity upon the general public and upon the natural environment--and eventually begins to devour itself. The immense inequality in economic power that exists in our capitalist society translates into a formidable inequality of political power, which makes it all the more difficult to impose democratic regulations. If the paladins of Corporate America want to know what really threatens “our way of life,” it is their way of life, their boundless way of pilfering their own system, destroying the very foundation on which they stand, the very community on which they so lavishly feed.

Now. Try to have a nice weekend. Suzan ____________________

Has U.S. Taxpayer "Hit the Wall" Finally? Your Cash For Trash!

I never thought Alan baby G-spandex had it "wrong." After all, how wrong can one be who retired from the game with gazillions (and a nice new slot playing the downside) before the "fall" was declared? Michael Hudson has some choice words to spit out at this Peck's bad boy below. Glenn Greenwald adds some cutting remarks on American Exceptionalism to the mix here and some even more bloodletting on "Obama’s Embrace of Bush/Cheney 'Terrorism Policies'" here. And you thought they weren't our best and brightest? (Emphasis marks were inserted - Ed.)

Finance Capitalism Hits a Wall The Oligarchs’ Escape Plan – at the Treasury’s Expense By Professor Michael Hudson

The financial “wealth creation” game is over. Economies emerged from World War II relatively free of debt, but the 60-year global run-up has run its course. Finance capitalism is in a state of collapse, and marginal palliatives cannot revive it. The U.S. economy cannot “inflate its way out of debt,” because this would collapse the dollar and end its dreams of global empire by forcing foreign countries to go their own way. There is too little manufacturing to make the economy more “competitive,” given its high housing costs, transportation, debt and tax overhead. A quarter to a third of U.S. real estate has fallen into Negative Equity, so no banks will lend to them. The economy has hit a debt wall and is falling into Negative Equity, where it may remain for as far as the eye can see until there is a debt write-down.

February 18, 2009 - Global Research - Mr. Obama’s “recovery” plan based on infrastructure spending will make real estate fortunes for well-situated properties along the new public transport routes, but there is no sign of cities levying a windfall property tax to save their finances. Their mayors would rather keep the cities broke than to tax real estate and finance. The aim is to re-inflate property markets to enable owners to pay the banks, not to help the public sector break even. So state and local pension plans will remain underfunded while more corporate pension plans go broke. One would think that politicians would be willing to do the math and realize that debts that can’t be paid, won’t be. But the debts are being kept on the books, continuing to extract interest to pay the creditors that have made the bad loans. The resulting debt deflation threatens to keep the economy in depression until a radical shift in policy occurs – a shift to save the “real” economy, not just the financial sector and the wealthiest 10% of American families. There is no sign that Mr. Obama’s economic advisors, Treasury officials and heads of the relevant Congressional committees recognize the need for a write-down. After all, they have been placed in their positions precisely because they do not understand that debt leveraging is a form of economic overhead, not real “wealth creation.” But their tunnel vision is what makes them “reliable” to Wall Street, which doesn’t like surprises. And the entire character of today’s financial crisis continues to be labeled “surprising” and “unexpected” by the press as each new surprisingly pessimistic statistic hits the news. It’s safe to be surprised; suspicious to have expected bad news and being a “premature doomsayer.” One must have faith in the system above all. And the system was the Greenspan Bubble. That is why “Ayn Rand Alan” was put in charge in the first place, after all. So the government tries to recover the happy Bubble Economy years by getting debt growing again, hoping to re-inflate real estate and stock market prices. That was, after all, the Golden Age of finance capital’s world of using debt leverage to bid up the book-price of fictitious capital assets. Everyone loved it as long as it lasted. Voters thought they had a chance to become millionaires, and approved happily. And at least it made Wall Street richer than ever before – while almost doubling the share of wealth held by the wealthiest 1% of America’s families. For Washington policy makers, they are synonymous with “the economy” – at least the economy for which national economic policy is being formulated these days. The Obama-Geithner plan to restart the Bubble Economy’s debt growth so as to inflate asset prices by enough to pay off the debt overhang out of new “capital gains” cannot possibly work. But that is the only trick these ponies know. We have entered an era of asset-price deflation, not inflation. Economic data charts throughout the world have hit a wall and every trend has been plunging vertically downward since last autumn. U.S. consumer prices experienced their fastest plunge since the Great Depression of the 1930s, along with consumer “confidence,” international shipping, real estate and stock market prices, oil and the exchange rate for British sterling. The global economy is falling into depression, and cannot recover until debts are written down. Instead of doing this, the government is doing just the opposite. It is proposing to take bad debts onto the public-sector balance sheet, printing new Treasury bonds give the banks – bonds whose interest charges will have to be paid by taxing labor and industry. The oligarchy’s plans for a bailout (at least of its own financial position) In periods of looming collapse, wealthy elites protect their funds like rats fleeing a sinking ship. In times past they bought gold when currencies started to weaken. (Patriotism never has been a characteristic of cosmopolitan finance capital.) Since the 1950s the International Monetary Fund has made loans to support Third World exchange rates long enough to subsidize capital flight. In the United States over the past half-year, bankers and Wall Street investors have tapped the Treasury and Federal Reserve to support prices of their bad loans and financial gambles, buying out or guaranteeing $12 trillion of these junk debts. Protection for the U.S. financial elite thus takes the form of domestic public debt, not foreign currency. It is all in vain as far as the real economy is concerned. When the Treasury gives banks newly printed government bonds in “cash for trash” swaps, it leaves today’s unpayably high private-sector debt in place. All that happens is that this debt is now owed to (or guaranteed by) the government, which will have to impose taxes to pay the interest charges. The new twist is a variant on the IMF “stabilization” plans that lend money to central banks to support their currencies – for long enough to enable local oligarchs and foreign investors to move their savings and investments offshore at a good exchange rate. The currency then is permitted to collapse, enabling currency speculators to rake in enough gains to empty out the central bank’s reserves. Speculators view these central bank holdings as a target to be raided – the larger the better. The IMF will lend a central bank, say, $10 billion to “support the currency.” Domestic holders will flee the currency at a high exchange rate. Then, when the loan proceeds are depleted, the currency plunges. Wages are squeezed in the usual IMF austerity program, and the economy is forced to earn enough foreign exchange to pay back the IMF. As a condition for getting this kind of IMF “support,” governments are told to run a budget surplus, cut back social spending, lower wages and raise taxes on labor so as to squeeze out enough exports to repay the IMF loans. But inasmuch as this kind “stabilization plan” cripples their domestic economy, they are obliged to sell off public infrastructure at distress prices – to foreign buyers who themselves borrow the money. The effect is to make such countries even more dependent on less “neoliberalized” economies. Latvia is a poster child for this kind of disaster. Its recent agreement with Europe is a case in point. To help the Swedish banks withdraw their funds from the sinking ship, EU support is conditional on Latvia’s government agreeing to cut salaries in the private sector – and not to raise property taxes (currently almost zero). The problem is that Latvia, like other post-Soviet economies, has scant domestic output to export. Industry throughout the former Soviet Union was torn up and scrapped in the 1990s. (Welcome to victorious finance capitalism, Western-style.) What they had was real estate and public infrastructure free of debt – and hence, available to be pledged as collateral for loans to finance their imports. Ever since its independence from Russia in 1991, Latvia has paid for its imported consumer goods and other purchases by borrowing mortgage credit in foreign currency from Scandinavian and other banks. The effect has been one of the world’s biggest property bubbles – in an economy with no means of breaking even except by loading down its real estate with more and more debt. In practice the loans took the form of mortgage borrowing from foreign banks to finance a real estate bubble – and their import dependency on foreign suppliers. So instead of helping it and other post-Soviet nations develop self-reliant economies, the West has viewed them as economic oysters to be broken up to indebt them in order to extract interest charges and capital gains, leaving them empty shells. This policy crested on January 26, 2009, when Joaquin Almunia of the European Commission wrote a letter to Latvia’s Prime Minister spelling out the terms on which Europe will bail out the Swedish and other foreign banks operating in Latvia – at Latvia’s own expense: Extended assistance is to be used to avoid a balance of payments crisis, which requires . . . restoring confidence in the banking sector [now entirely foreign owned], and bolstering the foreign reserves of the Bank of Latvia. This implies financing … outstanding government debt repayments (domestic and external). And if the banking sector were to experience adverse events, part of the assistance would be used for targeted capital infusions or appropriate short-term liquidity support. However, financial assistance is not meant to be used to originate new loans to businesses and households. . . . it is important not to raise ungrounded expectations among the general public and the social partners, and, equally, to counter misunderstandings that may arise in this respect. Worryingly, we have witnessed some recent evidence in Latvian public debate of calls for part of the financial assistance to be used inter alia for promoting export industries or to stimulate the economy through increased spending at large. It is important actively to stem these misperceptions. Riots broke out last week, and protesters stormed the Latvian Treasury. Hardly surprising! There is no attempt to help Latvia develop the export capacity to cover its imports. After the domestic kleptocrats, foreign banks and investors have removed their funds from the economy, the Latvian lat will be permitted to depreciate. Foreign buyers then can come in and pick up local assets on the cheap once again. The practice of European banks riding the crest of the post-Soviet real estate bubble is backfiring to wreck the European economies that have engaged in this predatory lending to neighboring economies as well. As one reporter has summarized:

In Poland 60 percent of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America’s sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not. Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks.1

This was the West’s alternative to Stalinism. It did not help these countries emulate how Britain and America got rich by protectionist policies and publicly nurtured industrialization and infrastructure spending. Rather, the financial rape and industrial dismantling of the former Soviet economies was the most recent exercise in Western colonialism. At least U.S. investors were smart enough to stand clear and merely ride the stock market run-up before jumping ship. But now, the government’s plan to “save” the economy is to “save the banks,” along similar lines to the West trying to save its banks from their adventure in the post-Soviet economies. This is the basic neoliberal economic plan, after all. The U.S. economy is about to be “post-Sovietized.” The U.S. giveaway to banks, masquerading as “help for troubled homeowners” The Obama bank bailout is arranged much like an IMF loan to support the exchange rate of foreign currency, but with the Treasury supporting financial asset prices for U.S. banks and other financial institutions. Instead of banks and oligarchs abandoning the dollar, the aim is to enable them to dump their bad mortgages and CDOs and get domestic Treasury bonds. Private-sector debt will be moved onto the U.S. Government balance sheet, where “taxpayers” will bear losses – mainly labor not Wall Street, inasmuch as the financial sector has been freed of income-tax liability by the “small print” in last autumn’s Paulson-Bush bailout package. But at least the U.S. Government is handling the situation entirely in domestic dollars. As in Third World austerity programs, the effect of keeping the debts in place at the “real” economy’s expense will be to shrink the domestic U.S. market – while providing opportunities for hedge funds to pick up depreciated assets cheaply as the federal government, states and cities sell them off. This is called letting the banks “earn their way out of debt.” It’s strangling the “real” economy, because not a dollar of the government’s response has been devoted to reducing the overall debt volume. Take the much-vaunted $50 billion program designed to renegotiate mortgages downward for “troubled homeowners.” Upon closer examination it turns out that the real beneficiaries are the giant leading banks such as Citibank and Bank of America that have made the bad loans. The Treasury will take on the bad debt that banks are stuck with, and will permit mortgagees to renegotiate their monthly payment down to 38% of their income. But rather than the banks taking the loss as they should do for over-lending, the Treasury itself will make up the difference – and pay it to the banks so that they will be able to get what they hoped to get. The hapless mortgage-burdened family stuck in their negative-equity home turns out to be merely a passive vehicle for the Treasury to pass debt relief on to the commercial banks. Few news stories have made this clear, but the Financial Times spelled the details buried in small print.2 It added that the Treasury has not yet decided whether to write down the debt principal for the estimated 15 million families with negative equity (and perhaps 30 million by this time next year as property prices continue to plunge). No doubt a similar deal will be made: For every $100,000 of write-down in debt owed by over-mortgaged homeowners, the bank will receive $100,000 from the Treasury. Government debt will rise by $100,000, and the process will continue until the Treasury has transferred $50,000,000 to the banks that made the reckless loans. There is enough for just 500 of these renegotiations of $100,000 each. Hardly enough to make much of a dent, but the principle has been put in place for many further bailouts. It will take almost an infinity of them, as long as the Treasury tries to support the fiction that “the miracle of compound interest” can be sustained for long. The danger is the economy may be dead by the time saner economic understanding penetrates the public consciousness. In the mean time, bad private-sector debt will be shifted onto the government’s balance sheet. Interest and amortization currently owed to the banks will be replaced by obligations to the U.S. Treasury. Taxes will be levied to make up the bad debts with which the government is stuck. The “real” economy will pay Wall Street – and will be paying for decades! Calling the $12 trillion giveaway to bankers a “subprime crisis” makes it appear that bleeding-heart liberals got Fannie Mae and Freddie Mac into trouble by insisting that these public-private institutions make irresponsible loans to the poor. The party line is, “Blame the victim.” But we know this is false. The bulk of bad loans are concentrated in the largest banks. It was Countrywide and other banksters that led the irresponsible lending and brought heavy-handed pressure on Fannie Mae. Most of the nation’s smaller, local banks didn’t make such reckless loans. The big mortgage shops didn’t care about loan quality, because they were run by salesmen. The Treasury is paying off the gamblers and billionaires by supporting the value of bank loans, investments and derivative gambles, leaving the Treasury in debt. U.S./post-Soviet Convergence? It may be time to look once again at what Larry Summers and his Rubinomics gang did in Russia in the mid-1990s and to Third World countries during his tenure as World Bank economist to see what kind of future is being planned for the U.S. economy over the next few years. Throughout the Soviet Union the neoliberal model established “equilibrium” in a way that involved demographic collapse: shortening life spans, lower birth rates, alcoholism and drug abuse, psychological depression, suicides, bad health, unemployment and homelessness for the elderly (the neoliberal mode of Social Security reform). Back in the 1970s, people speculated whether the US and Soviet economies were converging. Throughout the 20th century, of course, everyone expected government regulation, infrastructure investment and planning to increase. It looked like the spread of democratically elected governments would go hand in hand with people voting in their own economic interest to raise living standards, thereby closing the inequality gap. This is not the kind of convergence that has occurred since 1991. Government power is being dismantled, living standards have stagnated and wealth is concentrating at the top of the economic pyramid. Economic planning and resource allocation has passed into the hands of Wall Street, whose alternative to Hayek’s “road to serfdom” is debt peonage for the economy at large. There does need to be a strong state, to be sure, to keep the financial and real estate rentier power in place. But the West’s alternative to the old Soviet bureaucracy is a financial planning. In place of a political overhead, we have a financial and real estate overhead. Stalinist Russia and Maoist China achieved high technology without land-rent, monopoly rent and interest overhead. This purging of rentier income was the historical task of classical political economy, and it became that of socialism. The aim was to create a Clean Slate financially, bringing prices in line with technologically necessary costs of production. The aim was to provide everyone with the fruits of their labor rather than letting banks and landlords siphon off the economic surplus. Ideas of economic efficiency and “wealth creation” today are an utterly different kind of liberalism and “free markets.” Commercial banks lend money not to increase production but to inflate asset prices. Some 70% of bank loans are mortgage loans for real estate, and most of the rest is for corporate takeovers and raids, to finance stock buy-backs or simply to pay dividends. Asset-price inflation obliges people to go deeper into debt than ever before to obtain access to housing, education and medical care. The economy is being “financialized,” not industrialized. This has been the plan as much for the post-Soviet states as for North America, Western Europe and the Third World. But we are far from having reached the end of the line. Celebrations that our present financialized economy represents the “end of history” are laughingly premature. Today’s policies look more like a dead end. But that does not mean that, like the Roman Empire, they won’t lead us down toward a new Dark Age. That’s what tends to happen when oligarchies do the planning. Is America a Failed Economy? It may be time to ask whether neoliberal pro-rentier economics has turned America and the West into a Failed Economy. Is there really no alternative? Have the neoliberals made the shift of planning from governments to the financial oligarchy irreversible? Let’s first dispose of the “foundation myth” of the idea still guiding the United States and Europe. Free-market economists pretend that prices can be brought into line most efficiently with technologically necessary costs of production under capitalism, and indeed, under finance capitalism. The banks and stock market are supposed to allocate resources most efficiency. That at least is the dream of self-regulating markets. But today it looks like only a myth, public relations patter talk to get a generation of increasingly indebted voters not to act in their own self-interest. Industrial capitalism always has been a hybrid, a symbiosis with its feudal legacy of absentee property ownership, oligarchic finance and public debts rather than the government acting as net creditor. The essence of feudalism was extractive, not productive. That is why it created industrial capitalism as State Policy in the first place – if only to increase its war-making powers. But the question must now be raised as to whether only socialism can complete the historical task that classical political economy set out for itself – the ideal that futurists in the 19th and 20th centuries believed that an unpurified capitalism might still be able bring about without shedding its legacy of commercial banking indebting property and carving infrastructure out of the public domain. Today it is easier to see that the Western economies cannot go on the way they have been. They have reached the point where the debts exceed the ability to pay. Instead of recognizing this fact and scaling debts back into line with the ability to pay, the Obama-Geithner plan is to bail out the big banks and hedge funds, keeping the volume of debt in place and indeed, growing once again through the “magic of compound interest.” The result can only be an increasingly extractive economy, until households, real estate and industrial companies, states and cities, and the national government itself is driven into debt peonage. The alternative is a century and a half old, and emerged out of the ideals of the classical economic doctrines of Adam Smith, David Ricardo, John Stuart Mill, and the last great classical economist, Marx. Their common denominator was to view rent and interest are extractive, not productive. Classical political economy and its successor Progressive Era socialism sought to nationalize the land (or at least to fully tax its rent as the fiscal base). Governments were to create their own credit, not leave this function to wealthy elites via a bank monopoly on credit creation. So today’s neoliberalism paints a false picture of what the classical economists envisioned as free markets. They were markets free of economic rent and interest (and taxes to support an aristocracy or oligarchy). Socialism was to free economies from these overhead charges. Today’s Obama-Geithner rescue plan is just the reverse. Notes 1 Ambrose Evans-Pritchard, “If Eastern Europe falls, world is next,” The Telegraph, February 14, 2009. 2 Krishna Guha, “US closes in on subsidy plan to stop foreclosures,” Financial Times, February 13, 2009.

Ready for a fun weekend? Suzan ________________________

More Bad News (To (En)Lighten Your Day)

If you're looking to fill in with some light reading while I continue to readjust to my move, there's always this:

Bad News From America’s Top Spy TruthDig By Chris Hedges February 16, 2009 - We have a remarkable ability to create our own monsters. A few decades of meddling in the Middle East with our Israeli doppelgänger and we get Hezbollah, Hamas, al-Qaida, the Iraqi resistance movement and a resurgent Taliban. Now we trash the world economy and destroy the ecosystem and sit back to watch our handiwork. Hints of our brave new world seeped out Thursday when Washington’s new director of national intelligence, retired Adm. Dennis Blair, testified before the Senate Intelligence Committee. He warned that the deepening economic crisis posed perhaps our gravest threat to stability and national security. It could trigger, he said, a return to the “violent extremism” of the 1920s and 1930s. It turns out that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists. You wouldn’t know this from the Obama administration, which seems hellbent on draining the blood out of the body politic and transfusing it into the corpse of our financial system. But by the time Barack Obama is done all we will be left with is a corpse—a corpse and no blood. And then what? We will see accelerated plant and retail closures, inflation, an epidemic of bankruptcies, new rounds of foreclosures, bread lines, unemployment surpassing the levels of the Great Depression and, as Blair fears, social upheaval. The United Nations’ International Labor Organization estimates that some 50 million workers will lose their jobs worldwide this year. The collapse has already seen 3.6 million lost jobs in the United States. The International Monetary Fund’s prediction for global economic growth in 2009 is 0.5 percent—the worst since World War II. There are 2.3 million properties in the United States that received a default notice or were repossessed last year. And this number is set to rise in 2009, especially as vacant commercial real estate begins to be foreclosed. About 20,000 major global banks collapsed, were sold or were nationalized in 2008. There are an estimated 62,000 U.S. companies expected to shut down this year. Unemployment, when you add people no longer looking for jobs and part-time workers who cannot find full-time employment, is close to 14 percent. And we have few tools left to dig our way out. The manufacturing sector in the United States has been destroyed by globalization. Consumers, thanks to credit card companies and easy lines of credit, are $14 trillion in debt. The government has pledged trillions toward the crisis, most of it borrowed or printed in the form of new money. It is borrowing trillions more to fund our wars in Afghanistan and Iraq. And no one states the obvious: We will never be able to pay these loans back. We are supposed to somehow spend our way out of the crisis and maintain our imperial project on credit. Let our kids worry about it. There is no coherent and realistic plan, one built around our severe limitations, to stanch the bleeding or ameliorate the mounting deprivations we will suffer as citizens. Contrast this with the national security state’s strategies to crush potential civil unrest and you get a glimpse of the future. It doesn’t look good. “The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications,” Blair told the Senate. “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.” The specter of social unrest was raised at the U.S. Army War College in November in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development.” The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.” “An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on. “Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read. In plain English, something bureaucrats and the military seem incapable of employing, this translates into the imposition of martial law and a de facto government being run out of the Department of Defense. They are considering it. So should you. Adm. Blair warned the Senate that “roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown.” He noted that the “bulk of anti-state demonstrations” internationally have been seen in Europe and the former Soviet Union, but this did not mean they could not spread to the United States. He told the senators that the collapse of the global financial system is “likely to produce a wave of economic crises in emerging market nations over the next year.” He added that “much of Latin America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access to international aid or credit, or other coping mechanism.” “When those growth rates go down, my gut tells me that there are going to be problems coming out of that, and we’re looking for that,” he said. He referred to “statistical modeling” showing that “economic crises increase the risk of regime-threatening instability if they persist over a one to two year period.” Blair articulated the newest narrative of fear. As the economic unraveling accelerates we will be told it is not the bearded Islamic extremists, although those in power will drag them out of the Halloween closet when they need to give us an exotic shock, but instead the domestic riffraff, environmentalists, anarchists, unions and enraged members of our dispossessed working class who threaten us. Crime, as it always does in times of turmoil, will grow. Those who oppose the iron fist of the state security apparatus will be lumped together in slick, corporate news reports with the growing criminal underclass. The committee’s Republican vice chairman, Sen. Christopher Bond of Missouri, not quite knowing what to make of Blair’s testimony, said he was concerned that Blair was making the “conditions in the country” and the global economic crisis “the primary focus of the intelligence community.” The economic collapse has exposed the stupidity of our collective faith in a free market and the absurdity of an economy based on the goals of endless growth, consumption, borrowing and expansion. The ideology of unlimited growth failed to take into account the massive depletion of the world’s resources, from fossil fuels to clean water to fish stocks to erosion, as well as overpopulation, global warming and climate change. The huge international flows of unregulated capital have wrecked the global financial system. An overvalued dollar (which will soon deflate), wild tech, stock and housing financial bubbles, unchecked greed, the decimation of our manufacturing sector, the empowerment of an oligarchic class, the corruption of our political elite, the impoverishment of workers, a bloated military and defense budget and unrestrained credit binges have conspired to bring us down. The financial crisis will soon become a currency crisis. This second shock will threaten our financial viability. We let the market rule. Now we are paying for it. The corporate thieves, those who insisted they be paid tens of millions of dollars because they were the best and the brightest, have been exposed as con artists. Our elected officials, along with the press, have been exposed as corrupt and spineless corporate lackeys. Our business schools and intellectual elite have been exposed as frauds. The age of the West has ended. Look to China. Laissez-faire capitalism has destroyed itself. It is time to dust off your copies of Marx.

Sorry ya asked now, aren't ya? (Doin' my best Scarahy impression.) Suzan ____________________________________

Marx Lives! It Is NO Accident That Lives Have Been Destroyed by the Treasury

Please forgive my last week's efforts (or lack thereof) as I have been moving (again). Like driftglass and uncountable others, I continue to seek a J-O-B across this once fine country of ours in the mad hope that decent employment (with some benefits?) is not just another fond memory constituting most of the miserly sum with which we will be left as the Cheney/Bush detritus is flushed (if that's even possible). I was working on three essays concerning our present limboish condition (and it's only Limbo if you don't know where you'll be ending up), focusing on the argument that if you believe these "toxic assets" are a real unknown to those in on the take, well, I'm guessing you've already been taken on several pyramid schemes. Here are three articles/essays I've perused at length recently from some of my favorite economics and/or political members of the intelligentsia, from which I'll give you a tasty selection (but you should read each of them as they are quite good at illuminating this otherwise dismally cloudy news coverage). Pay attention to the tales of spending exemplified by the John Thains of this rarefied world. I'll be back online in more rested form in a day or two. Forgive me. As Drifty said in this superb confluence of literary achievement you should read in its entirety (a tiny bit of editing was inserted - Ed.):

To fight a tiny number of Very Scary Brown People, America wiped its collective ass with the rule of law and turned itself over to this idiot and his band of pinstriped terrorists. And like the sirens and apparitions we followed into catastrophe during the reign of Bush, America allowed itself to be fatally mesmerized by powerfully authoritarian impulses in the world of finance. As Flight Suit Action Figure Dubya promised to protect us from the collywobbles under our beds, Pinstripe Action Figure CEOs promised to deliver ouchless wealth that would forever cofferdam us from the specter of Scary Poverty. So when they told us they had pulled a whole, new economy out of their collective heinies made out of incomprehensibly complex "instruments" that would make us all rich as pirates forever and ever, instead of calling the Bunko Squad, America tossed common sense and basic arithmetic into the wood chipper and turned itself over to the League of Free Market Economic Justice, who had come thundering down from Mount Laffer to deliver us from want. And in exchange all we had to do is give them what every other comic book superhero gets to have: unlimited power.

Until finally we reaped the superhuman savior the churches had been priming us for (although less of a Jesus figure(s) I cannot imagine):

You are a World-Saver. A Decider. A Superman. Master of a Universe where wealth bears all things, believes all things, hopes all things, endures all things. Where money understands all. Forgives all. Excuses all. And thus we find ourselves where the road diverges once again. On the one side, are the men and women who council reform. Who call to our better angels and ask us once again to stand against:

“…this new industrial dictatorship. The savings of the average family, the capital of the small business man, the investments set aside for old age—other people's money—these were tools which the new economic royalty used to dig itself in. “ Franklin D. Roosevelt July 27, 1936

While on the other side are democracy’s enemies, who try to gin up those old, reliable fears one more time. Who whisper that all we really need are more supermen.

"And, for an instant, she stared directly into those soft blue eyes and knew, with an instinctive mammalian certainty, that the exceedingly rich were no longer even remotely human” William Gibson, "Count Zero"

Rep. Paul Kanjorski (D-PA) stated on CSPAN on Feb 8, 2009, after saying that "We don't even talk about these things," that on September 15, 2008, that the Secretary of the Treasury Paulson and the Fed Chairman Bernanke told Congress that he "Federal Reserve noticed around 11:00 AM a tremendous drawdown of money market funds in the U.S. to the tune of $550B in one hour," called "an electronic run on the bank" that would have withdrawn 5.5 trillion by 2:00 PM if they hadn't stopped the bank run and the total collapse of the U.S. economy and the world economy. Thus Congress was terrorized into the original Paulson TARP bailout which promised to buy the unknown toxic assets. ___________________________

Bubble Economy 2.0: The Financial Recovery Plan from Hell By Michael Hudson Global Research, February 11, 2009 (Emphasis marks were inserted - Ed.) Martin Wolf started off his Financial Times column today (February 11) with the bold question: “Has Barack Obama's presidency already failed?”[1] The stock market had a similar opinion, plunging 382 points. Having promised “change,” Mr. Obama is giving us more Clinton-Bush via Robert Rubin's protégé, Tim Geithner. Tuesday's $2.5 trillion Financial Stabilization Plan to re-inflate the Bubble Economy is basically an extension of the Bush-Paulson giveaway – yet more Rubinomics for financial insiders in the emerging Wall Street trusts. The financial system is to be concentrated into a cartel of just a few giant conglomerates to act as the economy's central planners and resource allocators. This makes banks the big winners in the game of “chicken” they've been playing with Washington, a shakedown holding the economy hostage. “Give us what we want or we'll plunge the economy into financial crisis.” Washington has given them $9 trillion so far, with promises now of another $2 trillion – and still counting. A true reform – one designed to undo the systemic market distortions that led to the real estate bubble – would have set out to reverse the Clinton-Rubin repeal of the Glass-Steagall Act so as to prevent the corrupting conflicts of interest that have resulted in vertical trusts such as Citibank and Bank of America/Countrywide/Merrill Lynch. By unleashing these conglomerate grupos (to use the term popularized under Pinochet with Chicago Boy direction – a dress rehearsal of the mass financial bankruptcies they caused in Chile by the end of the 1970s) The Clinton administration enabled banks to merge with junk mortgage companies, junk-money managers, fictitious property appraisal companies, and law-evasion firms all designed to package debts to investors who trusted them enough to let them rake off enough commissions and capital gains to make their managers the world's highest-paid economic planners. Today's economic collapse is the direct result of their planning philosophy. It actually was taught as “wealth creation” and still is, as supposedly more productive than the public regulation and oversight so detested by Wall Street and its Chicago School aficionados. The financial powerhouses created by this “free market” philosophy span the entire FIRE sector – finance, insurance and real estate, “financializing” housing and commercial property markets in ways guaranteed to make money by creating and selling debt. Mr. Obama's advisors are precisely those of the Clinton Administration who supported trustification of the FIRE sector. This is the broad deregulatory medium in which today's bad-debt disaster has been able to spread so much more rapidly than at any time since the 1920s. The commercial banks have used their credit-creating power not to expand the production of goods and services or raise living standards but simply to inflate prices for real estate (making fortunes for their brokerage, property appraisal and insurance affiliates), stocks and bonds (making more fortunes for their investment bank subsidiaries), fine arts (whose demand is now essentially for trophies, degrading the idea of art accordingly) and other assets already in place. The resulting dot.com and real estate bubbles were not inevitable, not economically necessary. They were financially engineered by the political deregulatory power acquired by banks corrupting Congress through campaign contributions and public relations “think tanks” (more in the character of Orwellian doublethink tanks) to promote the perverse fiction that Wall Street can be and indeed is automatically self-regulating. This is a travesty of Adam Smith's “Invisible Hand.” This hand is better thought of as covert. The myth of “free markets” is now supposed to consist of governments withdrawing from planning and taxing wealth, so as to leave resource allocation and the economic surplus to bankers rather than elected public representatives. This is what classically is called oligarchy, not democracy. This centralization of planning, debt creation and revenue-extracting power is defended as the alternative to Hayek's road to serfdom. But it is itself the road to debt peonage, a.k.a. the post-industrial economy or “Information Economy.” The latter term is another euphemistic travesty in view of the kind of information the banking system has promoted in the junk accounting crafted by their accounting firms and tax lawyers (off-balance-sheet entities registered on offshore tax-avoidance islands), the AAA applause provided as “information” to investors by the bond-rating cartel, and indeed the national income and product accounts that depict the FIRE sector as being part of the “real” economy, not as an institutional wrapping of special interests and government-sanctioned privilege acting in an extractive rather than a productive way. “Thanks for the bonuses,” bankers in the United States and England testified this week before Congress and Parliament. “We'll keep the money, but rest assured that we are truly sorry for having to ask you for another few trillion dollars. At least you should remember our theme song: We are still better managers than the government, and the bulwark against government bureaucratic resource allocation.” This is the ideological Big Lie sold by the Chicago School “free market” celebration of dismantling government power over finance, all defended by complex math rivaling that of nuclear physics that the financial sector is part of the “real” economy automatically producing a fair and equitable equilibrium. This is not bad news for stockholders of more local and relatively healthy banks (healthy in the sense of avoiding negative equity). Their stocks soared and were by far the major gainers on Tuesday's stock market, while Wall Street's large Bad Banks plunged to new lows. Solvent local banks are the sort that were normal prior to repeal of Glass Steagall. They are to be bought by the large “troubled” banks, whose “toxic loans” reflect a basically toxic operating philosophy. In other words, small banks who have made loans carefully will be sucked into Citibank, Bank of America, JP Morgan Chase and Wells Fargo – the Big Four or Five where the junk mortgages, junk CDOs and junk derivatives are concentrated, and have used Treasury money from the past bailout to buy out smaller banks that were not infected with such reckless financial opportunism. Even the Wall Street Journal editorialized regarding the Obama Treasury's new “Public-Private Investment Fund” to pump a trillion dollars into this mess: “Mr. Geithner would be wise to put someone strong land independent in charge of this fund – someone who can say no to Congress and has no ties to Citigroup, Robert Rubin or Wall Street.” None of this can solve today's financial problem. The debt overhead far exceeds the economy's ability to pay. If the banks would indeed do what Pres. Obama's appointees are begging them to do and lend more, the debt burden would become even heavier and buying access to housing even more costly. When the banks look back fondly on what Alan Greenspan called “wealth creation,” we can see today that the less euphemistic terminology would be “debt creation.” This is the objective of the new bank giveaway. It threatens to spread the distortions that the large banks have introduced until the entire system presumably looks like Citibank, long the number-one offender of “stretching the envelope,” its euphemism for breaking the law bit by bit and daring government regulators and prosecutors to try and stop it and thereby plunging the U.S. financial system into crisis. This is the shakedown that is being played out this week. And the Obama administration blinked – as these same regulators did when they were in charge of the Clinton administration's bank policy. So much for the promised change! The three-pronged Treasury program seems to be only Stage One of a two-stage “dream recovery plan” for Wall Street. Enough hints have trickled out for the past three months in Wall Street Journal op-eds to tip the hand for what may be in store. Watch for the magic phrase “equity kicker,” first heard in the S&L mortgage crisis of the 1980s. It refers to the banker's share of capital gains, that is, asset price inflation in Bubble #2 that the Recovery Program hopes to sponsor. The first question to ask about any Recovery Program is, “Recovery for whom?” The answer given on Tuesday is, “For the people who design the Program and their constituency” – in this case, the bank lobby. The second question is, “Just what is it they want to ‘recover'?” The answer is, the Bubble Economy. For the financial sector it was a golden age. Having enjoyed the Greenspan Bubble that made them so rich, its managers would love to create yet more wealth for themselves by indebting the “real” economy yet further while inflating prices all over again to make new capital gains. The problem for today's financial elites is that it is not possible to inflate another bubble from today's debt levels, widespread negative equity, and still-high level of real estate, stock and bond prices. No amount of new capital will induce banks to provide credit to real estate already over-mortgaged or to individuals and corporations already over-indebted. Moody's and other leading professional observers have forecast property prices to keep on plunging for at least the next year, which is as far as the eye can see in today's unstable conditions. So the smartest money is still waiting like vultures in the wings – waiting for government guarantees that toxic loans will pay off. Another no-risk private profit to be subsidized by public-sector losses. While the Obama administration's financial planners wring their hands in public and say “We feel your pain” to debtors at large, they know that the past ten years have been a golden age for the banking system and the rest of Wall Street. Like feudal lord claiming the economic surplus for themselves while administering austerity for the population at large, the wealthiest 1% of the population has raised their appropriation of the nationwide returns to wealth – dividends, interest, rent and capital gains – from 37% of the total ten years ago to 57% five years ago and it seems nearly 70% today. This is the highest proportion since records have been kept. We are approaching Russian kleptocratic levels. The officials drawn from Wall Street who now control of the Treasury and Federal Reserve repeat the right-wing Big Lie: Poor “subprime families” have brought the system down, exploiting the rich by trying to ape their betters and live beyond their means. Taking out subprime loans and not revealing their actual ability to pay, the NINJA poor (no income, no job, no audit) signed up to obtain “liars' loans” as no-documentation Alt-A loans are called in the financial junk-paper trade. I learned the reality a few years ago in London, talking to a commercial banker. “We've had an intellectual breakthrough,” he said. “It's changed our credit philosophy.” “What is it?” I asked, imagining that he was about to come out with yet a new magical mathematics formula? “The poor are honest,” he said, accompanying his words with his jaw dropping open as if to say, “Who would have guessed?” The meaning was clear enough. The poor pay their debts as a matter of honor, even at great personal sacrifice and what today's neoliberal Chicago School language would call uneconomic behavior. Unlike Donald Trump, they are less likely to walk away from their homes when market prices sink below the mortgage level. This sociological gullibility does not make economic sense, but reflects a group morality that has made them rich pickings for predatory lenders such as Countrywide, Wachovia and Citibank. So it's not the “lying poor.” It's the banksters' fault after all! For this elite the Bubble Economy was a deliberate policy they would love to recover. The problem is how to start a new bubble to make yet another fortune? The alternative is not so bad – to keep the bonuses, capital gains and golden parachutes they have given themselves, and run. But perhaps they can improve in Bubble Economy #2. The Treasury's newest Financial Stability Plan (Bailout 2.0) is only the first step. It aims at putting in place enough new bank-lending capacity to start inflating prices on credit all over again. But a new bubble can't be started from today's asset-price levels. How can the $10 to $20 trillion capital-gain run-up of the Greenspan years been repeated in an economy that is “all loaned up”? One thing Wall Street knows is that in order to make money, asset prices not only need to rise, they have to go down again. Without going down, after all, how can they rise up? Without a crucifixion for the economy, how can there be a resurrection? The more frenetic the price fibrillation, the easier it is for computerized buy-and-sell programs to make money on options and derivatives. So here's the situation as I see it. The first objective is to preserve the wealth of the creditor class – Wall Street, the banks and the other financial vehicles that enrich the wealthiest 1% and, to be fair within America's emerging new financial oligarchy, the richest 10% of the population. Stage One involves buying out their bad loans at a price that saves them from taking a loss. The money will be depicted to voters as a “loan,” to be repaid by banks extracting enough new debt charges in the new rigged game the Treasury is setting up. The current loss will be shifted onto “taxpayers” and made up by new debtors – in both cases labor, onto whose shoulders the tax burden has been shifted steadily, step by step since 1980. An “aggregator” bank (sounds like “alligator,” from the swamps of toxic waste) will buy the bad debts and put them in a public agency. The government calls this the “bad” bank. (This is Geithner's first point.) But it does good for Wall Street – by buying loans that have gone bad, along with loans and derivative guarantees and swaps that never were good in the first place. If the private sector refuses to buy these bad loans at prices the banks are asking for, why should the government pretend that these debt claims are worth more. Vulture funds are said to be offering about what they were when Lehman Brothers went bankrupt: about 22 cents on the dollar. The banks are asking for 75 cents on the dollar. What will the government offer? Perhaps the worst alternative is that is now being promoted by the banks and vulture investors in tandem: the government will guarantee the price at which private investors buy toxic financial waste from the banks. A vulture fund would be happy enough to pay 75 cents on the dollar for worthless junk if the government were to provide a guarantee. The Treasury and Federal Reserve pretend that they simply would be “providing liquidity” to “frozen markets.” But the problem is not liquidity and it is not subjective “market psychology.” It is “solvency,” that is, a realistic awareness that toxic waste and bad derivatives gambles are junk. Mr. Geithner has not been able to come to terms with how to value this – without bringing the Obama administration down in a wave of populist protest – any more than Mr. Paulson was able to carry out his original Tarp proposal along these lines. The hardest task for today's banksters is to revive opportunities for creditors to make a new killing. (It's the economy that's being killed, of course.) This seems to be the aim of the Public/Private investment company that Mr. Geithner is establishing as the second element in his plan. The easiest free lunch is to ride the wave of a new bubble – a fresh wave of asset-price inflation to be introduced to “cure” the problem of debt deflation. Here's how I imagine the ploy might work. Suppose a hapless family has bought a home for $500,000, with a full 100% $500,000 adjustable-rate mortgage scheduled to reset this year at 8%. Suppose too that the current market price will fall to $250,000, a loss of 50% by yearend 2009. Sometime in mid 2010 would seem to be long enough for prices to decline by enough to make “recovery” possible – Bubble Economy 2.0. Without such a plunge, there will be no economy to “rescue,” no opportunity for Tim Geithner and Laurence Summers to “feel your pain” and pull out of their pocket the following package – a variant on the “cash for trash” swap, a public agency to acquire the $500,000 mortgage that is going bad, heading toward only a $250,000 market price. The “bad bank” was not quite ready to be created this week, but the embryo is there. It will take the form of a public/private partnership (PPP) of the sort that Tony Blair made so notorious in Britain. And speaking of Mr. Blair, I am writing this from England, where almost every America-watcher I talk to has expressed amazement at Obama's performance last week idealizing England's counterpart to George Bush when it comes to unpopularity contests. Blair's tenure in office was a horror story, not something to be congratulated for. He privatized the railroads and entering into the disastrous public/private partnership that doubled, tripled or quadrupled the cost of public projects by adding on a heavy financial overhead. If Obama does not realize how he shocked Britain and much of Europe with his praise, then he is in danger of foisting a similar public/private financialized “partnership” on the United States.

The new public/private institution will be financed with private funds – in fact, with the money now being given to re-capitalize America's banks (headed by the Wall St. bank's that have done so bad). Banks will use the Treasury money they have received by “borrowing” against their junk mortgages at or near par to buy shares in a new $5 trillion institution created along the lines of the unfortunate Fanny Mae and Freddie Mac. Its bonds will be guaranteed. (That's the “public” part – “socializing” the risk.) The PPP institution will have the power to buy and renegotiate the mortgages that have passed into the hands of the government and other holders. This “Homeowner Rescue Trust” will use its private funding for the “socially responsible” purpose of “saving the taxpayer” and middle class homeowners by renegotiating the mortgage down from its original $500,000 to the new $250,000 market price. Here's the patter talk you can expect, with the usual Orwellian euphemisms. The Homeowners Rescue PPP will appear as a veritable Savior Bank resurrected from the wreckage of Bubble #1. Its clients will be families strapped by their mortgage debt and feeling more and more desperate as the price of their major asset plummets more deeply into Negative Equity territory. To them, the new PPP will say: “We've got a deal to save you. We'll renegotiate your mortgage down to the current market price, $250,000, and we'll also lower your interest rate to just 5.50%, the new rate. This will cut your monthly debt charges by nearly two thirds. Not only can you afford to stay in your home, you will escape from your negative equity.” The family probably will say, “Great.” But they will have to make a concession. That's where the new public/private partnership makes its killing. Funded with private money that will take the “risk” (and also reap the rewards), the Savior Bank will say to the family that agrees to renegotiate its mortgage: “Now that the government has absorbed a loss (in today's travesty of “socializing” the financial system) while letting let you stay in your home, we need to recover the money that's been lost. If we make you whole, we want to be made whole too. So when the time comes for you to sell your home or renegotiate your mortgage, our Homeowners Rescue PPP will receive the capital gain up to the original amount written off.” In other words, if the homeowner sells the property for $400,000, the Homeowners Rescue PPP will get $150,000 of the capital gain. If the home sells for $500,000, the bank will get $250,000. And if it sells for more, thanks to some new clone of Alan Greenspan acting as bubblemeister, the capital gain will be split in some way. If the split is 50/50 and the home sells for $600,000, the owner will split the $100,000 further capital gain with the Homeowners Rescue PPP. It thus will make much more through its appropriation of capital gains (the new debt-fueled asset-price inflation being put in place) than it extracts in interest! This would make Bubble 2.0 even richer for Wall Street than the Greenspan bubble! Last time around, it was the middle class that got the gains – even if new buyers had to enter a lifetime of debt peonage to buy higher-priced homes. It really was the bank that got the gains, of course, because mortgage interest charges absorbed the entire rental value and even the hoped-for price gain. But homeowners at least had a chance at the free ride, if they didn't squander their money in refinancing their mortgages to “cash out” on their equity to support their living standards in a generation whose wage levels had stagnated since 1979. As Mr. Greenspan observed in testimony before Congress, a major reason why wages have not risen is that workers are afraid to strike or even to complain about being worked harder and harder for longer and longer hours (“raising productivity”), because they are one paycheck away from missing their mortgage payment – or, if renters, one paycheck or two away from homelessness. This is the happy condition of normalcy that Wall Street's financial planners would like to recover. This time around, they may not be obliged to make their gains in a way that also makes middle class homeowners rich. In the wake of Bubble Economy #1, today's debt-strapped homeowners are willing to settle merely for a plan that leaves them in their homes! The Homeowners Rescue PPP can appropriate for its stockholder banks and other large investors the capital gains that have been the driving force of U.S. “wealth creation,” bubble-style. That is what the term “equity kicker” means.

This situation confronts the economy with a dilemma. The only policies deemed politically correct these days are those that make the situation worse: yet more government money in the hope that banks will create yet more credit/debt to raise house prices and make them even more unaffordable; credit/debt to inflate a new Bubble Economy #2. Lobbyists for Wall Street's enormous Bad Bank conglomerates are screaming that all real solutions to today's debt problem and tax shift onto labor are politically incorrect, above all the time-honored debt write-downs to bring the debt burden within the ability to pay. That is what the market is supposed to do, after all, by bankruptcy in an anarchic collapse if not by more deliberate and targeted government policy. The Bad Banks, having demanded “free markets” all these years, fear a really free market when it threatens their bonuses and other takings. For Wall Street, free markets are “free” of public regulation against predatory lending; “free” of taxing the wealthy so as to shift the burden onto labor; “free” for the financial sector to wrap itself around the “real” economy like parasitic ivy around a tree to extract the surplus. This is a travesty of freedom. As the putative neoliberal Adam Smith explained, “The government of an exclusive company of merchants, is, perhaps, the worst of all governments.” But worst of all is the “freedom” of today's economic discussion from the wisdom of classical political economy and from historical experience regarding how societies through the ages have coped with the debt overhead. How to save the economy from Wall Street There is an alternative to ward all this off, and it is the classic definition of freedom from debt peonage and predatory credit. The only real solution to today's debt overhang is a debt write-down. Until this occurs, debt service will crowd out spending on goods and services and there will be no recovery. Debt deflation will drag the economy down while assets are transferred further into the hands of the wealthiest 10 percent of the population, operating via the financial sector.

Read the rest here.

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Where Has the U.S. Bailout Money Gone? Sat Feb 7, 2009 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Monday will unveil the Obama administration's plans for using the remaining money in the $700 billion financial bailout program approved by Congress in October. The Treasury said on Friday it has disbursed $295.02 billion from the Troubled Asset Relief Program but has made further pledges that would leave it with about $320 billion to tap. Following is an outline of TARP funds spent or pledged so far: -- $250 billion pledged for purchases of senior preferred shares and warrants in banks and thrifts under the Capital Purchase Program. In the most recent report on TARP transactions through January 30, the Treasury said it has completed equity purchases totaling $195.33 billion in 359 institutions. -- $20 billion pledged for Bank of America (BAC.N) as part of a package in which the government agreed to share in losses on $118 billion of assets. The $20 billion is in addition to $25 billion for the bank disbursed under the $250 billion Capital Purchase Program. -- $20 billion investment in Citigroup (C.N) as part of a package in which the government agreed to share in losses on $301 billion of assets. In addition to the $20 billion investment, the Treasury agreed to cover up to $5 billion in losses on the portfolio with TARP funds. -- $40 billion investment in troubled insurer American International Group (AIG.N). -- $20.9 billion to prop up the U.S. auto industry. The amount is made up of $10.4 billion in loans to General Motors Corp (GM.N), including $1 billion for GM to help its financing affiliate GMAC reorganize as a bank holding company; a $4 billion loan for Chrysler LLC CBS.UL; a $5 billion direct investment in GMAC; and a $1.5 billion loan for Chrysler Financial. GM could also qualify for a further loan of $4 billion in March. -- $20 billion pledged to cover potential losses for a Federal Reserve program aimed at improving consumer access to credit. For details on money already disbursed and recipients, see www.treas.gov/initiatives/eesa/transactions.shtml. ____________________ WTO Chief Warns of Looming Political Unrest By AFP February 09, 2009 -- BERLIN (AFP) – The global economic crisis could trigger political unrest equal to that seen during the 1930s, the head of the World Trade Organization (WTO) said in a German newspaper interview Saturday. "The crisis today is spreading even faster (than the Great Depression) and affects more countries at the same time," Pascal Lamy told the Die Welt newspaper. Questioned about the risks of political instability, Lamy -- who wraps up his four-year term as WTO director-general in September -- responded that that was "the main danger". "This crisis weighs heavily on politics and puts peace in danger," he said. "Some democracies are old and sufficiently stable to overcome such problems, (but) others are going to be confronted by unrest and inter-religious and inter-ethnic conflicts." He went on to warn against protectionism, saying it would be "wrongly easy" for nations to throw up trade barriers in response to the economic and financial downturn. Launched in January 1995, and now with 153 member states, the WTO's mandate is to liberalise international trade.

_________________ All Hail Caesar(s)! Suzan ___________________