Sunday, February 7, 2010

Voting Against One's Own Interests in "Jive Economy" (Let's Change Our Pottersvilles - MOVE Your $$$!) - How the Titans Rule: JP Morgan-Goldman Sachs

It's like a French Revolution in reverse in which the workers come pouring down the street screaming more power to the aristocracy.
Thomas Frank published a very compelling book in 2005 entitled What's the Matter With Kansas? that exposed the controversial reality that lower-class citizens there voted against their economic interests and in favor of Republican candidates who espoused instead radical conservative religious positions that were antiabortion, anti-women and anti-gay. Dr David Runciman has a slightly more nuanced opinion of these seemingly foolish actions. (Some of us still think they are very foolish.) (Frank has published another great book The Wrecking Crew: How Conservatives Ruined Government, Enriched Themselves, and Beggared the Nation in 2009, which I highly recommend as well.) (Emphasis marks added - Ed.)

Political scientist Dr David Runciman gives his view on why there is often such deep opposition to reforms that appear to be of obvious benefit to voters. Last year's series of "town-hall meetings" across the U.S. gave many citizens "the chance to debate President Obama's proposed healthcare reforms." What happened was an explosion of rage and barely suppressed violence. Polling evidence suggests that the numbers who think the reforms go too far are nearly matched by those who think they do not go far enough.

But it is striking that the people who most dislike the whole idea of healthcare reform - the ones who think it is socialist, godless, a step on the road to a police state - are often the ones it seems designed to help.

In Texas, where barely two-thirds of the population have full health insurance and over a fifth of all children have no cover at all, opposition to the legislation is currently running at 87%. . . . Instead, to many of those who lose out under the existing system, reform still seems like the ultimate betrayal. Why are so many American voters enraged by attempts to change a horribly inefficient system that leaves them with premiums they often cannot afford? Why are they manning the barricades to defend insurance companies that routinely deny claims and cancel policies? . . . If people vote against their own interests, it is not because they do not understand what is in their interest or have not yet had it properly explained to them. They do it because they resent having their interests decided for them by politicians who think they know best. There is nothing voters hate more than having things explained to them as though they were idiots. As the saying goes, in politics, when you are explaining, you are losing. And that makes anything as complex or as messy as healthcare reform a very hard sell. . . . stories always trump statistics, which means the politician with the best stories is going to win: "One of the fallacies that politicians often have on the Left is that things are obvious, when they are not obvious. Obama's administration made a tremendous mistake by not immediately branding the economic collapse that we had just had as the Republicans' Depression, caused by the Bush administration's ideology of unregulated greed. The result is that now people blame him."

Thomas Frank believes that "the voters' preference for emotional engagement over reasonable argument has allowed the Republican Party to blind them to their own real interests.

The Republicans have learnt how to stoke up resentment against the patronising liberal elite, all those do-gooders who assume they know what poor people ought to be thinking.

Right-wing politics has become a vehicle for channelling this popular anger against intellectual snobs. The result is that many of America's poorest citizens have a deep emotional attachment to a party that serves the interests of its richest.

Thomas Frank
Thomas Frank thinks that voters have become blinded to their real interests

Frank states authoritatively "that whatever disadvantaged Americans think they are voting for, they get something quite different:"

"You vote to strike a blow against elitism and you receive a social order in which wealth is more concentrated than ever before in our life times, workers have been stripped of power, and CEOs are rewarded in a manner that is beyond imagining.

"It's like a French Revolution in reverse in which the workers come pouring down the street screaming more power to the aristocracy."

As Mr Frank sees it, authenticity has replaced economics as the driving force of modern politics. The authentic politicians are the ones who sound like they are speaking from the gut, not the cerebral cortex. Of course, they might be faking it, but it is no joke to say that in contemporary politics, if you can fake sincerity, you have got it made.

And the ultimate sin in modern politics is appearing to take the voters for granted.

This is a culture war but it is not simply being driven by differences over abortion, or religion, or patriotism. And it is not simply Red states vs. Blue states any more. It is a war on the entire political culture, on the arrogance of politicians, on their slipperiness and lack of principle, on their endless deal making and compromises.

And when the politicians say to the people protesting: 'But we're doing this for you', that just makes it worse. In fact, that seems to be what makes them angriest of all.

This edition of Turkeys Voting for Christmas was first broadcast on BBC Radio 4 on Sunday 24 January . . . . Listen via the BBC iPlayer.

Read the whole article here. Jim Kunstler owns the truly inspiring (and many times highly ironic) oldtime Republican site ClusterFuck Nation (yes, they know it's a clusterfuck too). As a matter of fact, he knows everything about the details of the market that the last part of the essay will perhaps only whisper to you, and even if you think it's a waste of your valuable time to read, he's always worth a few moments or more of anyone's time. Don't miss it. (Emphasis marks added - Ed.)
What started out as a case of The Emperor's New Clothes now has America looking like the world's biggest nudist colony, with everyone in the long chain of power and authority admiring each other's splendid new (imagined) pimp suits. George W. Bush (remember him?) wasn't kidding when he discounted the function of objective reality in our national life, saying, "we make our own reality." This apparently hasn't changed much with a new chief at the top. A nice example popped up last week with the GDP (Gross Domestic Product) index for the fourth quarter of 2009. The equation affects to measure the growth in economic activity and this particular release imputed that the US economy had expanded at an annualized rate of 5.7 percent. Wow, impressive! We must be digging a new Panama Canal or something. It turned out to be based largely on some jive about inventory "investments" - meaning, I guess, that the Ronco Corporation has laid in 1.7 million Dial-O-Matic food slicers and Showtime Rotisseries in the expectation that American stock market investors will enter 2010 creaming off their mutual fund profits to spend wildly on every infomercial prompt beamed at them over the graveyard shift at Fox News. Memo to nation: we're not really growing, we're shrinking. Is this necessarily a bad thing? I dunno. Unlike, say, the stockholders of Toll Brothers, I'm not so sure that "housing starts" represents my idea of a healthy economy - since it really means we're destroying every cornfield and cow pasture left outside our cities, which will play havoc with our national life when the reality of our Wile E. Coyote agribusiness fiasco starts to hit home and we discover what cornfields and cow pastures were really all about in the first place. Likewise, the standard processors of news media go orgasmic when they announce car sales figures of 11 million units annualized, or something like that. Isn't that wonderful: more cars on the San Diego Freeway and the Cross Bronx Expressway. Ever larger parking requirements for the new WalMart. More trips-per-household to buy milk and Fruit Loops. Do you really think that more suburban sprawl makes this a better nation? When our soldiers bleed out in the sands of Central Asia, will their last thoughts be of the curb cut between the Best Buy and the Burger King?

By the way, it is established fact that the GDP figure benefits from increases in medical services, meaning that the more obese, diabetic, two-pack-a-day cigarette smokers this country produces, the better off our economy is assumed to be. Bring on the Little Debbie Snack Cakes! Let's turn up the dial on hospital admissions! But as I said, our economy is not really expanding, it's contracting - and pretty swiftly. The question is how will we manage this contraction and what kind of nation do we become as this occurs. For the moment, we are a nation committed to sustaining the unsustainable, and because this is the case we invite grievous political mischief as it becomes ever more obvious that the populace is being swindled - and the populace becomes ever more ticked off about it. Thus, you get the Tea Bagger movement, and things like it, where the disenfranchised meld legitimate complaints with fantasies and conspiracy theories, and produce an incoherent agenda based on ideas like "keeping the government out of Medicare!" One can easily see a movement like this ramping up into full-bore corn-pone Naziism - and for a nice dramatic enactment of such a scenario I recommend my new three-act stage play Big Slide, which we've posted over at the podcast. The Republican resurgence now underway - or imagined to be, I'm not really sure - casts photogenic clods like Massachusetts's new senator Scott Brown as heralds of a new free market Golden Age, in which WalMart will profitably manage every moment of daily life from grocery shopping to banking to medical care to the mortuary (and perhaps even war). Little thought has been allotted to exactly what the role of citizens might be in such a nirvana. I suppose we'd become an endless chain of $8-an-hour "greeter associates" - which is at least a step above being a national feedlot of polled Herefords. But I wouldn't want to be mistaken as a shill for the Democratic party, either, since the Obama team has opted for creating its own reality as much as its predecessor bunch did. The result will certainly be the election of countless maniacs to Congress this fall, especially of the theocratic-despotic brand - creationists, alien abductees, economics professors from bible colleges, Sunbelt war hawks, Lyndon LaRouche acolytes, Nativists, Palinites, crusaders against the New World Order, anti-Bilderbergers . . . the whole appalling menu of thought-disorder cases now roiling in the breakdown lane of American history. They are our future, these yeast people and mudskippers, because the intelligent minority of this nation lacks the one thing that animates intelligence in the service of reality, and that is the courage to tell the truth. I suppose this is what galls so many former Obama boosters: that the "hope" vested in him would be enacted in truth-telling, which would lead to "change" in the choices we make about doing things. What we ended up with seems to be something like a false champion with a good line of talk. Mr. Obama may yet be pushed into a recognition of the reality he did not personally create, and this may occur as the US economy heads much more drastically south in the months ahead. Something similar might have been the case for Mr. Lincoln. He might have coasted along through 1861 trying to sweet-talk Dixie - but the South Carolinians went apeshit on him from the get-go, and then there was no turning back from the ensuing conflagration. More probably, we'll be dragged kicking and screaming into an epochal contraction of economy, something the industrial world hasn't really seen before, something more severe even than the Great Depression we never stop chattering about (as though it was like The Hundred Years War). Instead of preparing for it intelligently by doing things like promoting small scale local farming, local networks of commerce, and rebuilt railroads (things, incidentally, which are within the powers of government to promote) we'll squander our dwindling capital and political resources fighting over the table scraps of the twentieth century. Life is tragic, history is merciless, and societies don't always make good collective choices.

Of all places (no, just kidding), we can find a real ray of light and some serious advice about improving our economic lives on Tavis Smiley's podcast with Eugene Jarecki (founder and executive director of The Eisenhower Project, an academic public policy group dedicated to studying the forces that shape American foreign policy), which occurred Friday night, January 29, 2010. He echoes some advice that I've been giving to my friends since the beginning of the Bush/Cheney stolen years (and why I've tilted to the Pottersville metaphor for the last 20 years - since I witnessed what our country didn't do at the end of the Cold War). It remains valid for the next few years at least (until (and if) they straighten out the mess).
Take the Pledge to Move Your Money!

As national banks soak up bailout dollars, cut lending, and exploit overdraft fees, a number of Americans have decided to move their money to local banks. While Wells Fargo and Citigroup have made headlines recently for repaying the massive debts they owed to the American taxpayer, people are still frustrated about subsidizing the gambling habits of mega-banks.

Like to know the inside facts about the guys who've benefitted JPMorgan Chase, Goldman Sachs and hundreds of other perp investment institutions (now called simply banks so they can borrow at 0% interest from the Federal Reserve)? How about the history of these government-running institutions? Well, don't stop reading yet. (Now, if we could only tie this information to the decisions to destroy the U.S. economy by shipping all the jobs overseas and cutting the taxes of the people who couldn't have cared less as it occurred.)
Web of Debt - 2010-01-28 We are witnessing an epic battle between two banking giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin). Left strewn on the battleground could be your pension fund and 401K. The late Libertarian economist Murray Rothbard wrote that politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players. No popular third party candidate had a real chance at winning, because the bankers had the exclusive power to create the national money supply and therefore held the winning cards.

In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s. In 1928, it launched the Goldman Sachs Trading Corp., a closed-end fund similar to a Ponzi scheme. The fund failed in the stock market crash of 1929, marring the firm's reputation for years afterwards. Former Treasury Secretaries Henry Paulson, Robert Rubin, and Larry Summers all came from Goldman, and current Treasury Secretary Timothy Geithner rose through the ranks of government as a Summers/Rubin protégé. One commentator called the U.S. Treasury Goldman Sachs South.

Goldman's superpower status comes from something more than just access to the money spigots of the banking system. It actually has the ability to manipulate markets. Formerly just an investment bank, in 2008 Goldman magically transformed into a bank holding company. That gave it access to the Federal Reserve's lending window; but at the same time it remained an investment bank, aggressively speculating in the markets.The upshot was that it can now borrow massive amounts of money at virtually 0% interest, and it can use this money not only to speculate for its own account but to bend markets to its will.

But Goldman Sachs has been caught in this blatant market manipulation so often that the JPMorgan faction of the banking empire has finally had enough. The voters too have evidently had enough, as demonstrated in the recent upset in Massachusetts that threw the late Senator Ted Kennedy s Democratic seat to a Republican. That pivotal loss gave Paul Volcker, chairman of President Obama s newly formed Economic Recovery Advisory Board, an opportunity to step up to the plate with some proposals for serious banking reform. Unlike the string of Treasury Secretaries who came to the government through the revolving door of Goldman Sachs, former Federal Reserve Chairman Volcker came up through Chase Manhattan Bank, where he was vice president before joining the Treasury. On January 27, market commentator Bob Chapman wrote in his weekly investment newsletter The International Forecaster:

A split has occurred between the paper forces of Goldman Sachs and JP Morgan Chase. Mr. Volcker represents Morgan interests. Both sides are Illuminists, but the Morgan side is tired of Goldman's greed and arrogance. . . . Not that JP Morgan Chase was blameless, they did their looting and damage to the system as well, but not in the high handed arrogant way the others did. The recall of Volcker is an attempt to reverse the damage as much as possible. That means the influence of Geithner, Summers, Rubin, et al will be put on the back shelf at least for now, as will be the Goldman influence. It will be slowly and subtly phased out. . . . Washington needs a new face on Wall Street, not that of a criminal syndicate.

Goldman's crimes, says Chapman, were that it got caught stealing. First in naked shorts, then front-running the market, both of which they are still doing, as the SEC looks the other way, and then selling MBS-CDOs to their best clients and simultaneously shorting them.

Volcker's proposal would rein in these abuses, either by ending the risky proprietary trading (trading for their own accounts) engaged in by the too-big-to-fail banks, or by forcing them to downsize by selling off those portions of their businesses engaging in it. Until recently, President Obama has declined to support Volcker's plan, but on January 21 he finally endorsed it.

The immediate reaction of the market was to drop and drop, day after day. At least, that appeared to be the reaction of the market. Financial analyst Max Keiser suggests a more sinister possibility. Goldman, which has the power to manipulate markets with its high-speed program trades, may be engaging in a Mexican standoff. The veiled threat is, Back off on the banking reforms, or stand by and watch us continue to crash your markets. The same manipulations were evident in the bank bailout forced on Congress by Treasury Secretary Hank Paulson in September 2008.

In Keiser's January 23 broadcast with co-host Stacy Herbert, he explains how Goldman's manipulations are done. Keiser is a fast talker, so this transcription is not verbatim, but it is close. He says:

High frequency trading accounts for 70% of trading on the New York Stock Exchange. Ordinarily, a buyer and a seller show up on the floor, and a specialist determines the price of a trade that would satisfy buyer and seller, and that 's the market price. If there are too many sellers and not enough buyers, the specialist lowers the price. High frequency trading as conducted by Goldman means that before the specialist buys and sells and makes that market, Goldman will electronically flood the specialist with thousands and thousands of trades to totally disrupt that process and essentially commandeer that process, for the benefit of siphoning off nickels and dimes for themselves. Not only are they siphoning cash from the New York Stock Exchange but they are also manipulating prices. What I see as a possibility is that next week, if the bankers on Wall Street decide they don't want to be reformed in any way, they simply set the high frequency trading algorithm to sell, creating a huge negative bias for the direction of stocks. And they'll basically crash the market, and it will be a standoff. The market was down three days in a row, which it hasn't been since last summer. It's a game of chicken, till Obama says, Okay, maybe we need to rethink this.

But the President hasn't knuckled under yet. In his State of the Union address on January 27, he did not dwell long on the issue of bank reform, but he held to his position. He said:

We can't allow financial institutions, including those that take your deposits, to take risks that threaten the whole economy. The House has already passed financial reform with many of these changes. And the lobbyists are already trying to kill it. Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.

What this real reform would look like was left to conjecture, but Bob Chapman fills in some blanks and suggests what might be needed for an effective overhaul:

The attempt will be to bring the financial system back to brass tacks. . . . That would include little or no MBS and CDOs, the regulation of derivatives and hedge funds and the end of massive market manipulation, both by Treasury, Fed and Wall Street players. Congress has to end the President's Working Group on Financial Markets, or at least limit its use to real emergencies. . . . The Glass-Steagall Act should be reintroduced into the system and lobbying and campaign contributions should end. . . . No more politics in lending and banks should be limited to a lending ratio of 10 to 1. . . . It is bad enough they have the leverage that they have. State banks such as North Dakota's are a better idea.

On January 28, the predictable reaction of the market was to fall for the seventh straight day. The battle of the Titans was on.

(Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and the money trust. She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include Forbidden Medicine, Nature's Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen).

So, now we know. Anyone ready to take to the streets yet? Suzan ____________________________

11 comments:

Serving Patriot said...

Suzan,

Great post. Thanks for highlighting the Kunstler item. He gets it. And one wonders how frustrated he must be at screaming into the wind.

Keep up the good work!

SP

Beekeepers Apprentice said...

"It's like a French Revolution in reverse in which the workers come pouring down the street screaming more power to the aristocracy."

That 'bout sums it up.

BuelahMan said...

Excellent.

I'm not sure this totally clears up the mindset of voting against your best interests, especially in times like these. But it helped.

I need to read the books you reference.

Thanks, Suzan.

Phil said...

Thanks, Suzan, for another great post. This actually clarified a few things for me and forced my thinking back on track. My list (short version) is almost complete, expect to put it online later today or sometime tomorrow.

Kvatch said...

Love the 'French Revolution in reverse' analogy! :-)

TomCat said...

While waiting for your blog to load, I prepared dinner, gave the cat a bath, and wrote my life story.. ;-)

But your writing is so good that I am compelled to return. My vote for Obama was the first time in my life I have voted FOR a candidate in the presidential election. In priors years, I have always voted AGAINST a candidate. While I support many of the things Obama is really trying to do, he has gone back on too many promises to vote FOR him again. He will still get my vote, but only because I will be voting AGAINST whichever goose-stepping ideologue the Republicans put up.

BuelahMan said...

He will still get my vote, but only because I will be voting AGAINST whichever goose-stepping ideologue the Republicans put up.

And the circle never ends.

Jack Jodell said...

Suzan,
Thank you for this truly superb, enlightening, and thought-provoking post! I love the reference made to the French Revolution in reverse. And I wholly agree that starving the big monster Wall Street banks is a step in the right direction. Fight on, sister!

Teeluck said...

Too big to fail?? That is not an option that should be made to remain in our future, I think the idea of putting our monies in smaller community banks is a great step in the right direction... whittle these banks down to size.

carlandjerry said...

Hi Suzan,

We read the same stuff, and view the same sites.

I believe that there is a war against working Americans.

Those in the GOP (Grotesquely Oligarchian Psychopathetics) and the Shameful Democons use the average American, who has been brainwashed to believe that government is too big and does not serve their interests, to protest. What results is the monopoly capitalistic elite getting what they want out of such anger, while the average American continues to lose.

It will not change. James Kunstler writes about how it all must change in order for the nation to recover and create a new and healthy paradigm of less is better, etc, but it won't for a very long time.

jerry

http://eye-on-washington.blogspot.com

Suzan said...

Thank you for your kind comments.

What I do here is to highlight writer/reporters whom I think are doing an exceptional job of keeping us informed about the important issues of our time. And comment on them myself in the hope of advancing the conversation that will return the U.S. to a path of Constitutional democracy.

I appreciate the time that each and every one of you gives to reading what I write, and I read your blogs.

I am overwhelmed with gratitude on a daily basis that I have been able to communicate with so many fine people.

Salute!

S
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