Terror Elites: What's Really With the Social Security/Medicare/Medicaid "Terror" Theft? (S&P Debt Downgrade Extortion) England's Cities Are Burning?

(Where I hang out under the trees in Guilford County's Battleground Park) So much is going on below the surface. Far more than above the surface, and we need to become aware quickly of the insider chicanery if we are to figure out how to protect our civilization (not to mention our asses). My only problem with the following dissection of this situation is that I believe the financial deregulation began under Reagan not Clinton, but he could be just talking about the increasing momentum of it then before the Bush Bashing of the Economy got going full tilt. (There again, it could be that Paul Craig Roberts doesn't want to discuss the deregulation that began under his watch during the Reagan administration. What would I care to guess?)

[Desperately seeking donations (even as little as $5.00, please) for gas for this blog's continuation!]

. . . as the debt ceiling imbroglio made clear, the policy choices are between eliminating Social Security and Medicare or eliminating wars and low tax rates on the mega-rich in order to eliminate the annual budget deficits that are threatening the dollar’s exchange value and enlarging the national debt. However, it is often the case that more is going on than traditional thinking can know about or explain. It is always a challenge to get people’s thinking into a new paradigm. Nevertheless, unless the effort is made, people might never comprehend the behind-the-scenes power struggle. A half century ago President Eisenhower in his farewell address warned the American people of the danger posed to democracy and the people’s control over their government by the military/security complex. Anyone can google his speech and read his stark warning. Unfortunately, caught up in the Cold War with the Soviet Union and reassured by America’s rising economic might, neither public nor politicians paid any attention to our five-star general president’s warning. In the succeeding half century the military/security complex became ever more powerful. The main power rival was Wall Street, which controls finance and money and is skilled at advancing its interests through economic policy arguments. With the financial deregulation that began during the Clinton presidency, Wall Street became all powerful. Wall Street controls the Treasury and the Federal Reserve, and the levers of money are more powerful than the levers of armaments. Moreover, Wall Street is better at intrigue than the CIA. The behind the scenes fight for power is between these two powerful interest groups. America’s hegemony over the world is financial, not military. The military/security complex’s attempt to catch up is endangering the dollar and US financial hegemony. The country has been at war for a decade, running up enormous bills that have enriched the military/security complex. Wall Street’s profits ran even higher. However, by achieving what economist Michael Hudson calls the “financialization of the economy,” the financial sector over-reached. The enormous sums represented by financial instruments are many times larger than the real economy on which they are based. When financial claims dwarf the size of the underlying real economy, massive instability is present. Aware of its predicament, Wall Street has sent a shot across the bow with the S&P’s downgrade of the US credit rating. Spending must be reined in, and the only obvious chunk of spending that can be cut without throwing millions of Americans into the streets is the wars. Credit rating agencies are creatures of Wall Street. Just as they did Wall Street’s bidding in assigning investment grade ratings to derivative junk, they will do Wall Street’s bidding in downgrading the US credit rating. Wall Street might complain about downgradings, but that is just to disguise that Wall Street is calling the shots. The struggle between the military/security complex and the financial sector comes down to a struggle over patronage. The military/security complex’s patronage network is built upon armaments factories and workforces, military bases and military families, military contractors, private security firms, intelligence agencies, Homeland Security, federalized state and local police, and journalists who cover the defense sector. Wall Street’s network includes investors, speculators, people with mortgages, car, student, and business loans, credit cards, real estate, insurance companies, pension funds, money managers and their clients, and financial journalists. As the financial sector has over-extended and must shrink, Wall Street is determined to have access to public funds to manage the process and determined to maintain its relative power by forcing shrinkage in its competitor’s network. That means closing down the expensive wars in order to free up funds for entitlement privatization and to keep the dollar’s role as reserve currency. Wall Street realizes that if the dollar goes, its power goes with it. What insights can we draw from this analysis? The insight that it offers is that although economic policy will continue to be discussed in terms of employment, inflation, deficits, and national debt, the policies that are implemented will reflect the interests of the two contending power centers. Their struggle for supremacy could destroy the rest of us. Wall Street opened the game with a debt downgrade, implying more are to come unless action is taken. The new Pentagon chief replied that any cuts to the military budget would be a “doomsday mechanism” that “would do real damage to our security, our troops and their families and our military’s ability to protect the nation.” Will Americans be so afraid of terrorists that they will give up their entitlements? Will false flag terrorist events be perpetrated in order to elevate this fear? Will Wall Street provoke crises that are perceived as a greater threat? From whom do we need greater protection than from Wall Street and the military/security complex and from our government, which is the tool of both? (Dr. Roberts was Assistant Secretary of the Treasury in the Reagan administration and associate editor and columnist at the Wall Street Journal.)

I know. I know. You thought I only quote Roberts or Krugman or Baker or Black or Warren or Bair or Morgenson or . . . but you're wrong! I've got quite a nugget here from Peter Dorman at Econospeak which makes the points in spades that I've been addressing (obviously obliquely) for decades. He cuts through the crap analysis with a logic knife quality of pure high-carbon chromium 440C. Give him a moment of your precious time. You won't stop reading quickly.

It’s the Political Economy, Stupid!

Sometimes living in the world of ideas makes it harder to understand the real one. If you happen to be an economist, and the time is now, that is true in spades. Take Paul Krugman, for instance. After bemoaning the terrible policy choices of the last two years, he writes, “I’m still trying to make sense of this global intellectual failure.” It’s as if the core problem is that political leaders didn’t learn their macroeconomics well enough.

But Keynes was wrong about the power of “academic scribblers”. Idea-smiths provide language, narratives and tools for those in control, but the broad contours of policy depend on who the controllers happen to be. We are not living through an epoch of intellectual failure, but one in which there is no available mechanism to oust a political-economic elite whose interests have become incompatible with ours.

This is not some sudden development, much less a coup d’etat as is sometimes claimed. No, the accretion of power by the rentiers has been systematic, structural and the outcome of a decades-long process. It is deeply rooted in modern capitalist economies due to the transformation of corporations into tradable, recombinant portfolios of assets, increasing concentration of and returns to ownership, and the failure of regulation to keep pace with technology and transnational scale. Those who sit at the pinnacle of wealth for the most part no longer think about production, nor do they worry very much about who the ultimate consumers will be; they take financial positions and demand policies that will see to it that these positions are profitable.

The rapid and robust global restoration of profits post-2008 was not an accident. Public funds were used to bail out exposed creditors and shore up asset values, while the crisis was used to suppress wages and postpone meaningful regulatory reform. Indeed, I can predict with some confidence that many of the profits, particularly in the financial sector, that have been reported in official filings and blessed by the accounting firms will later be found to be illusory — but not before those who have claims on the revenues have cashed in to their own personal advantage. The institutions will be decimated, but those who owned, lent to or bet on them will be rich. This is not a failure, at least not for them.

You could make a case that, collectively, the interests of the financially endowed ultimately require a rescue of the real, nonfinancial global economy. Surely, when we take our painful plunge into the second dip of the Great Recession, their wealth will be at risk. But the ability to see it at a system level presupposes either a system-level organization of the class or the existence of individual interests that are transparently systemic. Neither appears to be the case today. From what we (you and me) can see from our vantage point, the ruling demands are to make sure my bonds are serviced, my counterparties pony up, the markets I invest in stay liquid, and expenditures for public welfare (i.e. the losers and chiselers) are slashed.

The first principle of political economy is that the scope of democracy depends on the range of views and interests (typically tightly linked) of the owning and controlling class. Genuine public debate and decision-making extends only to those issues on which the elites are divided. In what country today is there a significant division among political-economic elites over core economic questions? How would our situation be different if Obama, Cameron, Merkel, Sarkozy et al. had been on the losing side of their elections?

So, the current mess is not the result of a failure by intellectuals — although clearer, less ideologically-driven thinking by economists would certainly be a good thing and might make a small dent at the margin. As long as there are even a few economists who proclaim the virtues of austerity and deregulation, however, their views will dominate. They haven’t won a battle of ideas; they are simply the ones who have been handed the microphone.

The real problem is political, and it is profound. Unless we can unseat the class that sees the world only through its portfolios, they may well take us all the way down. Unfortunately, no one seems to have a clue how such a revolution can be engineered in a modern, complex, transnational economy. - Peter Dorman 1 Comment:

PQuincy said...

I'm a historian, and I think the past confirms your assessment of elite behavior and priorities, not only in the last 2 centuries of mass-based polities, but since the rise of large-scale states altogether. Political contention is almost always limited to a narrow range of issues on which those with power disagree, meaning that significant change (and there has been significant change in the political sphere, as well as the economic one) generally results from elite conflicts, not from 'popular' pressure. In fairness, elite contention does open gaps for genuinely 'progressive' change, and that's an important lever for intellectuals to remember...but as you say, academics, thinkers, et al. are as a rule never in a position to have more than a marginal effect. It's not a promising situation now, structurally: a series of positive feedback loops in the political sphere are actually concentrating the influence of what I am forced to call a "reactionary clique", at a time when the policies pursued by that clique are, at least on a larger time-frame, seriously destabilizing. But the narcotic effects of power are such that those who drive the dynamics of elite conflict rarely see the larger picture -- behave, for all practical purposes. as though they were incapable of seeing the larger picture (call it, if you like, discursive hegemony), and those who believe they see a larger picture are structurally excluded from bringing about changes in response to their perception. Awwww....we poor intellectuals ;-)

August 11, 2011 7:30 AM

Michael Lewis is featured in Vanity Fair this month on the European economic drama. He's usually good, so I recommend taking a look:

Since contributing editor Michael Lewis traveled to Ireland for his last article on the European debt crisis (for the March 2011 issue of Vanity Fair), Portugal had to accept a bailout; Spanish youth have begun to protest—although it is unclear what about; Italy’s shaky finances have emerged as a major threat to Euro stability and resulted in the E.C.B’s purchase of Italian and Spanish bonds; Ireland’s finance minister, Brian Lenihan, died; and Greece had to ask for more money. Now, with “It’s the Economy, Dummkopf!” in the September issue, Lewis concludes his series on the European financial crises with a trip to Germany, the provider of bailouts and the holder of all the gold. When VF Daily caught up with Europe’s least-welcome tourist to ask his opinion of Germany and the P.I.G.S. (Portugal, Italy, Greece, and Spain), the contagion in Europe had yet to spread — highlights from our chat:

VF Daily: Where did the euro go wrong?

From Snippits and Snappits we hear from a very close source what is happening in London and other English cities and whether you like this perspective or not, you've got to admit it's getting pretty close to what must be the reality on the ground:

I’m huddled in the front room with some shell-shocked friends, watching my city burn. The BBC is interchanging footage of blazing cars and running street battles in Hackney, of police horses lining up in Lewisham, of roiling infernos that were once shops and houses in Croydon and in Peckham. Last night, Enfield, Walthamstow, Brixton and Wood Green were looted; there have been hundreds of arrests and dozens of serious injuries, and it will be a miracle if nobody dies tonight. This is the third consecutive night of rioting in London, and the disorder has now spread to Leeds, Liverpool, Bristol and Birmingham. Politicians and police officers who only hours ago were making stony-faced statements about criminality are now simply begging the young people of Britain’s inner cities to go home. Britain is a tinderbox, and on Friday, somebody lit a match. How the hell did this happen? And what are we going to do now? In the scramble to comprehend the riots, every single commentator has opened with a ritual condemnation of the violence, as if it were in any doubt that arson, muggings and lootings are ugly occurrences. That much should be obvious to anyone who is watching Croydon burn down on the BBC right now. David Lammy, MP for Tottenham, called the disorder ‘mindless, mindless’. Nick Clegg denounced it as ‘needless, opportunistic theft and violence’. Speaking from his Tuscan holiday villa, Prime Minister David Cameron ~ who has finally decided to return home to take charge ~ declared simply that the social unrest searing through the poorest boroughs in the country was “utterly unacceptable.”

Toufeeq Mohammed, the manager of a hair piece and wigs family run business, looks at the remains of his stock on August 10, 2011, after it was set ablaze following disturbances in north London early Wednesday morning.

The violence on the streets is being dismissed as ‘pure criminality,’ as the work of a ‘violent minority’, as ‘opportunism.’ This is madly insufficient. It is no way to talk about viral civil unrest.

Angry young people with nothing to do and little to lose are turning on their own communities, and they cannot be stopped, and they know it. Tonight, in one of the greatest cities in the world, society is ripping itself apart.

Violence is rarely mindless. The politics of a burning building, a smashed-in shop or a young man shot by police may be obscured even to those who lit the rags or fired the gun, but the politics are there.

Hundreds of Londoners from the local area and beyond joined together to help clean up Clapham Junction after a night of destructive riots. Most had been drawn to the cleanup through social media and word of mouth. London, UK. 9th August 2011

Unquestionably there is far, far more to these riots than the death of Mark Duggan, whose shooting sparked off the unrest on Saturday, when two police cars were set alight after a five-hour vigil at Tottenham police station.

A peaceful protest over the death of a man at police hands, in a community where locals have been given every reason to mistrust the forces of law and order, is one sort of political statement.

Raiding shops for technology and trainers that cost ten times as much as the benefits you’re no longer entitled to is another.

A co-ordinated, viral wave of civil unrest across the poorest boroughs of Britain, with young people coming from across the capital and the country to battle the police, is another.

Months of conjecture will follow these riots. Already, the internet is teeming with racist vitriol and wild speculation.

The truth is that very few people know why this is happening. They don’t know, because they were not watching these communities. Nobody has been watching Tottenham since the television cameras drifted away after the Broadwater Farm riots of 1985.

Most of the people who will be writing, speaking and pontificating about the disorder this weekend have absolutely no idea what it is like to grow up in a community where there are no jobs, no space to live or move, and the police are on the streets stopping-and-searching you as you come home from school.

The people who do will be waking up this week in the sure and certain knowledge that after decades of being ignored and marginalized and harassed by the police, after months of seeing any conceivable hope of a better future confiscated, they are finally on the news. In one NBC report, a young man in Tottenham was asked if rioting really achieved anything:

“Yes,” said the young man. “You wouldn’t be talking to me now if we didn’t riot, would you?”

“Two months ago we marched to Scotland Yard, more than 2,000 of us, all blacks, and it was peaceful and calm and you know what? Not a word in the press. Last night a bit of rioting and looting and look around you.”

Eavesdropping from among the onlookers, I looked around. A dozen TV crews and newspaper reporters interviewing the young men everywhere.

There are communities all over the country that nobody paid attention to unless there had recently been a riot or a murdered child. Well, they’re paying attention now.

*

LONDON, ENGLAND ~ AUGUST 10: People walk past fire-damaged shops and flats in Clapham Junction on August 10, 2011 in London, England. As trouble erupted through the night in other major cities across England, London remained mostly quiet after 16,000 police were deployed. Tonight in London, social order and the rule of law have broken down entirely. The city has been brought to a standstill; it is not safe to go out onto the streets, and where I am in Holloway, the violence is coming closer.

As I write, the looting and arson attacks have spread to at least fifty different areas across the UK, including dozens in London, and communities are now turning on each other, with the Guardian reporting on rival gangs forming battle lines.

It has become clear to the disenfranchised young people of Britain, who feel that they have no stake in society and nothing to lose, that they can do what they like tonight, and the police are utterly unable to stop them. That is what riots are all about.

Riots are about power, and they are about catharsis.

They are not about poor parenting, or youth services being cut, or any of the other snap explanations that media pundits have been trotting out: structural inequalities, as a friend of mine remarked today, are not solved by a few pool tables.

People riot because it makes them feel powerful, even if only for a night.

People riot because they have spent their whole lives being told that they are good for nothing, and they realize that together they can do anything ~ literally, anything at all.

People to whom respect has never been shown riot because they feel they have little reason to show respect themselves, and it spreads like fire on a warm summer night.

And now people have lost their homes, and the country is tearing itself apart.

Police man the cordons beside the charred remains of Reeves furniture store in Croydon, south of London, on August 10, 2011, following riots in the area on Monday night. As masked youths burned down a fashion store and clashed with police in Manchester, residents of Britain's third largest city blamed the government for failing to deal with social problems. Hundreds of masked youths tore through the centre of the city in northwest England on Tuesday, looting and smashing shop windows as the worst riots in Britain for decades spread beyond London on a fourth day of violence.

NO ONE EXPECTED THIS.

The so-called leaders who have taken three solid days to return from their foreign holidays to a country in flames did not anticipate this.

The people running Britain had absolutely no clue how desperate things had become. They thought that after thirty years of soaring inequality, in the middle of a recession, they could take away the last little things that gave people hope, the benefits, the jobs, the possibility of higher education, the support structures, and nothing would happen.

They were wrong. And now my city is burning, and it will continue to burn until we stop the blanket condemnations and blind conjecture and try to understand just what has brought viral civil unrest to Britain.

Let me give you a hint: it ain’t Twitter.

*

Azim Mohamed, (L) the owner of a cutlery hire company, and assistant Riaz Mohamed, look at the charred remains of their business on August 10, 2011, after it was set ablaze following disturbances in north London early Wednesday morning. I’m stuck in the house, now, with rioting going on just down the road in Chalk Farm. Ealing and Clapham and Dalston are being trashed. Journalists are being mugged and beaten in the streets, and the riot cops are in retreat where they have appeared at all.

Police stations are being set alight all over the country. This morning, as the smoke begins to clear, those of us who can sleep will wake up to a country in chaos.

We will wake up to fear, and to racism, and to condemnation on left and right, none of which will stop this happening again, as the prospect of a second stock market clash teeters terrifyingly at the bottom of the news reports.

*

Now is the time when we make our choices.

Now is the time when we decide whether to descend into hate, or to put prejudice aside and work together.

Now is the time when we decide what sort of country it is that we want to live in.

Follow the #riotcleanup hashtag on Twitter.

And take care of one another.

I like that thought. Let's hold it a moment or two. Feels good, doesn't it? ________________________