Archive for the ‘Feudalism’ Category
If you set out to design a system that would implode with devastating consequences, it would be the Keynesian Cargo Cult’s neofeudal financialization debtocracy.
The heart and soul of the Keynesian Cargo Cult is the dogma that the cure for all economic ailments is more aggregate demand, i.e. consumption. The Keynesians’ fanatic faith in boosting consumption would be merely childishly naive if it didn’t directly support a parasitic neofeudal debt-serfdom. Sadly, Krugman and his fellow cultists’ single-minded parroting of “aggregate demand” makes them well-paid lackeys and toadies for an extractive neofeudal-neocolonial debtocracy.
If you are unfamiliar with the neofeudal, neocolonial model of financialization, please review:
Debt = Serfdom (April 2, 2013)
Crisis and Opportunity (February 1, 2013)
Students: You Are Exploited Debt-Serfs (April 12, 2011)
Is Anybody Else Tired of Buying and Owning Stuff? (September 7, 2012)
Like all cargo cults, Keynesians maintain a magical-thinking belief in the power of wanting more stuff. But in so doing, they embrace and support the mystification that protects the power structure that is dooming the nation and its economy to stagnation and eventual collapse (call it “reset” if you prefer).
By focusing on increasing demand and consumption by any means, the Keynesian Cultists miss the key dynamics of sustainable growth and fail utterly and completely to acknowledge the corrupt and exploitive nature of our cartel-state crony-capitalism economy.
Has their naivete blinded them to the power structure of the neofeudal-neocolonial debtocracy? It seems unlikely, and so that leaves a less savory motivation: co-option.They’re raking in big bucks as apologists for cartel-state crony-capitalism, and as a result they don’t dare question the power structure, much less hazard a critique of the hands that feed them.
The Krugman-Keynesian Cargo Cult is incapable of distinguishing between productive investment and profligate spending. Keynesian cultists focus on an incredibly blunt and misleading indicator of gross domestic product: GDP. Burn down a house and rebuild it, pay people to dig a hole and fill it, build bridges to nowhere, buy costly weapons systems the military doesn’t even want, purchase boatloads of particle board furniture from China that’s headed for the landfill: it’s all equally wonderful to the Keynesian apologists because it boosts GDP.
Incredible as it seems to GDP-worshippers, there is a difference between productive investment and squandering money. A productive investment generates a multiplier effect: most importantly, it increases productivity which then creates value, surplus and wealth.
There is no multiplier in building McMansions in the middle of nowhere, bridges to nowhere, particle board shelving from China or a university degree in film studies, etc. Housing is consumption, a bridge to nowhere is consumption, particle board shelving is consumption, and a $180,000 bachelor’s degree in a field of study with near-zero economic premium in the real economy is also consumption.
The Keynesian Cultists and their fellow apologists/neofeudal apparatchiks attempt to mystify this consumption by labeling it “investment.” The misdirection may fool craven politicos seeking to buy votes, but the real world is not fooled.
Value, surplus and wealth can only be created by increasing productivity. If an investment doesn’t increase productivity, it is either malinvestment, misallocation of scarce capital or consumption.
How does buying particle board shelving from China improve productivity in America? It does not. Does dumping trillions of borrowed dollars into cartels like sickcare, Big Pharma, higher education or the military-industrial complex increase productivity? No, it actively lowers it by diverting national income to the most corrupt, inefficient and least productive sectors of the economy.
The Keynesians are also blind to the dynamic of improving household income. It their magical-thinking universe, buying particle board shelving from China (yippee, aggregate demand!) is supposed to magically turn lead (wasteful consumption) into gold (higher wages). Wages can only increase as productivity increases. Any other apparent increase is simply a subsidy that shifts money from a more productive sector to a less productive sector.
This is how you end up with a healthcare system that is 50% fraud, paper-shuffling, and inefficiency. We know America’s sickcare is 50% waste, fraud and paper-shuffling because our competitors provide their citizens healthcare for half of what we spend per person.
The Keynesians’ inability to distinguish between consumption and investment that increases productivity is fatal.
The Cargo Cult is also blind to the metric that matters: debt and the ability to service debt. As financialization creates an unproductive nation of debt-serfs who depend on debt to fund their consumption, household income declines. This leaves households less able to service higher debt.
But since aggregate demand (i.e. financialization) is dependent on ever-expanding debt, the system falls apart once households cannot increase their debt loads. ( The Global Status Quo Strategy: Do More of What Has Failed Spectacularly)
In response, the Status Quo increases government borrowing and spending (either directly, or for subsidies to favored cartels like the mortgage industry) to fill the gap left by debt-serfs unable (or unwilling) to borrow more for shelving from China, etc.
The problem with borrowing money for unproductive consumption is the cheap shelving breaks and is hauled to the dump but the interest payment remains–in the case of government borrowing, essentially forever. Unproductive spending of cash is wasteful, as that scarce capital could have been invested in productive assets.
But spending borrowed money on unproductive consumption–McMansions, degrees in critical studies, duplicative medical tests, marginal-utility meds and weapons systems–is truly insane, for the cost of that consumption continues to rise over time as interest is paid, until the debt is retired (paid off) or renounced (defaulted). All that interest is diverting income that could have been invested in higher productivity.
The Keynesian Cultists are also blind to the enormous opportunity cost of funding consumption with debt. Over time, servicing debt bleeds the economy dry as productivity, wages and investment stagnate.
If you set out to design a system that would implode with devastating consequences, it would be the Keynesian Cargo Cult’s neofeudal financialization debtocracy. All the incentives favor increasing debt, misallocation of capital and mindless consumption, and all the disincentives weaken investments in productivity and the creative destruction of malinvestments and subsidies to favored cartels.
Why do the Keynesian Cargo Cultists continue dancing around the campfire waving dead chickens and worshipping aggregate demand? Toadies, lackeys and apologists are always well-paid to support the party line. Aggregate demand, aggregate demand, brawk!
Charles Hugh Smith – Of Two Minds
The lack of enthusiasm for the latest effort to centralize all banking and monitory regulation within the European Central Bank suggests that the surreal struggle for continental unanimity still resides in the minds of banksters. Elites still seek to perfect the class distinguish of century old traditions, into a modern version of feudal serfdom. Globalism is the brainchild of the cabal of international banking. As long as a financial monopoly dominates political institutions, the end result will be more consolidation of the rule of the House of Rothschild.
The European Commission recently announces and lays ground for banking union.
“A new proposal would see the European Central Bank (ECB) gaining new powers to monitor the performance of the 6 000 or so banks in the eurozone. The arrangement would be known as the single supervisory mechanism.
The ECB would take over tasks such as authorizing banks and other credit institutions, ensuring they have enough (liquid) capital to continue operating even when sustaining losses and monitoring the activities of financial conglomerates.
If a bank breaches – or is at risk of breaching – capital requirements, the ECB would be able to ask the bank to take corrective action. National supervisors would meanwhile continue to carry out day-to-day checks.
A single rulebook on capital requirements, standardized deposit protection schemes and new recovery and resolution provisions – all proposed earlier in the year – would complete the ‘banking union’.”
A champion for the proposal, Michel Barnier: European banking union is “necessary and possible”, explains the scheme further.
“It is also understood the ECB will have the power to wind up banks; remove bank licenses; and force recapitalization programs when it think it’s necessary, according to the documents.
The ECB will also be empowered to “enter into administrative arrangements” with regulators outside the eurozone – or act and negotiate on behalf of all members in talks on global financial regulation.”
The City of London has never been a keen supporter of European governance. Britain opposes ECB as head of Banking Union illustrates push back.
“Britain is pushing for changes to a proposed euro zone banking union to dilute the power of the European Central Bank, EU officials said, potentially hampering efforts to build the infrastructure urgently needed to underpin the euro.
Britain intends to propose a system that would give countries outside the banking union the possibility of blocking those within the project from clubbing together to shape EU-wide regulations, said EU officials, speaking on condition of anonymity.
“The concern is that the Bank of England can find itself outvoted by the ECB on aspects of rule making,” said one official. Britain will not join the banking union.”
Another report in, Britain pushing to dilute powers of ECB in banking union, reveals the concerns about a diminished influence of the British financial houses.
“Britain’s finance minister, George Osborne, fears the ECB will use its authority to impose EU-wide regulation that would favor countries with the euro and put London’s financial centre, using sterling, at a disadvantage.
“It seems unlikely that the ECB would ride roughshod over the wishes of the Bank of England, but that is what the British Treasury is worried about,” said the first official. “They want safeguards to make sure that doesn’t happen.”
Britain and all other members of the European Union must give the green light to the banking union before it can go ahead, an approval that could be delayed or withheld if London’s concerns are not addressed.”
Empowering the European Central Bank regulatory authority over every country as part of the broad EU coalition requires surrender of even more national sovereignty.
Since the initial pronouncement for a single supervisory mechanism, acceptance for a new European Central Bank Headquarters in Frankfurt Germany has shown caution.
In the article, Germany’s Merkel, Sweden’s Reinfeldt:Banking Union Must Be Done Right, even Angela Merkel told reporters, “Quality is more important than speed“.
“Mr. Reinfeldt said Sweden wasn’t fundamentally opposed to banking union, but added: “We don’t think suggestions on the table now are ready. It would be better to get it right than rush it through.”
He also said that although Sweden isn’t in the euro zone, Sweden must have influence over decisions taken that could have an impact on his country’s banks. “If we take part, we want to have influence. And we do not find in the current proposal that we have that,” Mr. Reinfeldt said.”
Germany having lost two military world wars, wants to win the financial conflict for dominance of Europe. However, is the relative prosperity of the German economy healthy enough to carry the burden of the bankrupt sister nations on the continent?
While the prospects of a single supervisory mechanism are profoundly disturbing, the forecast of globalized integration into a one-world economy is even worse. At stake is a total elimination of the national identity and home rule.
Essentially the will of the “people” demonstrated by numerous referendums, have sought to limit the centralization overreach of the European Commission. Now that the power grab of the European Central Bank is in motion, the communal interests of Europeans needs to reflect disgust for the administrative technocrats that seek to impose their will across national borders.
It seems the lessons of centuries are so soon forgotten, when the illusory and outlandish nightmare, that a centralized banking cartel is the best form for political government. Absent from the fiscal equation is that the Federal Reserve has been bailing out the failed ECB. MarketWatch reports in Fed bails out Europe while ECB dithers.
“On one level, it’s almost funny to call offering dollars at a cheaper rate to foreign banks “coordinated” action.
It’s only coordinated in the sense that the Federal Reserve is printing the dollars and the European Central Bank and other central banks put the greenbacks in the virtual vaults of mangled commercial banks that are drowning in European debt. See story on Fed action.”
The central banks are the problem, not the solution; and the only way to regain economic prosperity and political independence is to repudiate the illicit debt extortion.
Failure and losses are the essential feedback in capitalism which clears the way for success and innovation. Eliminate losses and failure by changing the rules to protect either an Elite or the majority and you doom the system to collapse.
Is the marriage of capitalism and democracy doomed to discord?The question has been pawed over many times, but longtime correspondent M.M. recently summarized the core issue very neatly:
Isn’t capitalism actually incompatible with democracy?Some wise person said “Capitalism without failure is like Christianity without hell.”
I agree. Failures are an essential part of the workings of capitalism. But what happens if a very large group invests in a false or foolish enterprise, for example 70% of the citizens become involved in that undertaking. Democracy allows those 70% to change the rules instead of accepting their failure…
Capitalism can be subverted by either an Elite or the majority.Marx traced out how Capital (wealth) naturally consolidates into monopolies or cartels (shared monopolies). These concentrations of wealth then buy political influence via campaign contributions, armies of lobbyists and the full spectrum of cronyism: sweetheart deals, envelopes of cash, revolving doors between the cartels and their regulators, plum jobs for lazy nephews and so on.
This base corruption of the Central State, which is now the dominant force in the economy, allows Elites to change the rules rather than accept failure (also known as losses). Thus we have Crony Capitalism: profits are private and yours to keep, losses are transferred to the taxpaying public.
This mechanism is well known and catches most of the attention. But M.M. highlighted the way the democratic majority can subvert capitalism.This is generally ignored for the simple reason that most commentators are part of the majority subverting capitalism to benefit their own self-interest.
This leads to a terminal state of self-delusion and self-justification:Half of US social program recipients believe they “have not used a government social program”(via Patrick.net)
Two examples that come to mind are the housing bubble and Medicare.Slightly more than two-thirds (65%) of U.S. households “own” a home. (The quotes denote the paucity of actual ownership if the mortgage exceeds the value of the home. In that case, it’s more like a lease with a balloon payment.) This super-majority is keenly interested in maintaining housing subsidies and any policies aimed at re-inflating the housing bubble: zero-rate interest policy (ZIRP), government-guaranteed mortgages to marginally qualified buyers, and so on.
The fact that this “changes the rules” so failure (the accepting of losses, bankruptcy, etc.) is voided or transferred to the public ledger is perfectly acceptable to the majority of homeowners pining for a return to bubblicious prices.
Their self-interest is misplaced, of course, because when you change the rules to protect yourself from losses, the market can never clear itself of rot and deadwood, and so the system becomes a zombie market dependent on a steady transfer of losses to the taxpaying public. This transfer of risk to the system eventually leads to systemic collapse.
I have reported on Medicare’s fundamental unsustainability in depth:That Which is Unsustainable Will Go Away: Medicare (May 16, 2012). Though nobody knows because only a tiny sliver of transactions are audited, it seems about 40% of Medicare’s expenses are fraud–phantom patients, phantom clinics, phantom tests, and so on. Another chunk is squandered on unproductive or even counterproductive tests, procedures and medications.
Recall that Medicare and Social Security are “pay as you go” entitlements: the “trust funds” are pure propaganda illusions, as any shortfalls are funded just like any other government agency, by the Treasury selling bonds.
The typical recipient pays in perhaps 10% ($30,000) of the average payout ($300,000-$500,000) in a lifetime of working. The system only functions in the long-term if the worker-beneficiary ratio is close to 10-to-1. It is now roughly 1-to-1, with 100 million Medicare/Medicaid benficiaries and 115 million full-time private-sector workers.
Once a majority of the voters believe they are entitled to something that is “too good to be true” (housing market bubbles, entitlements that pay 10X what is paid in, etc.) then they will refuse to accept its demise. But that which is unsustainable will go away, one way or another; keep changing the rules to avoid failure and what happens is the “too good to be true” system brings down the entire State, economy and nation.
This leads to a fundamental conclusion:In a sustainable system of democracy and capitalism, the Central State’s sole role is to protect the commons and enforce and enable competition, transparency, accountability, open markets and dissent. It cannot redistribute funds, as those disbursement streams will quickly fall under the control of wealthy Elites, nor can it distribute entitlements, as those will soon attract super-majorities that demand the rules be changed to protect their share of the unsustainable swag.
The Central State cannot be in the “business” of “managing” the economy, as the mechanisms of this management will quickly fall under the control of wealthy Elites or demagogue politicians promising “too good to be true” riches to a super-majority.
Those in the super-majority are delighted to blame the Elites for everything rotten while holding themselves blameless in the subversion of capitalism’s key mechanisms (transparency, accountability, failure, loss and clearing the market) to protect their share of the “too good to be true” swag.
I cover these topics more in depth in my latest book Resistance, Revolution, Liberation: A Model for Positive Change.
Charles Hugh Smith – Of Two Minds
The essence of debt serfdom is debt rises to compensate for stagnant wages.
I often speak of debt serfdom; here it is, captured in a single chart. The basic dynamics are all here, if you read between the lines:
1. Financialization of the U.S. and global economies diverts income to capital and those benefitting from globalization/ “financial innovation;” income for the top 5% rises spectacularly in real terms even as wages stagnate or decline for the bottom 80%.
2. Previously middle class households (or those who perceive themselves as middle class) compensate for stagnating incomes and rising costs by borrowing money: credit cards, auto loans, student loans, etc. In effect, debt is substituted for income.
3. The dot-com/Internet boom boosted incomes across the board, enabling the bottom 95% to deleverage some of the debt.
4. When the investment/speculation bubble popped, incomes again declined, and households borrowed heavily against their primary asset, the home, via home equity lines of credit (HELOCs), second mortgages, etc.
5. The incomes of the top 5% rose enough that these households could actually reduce their debt (deleverage) even before the housing bubble popped.
Here is a chart of real (inflation-adjusted) incomes, courtesy of analyst Doug Short: note that the incomes of the bottom 80% have been flatlined for decades, while the top 20% saw modest growth that vanished once the housing bubble popped. Only the top 5% experienced significant expansion of income. Notice that incomes of the top 20% and top 5% really took off in 1982, once financialization became the dominant force in the economy.
Interestingly, we can see the double-bubble (dot-com and housing) clearly in the top income brackets, as these speculative bubbles boosted capital gains and speculation-based income. Since the bottom 80% had little capital to play with, the twin bubbles barely registered in their incomes.
Bottom line: financialization and substituting debt for income have run their course. They’re not coming back, no matter how hard the Federal Reserve pushes on the string. Both of these interwined trends have traced S-curves and are now in terminal decline:
Those hoping the economy is “recovering” on the backs of financial speculation/ legerdemain and ramped up borrowing by the lower 95% will be profoundly disappointed when reality trumps fantasy.
Charles Hugh Smith – Of Two Minds
This Congress and President Obama have shredded the Bill of Rights. We have one last chance to restore the Founding Fathers’ bastion against a rogue Central State: the Bill of Rights.
“Everything that Richard Nixon did to me, for which he faced impeachment and prosecution, which led to his resignation, is now legal under the Patriot Act, the Foreign Intelligence Surveillance Act, and the National Defense Authorization Act (NDAA).” Daniel Ellsberg. Can Congress legalize tyranny by passing a law that says it can? Can Congress shred the Bill of Rights by passing a law that says it can? Well, Congress has passed such a law, and President Obama–the most effective Trojan Horse president in American history, a plutocrat dressed as a “progressive”– rushed to sign it on New Years Eve 2011 when nobody was looking.
This is not a partisan issue, though various flaks and toadies are attempting to make it so. Here is how the American Civil Liberties Union (ACLU) describes the NDAA: Indefinite Detention, Endless Worldwide War and the 2012 National Defense Authorization Act.
He signed it. We’ll fight it.President Obama signed the National Defense Authorization Act (NDAA) into law. It contains a sweeping worldwide indefinite detention provision. The dangerous new law can be used by this and future presidents to militarily detain people captured far from any battlefield. He signed it. Now, we have to fight it wherever we can and for as long as it takes.
Here is a discussion of the two key sections of the act: National Defense Authorization Act for Fiscal Year 2012 (Wikipedia)
The problem that all the congressional supporters of the NDAA don’t seem to get is that the difference between a dissenter and a “belligerent” is in the eye of the beholder. This is why the Founding Fathers guaranteed civil liberties against the power of the Central State. Now those guarantees have been overthrown by the pursuit of endless war against an ill-defined threat by a congressional act that no military or law-enforcement agency requested: this is 100% politico-instigated.
We have one last chance to restore at least a part of the Bill of Rights. Some members of Congress awakened from their fund-raising somnambulance and proposed the Due Process Guarantee Act which would restore the Bill of Rights to its proper place in US law.
So do one thing today for the nation and its liberties: contact your representative and senators to press them to support this bill. Ask them which military or law enforcement agencies requested that Congress nullify the Bill of Rights with the NDAA. Advise them to do the correct thing for once in their sordid little careers and vote for the Due Process Guarantee Act.
This page lists other articles about the NDAA and also provides links to find your representative and Senators: It’s treason. Call it what it is.
The only presidential candidate who has vowed to axe the NDAA provisions is Ron Paul. If you support any other candidate, ask why they are supporting the gutting of the Bill of Rights under the Orwellian umbrella of GWOT (global war on terror).
In case you have any doubts about where our “leadership” is taking us, please review these Assorted quotes by Fascists or about Fascism.
Charles Hugh Smith – Of Two Minds
The world is changing and few people understand the implications. Old rules and guidelines which worked for generations no longer apply. Profound changes, termed “discontinuities” by the late Peter Drucker, have obsoleted them. For those accustomed to linear change, there is a new normal. Mr. Drucker described a discontinuity as a change so profound that normal extrapolation of the past would produce misleading forecasts.
The most profound change the world faces is the future role of government in relationship to its citizens. Here are a few of the unsettled issues:
- Are citizens going to allow government to continue to grow at the expense of the productive sectors around the world?
- Can economies prosper as government becomes a larger section of the economy?
- Does government work for the people or has this relationship been inverted?
- Once government has reached a certain level of power over citizens, is it possible for people to ever reduce its control and power?
- Will what appears to be inevitable sovereign bankruptcies destroy economies, welfare states and societies themselves?
Short of the disruptions associated with a World War, there has never been as much uncertainty regarding the future. For the US, isolated by geography from most wars, the current situation has no comparable other than the Civil War. What is happening is not understood by the masses. For them, this crisis is another economic problem, just another recession albeit one that is harsher and longer than previous ones. For them, it will eventually pass like all others.
The reality is that this crisis is less an economic crisis than a political crisis. In raw terms, we are at a crossroads between freedom and slavery. Are the elites going to enslave the producers? That is the critical question, and this issue is also the causal factor behind what is perceived as just another economic crisis.
Sadly, many citizens do not recognize what is at risk. If it were merely the standard of living for the next generation, this crisis would be serious but not fatal. That is trivial compared to the risks to freedom and the future of civilization and peaceful coexistence itself. Social cooperation, innovation, liberty and progress are in play. If government suppresses its citizens, the world will enter another dark ages in terms of economy, peace and humanity.
Government, the so-called custodian of civilization, precipitated the economic crisis as a result of their desire to control everything economic and personal. Nowhere is this more apparent than their favoritism to financial institutions who reciprocate favors back to the political class.
As economic conditions worsen, government ratchets up its efforts to control and dominate individuals, information and outcomes. We are in uncharted territory, at least for the modern, developed world.
The force that created the crisis is unwilling to admit error or relinquish control. Despite deteriorating economic and social conditions, government appears determined to exploit these conditions to obtain more if not total control over its citizens. In poker parlance, government has gone “all in.”
The alternatives are clear. That State can be dismantled or it will assume total control. We can descend into the totalitarianism that plagued most of mankind for much of history or we can once again become masters of the government. There is no other outcome! It is one or the other.
Monty Pelerin – Economic Noise