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Archive for the ‘Oligarchy’ 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:

The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

Debt = Serfdom (April 2, 2013)

Crisis and Opportunity (February 1, 2013)

Financialization and Crony Capitalism Have Gutted the Middle Class (July 13, 2012)

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

In A Nutshell: Corporatocracy Has Replaced Capitalism

Capitalism Fixes Problems & Preserves Democracy: Capitalism is what we should be relying on to fix our problems. Capitalism has it’s own ecosystem, just like biology’s ecosystem. An economic ecosystem that weeds out the weak, has parasites that eat the failures and new bacteria that evolves and grows replacements for that which failed. A system that keeps everything in balance.

The problem is we are no longer a capitalistic society. What we were taught in school is now utter and absolute nonsense. Capitalism is a thing of the past.

As outlined in “It’s Not A Financial Crisis – It’s A Stupidity Crisis”, we created two back to back bubbles. The air out of the Tech Bubble was sucked up for fuel by our next stupidity crisis: The Housing Bubble.

Now, after the second Stupidity Crisis there isn’t a third bubble to inflate. If we still lived in a capitalistic environment the banks and financial institutions that created loans for folks who should have remained renters and then sold those loans as investments to pensions and countries would have been cleansed by capitalism’s ecosystem.

But that isn’t what happened.

In a very anti-capitalistic move the government decided that stupidity and criminal activity should be rewarded. I’d say they took our money, but it is worse, we didn’t have that much money. So they borrowed the money in our name. The loan has a variable rate. They borrowed so much money that our kids cosigned the loan. In fact, our kid’s future kid’s signed on the dotted line.

That is unequivocally immoral.

They gave that borrowed money to a bunch of morons as a reward for stupidity. Morons who created subprime loans, liar loans, no income no documentation loans and other fraudulent instruments. Morons bundled that trash, got it rated AAA and then sold these turds or weapons of mass destruction that they had the audacity to name complex financial instruments or derivatives to pensionfunds, countries and other “investors”.

Then it all blew up.

Big surprise.

For blowing up the world’s economy this Stupidity Crisis was falsely named an Economic Crisis by CNBC and 535 morons on a hill in DC (Ron Paul and a few other fiscally responsible adults excluded). The idiots who created the mess were rewarded with a 700 billion dollar “bailout”. This “bailout” was anything but a bailout and had a price tag of anything but 700 billion. The actual price tag is closer to 11 trillion and puts us on the hook for another 13-17 trillion – not counting interest.

Think about that for a second. This stupidity crisis is the equivalent of our Federal Debt which took a generations of politicians over a hundred years to wrack-up.

For anyone who still believes we live in a free country where capitalism reigns please show me one economic textbook which states that failure, and fraud get rewarded with borrowed taxpayer money. For anyone who believes we live in a democracy please show me a textbook that says the government will en-debt you and your kids and their kids to pay for a failed business. How is that democratic?

“Law of Morons”: Years ago, while serving on a committee I came to a sad realization. Like gravity, there is the another invisible force which I dubbed “The Law of Morons”. Put a group of very intelligent, well meaning people in a room together, put them on a committee or some governmental body that is devoid of guiding principles or merit-based decision making and “The Law of Morons” will prevail. The collective IQ will drop to the smallest shoe size in the room. And hope for loafers, because collectively this body won’t be able to tie anything together – not even a single shoelace.

Government Creates Problems: Basically our government is comprised of many well meaning intelligent people who for whatever reason, re-election, greed the “Law of Morons”, corporate puppet strings (read: lobbyist), self interest, corporatocracy or whatever else, do nothing but create massive problems. Lack of regulation, too much regulation.

And without any uncertainty — too much DEBT along with a deficit that will NEVER be paid.

They have failed us.

Terribly!

With debt and a failed capitalistic society our democracy is now at risk. Serious risk.

A democratic society requires a stable and effectively functioning economy. I trust that we and our successors at the Federal Reserve will be important contributors to that end.~ Alan Greenspan

Serious irony there unless he was talking about the end of a democratic society. Greenspan was primarily responsible for muzzling Brooksley Born’s attempt to regulate derivatives. 

Our deficit requires that we counterfeit “money” to service our debtpayments.

Forget about GDP, it is a bogus measure cooked by the BEA (US Bureau of Economic Analysis) . GDP is so baked that it makes the folks who cooked Enron’s books look like saints. Let’s focus on what we take in and what we pay out. We take in about 2 trillion in taxes and other revenues. We borrow about 2 trillion of which about 1 trillion must be taken off for debt service, and we spend well over 4 trillion.

To deal with the 1.6 trillion ++ shortfall we just print/counterfeit it. This debases the value of every dollar we hold, stealing wealth from every hard working American. It causes the need for more dollars to be injected into the system, which increases the amount of taxes that Americans pay.

There are only two crimes listed in our Constitution: Treason and counterfeiting.

“Solutions Create More Problems” ~ Al Bartlett (Worked on the Manhattan Project).

Another asked, “Is there any intelligent life on earth to change our future to a sustainable one?”

Dr. Bartlett replied, “Is there any intelligent life in Washington, DC is the bigger question?”

We Have a Corporatocracy: Not capitalism.

Corporatocracy: A government that serves the interest of, and may de facto be run by corporations.

Some states have government workers who have powerful unions that influence the government’s decisions. California has a massive pension mess, created in large part by government unions and elected officials who have catered to these unions.

“Too Big To Fail” is living proof that capitalism is dead. These TBTF institutions that blew up the economy in 2008 with their stupidity crisis, at the very least deserved to fail. They blew it. That is the definition of capitalism. You do well you are rewarded, you screw up you close shop. You commit fraud and you do time.

But with a Corporatocracy you have Hank Paulson – a former Goldman Sachs CEO worth about 700 million dollars who winds up becoming our past Secretary of the Treasury. There is a serious distinction between a civil servant and someone who serves a corporation, especially the last corporation he worked for. His salary was only six figures, but his benefit was that he got to cash out of his stocks and pay no taxes. He gave the morons who blew up the economy 700 billion dollars. He had another former Goldman Sachs employee disperse the funds while the current CEO of Goldman Sachs professed to be “Doing God’s work.”

The movie “The Corporation” can be viewed at NetFlix or online with Hulu.

In Summary: Our debt and our inability to revive capitalism and cut the waste in government will be our demise. Sadly, the only glimmer of hope I see is that Corporatocracy will destroy itself. I say sadly because it will destroy the average American citizen like some parasite that kills it’s host.

Capitalism is dead and that is why we are totally screwed.

Davos Sherman Okst ~ FinancialSense.com

The easy fixes–throwing around trillions in “free money”–have all been tried. Now the only choices left are the hard ones everyone has avoided for four years because they’re politically impossible.

I want to elaborate on a key point in yesterday’s entry The Resilience and Fragility of the Status Quo: now that we’ve run through all the easy fixes, all we’ve got left are the hard choices. You know, facing the music, dealing with reality, making the cuts, taking the losses and tossing aside the impossible promises.

The irony is that completely surrendering to the vested interests hasn’t fixed what’s broken, but neither will overthrowing them. Getting rid of the parasitic financial Elites would be a positive first step, but that won’t magically make Medicare a sustainable promise. Medicare is careening off the fiscal cliff regardless of who’s nominally in charge of the political machinery, for the reasons listed yesterday: demographics, the technological destruction of paid work and the diminishing returns on debt.

Here is the easy stuff that’s already been done:

1. Paper over every problem with trillions of yuan, euros, yen, dollars, etc. Print it, borrow it, conjure it electronically, but flood the vested interests with essentially “free money” to stop the political pain caused by vested interests screaming as their slice of the swag is threatened by financial collapse.

2. Twist, bend, fold or break the rules to insure the flood of free money flows to all the vested interests. “Rules are made to be broken,” especially in legal systems in which the Central State and its regulatory machinery have been captured by vested interests.

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” Frederic Bastiat, 1850 (via Scott)

That describes the easy part: surrendering to the vested interests. From the point of view of the vested interests, what was the point of buying political power other than securing and protecting our interests in times of crisis?

But the vested interests are short-sighted, and so their “solution”–free money for us– is politically expedient but financially disastrous. Medicare is careening off the fiscal cliff precisely because the simulacra “reforms” (Obamacare, etc.) are complexity shields behind which the vested interests retain their share of the national income and their political influence. What better mechanism for control than a convoluted 1,300 page bill with hundreds of opportunities to influence regulations to protect your fiefdom?

The same can be said of the Dodd-Frank financial reform bill, which ceded unprecedented powers to the Federal Reserve while creating hundreds of nooks and crannies in 4,500 pages of regulations (many yet to be written–the lobbyists are still writing them) for financial vested interests to exploit.

Lobbyists aren’t hired to understand the big picture, they’re hired to secure a swollen river of free money for their vested-interest clients. Public unions, banks, Big Pharma, for-profit hospital chains, insurance companies, defense contractors, etc. don’t care where the swag comes from or how it’s skimmed, they only care about getting their share of it.

In Survival+ and Resistance, Revolution, Liberation I discuss profound political disunity as an operative dynamic of devolution.

This describes not just the political battle between the 0.5% and the 99.5%, but the diverging interests of the various vested interests and Elites. It would be tidy if all the Elites were united, but as pressures build and systems are pushed to extremes, the interests of Elites diverge to the point that the system is pulled apart. None of the Elites are willing to act in the best interests of the nation, and so their self-absorbed greed becomes a destructive force that cannot be controlled.

The decline of the Roman Empire had this subtext. In Victorian England, the landed Elites who skimmed rents fought a political war with the Imperial “free trade” manufacturers who profited from the expansion of the Empire and the industrial workforce. The manufacturers won and the landed Nobility, though still immensely wealthy, took a back seat.

The collapse of Medicare/Medicaid would be a catastrophe for all those skimming billions in profits from the fraud-laced, bloated sickcare system. The same can be said of the crippled mortgage/real estate industry, the insolvent banking system, the bloated defense industry, the out-of-control National Security Complex and so on.

On a local level, the implosion of state, county and city finances is a catastrophe for public unions and all the other vested interests living off local government.

I call the war over dwindling resources and income streams internecine conflict between protected fiefdoms. Each fiefdom will fight to the death to protect its power and share of the swag, right up until the moment the government declares bankruptcy, the account is emptied, and the checks bounce.

Politicians and the Federal Reserve responded to the pain of their financial Overlords by ignoring both prudence and the rules as they fell over themselves to shovel free money to the vested interests. The trillions of dollars were borrowed from future taxpayers, of course, but who cares about them? They don’t even vote, much less give campaign contributions.

This disregard for the future and the fundamentals of fiscal well-being is about to reap consequences. The Powers That Be counted on “time healing all,” as if the mere passage of time would magically heal a broken economy and political machine.

Time heals all–unless you have an aggressive cancer. We have multiple aggressively metastasizing cancers–moral, political, demographic, technological and financial. The Status Quo has chosen to ignore these fast-growing cancers because it was politically expedient to quiet the powerful vested interests with trillions in bailouts, backstops, free loans, guarantees, “stimulus spending,” and so on.

That was easy to do, but it didn’t fix anything.

Now there are obstacles to this sort of irresponsible pandering: it is no longer fiscally or politically possible to hand another $23 trillion to vested interests. If the easy stuff is gone, that leaves only the hard stuff on the menu. The hard stuff has been ignored for four years precisely because it is politically impossible: how do you take away entitlements that have been promised to politically potent constituencies? How can you slash the income stream or profits of vested interests? You can’t, unless you want to lose your own power.

So toady politicos and their apparatchiks are squirming and twisting, trying not to visibly break impossible promises while continuing to divert billions to their their donors and insider pals. The problem is that this approach will bankrupt the nation and spark an overthrow of the Status Quo.

The system has been pushed to extremes: the expectations are impossibly high, the promises are impossibly generous and the sums of money demanded by the vested interests “just to stay afloat” are stratospheric. The “run to fail” levers have all been pushed to the maximum, and it is simply too politically painful to make any real-world adjustments that might save the system from imploding.

Nobody wants a crisis, yet a crisis is the only thing that can save the system from implosion.

Charles Hugh Smith – Of Two Minds

Today at a campaign stop in Pueblo, Colorado, Barack Obama was touting the success of the government bailouts.  He is just so enamored with them, that he said:

 “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.

Oh really, is that so, Mr. Obama?  I think what you really mean to say is that you’d like to take more money from one group of people and give it to another you deem ‘special’.  Let me enlighten people about the truth of what it is you have done and what you are suggesting.  First of all, your auto bailouts destroyed as many people and jobs as they ‘saved.‘  By no means can this be described as a ‘success’.  At best it was picking and choosing who got to live another day and who didn’t; at worst it was complete and utter lawlessness.  And the jury is still out on those that were ‘saved’ since contrary to popular belief and advertising, GM has NOT paid back the taxpayers, and indeed, since it went public again, it has lost its investors (suckers) yet more money.   The IPO price of GM shares was $33.00.  Today, GM sits languishing at $20.65.   You tell me.

In empathy to GM at this point, I’ll add that I find it highly unlikely that they’ll ever again be profitable due to the jackboot of government stomping on their neck forcing them to crank out extremely overpriced Chevy Volts, which use highly inefficient technology.  I’d think if anyone wanted to actually buy them, GM wouldn’t be forced to go into our public schools in an attempt to get 3rd graders to market Chevy Volts to their parents.  (No, I’m not kidding.)  So, you see, while GM was a ‘beneficiary’ of government largesse, it came with a price so high, that they’ve lost all autonomy.  To make matters worse, once you’re indebted to the government, you jump on the crony-bandwagon and you do what the government wants you to do to sell cars, even if it means rooting for $6.00 a gallon gasoline or destroying jobs in the United States and moving them to China and *gasp* advocating for Communism.  For GM the price of their bailout was no less than their soul.

GM’s bailout is merely a microcosm of what is wrong with our country.  Let me explain how all this works:

THE GOVERNMENT HAS NO MONEY OF ITS OWN, IT ALL BELONGS TO PEOPLE WHO WORK AND EARN IT; THE GOVERNMENT CAN ONLY BORROW AGAINST YOUR FUTURE EARNINGS AND TAKE FROM ONE GROUP OF PEOPLE TO GIVE TO ANOTHER! And every time they do this, they make a ‘special class’ of people. Eventually, there is no one left to take from!

And the government NEVER gives on merit. They give in response to crony lobbyists, pet projects, and to get kickbacks to enrich THEMSELVES first, and foremost! The end result is that productive people are robbed in present time AND in the future, while those who have committed massive fraud that needs to be swept under the rug (banks, Wall Street and other industries), those who can pay for access (banks, Wall Street, big pharma, pet industries, unions, minorities, etc.), those who don’t want to work (welfare kings and queens), those who think they’re better than everyone else (elite Wall Street firms, people in positions of power), and those in government get rich(er) or dodge having to work for themselves, on the backs of those who work hard (Joe Working-Stiff, Fred The Small Business Owner). This crony-capitalist system is what is running our country – and unless we find a way to stop it, there is no stopping the collapse that is coming.

This is not a ‘right or left’ ideology.  It is a ‘some are more special than others‘ ideology.  It is cronyism or crony-capitalism, which results in a VERY small, finite group of elite people controlling all the wealth and picking and choosing at THEIR whim who is to be the recipient of their largesse.  For those on the left who think this is ‘social justice,’ think again.  Just because today you might be in that class of ‘special people,’ doesn’t mean that tomorrow you will STILL be in that class. A government large enough to give you everything that you want, is also powerful enough to take it all away.  For those on the right who think we have ‘free market capitalism,’ wake up and smell the coffee; the system you are defending is essentially an oligarchy.  The rule of law is gone because there are whole classes of people to which those rules do not apply.

First and foremost, this is a matter of mathematics and finite resources.   Eventually you run out of productive people willing to work to support these various classes of ‘special people.’  The very first Americans over 400 years ago learnt this lesson the hard way in Jamestown.  We were the country that almost wasn’t.   I do believe that the Declaration of Independence said something about ‘all men being created equal’ and it said nothing about certain classes of people being more special than others.  The rule of law was intended to be applied to EVERYONE equally!

Think long and hard about it!

Now I’ve seen it all.

The USSC upheld Obamacare by, basically, twisting the Constitution into a pretzel, crapping on it, whizzing on that and then eating it.

Finding first that the Commerce Clause bars the government from compelling one to enter into commerce, the analysis then turned to whether there was any way to save the constitutionality of the act.

The justices found one.

They re-interpreted the penalty clause as a tax.

And of course, Congress can levy taxes.

That’s the path taken by this tortured process — a path that could only be dreamed up if someone had already determined the outcome they sought instead of being an independent jurist.

The real surprise, however, is that Chief Justice Roberts, believed to be a strict constructionist on the court, managed to not only agree with this piece of tortured logic he found and constructed it as the opinion is his!

So much for judicial restraint and strict construction!

You really ought to read the dissent that starts on page 127 of the opinion.  Justice Scalia, Thomas, Kennedy and Alito eviscertate the majority, saying in part:

Here, however, Congress has impressed into servicethird parties, healthy individuals who could be but are not customers of the relevant industry, to offset the undesirable consequences of the regulation. Congress’ desire to force these individuals to purchase insurance is motivatedby the fact that they are further removed from the marketthan unhealthy individuals with pre-existing conditions, because they are less likely to need extensive care in the near future. If Congress can reach out and command even those furthest removed from an interstate market to participate in the market, then the Commerce Clause becomes a font of unlimited power, or in Hamilton’s words, “the hideous monster whose devouring jaws . . . spare neither sex nor age, nor high nor low, nor sacred nor profane.” The Federalist No. 33, p. 202 (C. Rossiter ed. 1961).

What little was left of The Constitution died today, June 28th, 2012.

And incidentally, the math on federal health spending coupled with this decision means that by the time a 55 year old man reaches 85 (his life expectancy, roughly) the Federal government will be attempting to spend roughly $15 trillion a year on health care.

(No it won’t, no we won’t get that far, and the detonation of our government on the fiscal side is now assured — or your health care will be sacrificed.  This is mathematics, not politics.)

That pretty much sums it up.  Many of us have known this truth for a while.  What’s stunning is that this was on the mainstream media.  Wonder if there’s any chance that people are waking up?