Epic epicaricacy

Sardonic humor while the world burns. Ironic and often sarcastic satire amidst the collapse of western civilization. Epic epicaricacy

Thursday, July 28, 2011

RE: "The Romanovs Ride Again"

Casino Capitalism at the Terminus of Empire

for Matt O.

Q: "so short of violence, what do you think should be done? Let the debt soar? Up taxes? Ban investing? Clearly you're passionate about this stuff. I'd be interested to hear what you think should be done specifically to correct the current state of our economy. Lord knows Washington has no idea."

A: I wish I could tender a simple answer to what, on the surface, appears to be a relatively innocuous and simple question. Short of some sort of modern day Farmer's Rebellion, I feel there is no simple answer because the problem itself is very very complex. This point is not meant to be obtuse or otiose, but simply the truth at the heart of the matter: to "correct the current state of the economy" one needs to analyze what the core causes of the problem really are, beyond the superficialities that we generally accept as answers. Indeed the problems with the economy reflect a rather systematic failure of objective government and corporate self-regulation, both terms seemingly Orwellian, ironic, and oxymoronic in this day and age. One of the key issues here is that the engine of economy has co-opted our political process.

Ideally and historically our economy and government work best when opposed, it is perhaps best to conceptualize this notion as an inverse relationship; if the market is allowed to operate in a vacuum without regulation and oversight things usually congeal in a top down manner, monopolies, conglomerates, cartels, and sprawling corporations form - limiting choice and freedom, which is not to mention that if allowed to exist unfettered the market grows too quickly- (I have a mental image of my mother's tomato plants in the garden: huge tomatoes just destroying a small plant with no root system or stalk capable of supporting them)- and shaky, shady and sketchy practices are allowed to become the norm, forming bubbles and the economy grows rapidly before collapsing like a dying sun. Now the antipode has similar consequences - if the oversight and regulation of the government are too Draconian, growth is inhibited and freedom is again castrated, the market essentially becomes socialized and innovation is stagnant (this however has not been the case in the US yet, historically or at least in the last near century since the establishment of the Federal Reserve system, the market has swung repeatedly from the laissez-faire lack of any regulation what-so-ever to moderate regulation, but never really with any serious handcuffs - the US has never really had to worry about economic socialism as anything but the hyperbolic threats of FOX News Corp). When in opposition gov't and economy can strike a good balance, following the great depression the Glass-Steagall Act provided a healthy environment for slow steady growth which existed primarily until the Reagan administration (I am ignoring the gas crisis of the 70's as it does not reflect the failure of state or market, but rather of infrastructure in building a society completely dependent on an exogenous commodity). Because of the then (Reagan Era) popularity of economists like Milton Freidman and his cronies (contemporaries and predecessors e.g. the Laffer curve, 'The Road to Serfdom', ect.) which immediately followed a period of stagnant growth, supply-side-voodoo-trickle-down economics came en vogue and has remained fashionable ever since despite it's manifest failure. We have since watched the complete unraveling of all the regulation, oversight, accountability and transparency in our financial sectors. Wall Street and Washington are, for all intents and purposes, effectively attached at the hip.

And I don't mean this last point to resonate as hyperbolic or demagogic, I'm not trying to wax Glenn Beck here, but in an objective sense all three branches of government have become compromised by the interests of Wall Street. Congress is of course the most compromised branch of gov't, as legislators basically run as stool pigeons for corporate interests, and then retire to lucrative careers as lobbyists, the very lobbyists they were once influenced by. This is simony by another name, a complete corruption of the democratic process that has only become more obscene (consider the vicious ouroboros: W.S. Lobbyists push hard for deregulation i.e. the repeal of Glass-Steagall and get it. They then translate this new found boon into a windfall, using it in turn to lobby more aggressively with more zeal and capital to relax standards even more to make even more capital etcetera, etcetera. This is the snake devouring it own tail) in recent years, at least in terms of size and scope. And then there is the executive branch which has the benefit of appearing less corrupted but this in and of itself is a facade spun from the fantastic filaments of the PR machine. When 2 of the last 4 last Treasury Secretaries served as chief executives for Goldman Sachs (Rubin, Paulson) its hard not to think of the old axiom "don't piss on my leg and tell me its raining". [Pop Quiz: Rubin was on the board of which transnational investment bank when the mortgage bubble burst? (A)] The heads of the Fed haven't really been anything better than apologists for the S.O.P. or 'business as usual' mentality. All these positions being appointed by the executive branch, a branch that seems increasingly focused on placating Wall Street (Interesting Trivia: Obama's largest donors outside of Google, Microsoft, and I believe Cal U, were large investment banks [although it should be noted the McCain's donors were primarily investment banks, and he had about twice the amount of banks crack his top ten list {although the big banks seemed to hedge their bets by giving them both a shit ton of money}]). Which brings us to the last hope in our system of check and balances: the ever esteemed and always controversial Judiciary. And there is nothing to be optimistic about here..."Lasciate ogne speranza, voi ch'intrate" ...the Citizen's United ruling was a serious punch in the balls to democracy, and things seem to be trending along these same lines, as the Chamber of Commerce seems to hold the ear of the court, due (no doubt) in large part to the scads of lawyers and oodles cash they have at their disposal. This has a two fold effect on the Supreme court: a blatant selection bias in the cases they hear and a skew toward corporate interests. I am not being naïve or provincial in making this point, it is in fact supported by metrics (which I have read about but did not memorize, as is the case with everything that I am saying, I am writing this on my phone and do not have the luxury of being able to go back and forth to link the appropriate data to the relevant points I am trying to argue, but I assure you if you look for it, you will find it, I shit you not [in addendum: apologies for any missing prepositions, spelling errors, erroneous grammar, this being composed on a Blackberry in somewhat of a fugue state]) and relevant data, statistics, ect. ect.

<< Editorial Water Break: Now you may feel that all this so far has been a digression, aside, rant or what have you, and that I am not answering the initial question, which is partly true but I ask that you bear with me a little longer. I realize I may be trying your patience in what may very well read like a shrill or overly pedantic screed, but tone or narrative aside, I am getting to the question, I promise. >>


Now this marriage of business, economy and government is not new, and I do not intend to present it as such. Post World War II was the honeymoon, one only needs to do scant research into the early history of CIA to see that (1) its 'founding' members consisted of a motley cabal of Wall Streeters (2) that securing US interests abroad meant de-stabilizing established governments in the third world to artificially depreciate commodity prices and keep them that way under the puppet strong men of banana republics (3) that espionage was and is used for the benefit of US corporations [I can recall a more recent example of the CIA getting caught in the act of corporate espionage in negotiations in the 90's when Boeing was pitted against Airbus either in Brazil or Japan, I'd have to look it up, but it was rather embarrassing and quickly swept under the carpet *Although I could not find this example in particular, I found several others of the US intervening directly for Boeing, one using the Echelon system and another here]. However, this honeymoon was more like lovers eloping, as it was kept secret from pretty much everyone. (The term military-industrial complex seems pretty plangent here but what most people don't know is that this widely used phrase comes from a speech by Ike where the speechwriter had written 'military-industrial-banking complex'. A glaring redaction/omission in history* Correction, could not find evidence for this claim that was relayed to me anecdotally, however,  there is much to say about the revisions of this speech). All this to say: this courtship has lasted awhile - American industry/banking ect. has long existed under the shelter and auspices of the gov't's big stick. It is only a recent development, however, that the relationship has grown to be one sided, but that's a mediocre way of putting it... It should be essential when viewing the problem here that this relationship as once symbiotic now parasitic is essentially moot, the boundaries/ borders that exist between these two entities are either completely permeable or do not exist anymore at all.

So then the idea of working through the normal channels to enact reform seems like a farce or at least a portentous exercise in futility (just ask Elizabeth Warren, tasked with the simple chore of tracking the TARP money, she bears an unfortunate resemblance to a modern day Sysiphus). In fact its hard to think of any real economic reformers in the political arena at all. (If someone mentions that half wit Paul Ryan's accursed name I swear to God on high I'll rip off their head and shit down their throat) I'm hard pressed to come up with real historical examples...Andrew Jackson, FDR, JFK, (who, interestingly enough, enacted a rival currency to Fed's dollar through a silver backed note issued by the treasury. A year later he was dead, and LBJ rescinded that executive order. Draw your own conclusions) and most recently -the sheriff of Wall Street himself- Elliot Spitzer. And we know his story, it goes to show that if you go up against the big boys you better have no skeletons in the closet (and if you don't, be prepared for an assassination attempt [and here I'm not being conspiracy theory-esque, but referring to the attempt on Andrew Jackson's life by the banking cartels. This is the stuff of compelling history]). Most 'reform' these days is nothing but whitewashed propaganda packaged into toothless legislation. The Dodd bill is a joke, and even as we speak the largest lobby on Capitol Hill is seeking to send it to an early grave. Working within a systematically corrupt and co-opted bureaucracy to end corruption (i.e. enact reform) seems akin to a fool's errand but let's play it out: what would I do (within the constraints of legal action within the system) if given the chance to fix the problems, and what are the corresponding consequences?

Here are my simple solutions that will eventually lead to correcting the economy at least by way of restoring faith in the fiscal state of the union:

1) Close tax loopholes to avoid raising taxes which we all know is political poison [Bush Sr. "Read my lips..."]

2) Repeal the Bush tax cuts, or allow them to expire, another political landmine that's sure to get worse the longer we get accustomed to having them around as the norm

3) Balance the budget, if Clinton could do it with a GOP congress, it can't be that hard. Essentially put an end to deficit spending except in times of crisis

4) Reduce Spending:

4.1)Address the glut of military spending...

4.2) While at it remove corn subsidies...

4.3) And reform Social Security & Medicaid? Oy vey!

<< Editorial Flourish: Mind you all this being stated under the assumption that Wall Street and commerce do not up and reform themselves under the cover of darkness and purge themselves of corruption and police themselves to levels that make the SEC and DOJ seem like irrelevant redundancies. I make this assumption as their is no «immediate» profit incentive in this, and as such few companies are willing to take a quarterly hit for the sake of longevity. The "everybody else is doing it" ethos that pervades BODs seems reason enough to make this assumption. The assumption here is that regulation and reform has to be enacted by government (which as stated previously, is already in bed with business) because business (or any entity with greed as its engine) can never be able to or expected to monitor and correct itself. There is no profit motive. >>

Corresponding problems that stem from simple solutions that illustrate the vast complexities in what is a very tangled web of politics and economics:

1) Closing tax loopholes is, on paper, a very easy way to increase revenue without raising taxes per say, it is also has the benefit of streamlining an archaic and convuluted tax code. I do not think this will happen, probably ever. These tax loopholes primarily benefit huge conglomerates (monopolies) and the uber-rich, who as previously mentioned, effectively control the government (if you think this "J'accuse" of plutocracy is hyperbolic on my part consider what would happen if a congressman tried to pass legislation that crippled his campaign donors...where would the filthy lucre come from for his re-election campaign? How many lobbyists would come out of the woodwork to stymie his efforts? You bite the hand that feeds and you lose) and as such it should be no surprise that they will not go gentle into that goodnight. GE pays no taxes. Think about it.


2) I thought the Bush tax cuts would fade into the annals of history, but the support for their extension from Obama on down in times when that revenue seems sorely needed is a slap in the face. It appears that these may become permanent if Republicans get their way, and of course these tax cuts primarily benefit the rich. Of course.

3) Balancing the budget should not be some herculean labor, it should be S.O.P. but we know this is not the case. We have been locked into a paradigm of infinite growth, and this contagion is endemic to globalization. This is, of course, untenable. There are only so many markets to expand into globally, there are only so many resources, id est there are rational limits to expansion in capitalistic markets. This basic and unassuming fact is very neglected and looked over. We exist in a country of debt. We live off of consumer debt: credit cards, mortgages, car loans, leases, to the point where a jingle from an ad for a website that checks your credit rating is known by all. Our nation has the same problem of debt as we do as individuals, it spends far more than it makes to the point where payment of the interest on the money it has borrowed (the debt) is 250 billion dollars. That's just the interest which is "taking up more federal spending now than federal outlays on education, transportation and housing and urban development combined" according to today's NYTimes. Indeed the interest on our debt is more than our actual debt was in 1946 and just a little smaller than it was in 1970. We are now past the point of no return. This is really not reversible without serious austerity, and for the US to do that, the US that is the consumer of everything worldwide, would mean a global recession for decades. Because no one wants that the US continues to raise the debt ceiling and keeps spending like its going out of style. Simply put we, as a nation, live beyond our means and, like an individual with a lot of consumer debt, we keep getting offers in the mail for credit cards unsolicited. They want us to keep spending. And our politicians don't want to stop spending (because constituents love pork belly!) but they also don't want to pay for what they want to enact with higher taxes which are the bane of any re election campaign. Its called a free lunch. Its doesn't exist, and this paradigm of infinite growth is unsustainable. So that being the case the budget should be balanced i.e. we shouldn't spend more than we take in. This is problematic for reasons that will be made clear in 4) but its also disturbing that if we balance the budget all we manage to do is tread water, we pay the interest on the loans we took, but we remain trillions of dollars in debt. We aren't actually paying any of it back. Troubling...

4) So what really needs to be done politically is to reduce spending to both balance the budget and be able to payback the debt and reduce the deficit or else the entire budget of the US in 50 years will only be able to pay the interest on our loans (slightly hyperbolic? I don't have the numbers in front of me but I don't think that's far off). So what's the first thing that gets the axe? Probably our biggest line-item that consumes a quarter of our spending...


4.1) The military. Now here's what the scholars call a real shitpickle: if we overnight got rid of all military bases all over the world (we have military personnel in over 200 countries) would we really have the ability dominate economically? For an awfully small democracy that always considers itself an underdog, we do act presumptuously like an empire. We are an empire, and I don't really want to argue this because it is essentially moot, the real question is that if you remove the fangs of the hegemon, isn't it only a matter of time before the buzzards start circling? Before the corporations we built jump ship to the greener pastures of China? It seems a little late to be isolationist, and our economy couldn't handle a change in this direction after been weaned on globalization for so long; the soaring prices of the commodities indices would more than offset the amount of money we saved on our state-of-the-art death machine.


4.2) So it would make sense to just get fucking rid of something completely pointless like subsidies for farmers not to grow on their land so they don't flood the market with their bountiful crop to the point where said crop becomes worthless. Or even to remove subsidies for growing the crop itself, because its a bullshit crop with little to offer humanity besides calamitous obesity. Yet the almighty corn lobby trods forward, and politicians pay lip service to ethanol as a viable fuel alternative simply because of how important the Iowa primaries are in the ass backwards process of securing the party nomination (it seems making concessions «for the sake of a straw poll or caucus» no matter how critical these concessions are to the future, is more important than a telling the straight dope to a bunch of truculent bucolic-pastoral types: specifically that their beloved crop is a very inefficient use of arable land and a threat to the stability of our political and economic infrastructure in the near future). Are you beginning to see how inordinately complex this is?

4.3) Social Security on paper should pay for itself, which is why when you look at your check you should see a sizable chunk appropriated ostensibly for Social Security. SS is actually running a surplus at the moment which should continue in the short term until we see the retirement of the baby boomers en masse. But mind you I said "on paper". The thing is, before our esteemed congressmen decided to drive us deep into debt they decided to raid the coffers of SS, taking all the incoming revenue and swaping it out for junk bonds. They raided the piggy bank and left IOUs (The legality of this is questionable, but it happened so get over it). Which makes SS non-viable, a problem that will only get compounded by the fact that when baby boomers do retire there will not be enough people working to support them sitting on their asses. Because SS has been gutted and its surplus is for naught, it has essentially become a very large pyramid or Ponzi scheme, we need to increase the amount of people working to pay for the increasing number of retirees (This is a symptom of an infinite growth paradigm). This will not happen, there are high unemployment rates, and we can't reproduce fast enough to keep this fucker chugging along. The retirement age should be advanced a year or two, people are working longer, and some serious revamping needs to be done if this monstrous program is to survive. Medicaid and Medicare are also a huge drain on the budget but its not really a a fault of theirs, or SS for that matter. The problem with M&M is that they are forced to acquiesce to the medical industry and insurance companies that have been running a racket for years. The doctors and hospitals have been raising prices that have nothing to do with cost, insurances companies pass the buck to the businesses that insure their employees and everybody wins. Drug companies made sure they weren't left out. Prices spiraled upward, and were of course, unregulated (insurance companies, doctors, nurses & hospitals, and Big Pharm all have their own huge phalanx like teams of men in suits lobbying vigorously for them, just look what happened with a national consensus on health care). I mean its all so fucking ludicrous, M&M could be gutted along with ObamaCare and instead we could all be given some socialized healthcare and not have to worry about horrifying terms like medical debt in country whose health care system ranks below Cuba. Seriously WTF.

I am running out of steam writing this, trying to make it somewhat cogent and lucid while writing with my thumbs on a 3 inch screen but I'll try to wrap this up coherently.

So what would I do to fix the problem? What can be done to correct the current state of the economy? I have tried to show that working within the system to reach a workable solution to our contemporary problems of economy is impossible and infuriating. I have tried to do this in a laconic matter (seriously, I did not really delve into the media and contemporary thought, the concept of a central banking system, globalization and the environment or the dynamics of fiat currency) and I hope my earnest attempt was able to demonstrate in some way, shape, or form the state of late-stage capitalism we exist in. This is not at all what Adam Smith envisioned. This is Casino Capitalism. It can't be saved (well maybe it could if you took FDR's heart put it with Teddy Roosevelt's balls in JFK's body, and created an über president that would smash the shit out the banks and tell congress to shut the fuck up and fall in line, and regulate all big business until their were none left just small business and no corporations). If you play the game you lose (I conceptualize it as a chess match, and going through the near infinite permutations the best outlook is a stalemate - a draw in which the status quo is able to continue to maintain itself, which seems highly unlikely). The only way to win is to throw out the rules, throw out the board, and re-conceptualize the game itself. The best way to fix the economy is to not fix it, not adhere some band aid to a lost limb, not dream that a paltry stop-gap solution is the answer to our prayers. The system is broken, the faster we acknowledge this the faster we can implement real stratagems. Short of violent uprising I advocate: large scale organization to show our dissatisfaction with government (wait... the Tea Party did this, and it was funded by the billionaire Koch bros. to advance a conservative agenda under the guise of populism...let's just scrap this point entirely). Hmm so what I would advocate is a reworking of economy in general, a change from profit-driven economy to purpose-driven economy, a *resource based economy*. This is all pretty radical stuff, and I don't expect you or anyone else to immediately get enthralled or jump on board. What I do expect is a collapse of the global economy within my lifetime, and the resulting life changes we will all be forced to make in order to survive. We need to live in sustainable communities with a focus on self sufficiency. The idea that its somehow cheaper to pull up oil from the remote corners of the world, spend endless amounts of energy shipping that oil across the world to be molded into a plastic fork to be thrown away in a landfill where it will not biodegrade because its non biodegradable, the idea that this is somehow cheaper than washing a fork needs to die. We need a better way to live. We really do, and call me a pessimist, a hatchet man, a naysayer, a paranoid doom-and-gloomer, call me what you will but I don't think we will find a better way to live on our own, not without some external impetus to get our collective shit together, if you will. It will take something catastrophic to wake us from the catatonic states of slumber and delusion we are cloistered in now. Luckily for us its just over the horizon. Calamity, that is.

Sincerely, DJV

Post Script: I don't know if you are one for scripture but my favorite part of the bible was when Jesus freaks out on the money changers outside the temple. There was a time when usury was considered a sin. Now its the norm. Sign o' the times.

*This was edited to remove my phone number, and to add formatting and much needed citations on Sunday Aug 7th, 2011

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