The American Bear

Sunshine/Lollipops

Yet, in the fine print, the agency also effectively empowered a handful of select banks to continue controlling the $700 trillion derivatives market. … Just five banks hold more than 90 percent of all derivatives contracts.

Regulators Overhaul Derivatives Market, but With a Caveat | NYTimes.com

$700 trillion derivatives market”

More: Deja Vu on the Hill: Wall Street Lobbyists Roll Back Finance Reform, Again by Matt Taibbi

Obama and the Class War | Margaret Kimberly

When a Democrat gets away with austerity and wars of aggression it is truly time to admit that a new paradigm is needed.”

Yes Virginia, there is a class war going on in America. There always has been, and the tide for working people ebbs and flows depending upon their own level of activism, world events, or economic conditions. For the past several decades working people have been losing and by growing margins with every successive presidential administration.

Despite the phony wars between Democrats and Republicans, there is consistency at the top. Ever since the Ronald Reagan presidency Democrats and Republicans have done their best to put and keep the malefactors of great wealth, the 1%, on top. Barack Obama has done nothing to alter this awful trend. Like all of his predecessors he would never have become president if he hadn’t sided with the ruling classes.

Read more

Plutocracy in America | Michael Brenner

The devolution of the Democratic Party from being the representative of ordinary people to being just “another bunch of guys” is a telling commentary on how American politics has degenerated into a plutocracy. The party’s rolling over to accommodate the interests of the wealthy has been a theme of the past four years. From the Obama White House to the halls of Congress, party leaders (and most followers) have conceded the dominance of conservative ideas about macro-economic strategy (the austerity dogma), about retaining largely untouched the for-profit health care “non-system,” about bailing out the big financial players as the expense of everyone else and the economy’s stability, about degrading Social Security and Medicare. The last item is the most egregious – and revealing – of our plutocratic ways and means. For it entails a combination of intellectual deceit, blatant massaging of the numbers, and disregard for the human consequences in a time of growing distress for tens of millions. In other words, there is no way to conceal or spin the trade-offs made, who was being hurt and who would continue to enjoy the advantages of skewed fiscal policies.

There is another, absolutely crucial dimension to the consolidation of America’s plutocracy. It is controlling the means to shape how the populace understands public matters and, thereby, to channel thought and behavior in the desired direction. Our plutocratic guides, prophets and trainers have been enormously successful in accomplishing this. One object of their efforts has been to render the media into either conscious allies or to denature them as critics or skeptics. Their success is readily visible. Who has challenged the plutocracy serving falsehood that Social Security and Medicare are the main cause of our deficits whose imminent bankruptcy puts in jeopardy the American economy? Who even bothers to inform the public that those two programs’ trust funds draw on a separate revenue source from the rest of the budget? Answer: no one in or near the mainstream media. Who has performed the most elementary service in pointing out that of all the jobs created since 2009, small as the number has been, 60% at least have been either part-time or temporary? Answer: again, no one. Who has bothered to highlight the logical flaws in the market fundamentalist view of the world that has so deformed perceptions of what works and doesn’t work in macro-economic management? Yes, Paul Krugman, Joseph Stiglitz and a handful of others – although even Krugman’s colleagues writing on business and economics at the NYT seem not to have the time to read him or else lack the wit to comprehend what he is saying.

A second objective in a similar vein has been to dominate the think tank/foundation world. Today, nearly every major Washington think tank depends on corporate money. Businessmen sit on the boards and shape research programs. Peter G. Peterson, the hedge fund billionaire, took the more direct route of acquiring the International Institute of Economics, renaming it after himself. He then set about using it as in instrument to carry on the campaign against Social Security which has become his life’s work. Then there is Robert Rubin. Rubin is the distilled essence of financial malpractice, and the embodiment of the government-Wall Street nexus that brought the country to wrack and ruin. Author of Clinton’s deregulation program while Secretary of the Treasury: later super lobbyist and Chairman of CITI bank in the years before it was pulled from the brink of bankruptcy by Ben Bernanke, Paulson and Tim Geithner; and adviser to Barack Obama who stocked the new administration with Rubin protégés. He since has ensconced himself as Chairman of the Council on Foreign Relations and Director of the highly prestigious, lavishly funded Hamilton Project at Brookings. By happenstance, both organizations late last year featured presentations by Jaime Dimon. The one billed as a forum for a leading global CEO to share priorities and insights before a high-level audience of CFR members. That is plutocracy in action.

The third objective has been to weaken public education. We have witnessed the assault on our public elementary school system in the name of effectiveness, efficiency and innovation. Charter schools are the watchword. Teachers are the heart of the problem. So privatization, highly profitable privitization, is sold as the solution to save America’s youth in the face of ample evidence to the contrary. Cast aside is the historical truth that our public school system is the one institution, above all others, that made American democracy. It also is a bastion of enlightened social thinking. It thereby qualifies as a target. The same for the country’s proud network of public universities. From state to state, they are starved for funding and made sacrificial lambs on the altar of the austerity cult. They, too, are stigmatized as “behind the times,” as no longer doing the job of supplying the business world with the obedient, practical skilled workers it wants. Business schools, long a dependency of the corporate world, as held up as the model for private-public partnership in higher education. Distance learning, often managed by for-profit ‘expert” consultants or “entrepreneurs”, is advertised as the wave a bright future – a future with fewer liberal-leaning professors with fuzzy ideas about the good society. Distance learning is the higher education companion to the charter school fad. Lots of promises, little delivery but well conceived to advance a plutocracy friendly agenda.

Here, too, boards of regents are led by business men or women. The abortive coup at the University of Virginia was instigated by the Rector who is a real estate developer in Virginia Beach. The Chairman of the Board of Regents at the University of Texas system where tensions are at a combustible level is a real estate developer. The Chairman at the University of California is CEO of two private equity firms – and the husband of Senator Diane Feinstein. His pet project was to have the moneys of the California teacher’s pension fund placed in the custody of private financial houses. Two former directors of the fund currently are under criminal investigation for taking very large kick-backs from other private equity firms to whom they directed monies – and which later employed them as ‘placers.’ That’s plutocracy at work. [++]

There are solutions, but they do not fit the needs of the Masters, for whom the crises are no problem. They are bailed out by the Nanny State. Today corporate profits are breaking new records and the financial managers who created the current crisis are enjoying huge bonuses. Meanwhile, for the large majority, wages and income have practically stagnated in the last 30-odd years. By today, it has reached the point that 400 individuals have more wealth than the bottom 180 million Americans. In parallel, the cost of elections has skyrocketed, driving both parties even deeper into the pockets of those with the money, corporations and the super-rich. Political representatives become even more beholden to those who paid for their victories. One consequence is that by now, the poorest 70% have literally no influence over policy. As you move up the income/wealth ladder influence increases, and at the very top, a tiny percent, the Masters get what they want. Noam Chomsky (via azspot)

(via azspot)

Our Current Economic Mess, Explained With Headlines | Common Dreams

randomactsofchaos:

I was doing research, gathering headlines for a post. But the headlines told a story of their own. So here they are:

2010

November 2010, Corporate Profits Hit New Record, U.S. Workers Still Struggling

2011

January 2011, Profits Are Booming. Why Aren’t Jobs?

May 2011, Corporate Profits At All-Time High As Recovery Stumbles

June 2011, Since 2009, 88 Percent Of Income Growth Went To Corporate Profits, Just One Percent Went To Wages

July 2011, Corporate profits’ share of pie most in 60 years

July 2011, A Boom in Corporate Profits, a Bust in Jobs, Wages

August 2011, Companies near record profits amid high unemployment

October 2011, While Corporate Profits Are At 60-Year High, Main Street Businesses Continue To Struggle

November 2011, GDP revised downward; corporate profits up

2012

February 2012, Corporate Margins And Profits Are Increasing, But Workers’ Wages Aren’t

May 2012, Corporate Profits Return To Prerecession Levels, But Job Growth And Investment Remain Weak

June 2012, Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low

July 2012, The Economy Stinks, but at Least Corporate Profits Are at 60-Year Highs!

December 2012, Corporate profits hit all-time high as wages drop to record low

2013

March 4, 2013, Corporate Profits Have Risen Almost 20 Times Faster Than Workers’ Incomes Since 2008

The Trillion Dollar Cat Shit Coin | Rob Urie

Some fair proportion of readers are already aware of the proposal to have the U.S. Mint produce a $1 trillion face amount coin to be deposited at the Federal Reserve and credited to the account of the Treasury Department to pay Federal bills. The $1 trillion would render the ‘debt ceiling’ debate irrelevant because it wouldn’t be funded with debt. It would demonstrate the contrived nature of the austerity ‘debate’ in Washington. Most fundamentally, it would lay bare the social nature of the institutions put forward as immutable facts. The current arrangement of affairs, debt based money, is not socially ‘neutral,’ it serves the political economic interests of some to the detriment of others. By making this visible, the trillion-dollar coin idea is extremely useful. So of course, the White House has said it has no use for the idea.

Why the coin would need to be platinum is a misleading technicality—the U.S. Mint requires no relation between the face amount of a platinum coin and the value of the metal it contains. That is, the Mint could use $100 market value of platinum (or in theory, zero cents worth of cat-shit or any other material) to create a coin with $1 trillion face amount and $1 trillion (digital) currency would end up in the Treasury Department’s account. More broadly, the U.S. already has a fiat currency—there is no relation between the face amount of ordinary currency and its component value. (A $500 bill has no more component value than a $1 bill). The value comes from the face amount on the currency and its designation ‘legal tender.’

The Federal Reserve creates large quantities of money out of ‘thin air’ on a regular basis already—this is where the trillions of dollars used in its Quantitative Easing and other stealth bank bailout programs comes from. But most money is created through the banking system as ‘private’ credit. There is no reason in principle why the Federal government shouldn’t create money directly and do so in the public interest. The (quasi-private) Federal Reserve uses the sleight-of-hand it serves the public interest with fully developed banker economics taught as fact in Graduate economics departments and with occasional warm gas being passed that debt based money be ‘managed’ in ways that coincidentally constitute the political economic wish list of the financial plutocracy. The view the Federal Reserve serves the public interest requires the ‘Geithnerian’ conceit the public benefits from a corrupt, predatory financial plutocracy.

Considered another way, ‘debt,’ as in Federal and household debt, represents obligations that money, per se, does not. What is useful in the platinum coin idea, and the central point of derision amongst protectors of the status quo, is if taken to its logical conclusion, there is no need for debt—government could create and distribute as much money as is needed via public policies in the public interest. The arguments for the existence of debt are straightforwardly ideological—government is less efficient at allocating resources in capitalist economies than ‘private’ interests and is prone to corrupt distribution. Banks, motivated by their desire for profits, are efficient allocators of money as debt. And relating government expenditures to receipts from taxes with excess spending funded with debt is a ‘natural’ guard against excessive shifting of resources from private interests to public. That outside the context of historical struggle this arrangement of affairs is entirely arbitrary is the great missing link in modern economics.

I used this very basic capitalist arithmetic in another piece recently and it serves a related purpose here: Revenues – Costs = Profits. Capitalism is theorized to be ‘efficient’ because the profit motive is purported to induce capitalists to minimize costs—lower costs mean higher profits. Without the profit motive, goes the argument; there is no incentive to produce the most output at the least cost. What is always left out of this formulation is unless the capitalist is forced to bear the costs of production capitalism is nothing but an externality generating machine—capitalists force everyone else to pay their costs. For instance, without developed and vigorously enforced environmental regulations, it is economically rational for a capitalist to maximize profits by dumping toxic waste that would cost him or her $10,000 to safely dispose of into a city’s water supply that then costs the city $1,000,000 to remove from the water. This is the ‘efficiency’ of capitalism. Capitalism was only ever theorized to work under conditions that capitalist capture of government assures would never materialize.

With respect to money, the West is still suffering from the most recent bout of externality generation in the banking sector. Banks (Wall Street) are by mandate expected to maximize profits and individual bankers are fabulously well paid to create the appearance that banks do so. But absent perpetual government guarantees of the banking sector, banks are spectacularly bad at ‘efficiently’ allocating capital. The costs of banking crises in terms of external economic destruction—the destructive effect these crises have on the rest of the world, are many multiples of the total profits banks have ‘earned’ in all of history. And quite aside from the systemic catastrophes the banking sector regularly creates, ‘prudent’ banking provides incentives to lend to capitalist enterprises most effective at forcing their costs of production onto others because doing so increases the probability of the banks being repaid. ‘Efficient’ finance lends to ‘efficient’ industry at maximum expense to the public.

Another canard used even by economists favorable to the idea of the platinum coin is that some level of money creation is inflationary. Quite astounding in what proponents of this view are forcing themselves not to see is the asset price inflation produced by the banking sector and the Federal Reserve in recent decades. The 1980s saw residential and commercial real estate bubbles that ended in a crash. The 1990s saw the mother of all stock market bubbles that ended in a crash. And the 2000s saw the mother of all private debt bubbles that ended in a crash. And with a tad more respect than is actually due, smart people should not waste their time with ‘bottom up’ theories of financial bubbles when corrupt bankers creating masses of money through financial leverage so well explain them. Not all bubbles in history were thus created, true enough, but why let the search for maximum generalization hide the facts in front of our eyes? So yes, inflation can be a problem. But on this, Hyman Minsky and (later) Irving Fisher have far more to offer than Milton Friedman.

What the platinum coin idea should generate is a robust dust-up over the use by plutocrats and their servants in government of contrived emergencies such as the debt ceiling and the ‘fiscal cliff’ to pose existing institutional arrangements as immutable facts in order to push ever more social wealth up the income and wealth ladders. On this Congressional Republicans may just have it right for all of the wrong reasons—why should the nation borrow money to pay for essential services when we can simply create the money ourselves without debt? Integrated with the nationalization of services such as education, healthcare and banking that don’t benefit from ‘private’ sector involvement, the direct issuance of money by the government would remove the rationale for the moral chide over government spending from deficit hawks and could explicitly establish serving the public interest as the goal of government spending. [more]

And as far as entitlement programs go, government guarantees and redistribution schemes are only a starting point. As economist Dean Baker has argued, America’s professional class retains monopoly pricing power for their labor through trade restrictions while the working class has been thrown to the wolves. The Federal Reserve has spent upwards of four trillion dollars to entitle the fortunes of the investor class since 2008, returning the already rich to their former wealth. And corporate executives have entitled themselves to robber-baron sized paychecks through the combination of trade policies that have so reduced the fortunes of the working class, tax abatements that have bled the public weal for some forty years, and through the financialization of the economy that has favored, along with Federal Reserve policies, the financial wealth that executives pay themselves with. All of these and more are entitlement programs that have redistributed ever more social wealth from the working class and poor up to the Washington establishment’s beloved plutocrats. Rob Urie

Another Goldman Creature Given Vital Government Post | Matt Taibbi

Big news yesterday in the United Kingdom, where the citizenry surveyed its domestic banking system and discovered that it couldn’t find a single person trustworthy enough to put in the top job at the Bank of England. So they went to Canada and stole that country’s central banker, Mark Carney, who just happens to be a former Goldman, Sachs executive – he was once Goldman’s managing director of investment banking.

Carney’s appointment may be seen as an admission that the British banking sector is now so tainted, only an outsider can be trusted to govern them. Almost all of the major English banks have been dinged by ugly scandals. The LIBOR mess, in which banks have been caught messing around with global interest rates for a variety of sordid reasons, has most infamously implicated Barclays, but the Royal Bank of Scotland is also a cooperator in those investigations.

Meanwhile, HSBC has been accused of laundering billions of dollars of Mexican drug money, a monstrous mess that recalls the infamous Bank of New York scandal of the late Nineties involving Russian mob money; officials have described the HSBC culture as “pervasively polluted.” And the British bank Standard Chartered is now being forced to pay $330 million to settle claims that it laundered hundreds of billions of dollars on behalf of Iran.

But Mark Carney is no Elliott Ness, brought in from the outside to clean the streets of Chicago. Instead, he’s another Geithner-esque character who will almost certainly prefer a hands-off regulatory approach, and seems to view the power of the government and the central bank as being necessary mainly to help bolster public confidence in the banking system. He’ll likely be another central banker in the mold of Ben Bernanke, who’s used endless rivers of cheap loans and money-printing programs like Quantitative Easing to keep floating corrupt banks all night long, for as long as they want to keep playing the roulette table. Here’s the Guardian’s prediction with regard to Carney:

He and many others in central bank circles know that most of the Britain’s banks are very highly leveraged. That without the support of the Bank of England’s quantitative easing programme, and its very low lending rates – all effectively backed by British taxpayers – Britain’s banks would effectively be insolvent.

And so Carney will continue with quantitative easing – which has provided British banks with the liquidity needed to indulge in speculative activity both at home and abroad, speculative activity that bears a scary resemblance to that undertaken before the crisis.

What the banking system really needs is a guy who will step in and force bankers to go back to being boring, risk-averse drips who lend businesses money to buy new equipment or fleets of trucks or whatever. What we have instead are coked-up wannabe big shots straight out of Boiler Room who are washing Mexican drug money and laundering Middle Eastern cash and playing around with wild price-fixing schemes – pretty much everything you can think of that isn’t quietly counting beans and helping grow the economy. [++]

The Dangerously Profound Distance Between The Elites And The Rest Of Us | Charles Pierce

We’re fighting over how far into the 30th percentile we’re going to let the top marginal rate soar, for the love of god. No discussion of stagnant wages, or income inequality, or unemployment, except the latter, sometimes, but only in context of how corporate panjandrums might be so nervous at how the top rate is rising that they might decline to hire people whom they never intended to hire in the first place. Maybe if we make the life of some old woman in a substandard nursing home more miserable, the CEO will feel secure enough to hire you for the minimum wage and no benefits. Shared sacrifice, my santorum.

There is not a single bit of “shared sacrifice” that is going to fall too heavily on Willard Romney. There is not a bit of “shared sacrifice” that is going to fall too heavily on David Gregory, either, or on Jon Meacham, or Andrea Mitchell, or Sean Hannity, or my man Chuck Todd. In the way we fight our wars, and in the way we conduct our politics, and in the way we run our economy, and in the way we function as a political commonwealth, we are now at the mercy of people who propose and enact policies for the rest of us under which they never will have to abide. Our elites are now a universe of chickenhawks and every issue out there is Vietnam.

It’s amazing to me that so many of these things that shock and dismay us today when they come to light—exotic, dubious financial instruments, close government connections to financial power, and so forth—were part of founding finance. Frequently people across the political spectrum think, if we could only get back to the basic values of the founding of the country, everything would be better. But the country came into creation largely via Robert Morris’s efforts, which involved absolutely shameless mingling of personal and public wealth, personal and public goals, and so forth. It’s very easy to put Morris down—people put him down at the time; a lot of people were revolted by everything Morris was doing in his own day. But, to me, the most interesting thing is that winning the revolutionary war and forming a nation required what Morris had to offer. Morris had a vision of American high finance, wealth concentration, and national power around the world based on a kind of financial-military-industrial complex, really. Ultimately what we can learn from founding fathers such as Morris has less to do with values we should be getting back to, but the degree to which the values we argue about today are based on the very same divisions prevailing when our nation was founded. William Hogeland (via azspot)

(via shrinkrants)

When corporations bankroll politics, we all pay the price | George Monbiot

It’s a revolting spectacle: the two presidential candidates engaged in a frantic and demeaning scramble for money. By 6 November, Barack Obama and Mitt Romney will each have raised more than $1bn. Other groups have already spent a further billion. Every election costs more than the one before; every election, as a result, drags the United States deeper into cronyism and corruption. Whichever candidate takes the most votes, it’s the money that wins.

Is it conceivable, for instance, that Romney, whose top five donors are all Wall Street banks, would put the financial sector back in its cage? Or that Obama, who has received $700,000 from both Microsoft and Google, would challenge their monopolistic powers? Or, in the Senate, that the leading climate change denier James Inhofe, whose biggest donors are fossil fuel companies, could change his views, even when confronted by an overwhelming weight of evidence? The US feeding frenzy shows how the safeguards and structures of a nominal democracy can remain in place while the system they define mutates into plutocracy.

Despite perpetual attempts to reform it, US campaign finance is now more corrupt and corrupting than it has been for decades. It is hard to see how it can be redeemed. If the corporate cronies and billionaires’ bootlickers who currently hold office were to vote to change the system, they’d commit political suicide. What else, apart from the money they spend, would recommend them to the American people?

It is no accident that in America today the gap between the very rich and everyone else is wider than at any time since the Gilded Age. Now, as then, the titans are seeking an even greater political voice to match their economic power. Now, as then, the inevitable danger is that they will confuse their own self-interest with the common good. The irony of the political rise of the plutocrats is that, like Venice’s oligarchs, they threaten the system that created them. The Self-Destruction of the 1 Percent - NYTimes.com (via pieceinthepuzzlehumanity)

(via pieceinthepuzzlehumanity-deacti)

Thomas Frank: Pity the Plutocrats | The New York Times

In the broad scheme of things, these are excellent times to be a billionaire. Labor is powerless. Taxes are low. The banks that survived the crisis are bigger than ever. So why do the well-to-do whine so? Why do they wring their hands?

For one thing, their criticisms reveal a contemptuous view of their fellow citizens. That all the books and articles on the financial crisis and the recession might have had an effect — that people might see the economic downturn as a reflection on the individuals who were, a few years back, lionized as the economy’s leaders — is inconceivable to the class-war complainers. The public’s attitude, they seem to believe, can have arisen only as a result of propagandizing by Mr. Obama. No American would ever stop respecting his betters unless he was brainwashed into it.

(Source: circlingtheroundabout)