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|Principal-agent problem||Quiet coup||Pecora commission||History of Casino Capitalism||Casino Capitalism Dictionary :-)||Humor||Etc|
Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic systems at both the macro and micro levels.
Its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector, (2) transfer income from the real sector to the financial sector, and (3) increase income inequality and contribute to wage stagnation. Additionally, there are reasons to believe that financialization may put the economy at risk of debt deflation and prolonged recession.
Financialization operates through three different conduits: changes in the structure and operation of financial markets, changes in the behavior of nonfinancial corporations, and changes in economic policy.
Countering financialization calls for a multifaceted agenda that (1) restores policy control over financial markets, (2) challenges the neoliberal economic policy paradigm encouraged by financialization, (3) makes corporations responsive to interests of stakeholders other than just financial markets, and (4) reforms the political process so as to diminish the influence of corporations and wealthy elites.
Thomas Palley, See http://www.levyinstitute.org/pubs/wp_525.pdf
|Speculation and gambling were always a part of Wall Street but since the 1930’s
they were just a side-show, now they are the show.
Comment to Matt Taibbi article Fannie, Freddie, and the New Red and Blue t
“The sense of responsibility in the financial community
for the community as a whole is not small. It is nearly nil.”
-- John Kenneth Galbraith, The Great Crash of 1929
The term Casino Capitalism generally is symonim of neoliberalism (also called economic liberalism), but it also point out to a specific phase of neoliberal transformation of capitalism. Politically it was slow motion corporate coup d'état, which started in 70th and is now accomplished in the USA and other Western countries which buries social-democratic (New Deal style) model of capitalism.
It hypertrophied police functions of state (in the form of national-security state) while completely avoiding economic sphere in ways other then enforcement of laws (with a notable exclusion from this top 1% -- "Masters of the Universe"). Like bolshevism it uses the state for the enforcement of the social system. On top level this is crony capitalism for major corporation. On low level of medium and small business owners it presupposed a deregulated economy (in a sense of the "law of jungle" as a business environment).
Casino capitalism presupposes strong militarized state, suppressing all the attempts to challenge the new "nomenklatura" (much like was the case in the USSR). It is quite different from traditional liberalism:
“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate “liberals” — meaning the political type — have no real problem with economic liberalism, including neoliberalism.
In other words this is neoliberal model of corporatism during the period of "cheap hydrocarbons". The period that is probably near the end and which by some estimate can last only another 50 years or so (less than 100 years). The major crisis of casino capitalism in 2008 was connected both with financial excesses (caused by moving to semi-criminal ways of extracting return on capital, typical for casino capitalism), but also with the rise of the price of oil and decrease of Energy returned on energy invested (EROEI). In this sense the last low oil price period which started in late 2014 and ended in spring 2018 can be viewed as the "last hurrah" of the casino capitalism.
In understanding neoliberal transformation of the society since early 80th it is important to understanding of the key role of financialization in this process. When major services are privatized (education, healthcare, pension plans) financial institution insert themselves as intermediaries in this arrangement and make it the main source of their profits. Also contrary to neoliberal propaganda this process is aided and abetted by state. State is used by neoliberalism as a tool of enforcing market relations even where they are not useless or even harmful (education). All this talk about irresolvable controversy between market and state is for gullible fools. In reality, being Trotskyism for rich, neoliberalism uses power of the state to enforce market relations by force on reluctant population even in areas where this can do no good. That make really it close to Soviet social experiment, which lasted from 1917 to 1991 or almost 75 years. As Marx noted "History repeats itself, first as tragedy, second as farce."
A very good discussion of the role of Financialisation in entrenchment of neoliberalism in modern societies can be found in the book by Costas Lapavitsas. Some highlights are provided in his Guardian article Finance's hold on our everyday life must be broken
This extraordinary public largesse towards private banks was matched by austerity and wage reductions for workers and households. As for restructuring finance, nothing fundamental has taken place. The behemoths that continue to dominate the global financial system operate in the knowledge that they enjoy an unspoken public guarantee. The unpalatable reality is that financialisation will persist, despite its costs for society.
Financialisation represents a historic and deep-seated transformation of mature capitalism. Big businesses have become "financialised" as they have ample profits to finance investment, rely less on banks for loans and play financial games with available funds. Big banks, in turn, have become more distant from big businesses, turning to profits from trading in open financial markets and from lending to households. Households have become "financialised" too, as public provision in housing, education, health, pensions and other vital areas has been partly replaced by private provision, access to which is mediated by the financial system. Not surprisingly, households have accumulated a tremendous volume of financial assets and liabilities over the past four decades.
The penetration of finance into the everyday life of households has not only created a range of dependencies on financial services, but also changed the outlook, mentality and even morality of daily life. Financial calculation evaluates everything in pennies and pounds, transforming the most basic goods – above all, housing – into "investments". Its logic has affected even the young, who have traditionally been idealistic and scornful of pecuniary calculation. Fertile ground has been created for neoliberal ideology to preach the putative merits of the market.
Financialisation has also created new forms of profit associated with financial markets and transactions. Financial profit can be made out of any income, or any sum of money that comes into contact with the financial sphere. Households, for example, generate profits for finance as debtors (mostly by paying interest on mortgages) but also as creditors (mostly by paying fees and charges on pension funds and insurance). Finance is not particular about how and where it makes its profits, and certainly does not limit itself to the sphere of production. It ranges far and wide, transforming every aspect of social life into a profit-making opportunity.
The traditional image of the person earning financial profits is the "rentier", the individual who invests funds in secure financial assets. In the contemporary financialised universe, however, those who earn vast returns are very different. They are often located within a financial institution, presumably work to provide financial services, and receive vast sums in the form of wages, or more often bonuses. Modern financial elites are prominent at the top of the income distribution, set trends in conspicuous consumption, shape the expensive end of the housing market, and transform the core of urban centres according to their own tastes.
Financialised capitalism is, thus, a deeply unequal system, prone to bubbles and crises – none greater than that of 2007-09. What can be done about it? The most important point in this respect is that financialisation does not represent an advance for humanity, and very little of it ought to be preserved. Financial markets are, for instance, able to mobilise advanced technology employing some of the best-trained physicists in the world to rebalance prices across the globe in milliseconds. This "progress" allows financiers to earn vast profits; but where is the commensurate benefit to society from committing such expensive resources to these tasks?
The term "casino capitalism" was coined by Susan Strange who used it as a title of her book Casino Capitalism published in 1986. She was one of the first who realized that
According to Susan Strange transformation of industrial capitalism into neoliberal capitalism ("casino capitalism") involved five trends. All of them increased the systemic instability of the system and the level of political corruption:
Now it is pretty much established fact that the conversion from "industrial capitalism" to neoliberal, completely financialialized "casino capitalism" is the natural logic of development of capitalism. In early and incomplete matter this trend was noticed at early 1990th by many thinkers. This is just the second iteration of the same trend which was interrupted by the Great Depression and subsequent WWII. So, in a way, replacement of industrial capitalism with financial capitalism in a natural tendency within the capitalism itself and corruption was contributing, but not decisive factor. The same is true about globalization, especially about globalization of financial flows, typical for casino capitalism, which is a form of colonialism (neocolonialism).
Also this conversion did not happen due to lack of oversight or as a folly. It was a couscous choice made by the US and GB elite, both of which faced deterioration of rates of return on capital. Also unlike "industrial capitalism" which was more-or-less stable system, able to outcompete the neo-theocratic system of the USSR, the financial capitalism is unstable in the same sense as radioactive elements are unstable. And this instability tend to increase with time. So there is probably natural half-life period for neoliberalism as a social system. It might be already reached in 2008. In we assume that global victory of neoliberalism happened in 1990. It is just 18 years. If we think that it happened in late 60th, then it is closer to 50 years.
The global crisis of neoliberal capitalism which started from bursting the USA subprime housing bubble in 2008 undermined ideological legitimacy of its central claim that "free markets" lead to faster and more uniform economic development of all countries. While the peak of its "ideological" power might be over (much like the peak of attractiveness of "command socialism" was over after WWII), it will exist in a zombie state for a long time due to economic and military power of the USA and G7. And as we know from Hollywood films, zombies can be especially bloodthirsty. It probably will remain the dominant force for at least the next two decades pursuing the same policy of "forceful" opening of energy rich and resource countries for western multinationals intact using color revolutions and local wars. But as Napoleon quipped "You can do anything with bayonets, you just can't sit on them".
Conversion to neoliberal capitalism was a reaction on stagnation of industrial production and as such it was nurtured and encouraged by a series of government decisions for the last 50 years. Stagnation of industrial production made expansion of financial sector of paramount importance for the ruling elite and by extension for Congress which represents this elite. House vote 377:4 for Commodity Futures Modernization Act of 2000 is pretty telling in this respect.
There were also at least two important parallel developments.
"Appetite comes with eating" and banks which initially rise as an alternative to usury gradually became indistinguishable from them, the new usury (vampire squid as Matt Taibbi called GS).
Financial institutions brass became dominant political force partially displacing (or more correctly complementing) media-military-industrial complex and oil-energy complex... Sen. Dick Durbin, on a local Chicago radio station blurted out an obvious truth about Congress which, despite being quite obvious, is rarely spoken "press scorps" :
“And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”
In other words the US political system is a brand of corporatism with financial capital standing on the top stop on interval to Washington, DC corporate hierarchy and holding the most of political power.
Most respectable authors like Henry Giroux in his article in Counterpunch generally consider the term "casino capitalism" to be an equivalent to the term Neoliberalism. Here is a relevant quote from Henry Giroux's Authoritarian Politics in the Age of Casino Capitalism :
There is more at work here than simply a ramped up version of social Darwinism with its savagely cruel ethic of “reward the rich, penalize the poor, [and] let everyone fend for themselves,” [ii] there is also a full scale attack on the social contract, the welfare state, economic equality, and any viable vestige of moral and social responsibility. The Romney-Ryan appropriation of Ayn Rand’s ode to selfishness and self-interest is of particular importance because it offers a glimpse of a ruthless form of extreme capitalism in which the poor are considered “moochers,” viewed with contempt, and singled out to be punished. But this theocratic economic fundamentalist ideology does more. It destroys any viable notion of the and civic virtue in which the social contract and common good provide the basis for creating meaningful social bonds and instilling in citizens a sense of social and civic responsibility. The idea of public service is viewed with disdain just as the work of individuals, social groups, and institutions that benefit the citizenry at large are held in contempt.
As George Lakoff and Glenn W. Smith point out, casino capitalism creates a culture of cruelty: “its horrific effects on individuals-death, illness, suffering, greater poverty, and loss of opportunity, productive lives, and money.”[iii]
But it does more by crushing any viable notion of the common good and public life by destroying “the bonds that hold us together.”[iv] Under casino capitalism, the spaces, institutions, and values that constitute the public are now surrendered to powerful financial forces and viewed simply as another market to be commodified, privatized and surrendered to the demands of capital. With religious and market-driven zealots in charge, politics becomes an extension of war; greed and self-interest trump any concern for the well-being of others; reason is trumped by emotions rooted in absolutist certainty and militaristic aggression; and skepticism and dissent are viewed as the work of Satan.
If the Republican candidacy race of 2012 is any indication, then political discourse in the United States has not only moved to the right—it has been introducing totalitarian values and ideals into the mainstream of public life. Religious fanaticism, consumer culture, and the warfare state work in tandem with neoliberal economic forces to encourage privatization, corporate tax breaks, growing income and wealth inequality, and the further merging of the financial and military spheres in ways that diminish the authority and power of democratic governance.[v] Neoliberal interests in freeing markets from social constraints, fueling competitiveness, destroying education systems, producing atomized subjects, and loosening individuals from any sense of social responsibility prepare the populace for a slow embrace of social Darwinism, state terrorism, and the mentality of war — not least of all by destroying communal bonds, dehumanizing the other, and pitting individuals against the communities they inhabit.
Totalitarian temptations now saturate the media and larger culture in the language of austerity as political and economic orthodoxy. What we are witnessing in the United States is the normalization of a politics that exterminates not only the welfare state, and the truth, but all those others who bear the sins of the Enlightenment — that is, those who refuse a life free from doubt. Reason and freedom have become enemies not merely to be mocked, but to be destroyed. And this is a war whose totalitarian tendencies are evident in the assault on science, immigrants, women, the elderly, the poor, people of color, and youth.
What too often goes unsaid, particularly with the media’s focus on inflammatory rhetoric, is that those who dominate politics and policymaking, whether Democrats or Republicans, do so largely because of their disproportionate control of the nation’s income and wealth. Increasingly, it appears these political elite choose to act in ways that sustain their dominance through the systemic reproduction of an iniquitous social order. In other words, big money and corporate power rule while electoral politics are rigged. The secrecy of the voting booth becomes the ultimate expression of democracy, reducing politics to an individualized purchase—a crude form of economic action. Any form of politics willing to invest in such ritualistic pageantry only adds to the current dysfunctional nature of our social order, while reinforcing a profound failure of political imagination. The issue should no longer be how to work within the current electoral system, but how to dismantle it and construct a new political landscape that is capable of making a claim on equity, justice, and democracy for all of its inhabitants. Obama’s once inspiring call for hope has degenerated into a flight from responsibility.
The Obama administration has worked to extend the policies of the George W. Bush administration by legitimating a range of foreign and domestic policies that have shredded civil liberties, expanded the permanent warfare state, and increased the domestic reach of the punitive surveillance state. And if Romney and his ideological cohorts, now viewed as the most extremists faction of the Republican Party, come to power, surely the existing totalitarian and anti-democratic tendencies at work in the United States will be dangerously intensified.
Alternatively, we could have spent more time studying the work of Hyman Minsky. We could also
have considered the possibility that, just as Keynes’s ideas were tested to destruction in the
1950s, 1960s and 1970s, Milton Friedman’s ideas might suffer a similar fate in the 1980s, 1990s
and 2000s. All gods fail, if one believes too much. Keynes said, of course, that "practical men
… are usually the slaves of some defunct economist". So, of course, are economists, even if the defunct economists are sometimes still alive.
Casino capitalism is a nickname for nailibelism. Probably more properly nickname would be financial corporatism. While the key idea of corporatism: that political actors are not individual people, but some associations and first of all corporations (which are officially considered to be "persons" and have rights as well as trade unions and some other associations) remains intact, financial corporatism is different from classic corporatism in several major ways:
Historically corporatism in various modifications became dominant social system after WWII and defeated "command socialism" as was implemented in the USSR. Here is an instructive review of corporatism history (The Economic System of Corporatism):
In the last half of the 19th century people of the working class in Europe were beginning to show interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly the Catholic intelligentsia, decided to formulate an alternative to socialism which would emphasize social justice without the radical solution of the abolition of private property. The result was called Corporatism. The name had nothing to do with the notion of a business corporation except that both words are derived from the Latin word for body, corpus.
The basic idea of corporatism is that the society and economy of a country should be organized into major interest groups (sometimes called corporations) and representatives of those interest groups settle any problems through negotiation and joint agreement. In contrast to a market economy which operates through competition a corporate economic works through collective bargaining. The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism. He would gather the parties to some dispute and say, "Let us reason together."
Under corporatism the labor force and management in an industry belong to an industrial organization. The representatives of labor and management settle wage issues through collective negotiation. While this was the theory in practice the corporatist states were largely ruled according to the dictates of the supreme leader.
One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin dangers of the egalitarianism of the French Revolution and the laissez faire economics of Adam Smith. In Germany and elsewhere there was a distinct aversion among rulers to allow markets to function without direction or control by the state. The general culture heritage of Europe from the medieval era was opposed to individual self-interest and the free operation of markets. Markets and private property were acceptable only as long as social regulation took precedence over such sinful motivations as greed.
Coupled with the anti-market sentiments of the medieval culture there was the notion that the rulers of the state had a vital role in promoting social justice. Thus corporatism was formulated as a system that emphasized the positive role of the state in guaranteeing social justice and suppressing the moral and social chaos of the population pursuing their own individual self-interests. And above all else, as a political economic philosophy corporatism was flexible. It could tolerate private enterprise within limits and justify major projects of the state. Corporatism has sometimes been labeled as a Third Way or a mixed economy, a synthesis of capitalism and socialism, but it is in fact a separate, distinctive political economic system.
Although rulers have probably operated according to the principles of corporatism from time immemorial it was only in the early twentieth century that regimes began to identify themselves as corporatist. The table below gives some of those explicitly corporatist regimes.
|Corporatist Regimes of the Early Twentieth Century|
|National Corporatism||Italy||1922-1945||Benito Mussolini|
|Country, Religion, Monarchy||Spain||1923-1930||Miguel Primo de Rivera|
|National Socialism||Germany||1933-1945||Adolph Hitler|
|National Syndicalism||Spain||1936-1973||Francisco Franco|
|New State||Portugal||1932-1968||Antonio Salazar|
|New State||Brazil||1933-1945||Getulio Vargas|
|New Deal||United States||1933-1945||Franklin Roosevelt|
|Third Hellenic Civilization||Greece||1936-1941||Ioannis Metaxas|
|Justice Party||Argentina||1943-1955||Juan Peron|
In the above table several of the regimes were brutal, totalitarian dictatorships, usually labeled fascist, but not all the regimes that had a corporatist foundation were fascist. In particular, the Roosevelt New Deal despite its many faults could not be described as fascist. But definitely the New Deal was corporatist. The architect for the initial New Deal program was General Hugh Johnson. Johnson had been the administrator of the military mobilization program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good job of managing the economy during that period and that is why he was given major responsibility for formulating an economic program to deal with the severe problems of the Depression. But between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini's National Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.
It should be noted that many elements of the early New Deal were later declared unconstitutional and abandoned, but some elements such as the National Labor Relations Act which promoted unionization of the American labor force are still in effect. One part of the New Deal was the development of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority (TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make TVA a model for the creation of regional political units which would replace state governments. Their goal was not realized. The model for TVA was the river development schemes carried out in Spain in the 1920's under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son of Miguel Primo de Rivera, was the founder of Franco's National Syndicalism.
Corporatist regime typically promote large governmental projects such as TVA on the basis that they are too large to be funded by private enterprise. In Brazil the Vargas regime created many public enterprises such as in iron and steel production which it felt were needed but private enterprise declined to create. It also created an organized labor movement that came to control those public enterprises and turned them into overstaffed, inefficient drains on the public budget.
Although the above locates the origin of corporatism in 19th century France it roots can be traced much further back in time. Sylvia Ann Hewlett in her book, The Cruel Dilemmas of Development: Twentieth Century Brazil, says,Corporatism is based on a body of ideas that can be traced through Aristotle, Roman law, medieval social and legal structures, and into contemporary Catholic social philosophy. These ideas are based on the premise that man's nature can only be fulfilled within a political community.
The central core of the corporatist vision is thus not the individual but the political community whose perfection allows the individual members to fulfill themselves and find happiness.
The state in the corporatist tradition is thus clearly interventionist and powerful.
Corporatism is collectivist; it is a different version of collectivism than socialism but it is definitely collectivist. It places some importance on the fact that private property is not nationalized, but the control through regulation is just as real. It is de facto nationalization without being de jure nationalization.
Although Corporatism is not a familiar concept to the general public, most of the economies of the world are corporatist in nature. The categories of socialist and pure market economy are virtually empty. There are only corporatist economies of various flavors.
These flavors of corporatism include the social democratic regimes of Europe and the Americas, but also the East Asian and Islamic fundamentalist regimes such as Taiwan, Singapore and Iran. The Islamic socialist states such as Syria, Libya and Algeria are more corporatist than socialist, as was Iraq under Saddam Hussain. The formerly communist regimes such as Russia and China are now clearly corporatist in economic philosophy although not in name.
Sine ira et studio
Tacitus, see Wikipedia
The term "Quiet coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced by Simon H. Johnson, a British-American economist, who currently is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. From March 2007 through the end of August 2008, he was Chief Economist of the International Monetary Fund. The term was introduced in his article in Atlantic magazine, published in May 2009(The Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government
The wealth of financial sector gave it unprecedented opportunities of simply buying the political power iether directly or indirectly (via revolving door mechanism):
Becoming a Banana Republic
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.
But these various policies — lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits — such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The great wealth that the financial sector created and concentrated gave bankers enormous political weight — a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.
He further researched this theme in his book 2010 book 13 Bankers The Wall Street Takeover and the Next Financial Meltdown (ISBN 978-0307379054), coauthored with James Kwak. They also founded and regularly contributes to the economics blog The Baseline Scenario. See also History of Casino Capitalism
The net effect of the ideological counter-revolution based on market fundamentalism ideology was that it restored the power of financial oligarchy typical for Gilded Age. As Simon Johnson argues that was partially done by subverting regulators and that oversize institutions always disproportionately influence public policy:
The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.
Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.
This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual institutions in a sector that is essential to the economy as a whole. Of course, some people will complain about the "efficiency costs" of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.
To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat industrial monopolies were not designed to address the problem we now face. The problem in the financial sector today is not that a given firm might have enough market share to influence prices; it is that one firm or a small set of interconnected firms, by failing, can bring down the economy. The Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trust-busting.
Caps on executive compensation, while redolent of populism, might help restore the political balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to the people who work there and to the government officials who were only too happy to bask in its reflected glory—has been the astounding amount of money that could be made. Limiting that money would reduce the allure of the financial sector and make it more like any other industry.
Still, outright pay caps are clumsy, especially in the long run. And most money is now made in largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated. Regulation and taxation should be part of the solution. Over time, though, the largest part may involve more transparency and competition, which would bring financial-industry fees down. To those who say this would drive financial activities to other countries, we can now safely say: fine.Two Paths
To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the important thing is to change them from time to time. If the U.S. were just another country, coming to the IMF with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market crises that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.
Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When they get into trouble, they quite literally run out of money—or at least out of foreign currency, without which they cannot survive. They must make difficult decisions; ultimately, aggressive action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own currency, which it can print. As a result, it could very well stumble along for years—as Japan did during its lost decade—never summoning the courage to do what it needs to do, and never really recovering. A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a sure thing right now. Certainly no one at the IMF can force it.
In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.
Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?
Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.
The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.
The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.
It is pretty interesting to see how financial oligarchy filters information provided to the population to fit their biases. For example, the key facts about repeal of Glass-Steagall law (BTW Joe Biden voted for it) mostly hidden from the public:
The measure, which Mr. Gramm helped write and move through the Senate, also split up oversight of conglomerates among government agencies. The Securities and Exchange Commission, for example, would oversee the brokerage arm of a company. Bank regulators would supervise its banking operation. State insurance commissioners would examine the insurance business. But no single agency would have authority over the entire company.
"There was no attention given to how these regulators would interact with one another," said Professor Cox of Duke. "Nobody was looking at the holes of the regulatory structure."
The arrangement was a compromise required to get the law adopted. When the law was signed in November 1999, he proudly declared it "a deregulatory bill," and added, "We have learned government is not the answer."
Commodity Futures Trading Commission — under the leadership of Mr. Gramm’s wife, Wendy — had approved rules in 1989 and 1993 exempting some swaps and derivatives from regulation. In December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous consent after Senator Gramm dominated the Senate debate...
"He was the architect, advocate and the most knowledgeable person in Congress on these topics," Mr. Donovan said. "To me, Phil Gramm is the single most important reason for the current financial crisis."
"The virtually unregulated over-the-counter market in credit-default swaps has played a significant role in the credit crisis, including the now $167 billion taxpayer rescue of A.I.G.," Christopher Cox, the chairman of the S.E.C. and a former congressman, said Friday.
But you will never find discussion of flaws and adverse consequences Phil Gram (or Greenspan for a change) initiatives in Heritage Foundation and other right-wing think tanks publications.
So what we are experiencing is a the completion of the transformation of one phase of capitalism to another. It happened in stages:
Manufacturing stagnated and can't provide the "decent" rate of growth. Competition from
re-built Europe and Asian markets severely stressed the US manufacturing. due to competition
return of capital dropped and in several industries became negative.
Computers brought innovations into financial markets. They make possible real time trading
of induces like S&P500, complex financial instruments like derivatives, etc. Later they enables superfast
trading (HFT). All those instruments dramatically increased the possibilities of extracting the rent
by financial institutions from the society.
Globalization kicked in due to new opportunities offered by high speed global communications
(Internet). And that is not limited to outsourcing. Due to globalization the sheer size of the
financial markets increased to the extent that they started to represent a different, new transnational
phenomena allowing new types of redistribution of wealth to be practiced. Integration of Russian
elite (oligarchs) is just one example of this process. In case of pro-western oligarchs (fifth
column) West went to significant length to protect them and their racket (Mikhail
Khodorkovsky - Wikipedia,)
Commercial banks turned into investment banks to exploit this opportunity.
Financial sector completely corrupted academic science converting most economists to pay prostitutes
which serve their interests.
Collapse of the USSR provided the financial sector major shoot in the arm and a golden, once
in century opportunity to finance new half-billion consumers and stole for a penny on a dollar huge
industrial assets and natural resources as well as put most of those countries in the debt (Latin-Americanization
of xUSSR space). Harvard Mafia (with some
support from London) did the bidding of western banks in xUSSR space. As more becomes known about
the laundering of Russian money in Western banks, many in the United States will likely try to hide
behind stories of faraway organized crime. But U.S. policy toward Russia has contributed to that
country's sorry conditions--with the Harvard Institute for International Development's Russia project
(HIID) playing a major role (Harvard's
'Best and Brightest' Aided Russia's Economic Ruin ). Professor
Jeffery Sacks provided
a bogus idea of "shock therapy" to achieve spectacular for Western banks result. As a result all
xUSSR space became new Latin America with typical for Latin America problems like huge level of inequality,
prostitution, child poverty, and prominent role of organized crime.
Banks became dominant political force on western societies with no real counterbalance from
other parts of the elite. The first president completely subservient to banking elite was elected
in the USA in 1992. Bill Clinton regime lasted eight years and along with
economic rape of xUSSR space in best colonial powers tradition, it removed what was left of financial
regulations after the flurry of deregulation of the early 1980s. And they behaved as an occupying
force not only in xUSSR space but in the USA as well. They deprived workers out of their jobs, they
abolished the US pension system as it impede playing with population money and replaced in with widely
inadequate 401K plans. They deprived municipalities out of their revenues and assets, while municipalities
became just a den of bond traders looking for then next mark which give them the ability to put municipalities
deeper in debt.
Newly acquired political power of financial elite speeded the shift to bank "self-regulation"
created huge shadow banking system which dwarf "official" under the smoke screen of "free-market"
propaganda and PR from a coterie of corrupts academics (Chicago
Scholl, Harvard Mafia, etc) . It engaged
in pursuit of short term profits and self-enrichment of top brass which became new elite by-and-large
displacing not only the old one, but also the newly minted IT elite of dot-com boom. Using newly
acquired power financial elite remove all regulations that hamper their interests.
Glass-Steagall was repealed at the last
days of Clinton presidency, financial derivatives became unregulated.
Deindustrialization kicked in. As financial speculation proved to be much more profitable
to other activities deindustrialization kicked in the USA as the financial center of the world. Outsourcing
which first was limited to manufacturing jobs now extent its reach on IT and decimate previously
profitable sector and its export potential.
Externalities can no longer be suppressed and economics became unstable. Growth of inequality,
job insecurity, as well as frequency of financial crises were natural consequences of financialization
of the economy. They create huge imbalances, like bubble in residential real estate which was blown
with the help and full support of the USA government as a way to overcome dot-com crisis consequences.
Debt crisis strikes. Growth of debt became unsustainable and produces the financial crisis
of enormous proportions. By their reckless policies and greed financial sector caused huge financial
crisis of 2008 and now they are forcing national governments to auction off their cultural heritage
to the highest bidder. Everything must go in fire sales at prices rigged by twenty-something largest
banks, the most corrupt institutions the world has ever known.
Devastating "local" wars became "new normal". Due to financial crisis, the overconsumption in western economies came under threat. Debt expansion which led to overconsumption within the western economies affected (or infected) by financialization. To sustain the current standard of living financial expansion became the necessity. It took the form of a competition for spheres of influence in the area of energy supplies, which we see in post USSR space, Iraq, Libya and elsewhere. And central banks play critical role in financing wars. After all Banks of England was created with this exact purpose.
I think by 2008 when the second major financial crisis hit the USA, the transformation on the USA economy into casino capitalism, which is essentially implementation of neoliberal doctrine (or more correctly the US brand of corporatism) was by-and-large complete.
In short we are living in a new politico-economic system in which financial capital won victory over both labor and industrial capital. We might not like what we got, but financial elite is now a new ruling class and this fact is difficult to dispute. As a result. instead of the robber barons of the early 20th century (some of whom actually created/consolidated new industries), we have the top executives from investment banks, insurers and mortgage industry who represent a new Rentier class, much like old aristocracy.
They are living off parasitic monopolization of access to any (physical, financial, intellectual, etc.) kind of property and gaining significant amount of profit without contribution to society (see Rentier capitalism which is a very fuzzy term for neoliberal model of capitalism).
Stagnation of industrial manufacturing droved up financial speculation as the method to compensate for falling rate on return on capital. This stagnation became prominent during Reagan administration (which started the major shift toward neoliberalism), although signs of it were present from early 60th.
For example Chicago which was a manufacturing center since 1969 lost approximately 400K manufacturing jobs which were replaced mainly by FIRE-related jobs, In 1995 over 22% of those employed by FIRE industries (66K people) were working in executive and managerial positions. Another 17% are in marketing, sales and processional specialty occupations (computer system analysts, PR specialists, writer and editors).
Those changes in the structure of employment had several consequences:
The key to understanding of Casino Capitalism is that it was a series of government decisions (or rather non-decisions) that converted the state into neoliberal model. In other words casino capitalism has distinct "Government property" mark. It was the USA elite, which refused to act responsibly in the face of changing economic conditions resulting from its own actions, and instead chose to try to perpetuate, by whatever means it had at its disposal, the institutional advantages of dollar as a reserve currency which it had vis-à-vis its main economic rivals and grab as large part of the world economic pie as it can. And this power grab was supported first of all by the role of dollar as currency in which oil is traded.
There might be some geo-strategically motives as well as the US elite in late 80th perceived that competitiveness is slipping out of the USA and the danger of deindustrialization is real. Many accuse Reagan with the desire to ride dollar status as a world reserve currency (exorbitant privilege) until the horse is dead. That's what real cowboys do in Hollywood movies... But the collapse of the main rival, the USSR vindicated this strategy and give a strong short in the arm to financialization of the economy. Actually for the next ten years can be called a triumphal ascend of financialization in the USA.
Dominance of FIRE industries clustered up and in recent years reached in the USA quite dramatic proportions. The old Bolsheviks saying "When we say Lenin we mean the Party and when we say the Party we mean Lenin" now can be reworded: "Now it we say US banks, we mean the US government and vise versa if we say US government we mean US banks".
According to the Center for Responsive Politics, the FIRE sector was and is the biggest contributor to federal candidates in Washington. Companies cannot give directly, so they leave it to bundlers to solicit maximum contributions from employees and families. They might have been brought down to earth this year, but they’ve given like Gods: Goldman Sachs, $4.8 million; Citigroup, $3.7 million; J.P. Morgan Chase & Co., $3.6 million; Merrill Lynch, $2.3 million; Lehman Brothers, $2.1 million; Bank of America, $2.1 million. Some think the long-term effect of such contributions to individual candidates was clear in the roll-call votes for the bailout.
Take the controversial first House vote on bailout of major banks on Sept. 29, 2008. According to CRP, the "ayes" had received 53 percent more contributions from FIRE since 1989 than those who voted against the bill, which ultimately failed 228 to 205. The 140 House Democrats who voted for the bill got an average of $188,572 in this election cycle, while the 65 Republicans backing it got an average of $185,461 from FIRE—about 23 percent more than the bill’s opponents received. A tinkered bill was passed four days later, 263 to 171.
According to the article Fire Sale (The American Conservative) half of Obama’s top ten contributors, together giving him nearly $2.2 million, are FIREmen. The $13 million contributed by FIRE executives to Obama campaign is probably an undercount. Democratic committee leaders are also dependent of FIRE contributions. The list includes Sen. Dodd ( please look at Senator Dodd's top donors for 2007-8 on openSecrets.org ) and Sen. Chuck Schumer ($12 million from FIRE since 1989), Rep. Barney Frank ($2.5 million), and Rep. Charlie Rangel ($4 million, the top recipient in the House). All of them have been accused of taking truckloads of contributions while failing to act on the looming mortgage crisis. Dodd finally pushed mortgage reform last year but by then as his hometown paper, The Hartford Courant stated, "the damage was done."
At the same time rise of financial capital dramatically increased instability. An oversized financial sector produces instability due to multiple positive feedback loops. In this sense we can talk about Financial Sector Induced Systemic Instability of Economy. The whole society became "House of cards", "Giant Enron" and "extension of Las Vegas". Reckless management, greed and out-right stupidity in playing derivatives games was natural consequence of the oversized financial sector, not just a human folly. In a way it was dramatic manifestation of the oversized financial sector negative influence of the economy. And in 2008 it did brought out economy to the brink of destruction. Peak oil added to suffocating effect on the economy of reckless gambling (and related debts) of financial sector producing the economic calamity that rivals Great Depression. Also, like Socialism, Casino Capitalism demands too much of its elite. And in reality, the financial elite much like Bolsheviks elite, is having its own interests above the interests of the society.
As Kevin Phillips noted "In the United States, political correctness, religious fundamentalism, and other inhibitions sometimes dumb down national debate". And the same statement is true for financial elite that became the center of power under the Casino Capitalism. Due to avalanche of greed the society became one giant Enron as money that are made from value addition in the form of manufacturing fade in significance to the volume of the money that is made from shuffling money around. In other was the Wall Street's locked USA in the situation from which there is no easy exit.
Self-reinforcing ‘positive’ feedback loops prevalent in Casino Capitalism trigger an accelerating creation of various debt instruments, interest of which at some point overwhelm the system carrying capacity. Ability to lend against good collateral is quickly exhausted. At some point apparently there is no good collateral against which lending freely was possible, even at high rates. This means that each new stage of financial innovation involves scam and fraud, on increasing scale. In other words Ponzi economy of "saving and loans" is replaced with Madoff economy.
Whether you shift the resulting huge private debt to public to increase confidence or not, the net result is of this development of events is a crisis and a huge debt that society needs to take. Actually the debt bubble in 2008 can only be compared to the debt bubble of 1933. The liquidation of Bear Sterns and Lehman was only a start of consolidation of finances and we need to find something that replace financial sector dominance in the national economy. It would be nice is some technological breakthrough happened which would lift the country out of this deep hole.
See Financial Sector Induced Systemic Instability of Economy for more details.
Like Bolshevism was marked by deification of teaching of Marx and Lenin, converting them into pseudo-religious doctrine, the Casino Capitalism has its own deified ideological doctrine. It is the ideology of Neoliberalism. The latter as an ideology and an agenda seeks to topple democratic capitalism and replace it with a de facto unaccountable autocratic government which serves as channel of a wealth transfer from the public to a rentier elite. In a way it is a spectacular example of a successful (in a very negative sense) pseudo-religious doctrine.
Addiction of the societies to disastrous politico-economical doctrines are similar to addictions to alcohol and drugs in individuals. It is not easy to recover and it takes a long, long time and a lot of misery. As dissolution of the USSR aptly demonstrated not all societies can make it. In this case the USSR elite (nomenklatura) simply shed the old ideology as it understood that it will be better off adopting ideology of neoliberal capitalism; so it was revolution from above. this abrupt switch created chaos in economics (which was applauded by Washington which under Clinton administration adopted the stance the Carnage needs to be destroyed and facilitated the process), criminal privatization of major industries, and pushed into object poverty the 99% of population of those countries. For some period under "drunk Yeltsyn" Russia sees to exist as an independent country and became a vassal of Washington.
This also means that "society at large" did not had effective brakes to the assent of financial plutocracy (aka financial oligarchy). I would add to this the computer revolution and internet that made many financial transaction qualitatively different and often dramatically cheaper that in previous history. Computers also enabled creation of new financial players like mutual funds (which created a shadow banking system with their bond funds) , hedge funds, exchange-traded funds (ETFs), as well as high-frequency trading and derivatives.
From the historical view Reaganomics also can be considered to be the US flavor of Lysenkoism with economics instead of genetics as a target. Here is how Reaganomics is defined in Wikipedia
Reaganomics (a portmanteau of "Reagan" and "economics") refers to the economic policies promoted by United States President Ronald Reagan. The four pillars of Reagan's economic policy were to:
- reduce the growth of government spending,
- reduce marginal tax rates on income from labor and capital,
- reduce government regulation of the economy,
- control the money supply to reduce inflation.
In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure from his immediate predecessors.
Reagan became president during a period of high inflation and unemployment (commonly referred to as stagflation), which had largely abated by the time he left office.
Please not that the Number 1 idea ("reduce government spending") was essentially a scam, a smoke screen designed to attract Rednecks as a powerful voting block. In a way this was a trick similar to one played by Bolsheviks in Russia with its "worker and peasants rule" smokescreen which covered brutal dictatorship. In reality all administrations which preached Reagonomics (including Clinton's) expanded the role of state and government spending. The number two was applied by-and-large to top 1%. The number three means deregulation in the interests of financial oligarchy and dismantling all social program that hamper profit of the latter (including privatizing of Social Security). The number fours is a scam, in the same sense as number one. As soon as financial institutions get in trouble, money are printed as if there is no tomorrow.
While the essence of Reagonomics was financial deregulation, the other important element was restoring the Gilded Age level of power of financial oligarchy which influence was diminished by FDR reforms. In this sense we can say that Reagan revolution was essentially a counter-revolution: an attempt to reverse the New Deal restrictions on financial sector and restore its dominance in the society.
Like it was the case in Bolshevism the ideology was developed and forced upon the society by a very small group of players. The key ideas of Casino Capitalism were formulated and implemented by Reagan administration with some contribution by Nixon (the role of rednecks aka "moral majority", "silent majority" as an important part of republican political base, which can be attracted to detrimental to its economic position policies by the smoke screen of false "moral" promises).
It was supported by each president after Reagan (paradoxically with Clinton having the most accomplished record -- he was the best Republican President in a very perverted way). Like in case of Lysenkoism opponents were purged and economic departments of the country were captured by principless careerists ready to tow the party line for personal enrichment. Like in case of Bolshevism, many of those special breed of careerists rotated from Republican Party into Fed and other government structures. A classic example of compulsive careerists that were used by finance sector to promote its interests was Alan Greenspan.
One of the key ideas of Reaganomics was the rejection of the sound approach that there should be a balance between too much government regulation and too little and that government role is important for smooth functioning of the market. In this area Reagan and its followers can be called Anarchists and their idea of 'free market" is a misnomer that masks the idea of "anarchic market" (corporate welfare to be exact -- as it was implemented). Emergence of corporate welfare Queens such as GS, Citi, AIG, are quite natural consequence of Reaganomics.
|Reaganomics was a the US flavor of Lysenkoism with economics instead of generics as a target... It can and should be called Economic Lysenkoism.|
The most interesting part of Reaganomics was that the power of this ideology made it possible to conditioned "working class" and middle class to act against their own economic interests. It helped to ensure the stagnation of wages during the whole 25 years period, which is close to what Soviets managed to achieve with working class of the USSR, but with much more resentment. This makes it in many ways very similar to Bolshevism as a whole, not just Lysenkoism (extremes meet or in less flattering way: "history repeats, first as a tragedy, then as farce).
Along with the term Reaganimics which implicitly stresses the deregulation, the other close term "market fundamentalism" is often used. Here is how market fundamentalism is defined (Longview Institute):
Market Fundamentalism is the exaggerated faith that when markets are left to operate on their own, they can solve all economic and social problems. Market Fundamentalism has dominated public policy debates in the United States since the 1980's, serving to justify huge Federal tax cuts, dramatic reductions in government regulatory activity, and continued efforts to downsize the government’s civilian programs.
Some level of government coercion (explicit or implicit ) is necessary for proper labeling of any pseudo-scientific theory with the term Lysenkoism. This holds true for both Market Fundamentalism (after all Reagan revolution was "revolution from above" by financial oligarchy and for financial oligarchy and hired guns from academia just do what powers that be expected) and, especially, Supply side economic. The political genius of those ideas is evident. Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?
In this sense the Republican Party played the role very similar to the Communist Party of the USSR.
For example supply side economics was too bizarre and would never survive without explicit government support. This notion is supported by many influential observers. For example, in the following comment for Krugman article (Was the Great Depression a monetary phenomenon):
Market fundamentalism (neoclassical counter-revolution — to be more academic) was more of a political construct than based on sound economic theory. However, it would take a while before its toxic legacy is purged from the economics departments. Indeed, in some universities this might never happen.
Extreme deregulation and extreme regulation (Brezhnev socialism) logically meets and both represent a variant of extremely corrupt society that cannot be sustained for long (using bayonets as in the case of USSR or using reserve currency and increasing leverage as is the case of the USA). In both cases the societies were economically and ideologically bankrupt at the end.
Actually, elements of market fundamentalism looks more like religious doctrine than political philosophy — and that bonds its even closer to Lysenkoism. In both cases critics were silenced with the help of the state. It is interesting to note that Reaganomics was wiped into frenzy after the dissolution of the USSR, the country which gave birth to the term of Lysenkoism. In a way the last act of the USSR was to stick a knife in the back of the USA. As a side note I would like to stress that contrary to critics the USSR was more of a neo-feudal society with elements of slavery under Stalin. Gulag population were essentially state slaves; paradoxically a somewhat similar status is typical for illegal immigrants in industrialized countries. From this point of view this category of "state slaves" is generally more numerous that gulag inmates. Prison population also can be counted along those lines.
It look like either implicitly or explicitly Reagan's bet was on restoration of gilded Age with its dominance of financial oligarchy, an attempt to convert the USA into new Switzerland on the "exorbitant privilege" of dollar status as the global fiat currency.
Casino Capitalism is characterized by political dominance of FIRE industries (finance, insurance, and real estate) and diminished role of other and first of all manufacturing industries. It was also accompanied by the drastic growth of inequality (New Gilded Age). Its defining feature is "the triumph of the trader in assets over the long-term producer" in Martin Wolf's words.
Attempts of theoretical justification of Economic Lysenkoism fall into several major categories:
Those can be called pillars, cornerstones of Economic Lysenkoism. Each of the deserves as separate article (see links above).
Historically especially important was Chicago school of market fundamentalism promoted pseudo-scientific theories of Milton Freedman (Chicago School) as well as supply side economics.
The huge boost of Casino Capitalism was given by the collapse of the USSR in 1991. That gave a second life to Reagan era. Collapse of the USSR was used as a vindication of market fundamentalism. After it New Deal regulations were systematically destroyed. Dumped down variants of Nietzsche philosophy like bastardatized variant promoted by Russian emigrant became fashionable with an individual "creative" entrepreneur as a new Übermensch, which stands above morality.
"The word Übermensch [designates] a type of supreme achievement, as opposed to 'modern' men, 'good' men, Christians, and other nihilists ... When I whispered into the ears of some people that they were better off looking for a Cesare Borgia than a Parsifal, they did not believe their ears." Safranski argues that the combination of ruthless warrior pride and artistic brilliance that defined the Italian Renaissance embodied the sense of the Übermensch for Nietzsche. According to Safranski, Nietzsche intended the ultra-aristocratic figure of the Übermensch to serve as a Machiavellian bogeyman of the modern Western middle class and its pseudo-Christian egalitarian value system.
The instability and volatility of active markets can devalue the economic base of real lives, or in more macro-scenarios can lead to the collapse of national and regional economies. In a very interesting and grotesque way it also incorporates the key element of Brezhnev Socialism in everyday life: huge manipulation of reality by mass media to the extend that Pravda and the USSR First TV Channel look pretty objective in comparison with Fox news and Fox controlled newspapers. Complete poisoning of public discourse and relying on the most ignorant part of the population as the political base (pretty much reminiscent of how Bolsheviks played "Working Class Dictatorship" anti-intellectualism card; it can be called "Rednecks Dictatorship").
While transformation to casino capitalism was an objective development, there were specific individuals who were instrumental in killing New Deal regulations. We would single out the following twelve figures:
There is no question that Reagan and most of his followers (Greenspan, Rubin, Phil Gramm, etc) were rabid radicals blinded by ideology. But they were radicals of quite different color then FDR with disastrous consequences for society. Here again the analogy with Bolsheviks looms strong. In a way, they can be called financial terrorists inflicting huge damage on the nation and I wonder if RICO can be use to prosecute at least some of them.
In Bailout Nation (Chapter 19) Barry Ritholtz tried to rank major players that led country into the current abyss:
1. Federal Reserve Chairman Alan Greenspan
2. The Federal Reserve (in its role of setting monetary policy)
3. Senator Phil Gramm
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley, and Goldman Sachs) and their CEOs
18. President George W. Bush
19. President Bill Clinton
20. President Ronald Reagan
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries Robert Rubin and Lawrence Summers
25. FOMC Chief Ben Bernanke
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk
Hyman Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation of debt and the fact the financial system represents a positive feedback loop that tend to destabilize the system, creating ossilations in the form of boom and bust cycles. . He identified 3 types of borrowers that contribute to the accumulation of insolvent debt: Hedge Borrowers; Speculative Borrowers; and Ponzi Borrowers. That corresponds to three stages of Casino Capitalism of increasing fragility:
Growth of debt and increased levarate at some point create predocition of the crash. The stage of business cycle at which those preconditions are met is called "Minsky moment":
A Minsky moment is the point in a credit cycle or business cycle when investors are starting to have cash flow problems due to spiraling debt they have incurred in order to finance speculative or Ponzy investments.
At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.
After the collapse of the USSR there were a lot of chest thumping of the status of America as a hyper power (American exceptionalism) and the "end of history" where neoliberalism that displaced Brazhvev socialism (and wiped out the socialist camp) was supposed to reign supreme forever.
But this triumphal march of neoliberalism was short lived. The system proved to be self-destructive due to strong positive feedback look from the unregulated financial sector.
But in 2000 the first moment to pay the piper arrives. It was postponed by Iraq war and housing bubble, but reappeared in much more menacing form in 2008. In 2009 the USA experienced a classic Minsky moment with high unemployment rate and economy suppressed by (and taken hostage) by Ponzi finance institutions which threaten the very survival of the capitalist system and way of life. Huge injection freom the state halped to save the economy from disintration, but the price was very high. And after 2009 the US economy entered the period prologed stagnation, called the perios of "secular stagnation".
In events preceding 2008 the shift from speculative toward Ponzi finance was speed up by increased corruption of major players. The drive to redistribute wealth up destroyed any remnants of the rule of the law in the USA. It became a neo-feudal two casts society with "Masters of the Universe" as the upper cast (top 1% ) and "despicables" (lower 80%) as the lower cast. With some comprador strata of professional in between (top 20% or so), who generally support the upper cast.
Loweer cast experienced deterioration of the standard of living, loss of well paying jobs to outsourcing and offshoring and in 2016 revolted electing Trump, who defeated Hillary Clinton, who became a real symbol of the corruption of neoliberal system.
"As Minsky observed, capitalism is inherently unstable. As each crisis is successfully contained, it encourages greater speculation and risk taking in borrowing and lending. Financial innovation makes it easier to finance various schemes. To a large extent, borrowers and lenders operate on the basis of trial and error. If a behavior is rewarded, it will be repeated. Thus stable periods naturally lead to optimism, to booms, and to increasing fragility.
A financial crisis can lead to asset price deflation and repudiation of debt. A debt deflation, once started, is very difficult to stop. It may not end until balance sheets are largely purged of bad debts, at great loss in financial wealth to the creditors as well as the economy at large."
For more information see
For Strange the speed at which computerized financial markets work combined with their much larger size and near-universal pervasiveness is an important qualitative change, that changes the social system into what he called "casino capitalism". She actually popularized the term "Casino Capitalism" with her important book Casino Capitalism published in 1997.
One of the side effects of this change is that volatility extends globally. Approximately $1.5 trillion dollars are invested daily as foreign transactions. It is estimated that 98% of these transactions are speculative. In comparison with this casino Las Vegas looks like a aborigine village in comparison with Manhattan.
Susan Strange (June 9, 1923 - October 25, 1998) was a British academic who was influential in the field of international political economy. Her most important publications include
- Casino Capitalism,
- Mad Money,
- States and Markets and The retreat of the State: The Diffusion of Power in the World Economy.
For a quarter of a century, Susan Strange was the most influential figure in British international studies. She held a number of key academic posts in Britain, Italy and Japan. From 1978 to 1988, she was Montague Burton Professor of International Relations at the London School of Economics and Political Science (LSE), the first woman to hold this chair and a professorial position in international relations at the LSE. She was a major figure in the professional associations of both Britain and the US: she was an instrumental founding member and first Treasurer of the British International Studies Association (BISA)  and the first female President of the International Studies Association (ISA) in 1995.
It was predominantly as a creative scholar and a forceful personality that she exercised her influence. She was almost single-handedly responsible for creating ‘international political economy’ and turning it into one of the two or three central fields within international studies in Britain, and she defended her creation with such robustness, and made such strong claims on its behalf, that her influence was felt—albeit not always welcomed—in most other areas of the discipline. She was one of the earliest and most influential campaigners for the closer integration of the study of international politics and international economics in the English language scholarship.
In the later period of her career, alongside the financial analyses offered in Casino Capitalism (the analysis in which she felt was vindicated by the South-East Asian financial crisis) and Mad Money, Strange's contributions to the field include her characterisation of the four different areas (production, security, finance and knowledge) through which power might be exercised in International Relations. This understanding of what she termed "structural power", formed the basis of her argument against the theory of American Hegemonic Decline in the early eighties.
Her analysis particularly in States and Markets focused on what she called the ‘market-authority nexus’, the see-saw of power between the market and political authority. The overall argument of her work suggested that the global market had gained significant power relative to states since the 1970s.
This led her to dub the Westphalia system Westfailure. She argued that a ‘dangerous gap’ was emerging between territorially-bound nation states and weak or partial intergovernmental cooperation in which markets had a free hand which could be constructive or destructive.
Among important early critiques of casino capitalism was John K. Galbraith. He promoted a pretty novel idea that the major economic function of Governments is to strengthen countervailing powers to achieve some kind of balance between capital and labor.
While unions are far from being perfect and tend to slide into corruption due to "iron law of oligarchy" when thier management stop representing interests of thwe worksers and start to reprreesnt interest of thier own narry strate of fat cats, there were the only sizable countewailing power that made the New Seal possible.
His prediction proved to be wrong as government actually represent the capitalist class and is not that interested in creating this balance, which was convincingly demonstrated by Thatcher and Reagan. Both Britain and the USA start sliding into a new form of corporations, called neoliberalism which actually does not allocate any space for uniot at the negotiation table and strive for their complete elimination and "atomization" of work force, when each invididual is up to himself to find employment and group solidarity is suppressed by instilling neoliberal ideology in schools and universitites as well as via MSM (which in the USA surprisingly never were allowed to use the work neoliberlaism, as if it represents some secret Masonic cult)
And it does not look like there is any renewed support of unions right (including important right to organize) at the post subprime/derivatives/shadow_banking crisis stage of neoliberalism, when neoliberal ideology became sufficiently discredited to allow rise of populist politicians such as Trump.
Still John K. Galbraith critique of primitive market fundamentalism of Milton Freedman and the whole pseudoscience of neoclassical economics which like Marxist political economy is one of there pillars of neoliberalism (along with Randism as philosophy and Neoconservatism or "Trotskyism for the rich" in politics), still has its value today. As Joseph Stiglitz noted (CSMonitor, Dec 28, 2006):
...In many ways, Galbraith was a more critical observer of economic reality.
Driven to understand market realities
Galbraith's vivid depictions of the good, bad, and ugly of American capitalism remain a sorely needed reminder that all is not quite as perfect as the perfect market models – with their perfect competition, perfect information, and perfectly rational consumers – upon which so much of Friedman's analysis depended.
Galbraith, who cut his teeth studying agricultural economics, strove to understand the world as it was, with all the problems of unemployment and market power that simplistic models of competitive markets ignore. In those models, unemployment didn't exist. Galbraith knew that made them fatally flawed
... ... ...
In his early research, Galbraith attempted to explain what had brought on the Great Crash of 1929 – including the role of the stock market's speculative greed fed by (what would today be called) irrational exuberance. Friedman ignored speculation and the failure of the labor market as he focused on the failures of the Federal Reserve. To Friedman, government was the problem, not the solution.
What Galbraith understood, and what later researchers (including this author) have proved, is that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered markets often produce too much of some things, such as pollution, and too little of other things, such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect – that is, always – markets are inefficient; hence the need for government action.
Galbraith reminded us that what made the economy work so well was not an invisible hand but countervailing powers. He had the misfortune of articulating these ideas before the mathematical models of game theory were sufficiently developed to give them expression. The good news is that today, more attention is being devoted to developing models of these bargaining relationships, and to complex, dynamic models of economic fluctuations in which speculation may play a central role.
While Friedman never really appreciated the limitations of the market, he was a forceful critic of government. Yet history shows that in every successful country, the government had played an important role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure. Galbraith made this case better than most.
Galbraith knew, too, that people aren't just rational economic actors, but consumers, contending with advertising, political persuasion, and social pressures. It was because of his close touch with reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson years.
Galbraith's penetrating insights into the nature of capitalism – as it is lived, not as it is theorized in simplistic models – has enhanced our understanding of the market economy. He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual life: Who will stand up against the economics establishment to articulate an economic vision that is both in touch with reality and comprehensible to ordinary citizens?
Galbraith was vindicated in his belief that the only economics possible is political economics and that government is always an agent of dominant class. As such it always pursue poklitics favorable to this class, just making marginal efforts to prevent the open revolt of lower classes.
In 2008 neoliberal economist such as Krugman and (to a lesse extent) Stiglitz both have eaten humble pie, because according to neoclassical economics the crises should not have happened. Both should now reread Galbraith's The Great Crash: 1929 (see also extracts). Krugman also need to shred his previous writings with this mathiness execises of using differential equations to justify the dominance of financial oligarchy, and eat them with borsch ;-)
BTW it is interesting that in 1996 neoliberal stooge Paul Krugman criticized limitations of Galbright vision in the following way:
To be both a liberal and a good economist you must have a certain sense of the tragic--that is, you must understand that not all goals can be attained, that life is a matter of painful tradeoffs. You must want to help the poor, but understand that welfare can encourage dependency. You must want to protect those who lose their jobs, but admit that generous unemployment benefits can raise the long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but accept that too high a rate of taxation can discourage investment and innovation.
To the free-market conservative, these are all arguments for government to do nothing, to accept whatever level of poverty and insecurity the market happens to produce. A serious liberal does not reply to such conservatives by denying that there are any trade-offs at all; he insists, rather, that some trade-offs are worth making, that helping the poor and protecting the unlucky may have costs but will ultimately make for a better society.
The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation of the complexity of the human condition than a mere technical economist would -- lacks this tragic sense. Galbraith's vision of the economy is one without shadows, in which what is good for social justice always turns out to have no unfavorable side effects. If this vision is typical of liberal intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness to face up to uncomfortable reality.
Similar limited understanding of Galbright is demonstrated in London Times (cited from comment to Economist's View blog) :
Some motifs of Galbraith’s work have entered popular consciousness. Galbraith wrote of private opulence amid public squalor, illustrating it with a memorable metaphor of a family that travels by extravagant private car to picnic by a polluted river.
Yet while arguing for increased public expenditure on welfare, Galbraith gave scant attention to the limits of that approach. His writings perpetuate a debilitating weakness of modern liberalism: a reluctance to acknowledge that resources are scarce.
In Galbraith’s scheme, said Herbert Stein, the former chairman of the Council of Economic Advisers: “The American people were only asked whether they wanted cleaner air and water . . . The answers to such questions seemed obvious — but they were not the right questions.”
This idea of "casino capitalism" as a driver of financial instability was developed further in the book The Crisis of Global Capitalism by prominent financial speculator and staunch neoliberal George Soros (1998), who after Minsky highlights the potential for disequilibrium in the financial system, and the inability of non-market sectors to regulate markets.
the latter is a prominant feature of Casino Capitalism, which can be defined as economic system were financial barons run amok.Although the insights of the Soros critique of global capitalism are scarcely new, they were articulated with such candor and accuracy that the book made a significant impact. The following is a sampling of Soros' insights.
Bank lending also contributes to the instability, because the price of real and financial assets is set in part by their collateral value. The higher their market price rises the larger the loans banks are willing to make to their buyers to bid up prices. When the bubble bursts, the value of the assets plummets below the amount of the money borrowed against them. This forces banks to call their loans and cut back on the lending, which depresses asset prices and dries up the money supply. The economy then tanks-until credit worthiness is restored and a new boom phase begins.
When I bought shares in Lockheed and Northrop after the managements were indicted for bribery, I helped sustain the price of their stocks. When I sold sterling short in 1992, the Bank of England was on the other side of my transactions, and I was in effect taking money out of the pockets of British taxpayers. But if I had tried to take social consequences into account, it would have thrown off my risk-reward calculation, and my profits would have been reduced.
Soros argues that if he had not bought Lockheed and Northrop, then somebody else would have, and
Britain would have devalued sterling no matter what he did. "Bringing my social conscience into
the decision-making process would make no difference in the real world; but it may adversely affect
my own results." One can challenge the Soros claim that such behavior is amoral rather than immoral,
but his basic argument is accurate. His understanding that it is futile to look to individual morality
as the solution to the excesses of financial markets is all too accurate.
Publicly owned companies are single-purpose organizations-their purpose is to make money. The tougher the competition, the less they can afford to deviate. Those in charge may be well-intentioned and upright citizens, but their room for maneuver is strictly circumscribed by the position they occupy.
They are duty-bound to uphold the interests of the company. If they think that cigarettes are unhealthy or that fostering civil war to obtain mining concessions is unconscionable, they ought to quit their jobs. Their place will be taken by people who are willing to carry on.
Though not specifically mentioned by Soros, this is why corporations were in the past (at least
partially) excluded from the political processes (although it was never complete and it is well known
fact that Crusades and
Siege of Constantinople
(1204) were financed by Genoese
bankers upset by lack of access to the Byzantium markets). But at least formally other parts of the
society can define their goals and the rules of the marketplace and suppress excessive appetities
of banker, if nessesary by brute force. Financial oligarchy is incapable of distinguishing
between private corporate interests and broader public interests. And that situation became even
worse with the the global dominance of corporatism in the form of neoliberalism.
"Foreign ownership of capital deprives peripheral countries of autonomy and often hinders the development of democratic institutions. The international flow of capital is subject to catastrophic interruptions."
In times of uncertainty financial capital tends to return to its country of origin, thus depriving
countries at the periphery of the financial liquidity necessary to the function of monetized economies.
"The center's most important feature is that it controls its own economic policies and holds in its
hands the economic destinies of periphery countries."
Monetary values [under neoliberalism] have usurped the role of intrinsic values, and markets have come to dominate spheres of existence where they do not properly belong.
Law and medicine, politics, education, science, the arts, even personal relations-achievements or qualities that ought to be valued for their own sake are converted into monetary terms; they are judged by the money they fetch rather than their intrinsic value."
Because financial "capital is free to go where most rewarded, countries vie to attract and retain capital, and if they are to succeed they must give precedence to the requirements of international capital over other social objectives.
One notable later researcher of casino capitalism, especially "free market" fundamentalism propaganda Cambridge University researcher Ha-Joon Chang. In 2011 he published a fascinating book 23 Things They Don't Tell You About Capitalism. Here is a Youtube lecture at LSE (23 Things They Don't Tell You About Capitalism ). We will reproduce two Amazon reviews that shed some light at the key ideas of the book:
William PodmoreLoyd E. Eskildson
Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans. Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalization'.
Chang takes on the free-marketers' dogmas and proposes ideas like
- there is no such thing as a free market;
- the washing machine has changed the world more than the internet has --[ I respectfully disagree --NNB];
- we do not live in a post-industrial age;
- globalization isn't making the world richer;
- governments can pick winners;
- some rules are good for business;
- US (and British) CEOs are overpaid;
- more education does not make a country richer;
- and equality of opportunity, on its own, is unfair.
He notes that the USA does not have the world's highest living standard. Norway, Luxemburg, Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland, Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the highest industrial output per person.
Free-market politicians, economists and media have pushed policies of de-regulation and pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more frequent crises. Britain's growth rate in income per person per year was 2.4 per cent in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009, and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.
So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'. Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment as a share of national output, in all the G7 countries.
Chang shows how free trade is not the way to grow and points out that the USA was the world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s, and that Britain was one of world's the most protectionist countries during its rise, from the 1720s to the 1850s.
He shows how immigration controls keep First World wages up; they determine wages more than any other factor. Weakening those controls, as the EU demands, lowers wages.
He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead, we need controls capital, on mergers and acquisitions, and on financial products. We need the welfare state, industrial policy, and huge investment in industry, infrastructure, worker training and R&D.
As Chang points out, "Even though financial investments can drive growth for a while, such growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term investments in real sector activities, as so vividly shown by the 2008 financial crisis."
This book is a commonsense, evidence-based approach to economic life, which we should urge all our friends and colleagues to read.
The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis, but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.' Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism." Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics professor at the University of Cambridge, is no enemy of capitalism, though he contends its current conservative version should be made better. Conventional wisdom tells us that left alone, markets produce the most efficient and just outcomes - 'efficient' because businesses and individuals know best how to utilize their resources, and 'just' because they are rewarded according to their productivity. Following this advice, countries have deregulated businesses, reduced taxes and welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised - slower growth and rising inequality, often masked by rising credit expansion and increased working hours. Alternatively, developing Asian countries that grew fast did so following a different version of capitalism, though to be fair China's version to-date has also produced much greater inequality. The following summarizes some of Chang's points:
- "There is no such thing as a free market" - we already have hygiene standards in restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008, the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by President Bush on the grounds that it was a necessary state intervention consistent with free-market capitalism. Chang's conclusion - free-marketers contending that a certain regulation should not be introduced because it would restrict market freedom are simply expressing political opinions, not economic facts or laws.
- "Companies should not be run in the interest of their owners." Shareholders are the most mobile of corporate stakeholders, often holding ownership for but a fraction of a second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate strategies that maximize short-term profits and dividends, usually at the cost of long-term investments. (This often also includes added leverage and risk, and reliance on socializing risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate limited liability, while a boon to capital accumulation and technological progress, when combined with professional managers instead of entrepreneurs owning a large chunk (e.g.. Ford, Edison, Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional managers to maximize their own prestige via sales growth and prestige projects instead of maximizing profits. Another negative long-term outcome driven by shareholders is increased share buybacks (less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale layoffs from off-shoring. Governments of other countries encourage longer-term thinking by holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater worker representation (Germany's supervisory boards), and cross-shareholding among friendly companies (Japan's Toyota and its suppliers).
- "Free-market policies rarely make poor countries rich." With a few exceptions, all of today's rich countries, including Britain and the U.S., reached that status through protectionism, subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite, not because of, protectionism. The problem with that explanation is the number of other nations paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany, Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong, Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang believes the 'official historians' of capitalism have been very successful re-writing its history, akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He also points out that developing nations that stick to their Ricardian 'comparative advantage,' per the conservatives prescription, condemn themselves to their economic status quo.
- "We do not live in a post-industrial age." Most of the fall in manufacturing's share of total output is not due to a fall in the quantity of manufactured goods, but due to the fall in their prices relative to those for services, caused by their faster productivity growth. A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities that used to be provided in-house - e.g.. catering and cleaning. Those advising the newly developing nations to skip manufacturing and go directly to providing services forget that many services mainly serve manufacturing firms (finance, R&D, design), and that since services are harder to export, such an approach will create balance-of-payment problems. (Chang's preceding points directly contradict David Ricardo's law of comparative advantage - a fundamental free market precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite lacking experienced managers and natural resources, is another.)
- "The U.S. does not have the highest living standard in the world." True, the average U.S. citizen has greater command over goods and services than his counterpart in almost any other country, but this is due to higher immigration, poorer employment conditions, and working longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S. in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides the best economic model. (This is already occurring - the World Bank's chief economist, Justin Lin, comes from China.)
- "Governments can pick winners." Chang cites examples of how the Korean government built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG), despite lacking raw materials or experience for those sectors. True, major government failures have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed - e.g.. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland, France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite well with government-picked winners. Another problem is that business and national interests sometimes clash - e.g.. American firms' massive outsourcing has undermined the national interest of maintaining full employment. (However, greater unbiased U.S. government involvement would be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations - $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve at the beginning of the Great Recession. Government planning allows minimizing excess capacity, maximizing learning-curve economies and economies of scale and scope; operational performance is enhanced by also forcing government-owned or supported firms into international competition. Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials, building infrastructure) are necessary for emerging economies to move into more sophisticated sectors.
- "Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics is based on the belief that the poor maximize current consumption, while the rich, left to themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3% in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
- "U.S. managers are over-priced." First, relative to their predecessors (about 10X those in the 1960s; now 300-400X the average worker), despite the latter having run companies more successfully, in relative terms. Second, compared to counterparts in other rich countries - up to 20X. (Third, compared to counterparts in developing nations - e.g.. JPMorgan Chase, world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial and Commercial Bank of China, the world's largest, being paid $234,700. Read more ›
Willem Buiter in his FT article After the Crisis Macro Imbalance, Credibility and Reserve-Currency suggested that after financial crisis of 2008 there might be very long a painful deleveraging period aka secular stagnation. He was right.
In short each financial crisis make recovery longer and longer. That's why the US will most likely face a long period of stagnation: the digestion of huge excessive debt of the private sector might well take a decade:
Since the excess of debt is relative to income and GDP, the lower the rate of growth, the longer the required period of digestion. This explains for the paradox of trying to stimulate consumption when the economy faces a monumental crisis provoked exactly by excessive debt and excessive consumption. A cartoon line best captured the spirit of it: "country addicted to speculative bubbles desperately searches a new bubble to invest in. "
... ... ...
The roots of the crisis are major international macroeconomic imbalances. Despite the fact that the excesses of the financial system were instrumental to lead these imbalances further than otherwise possible, insufficient regulation should not be viewed as the main factor behind the crisis. The expenditure of central countries, spinned by all sort of financial innovations created by a globalized financial system, was the engine of world growth. When debt became clearly excessive in central countries and the debt-financed expenditure cycle came to an end, the ensuing crisis paralyzed the world economy. With the lesson of 1929 well assimilated, American monetary policy became aggressively expansionist. The Fed inundated the economy with money and credit, in the attempt to avoid a deep depression. Even if successful, the economies of the US and the other central countries, given the burden of excessive debt, are likely to remain stagnant under the threat of deflation for the coming years. The assumption of troubled assets by the public sector, in order to avoid the collapse of the financial system, might succeed, but at the cost of a major increase in public debt. Fiscal policy is not efficient to restart the economy when the private sector remains paralyzed by excessive debt. Even if a coordinated effort to increase public expenditure is successful, the central economies will remain stagnant for as long as the excessive indebtedness of the private sector persists. The period of digestion of excess debt will be longer than the usual recessive cycle. Since imports represent a drain in the effort to reanimate domestic demand through public expenditure, while exports, on the contrary, contribute to the recovery of internal demand, the temptation to central economies to also adopt a protectionist stance will be strong.
Willem Buiter also defined ‘cognitive regulatory capture’ which existed during the Greenspan years and when the Fed were just an arm of Wall Street.
This regulatory capture has resulted in an excess sensitivity of the Fed to financial market and financial sector concerns and fears and in an overestimation of the strength of the link between financial market turmoil and financial sector deleveraging and capital losses on the one hand, and the stability and prosperity of the wider economy on the other hand. The paper gives five examples of recent behavior by the Fed that are most readily rationalized with the assumption of regulatory capture. The abstract of the paper follows next. The latest version of the entire enchilada can be found here. Future revisions will also be found there.
No. 1: Reagan Fires Fed Chairman Volcker and Replaces Him With Greenspan in 1987:
Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.
If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles.
I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest—toward short-term self-interest, at any rate, rather than Tocqueville’s "self interest rightly understood."
Stiglitz also refers to a 2004 decision by the SEC "to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process."
Once more, it was deregulation run amuck, and few even noticed.
The Bush administration was providing an open invitation to excessive borrowing and lending—not that American consumers needed any more encouragement.
Here he refers to bad accounting, the failure to address problems with stock options, and the incentive structures of ratings agencies like Moodys that led them to give high ratings to toxic assets.
Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.
The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
The flawed economic philosophy brought by Reagan, and embraced by so many, brought us to this day. Ideas have consequences, especially when we stop empirically testing them. Republican economics have created great pain to America and harmed our national interest.
The flaw that Greenspan found was always there: self-regulation does not work. As Stiglitz said:
As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest — toward short-term self-interest
Yes, for all their claims to science, the premise conflicts with tendencies of people.
This is the real legacy of Ronald Reagan and Alan Greenspan:
The whole scheme was kick-started under Ronald Reagan. Between his tax cuts for the rich and the Greenspan Commission’s orchestrated Social Security heist, working Americans lost out in a generational wealth transfer shift now exceeding $1 trillion annually from 90 million working class households to for-profit corporations and the richest 1% of the population. It created an unprecedented wealth disparity that continues to grow, shames the nation and is destroying the bedrock middle class without which democracy can’t survive.
Greenspan helped orchestrate it with economist Ravi Batra calling his economics "Greenomics" in his 2005 book "Greenspan’s Fraud." It "turns out to be Greedomics" advocating anti-trust laws, regulations and social services be ended so "nothing....interfere(s) with business greed and the pursuit of profits."
In Orwell's Animal Farm all animals are equal - except that some are more equal than others. All in the spirit of law, order and the proper functioning of society, of course. Fittingly, the animals that have chosen this role by themselves and for themselves, are the pigs.
Cut to US financial markets today. After years of swinish behavior more reminiscent of Animal House than anything else, the pigs are threatening to destroy the entire farm. As if it wasn't enough that they devoured all the "free market" food available and inundated the world with their excreta, they now wish to be put on the public trough. Truly, some businessmen believe they are more equal than others.
But do not blame the pigs; they are expected to act as swine nature dictates. The fault lies entirely with the farmers, those authorities entrusted by the people to oversee the farm because they supposedly knew better. While the pigs were rampaging and tearing the place apart, they were assuring us all that farms function best when animals are free to do as they please, guided solely by invisible hooves. No regulation, no oversight, no common sense. Oh yes, and pigs fly..
So what is to be done now? Two things:
- (a) Let financial markets sort themselves out, but with rock solid backing for bank depositors, pension funds and public institutions. The public purse should not be used to bail out - directly or indirectly - speculators in hedge funds, private equity funds and the like. Those that live by the leverage sword can defend themselves or perish by credit destruction.
- (b) Revamp public policy towards increasing earned income for working people.
In other words, the focus from now on should be on adding value by means of work and savings (capital formation), instead of inflating assets and borrowing.
Furthermore, we should realize that in a world already inhabited by close to 7 billion people and beset by resource depletion and environmental degradation, defending growth for growth's sake is a losing proposition. The wheels are already wobbling on the Permagrowth model; pumping harder on the accelerator is not going to make it go any faster and will likely result in a fatal crash.
Debt, and finance in general, should be left to re-size downwards to a level that better reflects the carrying capacity of our world. The Fed's current actions are shortsighted and "conservative" in the worst interpretation of the words: they are designed to artificially maintain debt at levels that myopically projects growth as far as the eye can see.
What level of resizing may be necessary? I hope not as much as at Bear Stearns, which got itself bought by Morgan at buzz-saw prices: $2 per share represents a 98% discount from its $84 book value. What scares me, though, is the statement by Morgan's CFO, who said the price reflected the risk the firm was taking, even though he was comfortable with the valuation of assets in Bear's books. It "...gives us the flexibility and margin of error that's appropriate given the speed at which the transaction came together", he said.
If it takes a 98% discount and the explicit guarantee of the Fed for a large portion of assets to buy one of the largest investment banks in the world, where should all other financial firms be trading at? ....Hello? Anyone? Is that a great big silence I hear, or the sound of credit imploding into a vacuum?
Sep 18, 2018 | lrb.co.ukOne might object that Trump, a billionaire TV star, does not resemble his followers. But this misses the powerful intimacy that he establishes with them, at rallies, on TV and on Twitter. Part of his malicious genius lies in his ability to forge a bond with people who are otherwise excluded from the world to which he belongs. Even as he cast Hillary Clinton as the tool of international finance, he said:
I do deals – big deals – all the time. I know and work with all the toughest operators in the world of high-stakes global finance. These are hard-driving, vicious cut-throat financial killers, the kind of people who leave blood all over the boardroom table and fight to the bitter end to gain maximum advantage.
With these words he brought his followers into the boardroom with him and encouraged them to take part in a shared, cynical exposure of the soiled motives and practices that lie behind wealth. His role in the Birther movement, the prelude to his successful presidential campaign, was not only racist, but also showed that he was at home with the most ignorant, benighted, prejudiced people in America. Who else but a complete loser would engage in Birtherism, so far from the Hollywood, Silicon Valley and Harvard aura that elevated Obama, but also distanced him from the masses?
The consistent derogation of Trump in the New York Times or on MSNBC may be helpful in keeping the resistance fired up, but it is counterproductive when it comes to breaking down the Trump coalition. His followers take every attack on their leader as an attack on them. 'The fascist leader's startling symptoms of inferiority', Adorno wrote, 'his resemblance to ham actors and asocial psychopaths', facilitates the identification, which is the basis of the ideal. On the Access Hollywood tape, which was widely assumed would finish him, Trump was giving voice to a common enough daydream, but with 'greater force' and greater 'freedom of libido' than his followers allow themselves. And he was bolstering the narcissism of the women who support him, too, by describing himself as helpless in the grip of his desires for them.
Adorno also observed that demagoguery of this sort is a profession, a livelihood with well-tested methods. Trump is a far more familiar figure than may at first appear. The demagogue's appeals, Adorno wrote, 'have been standardised, similarly to the advertising slogans which proved to be most valuable in the promotion of business'. Trump's background in salesmanship and reality TV prepared him perfectly for his present role. According to Adorno,
the leader can guess the psychological wants and needs of those susceptible to his propaganda because he resembles them psychologically, and is distinguished from them by a capacity to express without inhibitions what is latent in them, rather than by any intrinsic superiority.
To meet the unconscious wishes of his audience, the leader
simply turns his own unconscious outward Experience has taught him consciously to exploit this faculty, to make rational use of his irrationality, similarly to the actor, or a certain type of journalist who knows how to sell their sensitivity.
All he has to do in order to make the sale, to get his TV audience to click, or to arouse a campaign rally, is exploit his own psychology.
Using old-fashioned but still illuminating language, Adorno continued:
The leaders are generally oral character types, with a compulsion to speak incessantly and to befool the others. The famous spell they exercise over their followers seems largely to depend on their orality: language itself, devoid of its rational significance, functions in a magical way and furthers those archaic regressions which reduce individuals to members of crowds.
Since uninhibited associative speech presupposes at least a temporary lack of ego control, it can indicate weakness as well as strength. The agitators' boasting is frequently accompanied by hints of weakness, often merged with claims of strength. This was particularly striking, Adorno wrote, when the agitator begged for monetary contributions. As with the Birther movement or Access Hollywood, Trump's self-debasement – pretending to sell steaks on the campaign trail – forges a bond that secures his idealised status.
Since 8 November 2016, many people have concluded that what they understandably view as a catastrophe was the result of the neglect by neoliberal elites of the white working class, simply put. Inspired by Bernie Sanders, they believe that the Democratic Party has to reorient its politics from the idea that 'a few get rich first' to protection for the least advantaged.
Yet no one who lived through the civil rights and feminist rebellions of recent decades can believe that an economic programme per se is a sufficient basis for a Democratic-led politics.
This holds as well when it comes to trying to reach out to Trump's supporters. Of those providing his roughly 40 per cent approval ratings, half say they 'strongly approve' and are probably lost to the Democrats. But if we understand the personal level at which pro-Trump strivings operate, we may better appeal to the other half, and in that way forestall the coming emergency.
Mar 24, 2019 | www.nakedcapitalism.com
The late-Peter Bernstein once wrote, "The market's not a very accommodating machine; it won't provide high returns just because you need them."
When you do need higher investment returns because of a perceived shortfall in assets for a specific goal you generally have 3 options to remedy the situation:
(1) Adjust your expectations, and therefore, your lifestyle or goals.
(2) Increase your savings rate.
(3) Take more risk.
The first two options are for the realists while the third option is for the optimists.
David in Santa Cruz , March 22, 2019 at 8:46 pm
I've come to suspect that a more cynical ploy is in play:
The public is being fed the Koolade that outside high-fee money managers have the "Secret Sauce" that guarantees top-quartile returns not because anybody at CalPERS actually believes that poppycock for a minute.
Rather, this seemingly quixotic quest for the "Secret Sauce" provides a justification and a cover for the soft corruption of paying unconscionable fees to outside managers, who in turn grease the wheels with millions of dollars in political contributions, and soft-landing consulting gigs for former CalPERS muckety mucks.
More Shock Doctrine. They are lying. Follow the money
Mar 24, 2019 | www.zerohedge.com
... Never stop mocking their idiotic Rachel Maddow worship. Never stop mocking the Robert Mueller prayer candles.
Bastiat, 13 seconds ago
Trumps is SUCH prick--by refusing to be guilty he made Rachel Madcow cry . . . again, just like election night. Bastard!
Carioca Canuck , 13 minutes ago linkFarts and Leaves , 17 minutes ago link
Putin should sue the Democratic Party for defamation.
No surprise here. What does surprise me is how Adam Schiftless keeps going like the energizer bunny.
If Rachel Maddow, Chris Mathews, Judy Woodruff, Chuck Todd, Anderson Cooper, Brian Stelter, Chris Hayes, Mika Brzezinski, Don Lemon, Alysin Camerota, Lawrence O'Donnell had the slightest inkling of professional integrity, and human conscience - they'd commit seppuku on national live TeeVee to restore their honor.
The inversion of the Treasury yield curve shows bond traders see a worsening economy pushing the Federal Reserve to make its next interest-rate move a cut, even if officials seem reluctant to concede that just yet.
- 10-year rate sinks below 3-month rate for first time since '07
- New manufacturing data hinder already-weak case for tightening
U.S. central bankers sent interest rates plunging on March 20 by slashing their projections for future increases. Weak European and American manufacturing data two days later cemented the notion that their tightening campaign may be over, with yields on 10-year Treasuries slipping below 3-month rates for the first time since 2007.
The growing specter of an economic slump sent a shiver through financial markets Friday, hitting not only bond yields, but also also dragging down share prices and hammering emerging-market assets.
The so-called inversion of the Treasury yield curve has heralded recessions in the past. The idea is simple: the Federal Reserve typically responds to downturns in the economy by cutting rates. Investors anticipate the cuts and incorporate those expectations into longer-term yields, tilting the curve downward.
... ... ...Easing Priced
U.S. money markets are priced for about half a percentage point of easing from the Fed over the next two years, according to interest-rate derivatives. The dramatic swing from December, when markets were still priced for additional tightening, raises questions about how bad the outlook would have to get before Fed officials would start cutting rates.
For Rajiv Setia, the New York-based head of U.S. and European rates research at Barclays Capital Inc., a further deterioration overseas might be enough to tip the scales. He recalled what happened during the 1998 emerging-market crisis.
"Asian growth was weak, the Fed was worried about global growth potentially leading the U.S. into recession, and they preemptively eased," Setia said. "We might be in for a similar type of ride here."
Mar 23, 2019 | news.yahoo.com
W e are still trying to fathom the apparent but transient palace-coup attempts of Rod Rosenstein and Andrew McCabe. No one has gotten to the bottom of the serial lying by McCabe and James Comey, much less their systematic and illegal leaking to pet reporters.
We do not know all the ways in which James Clapper and John Brennan seeded the dossier and its related gossip among the press and liberal politicians -- only that both were prior admitted fabricators who respectively while under oath misled congressional representatives on a host of issues.
The central role of Hillary Clinton in funding the anti-Trump, Russian-"collusion," Fusion/GPS/Christopher Steele dossier is still not fully disclosed. Did the deluded FISA court know it was being used by Obama-administration DOJ and FBI officials, who withheld from it evidence to ensure permission to spy on American citizens? Could any justice knowingly be so naïve?
Do we remember at all that Devin Nunes came to national prominence when he uncovered information that members of the Obama administration's national-security team, along with others, had systematically unmasked surveilled Americans, whose names then were leaked illegally to the press?
One day historians will have the full story of how Robert Mueller stocked his legal team inordinately with partisans. He certainly did not promptly disclose the chronology of, or the interconnected reasons for, the firings of Lisa Page and Peter Strozk. And his team has largely used process-crime allegations to leverage mostly minor figures to divulge some sort of incriminating evidence about the president -- none of it pertaining to the original mandated rationale of collusion.
These are the central issues and key players of this entire sordid attempt to remove a sitting president.
But we should remember there were dozens of other minor players who did their own parts in acting unethically, and in some cases illegally, to destroy a presidency. We have mostly forgotten them. But they reflect what can happen when Washington becomes unhinged, the media go berserk, and a reign of terror ensues in which any means necessary is redefined as what James Comey recently monetized as a "Higher Loyalty" to destroy an elected president.
Here are just a few of the foot soldiers we have forgotten.
On September 5, 2018 (a date seemingly picked roughly to coincide with the publication of Bob Woodward's sensational tell-all book about the inside of the Trump White House), the New York Times printed a credo from a supposed anonymous Republican official deep within the Trump administration. In a supposed fit of ethical conviction, he (or she) warned the nation of the dangers it faced under his boss, President Trump, and admitted to a systematic effort to subvert his presidency:
The dilemma -- which he does not fully grasp -- is that many of the senior officials in his own administration are working diligently from within to frustrate parts of his agenda and his worst inclinations. I would know. I am one of them.
Given the instability many witnessed, there were early whispers within the cabinet of invoking the 25th Amendment, which would start a complex process for removing the president. But no one wanted to precipitate a constitutional crisis. So we will do what we can to steer the administration in the right direction until -- one way or another -- it's over.
We do not know whether Anonymous was describing the coup attempt as described by Andrew McCabe that apparently entailed Rod Rosenstein at the Justice Department informally polling cabinet officials, or marked a wider effort among Never Trump Republicans and deep-state functionaries to ensure that Trump failed -- whether marked by earlier efforts to leak confidential calls with foreign officials or to serve up unsubstantiated rumors to muckrakers or simply slow-walk or ignore presidential directives.
In any case, Anonymous's efforts largely explain why almost daily we hear yet another mostly unsubstantiated account that a paranoid, deranged, and dangerous Trump is holed up in his bedroom with his Big Macs as he plans unconstitutional measures to wreck the United States -- and then, by accident, achieves near-record-low peacetime unemployment, near-record-low minority unemployment, annualized 3 percent GDP growth, record natural-gas and oil production, record deregulation, comprehensive tax reform and reduction, and foreign-policy breakthroughs from the destruction of ISIS to cancellation of the flawed Iran deal.
In the course of congressional testimony, it was learned that the FBI general counsel, James Baker, for a time had been under investigation for leaking classified information to the press. Among the leaks were rumored scraps from the Steele dossier passed to Mother Jones reporter David Corn (who has denied any such connection) that may have fueled his sensational pre-election accusation of Trump–Russian collusion.
Nonetheless, about a week before the 2016 election, Corn of Mother Jones was writing lurid exposés, such as the following, to spread gossip likely inspired from the Christopher Steele dossier (italics inserted):
Does this mean the FBI is investigating whether Russian intelligence has attempted to develop a secret relationship with Trump or cultivate him as an asset? Was the former intelligence officer and his material deemed credible or not?
An FBI spokeswoman says, "Normally, we don't talk about whether we are investigating anything." But a senior US government official not involved in this case but familiar with the former spy tells Mother Jones that he has been a credible source with a proven record of providing reliable, sensitive, and important information to the US government. In June, the former Western intelligence officer -- who spent almost two decades on Russian intelligence matters and who now works with a US firm that gathers information on Russia for corporate clients -- was assigned the task of researching Trump's dealings in Russia and elsewhere, according to the former spy and his associates in this American firm.
What does "assigned" mean, and by whom? That Fusion/GPS (which, in fact, is a generic opposition-research firm with no particular expertise in Russia) hired with disguised Clinton campaign funds a has-been foreign-national spy to buy dirt from Russian sources to subvert a presidential campaign?
Those leaks of Christopher Steele's dirt also did their small part in planting doubt in voters' minds right that electing Trump was tantamount to implanting a Russian asset in the White House. Baker has been the alleged center of a number of reported leaks, even though the FBI's general counsel should have been the last person to disclose any government communication to the press during a heated presidential campaign. And there is still no accurate information concerning what role, if any, Baker played in Andrew McCabe's efforts to discuss removing the president following the Comey firing.
On March 1, 2017, just weeks after Trump took office, the New York Times revealed that. in a last-minute order, outgoing president Obama had vastly expanded the number of government officials with access to top-secret intelligence data. The Obama administration apparently sought to ensure a narrative spread that Trump may have colluded with the Russians. The day following the disclosure, a former Pentagon official, Evelyn Farkas (who might have been a source for the strange disclosure of a day earlier), explained Obama's desperate eleventh-hour effort in an MSNBC interview:
I was urging my former colleagues, and, and frankly speaking the people on the Hill . . . it was more actually aimed at telling the Hill people, get as much information as you can, get as much intelligence as you can before President Obama leaves the administration.
Because I had a fear that somehow that information would disappear with the senior people who left so it would be hidden away in the bureaucracy, um, that the [stutters] Trump folks -- if they found out how we knew what we knew about their [the] Trump staff, dealing with Russians -- that they would try to compromise those sources and methods, meaning we no longer have access to that intelligence.
So I became very worried because not enough was coming out into the open and I knew that there was more. We have very good intelligence on Russia, so then I had talked to some of my former colleagues and I knew that they were also trying to help get information to the Hill.
Despite media efforts to spin Farkas's disclosure, she was essentially contextualizing how outgoing Obama officials were worried that the incoming administration would discover their own past efforts ("sources and methods") to monitor and surveil Trump-campaign officials, and would seek an accounting. Her worry was not just that the dossier-inspired dirt would not spread after Trump took office, but that the Obama administration's methods used to thwart Trump might be disclosed (e.g., " if they found out how we knew what we knew about their [the] Trump staff, dealing with Russians -- that they would try to compromise those sources and methods, meaning we no longer have access to that intelligence" ).
So Farkas et al. desperately sought to change the law so that their rumors and narratives would be so deeply seeded within the administrative state that the collusion narrative would inevitably lead to Congress and the press, and thereby overshadow any shock at the improper or illegal methods the Obama-administration officials had authorized to monitor the Trump campaign.
And Farkas was correct. Even today, urination in a Russian hotel room has overshadowed perjury traps, warping the FISA courts, illegal leaking, inserting a spy into the Trump campaign, and Russian collusion with Clinton hireling and foreign agent Christopher Steele.
We now forget that for some reason, in her last year in office, but especially during and after the 2016 election, Power, the outgoing U.S. ambassador to the United Nations, reportedly asked to unmask the names of over 260 Americans picked up in government surveillance. She offered no real explanations of such requests.
Even stranger than a U.N. ambassador suddenly playing the role of a counterintelligence officer, Power continued her requests literally until the moments before Trump took office in January 2017. And, strangest of all, after Power testified before the House Oversight and Government Reform Committee, Representative Trey Gowdy reported that "her testimony is 'they [the unmasking requests] may be under my name, but I did not make those requests.'"
Who, in the world, then, did make those requests and why and, if true, did she know she was so being used?
And were some of those unmasking requests leaked, thus helping to fuel media rumors in late 2016 and early 2017 that Trump officials were veritable traitors in league with Russia? And why were John Brennan, James Clapper, Susan Rice, and Sally Yates reportedly in the last days (or, in some cases, the last hours) requesting that the names of Americans swept up in surveillance of others be unmasked? What was the point of it all?
In sum, did a U.N. ambassador let her name be used by aides or associates to spread rumors throughout the administrative state, and thereby brand them with classified government authenticity, and then all but ensure they were leaked to the press?
We the public most certainly wondered why the moment Trump was elected, the very name Carter Page became synonymous with collusion, and soon Michael Flynn went from a respected high-ranking military official to a near traitor, as both were announced as emblematic of their erstwhile complicit boss.
Ali Watkins and James Wolf
Watkins was the young reporter for Buzzfeed (which initially leaked the largely fake Steele dossier and erroneously reported that Michael Cohen would implicate Trump in suborning perjury) who conducted an affair with James Wolf, a staffer, 30 years her senior, on the Senate Intelligence Committee.
Wolf, remember, systematically and illegally began leaking information to her that found its way into sensationalized stories about collusion. But as Margot Cleveland of the Federalist pointed out, Watkins was also identified by Buzzfeed "in court filings as one of the individuals who 'conducted newsgathering in connection with the Dossier before Buzzfeed published the Article' on the dossier. This fact raises the question of whether Watkins received information from Wolfe concerning the dossier and, if so, what he leaked."
In other words, the dossier was probably planted among U.S. senators and deliberately leaked through a senior Senate aide, who made sure that the unverified dirt was published by the press to damage Donald Trump.
And it did all that and more.
The list of these bit players could be easily expanded. These satellites were not coordinated in some tight-knit vast conspiracy, but rather took their cue from their superiors and the media to freelance with assumed impunity, as their part in either preventing or ending a Trump presidency. And no doubt the Left would argue that the sheer number of federal bureaucrats and political appointees, in a variety of cabinets and agencies, throughout the legislative and the executive branches, all proves that Trump is culpable of something.
Perhaps. But the most likely explanation is that a progressive administrative state, a liberal media, and an increasingly radicalized liberal order were terrified by the thought of an outsider Trump presidency. Therefore, they did what they could, often both unethically and illegally, to stop his election, and then to subvert his presidency.
In their arrogance, they assumed that their noble professions of higher loyalties and duties gave them exemption to do what they deemed necessary and patriotic. And others like them will continue to do so, thereby setting the precedent that unelected federal officials can break the law or violate any ethical protocols they please -- if they disagree with the ideology of the commander in chief. We ridicule Trump for going ballistic at each one of these periodically leaked and planted new stories that raised some new charge about his stupidity, insanity, incompetence, etc. But no one has before witnessed any president subjected to such a comprehensive effort of the media, the deep state, political opponents, and his own party establishment to destroy him.
Subversion is the new political opposition. The nation -- and the Left especially -- will come to regret the legacy of the foot soldiers of the Resistance in the decades to come.
Mar 23, 2019 | www.nakedcapitalism.com
Jay Gallivan , March 23, 2019 at 8:00 am
" the Chinese simply don't play fair "
An American and European elites do?
Ignacio , March 23, 2019 at 8:38 am
You may consider that chinese don't play fair, it also migth be considered that Airbus strategy is just another way of economic colonization and to prevent the surge of new competitors maintaining the duopoly. Is it fair?
Given the recent drift of political geostrategy leaded by the US in which anything is "fair" to defend particular interests, my opinion is that China interest on developing their own airplane industry is not only fair but very reasonable. One wonders when the US will put in place another arbitrary ban.
Fairness is gone with the wind
Mar 23, 2019 | www.zerohedge.com
Authored by Caitlin Johnstone via Medium.com,
The Robert Mueller investigation which monopolized political discourse for two years has finally concluded , and his anxiously awaited report has been submitted to Attorney General William Barr. The results are in and the debate is over: those advancing the conspiracy theory that the Kremlin has infiltrated the highest levels of the US government were wrong, and those of us voicing skepticism of this were right.
The contents of the report are still secret, but CNN's Justice Department reporter Laura Jarrett has told us all we need to know, tweeting , "Special Counsel Mueller is not recommending ANY further indictments am told." On top of that, William Barr said in a letter to congressional leaders that there has been no obstruction of Mueller's investigation by Justice Department officials.
So that's it, then. A completely unhindered investigation has failed to convict a single American of any kind of conspiracy with the Russian government, and no further indictments are coming. The political/media class which sold rank-and-file Americans on the lie that the Mueller investigation was going to bring down this presidency were liars and frauds, and none of the goalpost-moving that I am sure is already beginning to happen will change that.
It has been obvious from the very beginning that the Maddow Muppets were being sold a lie. In 2017 I wrote an article titled " How We Can Be Certain That Mueller Won't Prove Trump-Russia Collusion ", saying that Mueller would continue finding evidence of corruption "since corruption is to DC insiders as water is to fish", but he will not find evidence of collusion. If you care to take a scroll through the angry comments on that article, just on Medium alone, you will see a frozen snapshot of what the expectations were from mainstream liberals at the time. They had swallowed the Russiagate narrative hook, line and sinker, and they believed that the Mueller investigation was going to vindicate them. It did not.
I've been saying Russiagate is bullshit from the beginning, and I've been called a Trump shill, a Kremlin propagandist, a Nazi and a troll every day for saying so by credulous mass media-consuming dupes who drank the Kool Aid . And I've only taken a fraction of the flack more high profile Russiagate skeptics like Glenn Greenwald and Michael Tracey have been getting for expressing doubt in the Gospel According to Maddow. The insane, maniacal McCarthyite feeding frenzy that these people were plunged into by nonstop mass media propaganda drowned out the important voices who tried to argue that public energy was being sucked into Russia hysteria and used to manufacture support for dangerous cold war escalations with a nuclear superpower.
Just think what we could have done with that energy over the last two years. Think how much public support could have been poured into the sweeping progressive reforms called for by the Sanders movement, for example, instead of constant demands for more sanctions and nuclear posturing against Russia. Think how much more attention could have been drawn to Trump's actual horrific policies like his facilitation of Saudi butchery in Yemen or his regime change agendas in Iran and Venezuela, his support for ecocide and military expansionism and the barbarism of Jair Bolsonaro and Benjamin Netanyahu. Think how much more energy could have gone into beating back the Republicans in the midterms, reclaiming far more House seats and taking the Senate as well, gathering momentum for a presidential candidacy that truly threatens Trump instead of 9,000 primary candidates who will probably be selected by superdelegates after the first ballot when there's too many of them to establish a clear majority under the new rules.
We must never let them forget what they did or what they cost us all. We must never let mainstream Democrats forget how crazy they got, how much time and energy they wasted, how very, very wrong they were and how very, very right we were.
Never stop reminding them of this. Never stop mocking them for it. Never stop mocking their idiotic Rachel Maddow worship. Never stop mocking the Robert Mueller prayer candles. Never stop making fun of the way they blamed all their problems on Susan Sarandon. Never stop reminding them of those stupid pink vagina hats. Never stop mocking them for elevating Louise Mensch and Eric Garland. Never stop mocking them for creating the fucking Krassenstein brothers.
Every politician, every media figure, every Twitter pundit and everyone who swallowed this moronic load of bull spunk has officially discredited themselves for life. Going forward, authority and credibility rests solely with those who kept clear eyes and clear heads during the mass media propaganda blitzkrieg, not with those who were stupid enough to believe what they were told about the behaviors of a noncompliant government in a post-Iraq invasion world. The people who steered us into two years of Russiavape insanity are the very last people anyone should ever listen to ever again when determining the future direction of our world.
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messystateofaffairs , 56 minutes ago linkchestergimli , 59 minutes ago link
I think Russiagate is a deliberate Jewish ploy to distract Trump supporters, and others, from the fact that Trump is very deeply involved in Israelgate. It's a sophisticated strategy designed to demonize Russia and favor Israel at the same time. The fact that America will bear the burden is lost on the Dumbfuck, if the narcissict is capable of caring in the first place. Obama was a brilliant *** handler compared to this man.keep the bastards honest , 58 minutes ago link
I believe that Trump and all the neocons along with Sheldon Adelson and Netenyahu pulled this BIG costly Shenanigan off to divert attention away from what Trump was doing for Israel.Brazen Heist II , 1 hour ago link
Moonlighting on https://youtu.be/pbYvRTGylyw shows the next insanity. Swearing it's Muellars findings are not true. That muellar was got at..whatever.
See revealing light tarot on YouTube to get the insanity and hate.
Hatred of Trump hatred of Putin. Jealousy of Melania. It's delusional.
No interest in Bolton or pompeo nor international affairs. blind hatred of Russia.johnnycanuck , 1 hour ago link
And lets be clear.....both Democrats and Republicans are failing America.
The fringe lunatics on both sides have hijacked the umbrella party. The Zionist cretins/MIC whores on the Right and SJW Snowflakes/ War Party on the Left are both owned by the bankster/corporate ruling classes. They are the same turd on foreign policy.
Its time to balkanize and butcher both parties.
The Deep State needs contrived divisions and dichotomies to split Americans. People should see past these pathetic attempts to divide the population.Brazen Heist II , 1 hour ago link
Even Caitlin misses what's going on here. I'm kinda disappointed, but hey no one gets everything right and she does have to earn a buck wherever she can. I get that
The new McCarthyism has been embraced far and wide in Murika, by both parties, all the MSM. But that's just a ruse for the home team, to recreate the USSR bogeyman for political purposes and to feed the MIC. It's worked, polls show Murikan sheep are more a feared of the Russian bogeyman than they have been since the cold war
Russia isn't encroaching on America's borders, PNAC is encroaching on theirs.
That said, the Mueller effort is more than what you think, it's like a bird dog and it flushed many a bird of prey for shotgun totin' prosecutors, if they be inclined to fire. And that is how the game works in the world of dirty sum bitches and misc psychopaths.
Like the big ***** guy in the movie Platoon said, 'the rich always **** over the poor, that's the way it's always been.'Brazen Heist II , 1 hour ago link
Recent events can be explained rather accurately if one knows history. Which most people don't apparently.
This is just a re-run of cold war psyops. Except this time, the USSA will meet the fate of the USSR in its own way.
The Jewish Marxists that ran away from Russia and infested America, are now drowning in their lies, and gotta vent somewhere! They are behind the MSM, and cozy dalliance between the Deep State and useful idiot Leftards.
Glancing at various Twatter feeds over the years...and I couldn't help but notice that the number of ****-for-brains Americans who fell for the Russiagate psyop was simply staggering.
I guess its these gullible morons that the powers-that-be relied on in the vaunted dumbassocracy, to get away with distracting away from their own crimes. But alas, the day of judgement always arrives, and the ******** implodes. It depends on how many of them awaken in the process, to render this reckoning as either a bang or a whimper.
Mar 20, 2019 | www.nakedcapitalism.com
By Lambert Strether of Corrente .
At some point in the future, I'd like to do failure matrix for the pathways to misfortune ( example of such a matrix here ) that precipitated two deadly Boeing 737 MAX crashes on take-off in five months , but I don't feel that I have enough information yet. (I'm not unsympathathetic to the view that the wholesale 737 MAX grounding was premature on technical grounds , but then trade and even geopolitical factors enter in, given that Boeing is a "national champion.") We do not yet have results from the cockpit voice and flight data recorders of either aircraft, for example. But what we do know is sufficiently disturbing -- a criminal investigation into Boeing had already been initiated after the Lion Air crash, but before the Ethiopian Airlines crash -- that I think it's worthwhile doing a play-by-play on the causes of the crashes, so far as we can know them. About that criminal investigation :
According to the Wall Street Journal, a Washington D.C. grand jury issued a March 11 subpoena requesting emails, correspondence, and other messages from at least one person involved in the development of the aircraft.
"It's a very, very serious investigation into basically, ?" Arthur Rosenberg, an aviation attorney who is representing six families whose relatives died in the Ethiopian Airlines and Lion Air crashes, explained.
"Nobody knows the answer to that yet," Rosenberg cautioned, adding that he had not yet seen the Justice Department's subpoena and therefore could not know its full scope.
Rosenberg expects the criminal probe to question whether Boeing fully disclosed to the FAA the engineering of the 737 Max 8's MCAS flight control system, called MCAS (Maneuvering Characteristics Augmentation System), during the plane's certification process. The flight control system was designed to prevent the plane from stalling.
Bloomberg comments :
. While airline accidents have at times raised criminal issues, such as after the 1996 crash of a ValuJet plane in the Florida Everglades, such cases are the exception.
Before we get to the play-by-play, one more piece of background: CEO Dennis Muilenburg's latest PR debacle, entitled " Letter from Boeing CEO Dennis Muilenburg to Airlines, Passengers and the Aviation Community ." The most salient material:
This overarching focus on safety spans and binds together our entire global aerospace industry and communities. We're united with our airline customers, international regulators and government authorities in our efforts to support the most recent investigation, understand the facts of what happened and help prevent future tragedies. Based on facts from the Lion Air Flight 610 accident and emerging data as it becomes available from the Ethiopian Airlines Flight 302 accident, we're taking actions to fully ensure the safety of the 737 MAX. We also understand and regret the challenges for our customers and the flying public caused by the fleet's grounding.
Boeing has been in the business of aviation safety for more than 100 years, and we'll continue providing the best products, training and support to our global airline customers and pilots. This is .
Soon we'll release a software update and related pilot training for the 737 MAX that will address concerns discovered in the aftermath of the Lion Air Flight 610 accident.
Fine words. Are they true? Can Boeing's "commitment to everyone to ensure " safe and reliable travel" really be said to be "absolute"? That's a high bar. Let's see!
I've taken the structure that follows from a tweetstorm by Trevor Sumner (apparently derived from a Facebook post by his brother-law, Dave Kammeyer ). However, I've added topic headings, changed others, and helpfully numbered them all, so you can correct, enhance, or rearrange topics easily in comments (or even suggest new topics). Let me also caveat that this is an enormous amount of material, and time presses, so this will not be as rich in links as I would normally like it to be. Also note that the level of abstraction for each topic varies significantly: From "The Biosphere" all the way to "Pilot Training." A proper failure matrix would sort that out.
* * *
(1) The Biosphere : The 737 MAX story beings with a customer requirement for increased fuel efficiency. This is, at bottom, a carbon issue (and hence a greenhouse gas issue , especially as the demand for air travel increases, especially in Asia). New biosphere-driven customer demands will continue to emerge as climate change increases and intensifies, and hence the continued 737 MAX-like debacles should be expected, all else being equal. From CAPA – Centre for Aviation :
The main expected impacts of climate change on aviation result from changes in temperature, precipitation (rain and snow), storm patterns, sea level and wind patterns. In addition, climate change is expected to lead to increased drought, impacts on the supply of water and energy, and changes in wildlife patterns and biodiversity. Consequences for aviation include reduced aircraft performance, changing demand patterns, potential damage to infrastructure, loss of capacity and schedule disruption.
All of these factors will affect aircraft design, manufacturing, maintenance, and use, stressing the system.
(2) Choice of Airframe : The Air Current describes the competitive environment that led Boeing to upgrade the 737 to the 737 MAX, instead of building a new plane:
Boeing wanted to replace the 737. The plan had even earned the endorsement of its now-retired chief executive. We're gonna do a new airplane," Jim McNerney said in February of that same year. "We're not done evaluating this whole situation yet, but our current bias is to not re-engine, is to move to an all-new airplane at the end of the decade." History went in a different direction. Airbus, riding its same decades-long incremental strategy and chipping away at Boeing's market supremacy, had made no secret of its plans to put new engines on the A320. But its own re-engineered jet somehow managed to take Boeing by surprise. Airbus and American forced Boeing's hand. .
Why? The earlier butchered launch of the 787:
Boeing justified the decision thusly: There were huge and excruciatingly painful near-term obstacles on its way to a new single-aisle airplane. In the summer of 2011, the 787 Dreamliner wasn't yet done after billions invested and years of delays. More than 800 airplanes later here in 2019, each 787 costs less to build than sell, but it's still running a $23 billion production cost deficit. .
The 737 Max was Boeing's ticket to holding the line on its position "both market and financial" in the near term. Abandoning the 737 would've meant walking away from its golden goose that helped finance the astronomical costs of the 787 and the development of the 777X.
So, we might think of Boeing as a runner who's tripped and fallen: The initial stumble, followed by loss of balance, was the 787; with the 737 MAX, Boeing hit the surface of the track.
(3) Aerodynamic Issues : The Air Current also describes the aerodynamic issues created by the decision to re-engine the 737:
Every airplane development is a series of compromises, but to deliver the 737 Max with its promised fuel efficiency, Boeing had to fit 12 gallons into a 10 gallon jug. Its bigger engines made for creative solutions as it found a way to mount the larger CFM International turbines under the notoriously low-slung jetliner. It lengthened the nose landing gear by eight inches, cleaned up the aerodynamics of the tail cone, added new winglets, fly-by-wire spoilers and big displays for the next generation of pilots. It pushed technology, as it had done time and time again with ever-increasing costs, to deliver a product that made its jets more-efficient and less-costly to fly.
In the case of the 737 Max, with its nose pointed high in the air, the larger engines "generating their own lift" nudged it even higher. The risk Boeing found through analysis and later flight testing was that under certain high-speed conditions both in wind-up turns and wings-level flight, that upward nudge created a greater risk of stalling. It's now at the center of the Lion Air investigation and stalking the periphery of the Ethiopian crash.
(4) Systems Engineering : Amazingly, there is what in a less buttoned-down world that commercial aviation would be called a Boeing 737 fan site, which describes the MCAS system in more technical terms :
MCAS was introduced to counteract the pitch up effect of the LEAP-1B engines at high AoA [Angle of Attack]. The engines were both larger and relocated slightly up and forward from the previous NG CFM56-7 engines to accomodate their larger diameter. This new location and size of the nacelle causes it to produce lift at high AoA; as the nacelle is ahead of the CofG [Center of Gravity] this causes a pitch-up effect which could in turn further increase the AoA and send the aircraft closer towards the stall. MCAS was therefore introduced to give an automatic nose down stabilizer input during steep turns with elevated load factors (high AoA) and during flaps up flight at airspeeds approaching stall.
Unfortunately for Boeing and the passengers its crashed aircraft were carrying, the MCAS system was very poorly implemented. Reading between the lines (I've helpfully labeled the pain points):
Boeing have been working on a software modification to MCAS since the Lion Air accident. Unfortunately although originally due for release in January it has still not been released due to both engineering challenges and differences of opinion among some federal and company safety experts over how extensive the changes should be.
Apparently there have been discussions about potentially adding [A] enhanced pilot training and possibly mandatory [B] cockpit alerts to the package. There also has been consideration of more-sweeping design changes that would prevent [C] faulty signals from a single sensor from touching off the automated stall-prevention system.
[A] Pilot training was originally not considered necessary, because MCAS was supposed to give 737 MAX the same flight characteristics as earlier 737s; that's why pilots weren't told about it. (This also kept the price low.) [B] Such alerts exist now, as part of an optional package, which Lion did not buy. [C] The single sensor was the result of regulatory capture, not to say gaming; see below.
(The MCAS system is currently the system fingered as the cause of both the Lion Air and Ethiopian crashes; we won't know for sure until the forensics are complete. Here, however, is the scenario for an MCAS-induced crash :
Black box data retrieved after the Lion Air crash indicates that a single faulty sensor -- a vane on the outside of the fuselage that measures the plane's "angle of attack," the angle between the airflow and the wing -- triggered MCAS multiple times during the deadly flight, initiating a tug of war as the system repeatedly pushed the nose of the plane down and the pilots wrestled with the controls to pull it back up, before the final crash.
(5) Regulatory Capture : Commercial aircraft need to be certified by the FAA before launch. The Washington Post labels today's process "self-certification":
The FAA's publication of pilot training requirements for the Max 8 in the fall of 2017 was among the final steps in a multiyear approval process carried out under the agency's now 10-year-old policy of entrusting Boeing and other aviation manufacturers to certify that their own systems comply with U.S. air safety regulations.
In practice, one Boeing engineer would conduct a test of a particular system on the Max 8, while another Boeing engineer would act as the FAA's representative , signing on behalf of the U.S. government that the technology complied with federal safety regulations, people familiar with the process said.
(Note that a 10-year-old process would have begun in the Obama administration, so the regulatory process is bipartisan.) I understand that " safety culture " is real and strong, but imagine the same role-playing concept applied to finance: One bankers plays the banker, and the other banker plays Bill Black, and after a time they switch roles . Clearly a system that will work until it doesn't. More:
The process was occurring during a period when the Transportation Department's Office of Inspector General was warning the FAA that its oversight of manufacturers' work was insufficient.
Four years after self-certification began, fires aboard Boeing's 787 Dreamliner jets led to the grounding of the fleet and a wave of questions about whether self-certification had affected the FAA's oversight.
Why "self-certification"? Investigative reporting from the Seattle Times -- the article is worth reading in full -- explains:
The FAA, citing lack of funding and resources, has over the years delegated increasing authority to Boeing to take on more of the work of certifying the safety of its own airplanes.
Alert readers will note the similarity to the Neoliberal Playbook , where government systems are sabotaged in order to privatize them, but in this case regulatory capture seems to have happened "by littles," rather than out of open, ideological conviction (as with the UKs's NHS, or our Post Office, our Veteran's Administration, etc.).
(6) Transfer of Authority to Boeing : In the case of the 737 Max, regulatory capture was so great that certification authority was transferred to Boeing. In order to be certified, a "System Safety Analysis" for MCAS had to be performed. The Seattle Times :
The safety analysis:Understated the power of the new flight control system, which was designed to swivel the horizontal tail to push the nose of the plane down to avert a stall. When the planes later entered service, MCAS was capable of moving the tail more than four times farther than was stated in the initial safety analysis document.
Failed to account for how the system could reset itself each time a pilot responded, thereby missing the potential impact of the system repeatedly pushing the airplane's nose downward. Assessed a failure of the system as one level below "catastrophic."
But even that "hazardous" danger level should have precluded activation of the system based on input from a single sensor -- and yet that's how it was designed.
So who certified MCAS? Boeing self-certified it. Once again The Seattle Times :
Several FAA technical experts said in interviews that as certification proceeded, managers prodded them to speed the process. Development of the MAX was lagging nine months behind the rival Airbus A320neo. Time was of the essence for Boeing .
"There wasn't a complete and proper review of the documents," the former engineer added. "Review was rushed to reach certain certification dates."
In this atmosphere, the System Safety Analysis on MCAS, just one piece of the mountain of documents needed for certification, was delegated to Boeing .
(I'm skipping a lengthy discussion of even more technical detail for MCAS, which includes discrepancies between what Boeing self-certified, and what the FAA thought that it had certified, along with the MCAS system acting like a ratchet, so it didn't reset itself, meaning that each time it kicked in, the nose was pitched down even lower. Yikes. Again, the article is worth reading in full; if you've ever done tech doc, you'll want to scream and run.)
(7) Political Economy : This tweet is especially interesting, because even I know that Muddy Waters Research is a famous short seller:MuddyWatersResearch Verified account @ muddywatersre Mar 18
What's the result? Two
$BA planes have been grounded: 787 and Max. Last FAA grounding of a type of plane was 1979. In the case of the Max, FAA outsourced more than planned bc BA was 9 months behind Airbus 320neo 3/4 2 replies 4 retweets 19 likes
This is a great example of real short-termism by a corporate. It's clearly in
$BA LT interest to have robust cert system, but those chickens come home to roost years later, allowing mgmt to meet ST expectations. BTW, semi-annual reporting would do NOTHING to fix this mentality. 4
And here we are! There are a myriad of other details, but many of them will only prove out once the black boxes are examined and the forensics are complete.
* * *
It should be clear at this point that the central claims of Muilenburg's letter are false. I understand that commercial aviation is a business, but if that is so, then Muilenburg's claim that Boeing's commitment to safety is "absolute" cannot possibly be true; indeed, the choice to re-engine the 737 had nothing to do with safety. Self-certification makes Boeing "a judge in its own cause," and that clearly contradicts Muilenburg's absurd claim that "safety" -- as opposed to profit -- "is at the core of who we are."
The self-certification debacle that allowed MCAS to be released happened on Muilenburg's watch and is already causing Boeing immense reputational damage, and a criminal case, not to mention the civil cases that are surely coming, will only increase that damage. Mr. Market, the Beltway, and even Trump, if his trade deals are affected, will all soon be bellowing for a sacrificial victim. Muilenburg should recognize the inevitable and gracefully resign. Given his letter, it looks unlikely that he will do the right thing.
John A , , March 19, 2019 at 4:34 pm
Maybe they should have appointed aviation expert Nikki Haley to the Boeing board earlier.
Yikes , , March 19, 2019 at 4:35 pm
Sacrificial Victims were spread over land and sea in Kenya and Indonesia. Muilenburg and Obbie The Wan both are the criminals who profit.
dcrane , , March 19, 2019 at 4:36 pm
That should be "five months" not "five weeks" in the first sentence. Lion Air crashed on 29 October 2018.
Howard Beale IV , , March 19, 2019 at 4:39 pm
IIRC, one of the big constraints that was leveled was the need to keep the 737, regardless of version, into the same height relative to all other generations of the 737, whereas Airbus kept their height a lot higher than the 737.
If you look at many 737's over the years, some of the engine's nacelles were flat at the bottom to accommodate larger engine. Why? Boeing kept the height the same in order to maintain built-in stairs that, with virtually all airports having adjustable jetways, was basically redundant.
When you compare an A320xeo against a B737, you'll find that the Airbus rides higher when it comes to the jetways.
Michael Hudson , , March 19, 2019 at 4:42 pm
It seems to me that the Boeing 737-Max with the heavier, larger fuel-saving engines is so unbalanced (tilting over and then crashing if not "overridden" by a computer compensation) that it never should have been authorized in the first place.
When Boeing decided to add a much larger engine, it should have kept the airplane in balance by (1) shifting it forward or backward so that the weight did not tip the plane, and (2) created a larger landing-gear base so that the large engines wouldn't scrape the ground.
The problem was that Boeing tried to keep using the old chassis with the larger engines under the wings – rather than changing the wings, moving them forward or aft, and expanding the plane to permit a more appropriate landing gear.
The computer system has been blamed for not being a "smart enough" workaround to tell the plane not to plunge down when it already is quite close to the ground – with no perception of altitude, not to mention double-checking on the wind speed from both sensors.
Beyond that ultimate problem is the ultimate regulatory problem: regulatory capture of the FAA by the airline companies. As a result, the FAA represents "its customers" the airplane makers, not the public users and customers. This is like the banks capturing the Fed, the Justice Dept. and Treasury to promote their own interests by claiming that "self-regulation" works. Self-regulation is the polite word for fraudulent self-indulgence.
I would be surprised if the European Airbus competitors do not mount a campaign to block the 737-Max's from landing, and insisting that Boeing buy them back. This gives Airbus a few years to grab the market for these planes.
This probably will throw Trump's China trade fight into turmoil, as China was the first country to ground the 737-Max's and is unlikely to permit their recovery without a "real" federal safety oversight program. Maybe Europe, China and other countries henceforth will each demand that their own public agencies certify the plane, so as to represent users and stakeholders, not only stockholders.
The moral: Neoliberalism Kills.
Lambert Strether Post author , , March 19, 2019 at 5:13 pm
Rule #2 of Neoliberalism: Go die.
> "Maybe Europe, China and other countries henceforth will each demand that their own public agencies certify the plane."
As if the 737 MAX were the chlorinated chicken of aircraft.
* * *
I'm not sure about redesigning the wing and the landing gear. That might be tantamount to designing a new plane. (I do know that the landing gear is so low because the first 737s needed to accommodate airports without jetways, and so there may be other facets of the design that also depend on those original requirements that might have to be changed.)
Synoia , , March 19, 2019 at 7:45 pm
Correct – redesign the wing = new plane.
Cal2 , , March 19, 2019 at 7:45 pm
Rule #3 of Neoliberalism:
Their profits = Your cancer, which presents even more profit taking. I.e. Bayer makes the carcinogenic pesticides AND the chemotherapy drugs.
Carey , , March 20, 2019 at 10:19 am
Precisely this. Thank you.
John Zelnicker , , March 19, 2019 at 7:46 pm
March 19, 2019 at 4:42 pm
-- -- -
"This gives Airbus a few years to grab the market for these planes."
That would be great for Mobile as the Airbus A320neo is assembled here.
Octopii , , March 20, 2019 at 7:38 am
And provides time for the A220 to ramp up in Mobile as well. Not a direct competitor for the 737 but a very good airplane developed by Bombardier.
Carey , , March 20, 2019 at 11:20 am
Also, the MC-21 is in final testing now; still using Western engines, for the moment. One to watch, maybe.
Which is worse - bankers or terrorists , , March 20, 2019 at 4:17 am
Engineering logs seem to indicate that larger landing gear cannot be added without re-engineering the plane.
115 kV , , March 20, 2019 at 8:15 am
Regulatory capture is rampant throughout the economy. Boeing self-certification being delegated by the FAA is not unlike the situation with electric transmission utilities.
After the 2003 northeast & Canada blackout, Congress passed the Energy Policy Act of 2005. It directed FERC to create an "electric reliability organization". Previously there were voluntary organizations set up after the 1966 blackout to establish operating standards in the industry. One of them was the North American Electric Reliability Council which morphed into the North American Electric Reliability Corporation (NERC) in 2006.
NERC is headquartered in Atlanta and employs hundreds of people. The standards setting generally takes place in NERC Committees and Subcommittees and sometimes from FERC itself. These are typically packed with industry people, with a patina of diversity that includes some governmental types and large industrial consumers. Let it suffice to say the electric transmission industry itself largely sets the rules how it operates.
Now consider the article in yesterday's NYT " How PG&E Ignored California Fire Risks in Favor of Profits ". The transmission circuit featured in the article (the Caribou-Palermo line) that caused the destruction of Paradise is a transmission line that is subject to both FERC and NERC regulation. As described in the article the circuit had many previous failures and was well beyond its design life.
However, both FERC and NERC have a laser focus on "market players" (think Enron or JP Morgan) and system operations (e.g., prevent collapses like the blackout of 2003). AFIK, neither FERC or NERC have prescriptive standards for routine maintenance or inspection and replacement (i.e., very expensive capital replacement that was not done on the Caribou-Palermo line), these are left to the discretion of the transmission owner. While substantive information about electric reliability is maintained by industry trade groups and submitted to FERC, what is available to the public is generally useless and subjected to scrubbing and polishing (often under the guise of Critical Energy Infrastructure Information).
We can see how self-policing work, can't we??? Rent-seeking market players can arbitrage markets, inflating prices consumers pay and make billions in profits, while California burns.
The neglectful rot in California is endemic in the industry as a whole.
A little bit of dignity , , March 19, 2019 at 4:47 pm
How about seppuku for the entire top management?
Robert Hahl , , March 20, 2019 at 7:14 am
If an airplane crashes in the forest, and no American were killed, did it make a sound?
Carolinian , , March 19, 2019 at 5:07 pm
That Seattle Times investigative story is indeed very good and a rare instance of newspaper writers troubling to carefully and cogently explain a technical issue.
In hindsight Boeing would have perhaps been better off to leave off the MCAS altogether and depend on pilot retraining to cover the altered handling.
One reason they may not have was that crash several years ago of a commuter plane in upstate NY where the plane started to stall and the confused pilot pulled up on the controls rather than making the airplane dive to regain speed. Still one has to believe that no automation is better than badly designed or malfunctioning automation.
allan , , March 19, 2019 at 5:31 pm
"depend on pilot retraining to cover the altered handling"
IANAP, but maybe the problem is that "nose up" situations can go south very quickly. For those with the stomach for it, there are videos on youtube of the 747 freighter that went nose up at Bagram a few years ago (perhaps due to loose cargo shifting backwards on takeoff). It was over very quickly.
ChrisPacific , , March 19, 2019 at 5:37 pm
Yes, I was impressed with it. Unfortunately the investigation precludes Boeing from responding as they did indicate they would have had something to say about it otherwise. But the analysis looks pretty cut and dried:
- Boeing underestimated the risk rating for the sensor, excluding the possibility of a catastrophic failure as occurred in the two incidents to date;
- Boeing also failed to implement the redundancy that would have been required even for their lower risk rating;
- Manual correction by the pilot as a possible risk mitigation was constrained by the fact that pilots weren't trained on the new system due to commercial factors.
Fixing any one of those three issues would have averted the disasters, although #3 is pretty precarious as you're relying on manual pilot actions to correct what is a clear systems defect at that point.
It sounds like #1 was partly because they failed to account for all the scenarios, like repeat activation raising the risk profile in certain circumstances. This is very easy to do and a robust review process is your best defense. So we could add the tight timelines and rushed process as a contributing factor for #1, and probably the others as well.
XXYY , , March 20, 2019 at 12:08 pm
People who work on accident investigation would probably agree on 2 things:
- (o) Accidents are invariably a confluence of a myriad of factors that all happened to line up on one day. There is never a single cause of an accident.
- (o) A minor change to some part of the system would have prevented the accident.
So while there is much to be profitably learned by investigating everything here, an effective "fix" may be surprisingly (or suspiciously) small in scope. There will be much clamoring for the whole plane to be resigned or scrapped, for better or worse.
anon in so cal , , March 19, 2019 at 6:28 pm
The Colgan crash, whose pilot, Renfrew, was chatting with the co-pilot below the allowed altitude? And who had apparently lied about his background, and had a pay-to-play pilot's license?
I think the Air France Airbus 447 also had a high-altitude stall (due to a faulty air speed sensor) and needed its nose pushed down, not up (which the copilots didn't realize).
Also, very informative article / OP, thanks for posting.
Synoia , , March 19, 2019 at 7:47 pm
MCAS was added to change the behavior of the plane from to tend to stall as speed increases. That is stall and crash, because such a high speed stall makes polit recovery very, very difficult.
In addition the MCAS driven amount of elevator change was initially 0.6 to 2.5, which indicates the 0.6 increment was found to be too low.
Carolinian , , March 19, 2019 at 8:07 pm
Well they are planning to keep it but
According to a detailed FAA briefing to legislators, Boeing will change the MCAS software to give the system input from both angle-of-attack sensors.
It will also limit how much MCAS can move the horizontal tail in response to an erroneous signal. And when activated, the system will kick in only for one cycle, rather than multiple times.
Boeing also plans to update pilot training requirements and flight crew manuals to include MCAS.
So apparently the greater elevator setting is not so necessary that they are not willing to reduce it. Also the max power setting would normally be on take off when the pilots are required to manually fly the plane.
Synoia , , March 20, 2019 at 12:12 pm
It is about speed, not power. I presume that MCAS was developed to solve a problem, nose up behaviour.
Carey , , March 20, 2019 at 10:28 am
Yes, that was an excellent Seattle times piece. Surprising to see that kind of truth-telling and, especially, *clarity* in an MSM piece these days. So what's the angle?
voislav , , March 19, 2019 at 5:48 pm
Reports I've read indicates that Boeing ignored even the clearly inadequate certification. "Documentation provided to the FAA claims that the MCAS system can only adjust the horizontal tail on the plane by 0.6 degrees out of a maximum of five-degrees of nose-down movement. But that limit was later increased to 2.5-degrees of nose-down movement. Boeing didn't communicate the change from 0.6-degrees to 2.5-degrees until after Lion Air."
Apparently this was done after simulations showed that 0.6 degrees was inadequate and the new 2.5 degree setting was not extensively tested before the planes were rolled out. IANAL, but this may be a serious problem for Boeing. Boeing could also be liable for damages due to 737 groundings and due to delays in delivery of contracted planes.
Big question is how 737 issues will affect 777X rollout, due at the end of the year. If 777X certification is called into question, this may cause further delays and put it at a further disadvantage against A350.
Lambert Strether Post author , , March 20, 2019 at 3:17 am
The 777 has been a great plane. Let's all pray the MBAs didn't fuck it up, too.
If I were Boeing, I'd have a team looking into the 777 certification process right now. And I'd set up a whistleblower line (so the Seattle Times doesn't get to the story first).
The analogy has been made between this the 737 MAX story and the Tylenol story. J&J got out in front of the problem and saved the product (and their company). Boeing's problem is of that order, and Muilenberg -- that letter! -- seems incapable of understanding that; insular, arrogant. One more reason to fire the dude toot sweet. If he comes out of his next review with a raise -- Everything Is Like CalPERS™ -- consider shorting Boeing
Chris , , March 20, 2019 at 1:35 pm
Thanks, Lambert, for post and comments. I don't know if this angle has been covered or explored: the relatively new way that Boeing now "manufactures" "tests" and "assembles" parts of its planes. I had dinner with new acquaintance, Boeing engineer for decades (I live near a plant in WA state). For the last few years, this engineer is stationed half year in Russia annually to oversee assembly there. In this newish, more profitable manufacturing system for Boeing, the parts come in from around the world with sketchy quality control, are then assembled by Russian workers this engineer (and other Boeing employees sent from States) supposedly oversees. But the engineer doesn't speak Russian and has too little access to translators .Needless to say, this engineer is planning an exit as soon as possible. Having grown up in WA state for 60 years with neighbors/friends who were Boeing engineers, assemblers, line workers, etc it makes me heart sick to see the current decimation of talent, rigor and wages with additional far-flung assembly factories (Russia with few translators?! who knew?). Might these manufacturing/assemblying "improvements" also be a contributing factor in these terrifying woes for Boeing?
PlutoniumKun , , March 19, 2019 at 5:57 pm
Thanks for this Lambert, fantastically informative and interesting post.
Self regulation only works when liability is transferred with it – over example, in construction whereby certification by the engineers or architects designing the building are also taking on liability in the event something goes wrong. It seems unlikely that this is the situation with Boeing.
Allowing this to happen seems the ultimate in short term thinking by Boeing. US manufacturers have always had an advantage over competitors because the FAA was held in such high regard worldwide that it was the de facto world safety regulatory body – every country followed its lead. But this chipping away of its authority has led to a near fatal loss of faith, and will no doubt lead to European and Asian regulatory authorities being strengthened. And no doubt commercial realities will mean they will look much more closely at US manufactured aircraft if there is some benefit to their own manufacturers.
Airbus will no doubt try to take advantage – just as Boeing (with some justification) tried to focus attention on the Air France Airbus loss which was attributed at least in part to excessive automation. China is pushing hard with its new Comac aircraft, but they seem to be poorly regarded worldwide (only Chinese airlines are buying). The Canadians have missed their chance with the Bombadier C-series.
JBird4049 , , March 19, 2019 at 6:07 pm
The more I read of this the more baffling it is. What was there stopping Boeing from just highlighting the changes and installing an easy manual override instead of this hidden change with effectively no way to permanently do so? Especially when in crisis mode? One could make a case of no extra training needed so long as the pilot knows about it and can easily turn it off.
Darius , , March 19, 2019 at 6:30 pm
I didn't see this before I posted my response. A more concise statement of my thoughts. This plus more robust redundant sensors. Penny wise and pound foolish.
The Times thinks Boeing is too big to fail. Without a blockbuster Max, I don't see how Boeing maintains its current status in the industry.
Synoia , , March 19, 2019 at 7:52 pm
One could make a case of no extra training needed so long as the pilot knows about it and can easily turn it off.
That's the expensive re-certification Boeing wanted to avoid.
Robert Hahl , , March 20, 2019 at 7:52 am
That would entail simulator training, that would entail modifying the simulators and the curriculum.
Darius , , March 19, 2019 at 6:22 pm
I am leaning towards thinking the kludgy design of the 727 Max could have been rolled out with no major problems if Boeing had been up front about design changes, made a robust and conservative MCAS, fully at the command of the pilot, and provided ample training for the new aircraft.
They still could have saved billions on the airframe. They would have had to acknowledge the significant modifications to the airlines with the attendant training and other costs and delays. They would have lost some sales. They still would have been far ahead of Airbus and light years ahead of where they are now.
I also think they have been completely afflicted by the defense contractor mentality.
Lambert Strether Post author , , March 20, 2019 at 3:08 am
> I also think they have been completely afflicted by the defense contractor mentality.
Yes, the famous McDonnell-Douglas reverse takeover , where financial engineers inserted their sucking mandibles into an actual engineering culture. The merger took place in 1997, 22 years ago, which is not so long, really. Note also that the finance guys drove the decision to outsource as much 787 manufacturing as possible , which creates headaches for real engineering, so the initial stumble with the 787 that led to the 737 fall is down to them, too.
Note that Muilenberg came up through the defense side of the company not the commercial aircraft side. He may simply not have been equipped to understand FAA regulation at any deep level, hence the rot that finally surfaced.
VietnamVet , , March 19, 2019 at 6:50 pm
The 737 Max crashes and Brexit are the chickens coming home to roost. NC is a treasure for your coverage of both.
Clearly upper management in Chicago only knows short term finance. Boeing stuck with old fashion hydraulic controls in the 737 but faced with an unacceptable flight characteristics of the larger more efficient engines added a fly-by-wire system to compensate for it.
The criminal charges are that besides being a faulty design (it relies on one fragile exposed sensor that if out of position keeps triggering dives until switched off) but Boeing hid it and self-certified that it was safe. Adding a discrepancy warning and position indicator for the two independent flight sensors to the cockpit video display is an extra cost feature.
Neither of the planes that crashed had the added safety display. All are cost saving measures. Finally, if a faulty sensor triggers dives, the pilot at the controls is busy with both hands on the yoke forcing the airplane to stay in the air with stall and proximity warnings are sounding. The second pilot also must realize what's going on, immediately turn off the electricity to the screw jack motor and manually turn the stabilizer trim wheel to neutral.
You can't learn this on an iPad. Both pilots should practice it together in a Flight Simulator. If the co-pilot was experienced, unlike the one in the Ethiopian crash; just maybe, they could have survived the repeated attempts by the airplane to dive into the ground on takeoff.
The tragedy is that corporate media in pursuit of profits will keep us up to date but will never mention the 6 or 8 minutes of terror for the 346 souls aboard the two flights. They will cover the criminal negligence trial if there are ever indictments. But, the news reports never will say that neoliberalism, deregulation, and privatization are the root causes of the deaths.
Lambert Strether Post author , , March 20, 2019 at 3:01 am
> if a faulty sensor triggers dives, the pilot at the controls is busy with both hands on the yoke forcing the airplane to stay in the air with stall and proximity warnings are sounding. The second pilot also must realize what's going on, immediately turn off the electricity to the screw jack motor and manually turn the stabilizer trim wheel to neutral. You can't learn this on an iPad. Both pilots should practice it together in a Flight Simulator. If the co-pilot was experienced, unlike the one in the Ethiopian crash; just maybe, they could have survived the repeated attempts by the airplane to dive into the ground on takeoff.
That's what I mean by horrid UI/UX. Might as well as both pilots to pat their heads and rub their tummies in synch. And since the two pilots have to both understand what's going on, we've multiplied the chances for failure.
Boeing also clearly did not know its customers . It should be engineering for the sort of pilots who are going to be hired by Lion Air, or any rapidly expanding airline in what we used to all the Third World. Hegemony, it seems, makes you insular and provincial.
EoH , , March 20, 2019 at 4:54 pm
Added cost, "mandatory" safety feature. Does not seem to square with the [soon to be former?] CEO's apology-industry written claim to be committed to absolute safety.
You can't make this stuff up.
dearieme , , March 19, 2019 at 7:03 pm
"The FAA, citing lack of funding and resource": I don't suppose I'll survive to see any arm of government not blame lack of funds for its boneheaded or corrupt incompetence.
But the bigger picture: suppose the FAA is to do its job properly. From where is it going to recruit its staff?
Smaller picture: it doesn't really matter whether the cocked-up MCAS killed all those people or not. Even if it's innocent of the charge, the account of its development and application is a horror story.
Bigger picture: what other horrors have been hidden by Boeing?
Lambert Strether Post author , , March 20, 2019 at 2:48 am
> the account of its development and application is a horror story.
That's how I feel. The tech doc department at Boeing sounds like a horrible place to work; MBAs or their goons telling you all the time to do stuff you know is wrong. It's not surprising people were willing to talk to the Seattle Times; I bet there are more people. (Hey, Seattle Times! How about people testing the 737 MAX in simulators (assuming this is done)).
Sounds like the MBAs in Chicago have been busy planting land mines everywhere. Somebody stepped on this one; there are others.
oaf , , March 19, 2019 at 7:05 pm
The unfortunate pilots were made test pilots; the unsuspecting passengers: Guinea pigs. Lab rats. And paid for the privilege. Some others may share this opinion. Change one little thing? Chaos Theory Rules. Same with weather/climate; folks. That rant is for later.
dcrane , , March 19, 2019 at 7:08 pm
Boeing stuck with old fashion hydraulic controls in the 737 but faced with an unacceptable flight characteristics of the larger more efficient engines added a fly-by-wire system to compensate for it.
Interestingly, and maybe relevant to the problem of confusion for the pilots, is that Boeing has had another automatic trim-modifier operating on its 737s for some time, the speed-trim system (STS):
This system also modifies the stabilizer position during manual flight. Like MCAS, it was brought in to improve stability under certain flight conditions (the reasons for which are far beyond my knowledge). There is an indication that the pilots on the flight before the Lion Air crash misinterpreted MCAS actions for STS behavior.
Synoia , , March 19, 2019 at 7:55 pm
Safety is at the core of who we are at Boeing
Yes, after money.
drumlin woodchuckles , , March 19, 2019 at 8:08 pm
At what point does "crapification" become insufficient to describe Boeing's product and process here? At what point do we have to speak of " ford-pintofication"?
barrisj , , March 19, 2019 at 8:15 pm
OK, I'm told to resubmit my crib re: "Boeing options" from the ZeroHedge "tweetstorm" by Trevot Sumner, and include a link got it:
Economic problem. Boeing sells an option package that includes an extra AoA vane, and an AoA disagree light, which lets pilots know that this problem was happening. Both 737MAXes that crashed were delivered without this option. No 737MAX with this option has ever crashed
Ooops! "Options package"? Wait, a "package" that in the interim corrects a potentially catastrophic mfg. defect and airlines have to pay for it? Whoa, here's your late capitalism in play.
Lambert Strether Post author , , March 20, 2019 at 2:45 am
> Boeing sells an option package that includes an extra AoA vane, and an AoA disagree light
This is one of the details I could not get to (and we don't 100% know this is an issue until the forensics are done. Right now, we have narrative. Truly excellent narrative to be sure -- if only we thought of government the same way as pilots think of their aircraft! -- but narrative nonetheless).
Let me see if I have this right. Pilots, chime in!
"Authority" is one of the big words in this discussion; MCAS takes authority away from the pilot (and can do in such a drastic fashion as to crash the plane). Worse, the default case is that it can do so on the basis of a single sensor reading. In a design appropriate to the consequences for failure (i.e., a different design from that described in the "System Safety Analysis" that Boeing self-certified) MCAS would take readings from two sensors, and if they disagreed, authority would revert to the pilot . That's a general principle at Boeing, and so it's reasonable for pilots to assume that they retain authority of MCAS has not told them they don't have it any more.
Hence, the disagree light, which tells the pilots to take back authority because the sensors are confused. However, I think there are UI/UX issues with that, given that the 737 cockpit is extremely noisy and pilots have a lot to do on take-off. So a light might not be the answer. (The light also strikes me as a kludge; first, MCAS feels to me like a kludge, in that we're making the aircraft flyable only through software.* Fine for fighter jets, which can be inherently unstable, but perhaps not so fine for commercial aircraft? Then we have a second kludge, a light to tell us that the first kludge has kicked in. I dunno.)
NOTE * However, it's also true that automation affects flight characteristics all the time. So I'm not sure how savage to make this indictment.
rowlf , , March 20, 2019 at 6:00 am
The AOA indication is Service Bulletin 737-31-1650 (there may be others) and is on the both Pilot Flight Displays (PFDs). Pilots would likely abort a takeoff if they saw the indication come on before getting airborne.
California Bob , , March 19, 2019 at 8:20 pm
In hindsight, it appears Boeing should have made Mulally CEO. He appears to be competent.
Cal2 , , March 19, 2019 at 8:25 pm
"Boeing has been in the business of aviation safety for more than 100 years, "
How many years ago did Wall Street take over the fortunes of the company? Why did they move their headquarters from their birthplace of Seattle to Chicago? Why did they start assembling planes in South Carolina and China? Was it to improve aviation safety? Or, to allow the profiteering parasites to feed off the carcass of the company?
I want to fly on Boeing planes put together by well paid members of the Seattle Machinists Union, not low wage peons. Let's not even mention the maintenance of American aircraft in China and El Salvador.
President Trump, here's a reelection tip: "Today I am declaring that all American registered aircraft flying in American airspace must be maintained in the U.S."
Lambert Strether Post author , , March 20, 2019 at 2:32 am
> President Trump, here's a reelection tip:
> "Today I am declaring that all American registered aircraft flying in American airspace must be maintained in the U.S."
Amazingly, Trump seems to have done OK on this. First, he didn't cave to Muilenberg's (insane, goofy, tone-deaf) request to keep the 737 flying; then he frames the issue as complexity (correct, IMNSHO), and then he manages to nominate a Delta CEO as head of the FAA .
And your suggestion is very good one. I wonder if he could do that by executive order? And I wonder how many grey-beards would come off the golf courses to help out? I bet a lot.
oaf , , March 19, 2019 at 8:47 pm
The aircraft is NOT CRAP!!! However. It should have been flown A WHOLE LOT MORE before receiving certification.
*Real* test pilots should have their a–es on the line ; operating for a lot more hours at *the edge of the envelope*, as it is known. Stability should be by design; not software*patch*. Patch this!
What portion of its' MCAS system flight testing was in computer simulation? Like the so-called Doppler Radar; which *magically* predicts what the future will bring; while the experts pitch it as fact? And make life-or-death decisions on the theoretical data???
Rush to market; markets rule. We can die.
dcrane , , March 19, 2019 at 9:19 pm
The aircraft is NOT CRAP!!!
Agreed, but I think we're seeing signs that a crapification process has begun on the safety side in this industry. (It has been proceeding for years on the service/amenities side.)
Lambert Strether Post author , , March 20, 2019 at 2:25 am
> The aircraft is NOT CRAP!!!
Didn't say it was. The headline reads "Boeing Crapification," not "737 Crapification."
That said, the 737 clearly has issues, as Boeing itself knew, since if they'd had their druthers, they would have launched a new plane to replace it. See point #2.
> What portion of its' MCAS system flight testing was in computer simulation?
That is a very good question. If I understand the aerodynamics issues aright, MCAS would be most likely to kick in at takeoff, which raises a host of UI/UX issues because the pilots are very busy at that time. So was MCAS not tested in the simulators? If so, how on earth was a scenario that included sensor failure not included? It may be that there are more issues with Boeing's engineering process than the documentation issues raised by the Seattle Times, though those are bad enough.
Ron D , , March 20, 2019 at 4:18 pm
I say the 737-whatever is a flying Turd, and always has been. It has a bad wing design which means it has to fly nose up compared to other models( I always remember that when going to the restroom while going somewhere on one). And because of its poor design it has to takeoff and land at higher speeds. So when flying into someplace like Mexico City it can be quite a harrowing experience, and the smell of cooking brakes is relatively normal.
Boeing never should have let go of the 757. Now that was a good plane that was simply ahead of its time.
The Rev Kev , , March 19, 2019 at 8:53 pm
Considering the fact that all these 737s are grounded as no airline trust them to not kill a plane load of passengers and crew, this is a really big deal. Putting aside the technical and regulatory issues, the fact is that the rest of the world no longer trusts the US in modern aviation so what we have here is a trust issue which is an even bigger deal.
We now know that the FAA does not audit the work done for these aircraft but the airlines themselves do it. It cannot be just Boeing but the other aircraft manufacturers as well. Other countries are going to be asking some very hard questions before forking over their billions to a US aircraft manufacturer in future. Worse is when Ethiopia refused to hand over the black boxes to the US but gave them instead to a third party.
That was saying that based on how you treated the whole crash, we do not trust you to do the job right and not to change some of the results. It has been done before, ironically enough by France who the Ethiopians gave the black boxes to. And when you lose trust, it takes a very long time to gain it back again – if ever. But will the changes be made to do so? I would guess no.
notabanker , , March 19, 2019 at 9:44 pm
But if the discount foreign airlines had just trained their pilots and paid for the non-crashintothegroundat500mph upgrade, all of this could have been avoided.
The Rev Kev , , March 20, 2019 at 12:55 am
Do you think that there was an app for that?
Lambert Strether Post author , , March 20, 2019 at 2:23 am
> we have here is a trust issue which is an even bigger deal
Loss or at least wobbliness of imperial hegemony, like. It's not just the aircraft, it's US standards-setting bodies, methods, "safety culture," even -- dare we say it -- English as the language of aviation. French is no longer the language of diplomacy, after all, though it had a good run.
Because markets. Neoliberalism puts everything up for sale. Including regulation. Oversimplifying absurdly: And so you end up with the profit-driven manufacturer buying the regulator, its produce killing people, and the manufacturer canceling its future profits. That's what the Bearded One would call a contradiction.*
NOTE * There ought to be a way to reframe contradiction in terms of Net Present Value which would not be what we think it is, under that model.
Synoia , , March 19, 2019 at 10:05 pm
Thank you Lambert, this is very complete.
Can Boeing survive? Yes, as a much smaller company. What is upsetting to me, is that the Boeing management has sacrificed thousands of Jobs.
Lambert Strether Post author , , March 20, 2019 at 2:10 am
> Thank you Lambert, this is very complete.
I wish it were as complete as it should be! There are a ton of horrid details about sensors, the UI/UX for the MCAS system, 737 cockpit design, decisions by the marketing department, and training and maintenance for Asian airlines that I just couldn't get to. (Although most of those presume that the forensics have already been done.) But I felt that dollying back for the big picture was important to. Point #1 is important, in that all the factors that drove the 737 decision making are not only still in place, they're intensifying, so we had better adjust our systems (assuming Boeing remains a going concern -- defenestrating Muilenberg would be an excellent way to show we accept the seriousness of customer and international concern).
Bill Smith , , March 19, 2019 at 10:56 pm
Bloomberg is reporting that : "The Indonesia safety committee report said the plane had had multiple failures on previous flights and hadn't been properly repaired."
And the day before when the same plane had the problem that killed everyone the next day: "The so-called dead-head pilot on the earlier flight from Bali to Jakarta told the crew to cut power to the motor driving the nose down, according to the people familiar, part of a checklist that all pilots are required to memorize."
Lambert Strether Post author , , March 20, 2019 at 2:14 am
There's an enormous expansion of air travel in Asia. The lower end -- not flag -- carriers like Lion Air and also Air Asia are in that business to be cheap ; they're driven by expansion and known to be run by cowboys.
That said, know your customer . I would translate this into an opportunity for Boeing to sell these airlines a service package for training their ground operations. But it seems that cutting costs is the only thing the MBAs in Chicago understand. Pilots, pipe up!
Bill Smith , , March 20, 2019 at 7:13 am
Pilot training and requirements are in the hands of the country, not Boeing. If the story that the copilot of the Ethiopian Airlines plane had only 200 hours of experience that is astounding.
In the US that requirement is 1500 hours. In addition most US airlines would require more than that. And then they slot 'beginning' pilots for flights in good (better) weather as high minimums pilot.
Bill Smith , , March 20, 2019 at 7:17 am
"sell these airlines a service package" That won't help an airline that is in the business to be cheap. The Indonesia airplane was repeatedly reported for problems in prior days/flights that was never fixed.
Basil Pesto , , March 20, 2019 at 2:42 am
indeed I was just about to mention this same story. The link is here: https://www.bloomberg.com/news/articles/2019-03-19/how-an-extra-man-in-cockpit-saved-a-737-max-that-later-crashed?utm_campaign=news&utm_medium=bd&utm_source=applenews
and this quote makes an interesting follow-on to the thread yesterday with 737 Pilot (which Lambert linked to in the first paragraph here):
"The combination of factors required to bring down a plane in these circumstances suggests other issues may also have occurred in the Ethiopia crash, said Jeffrey Guzzetti, who also directed accident investigations at FAA and is now a consultant.
"It's simply implausible that this MCAS deficiency by itself can down a modern jetliner with a trained crew," Guzzetti said."
Setting aside Mr Guzzetti's background (dismissing his claim here as tendentious right off the bat would strike me as uncharitable), and without wishing to exculpate anyone, it does lend some credence to the idea that Ethiopia Airlines may have some contributory negligence here, staffing the flight with such an inexperienced first officer.
JBird4049 , , March 20, 2019 at 12:25 pm
Setting aside Mr Guzzetti's background (dismissing his claim here as tendentious right off the bat would strike me as uncharitable), and without wishing to exculpate anyone, it does lend some credence to the idea that Ethiopia Airlines may have some contributory negligence here, staffing the flight with such an inexperienced first officer.
One can often point to inexperience, incompetence, stupidity, incompetence or just bad luck when some disaster happens, but Boeing counted on perfect performance from flight crews to successfully work with a workaround needed for other workarounds that needed perfect performance to not catastrophically fail. I know enough about complexity that you cannot depend on perfection because something will always fail.
BillC , , March 20, 2019 at 7:25 am
Your excellent summary lacks some MCAS details that are not widely reported by the general-audience press.
Like you, I am a retired software engineer, so I have followed an aviation blog discussion of this issue quite closely since it emerged as a probable software and system design failure. As the blog is open to all, its signal-to-noise ratio is pretty low, but it seems not too difficult for any technically-minded person to separate the wheat from the chaff. My current understanding, which I believe others here are in a position to correct, if necessary:
A. The requirement for MCAS apparently emerged very late in the MAX's development, when it became clear that the upper cowling around the larger engines, being moved up and forward with respect to earlier 737 versions, adds nose-up force as the angle of attack (AoA) approaches the upper limits of the MAX's operating envelope because at such angles, the cowling itself generates lift beyond that of the wing.
B. As perceived by a pilot flying manually (not on autopilot), this added nose-up force makes it easier to pull back on the control column ("stick"), increasing the AoA further. This is like a car running off the asphalt onto a muddy shoulder: the steering wheel wants to turn the wrong way (toward the ditch) rather than the right way (back on the road).
C. An FAA regulation prohibits certification of an aircraft that presents the pilot with changing stick forces near stall that nudge the pilot toward the wrong reaction, 14 CFR 25.203(a) , IIRC (unfortunately, I can't find the original blog citation).
D. MCAS was put in place to satisfy this certification requirement -- not to automagically correct stalls without pilot action.
E. Other means of meeting this requirement exist, ranging from an airframe redesign that avoids the extra nose-up effect of the larger repositioned engines down to a "stick pusher" that increases the force a pilot would need to pull the stick back further in this situation.
F. Any of the other options would negate one or both of the MAX's chief selling points: little cost or schedule impact to Boeing (in a rush to meet the Airbus 320 NEO challenge) and to its customers ("No new flight crew training necessary, because to the pilot, the MAX feels just like its 737 predecessors.") That is, all the other options introduce new hardware to a completed design and the more fundamental changes could require new type certification.
G. The easiest fix was pure software: at high indicated AoA, under manual control, and with flaps up, automatically rotate the horizontal stabilizer a little bit nose-down, which increases the pressure needed to pull the stick back (nose-up). No need to tell the pilot about this in training or real time, since it's just to make MAX feel like any other 737.
H. The design presented for certification described a single small rotation. Testing showed this was insufficient to provide the tactile feedback necessary for certification in all cases, so the software fix was obvious: if the trigger conditions still hold after a 5 sec. pause, do it again.
I. Apparently nobody asked at that point, "What if the AoA indication is stuck high?" We're under schedule and cost pressure, so who wants to complexify things by (1) adding additional sanity-checking to the aircraft's AoA computations or (2) limiting how many times we add a little bit of nose-down.
J. When these details combine with a consistently erroneous AoA reading, MCAS can -- if not repeatedly countermanded or disabled and manually reversed -- eventually rotate the horizontal stabilizer to its maximum nose-down position, where it was found in both recent incidents, IIRC.
Even if the pilots figure out that's what's happening amid a cacophony of seemingly contradictory instrument readings and warnings (stick-shaker, trim wheel clacking, alarm chimes, and synthesized voices), the pilots still have to (1) cut power to the electrical trim systems and (2) restore the required trim, which may then require as many as 50 manual turns of a trim wheel. If you're near the ground, time is short
A minority of commenting pilots assert that any competently trained cockpit crew should be able to identify MCAS misbehavior quickly and power off automatic trim per the same checklist that was prescribed for "runaway automatic trim" on every 737 variant, MAX included. Most seem to agree that with aircraft control difficulties, multiple alarms, and disagreement among the pilot's and first officer's airspeed and AoA readings almost from the moment of takeoff (not yet officially confirmed), an MCAS-commanded runaway trim event may feel very different from the runaway trim flavors for which pilots have had simulator training, making problem identification difficult even given knowledge of the earlier Lion Air incident.
I imagine most software developers and engineers have seen cost/schedule pressures lead to short cuts. If their life was at stake, I doubt that many would think self-certification that such a project complies with all relevant safety requirements is a good idea.
ShamanicFallout , , March 20, 2019 at 12:59 pm
Thank you for that. And just 'wow'. I don't really know anything about aircraft/flying but this story is really fascinating and seems to be true a sign of the times. I guess we'll know what the current 'temperature' is out there when the fallout (civil liability, criminal liability, plane orders cancelled/ returned, etc) manifests. If Boeing skates, we'll know we've got a long way to go.
Cheryl from Maryland , , March 20, 2019 at 8:15 am
The Post's article on the FAA and Regulatory Capture is incomplete. The process for the FAA (and probably MANY government agencies) started under Reagan, did not revert to safety under Clinton (make government smaller and all that), and then accelerated under Bush II in 2005 (not a bi-partisan time). In particular, big changes to the FAA were made in 2005 that were executive in nature and did not require Congressional approval. CF: https://www.seattletimes.com/business/delegating-aircraft-safety-assessments-to-boeing-is-nothing-new-for-the-faa/
drfrank , , March 20, 2019 at 9:22 am
Yes, but. Part of what we are seeing in this case is a rush to judgement based on less than full evidence and analysis, and so prejudices and ideological positions (which I share actually) are plainly to be seen (and perhaps worth analyzing). "Crapification," says the headline.
Yet, I cannot say that I disagree with BA's business decisions as such in a highly competitive environment as regards the tradeoffs in the development of the MAX and there is a certain absurdity in the idea that Boeing would knowingly take a high reputational risk, in an industry where failure is front page news (contrast banking or pharma failures).
I have no reason to believe that an FAA fully in charge of all aspects of certification would have prevented these crashes, as banking and drug regulators have not kept us safe either. What seems worthy of note is that neither the airlines that buy the product nor the foreign aviation regulators nor pilots' associations do their own testing and certification, in an area where more redundancy would be good. Nor is there any kind of private third party watchdog testing, like a Moody's or S&P, evaluating potentially toxic products and services for a price.
Finally, I suppose we have to ask ourselves why the price of the stock is holding up fairly well even as the news flow on these tragedies is helping the short sellers. Lest we forget that Boeing is the 5th largest defense contractor in the US.
oaf , , March 20, 2019 at 10:01 am
Is engine throttle automated in the flight regime where these accidents occurred? Or are the pilots controlling power? Is the lag in thrust response interacting with the MCAS in an unanticipated way? Aerodynamic lift of nacelles is mentioned several times; there is another lift factor relating to the thrust angle; which is not necessarily aligned with the fuselage axis in flight. Departure procedures often require speed limits and altitude changes; so it is likely multiple power demand levels get set through takeoff and climb until cruise altitude is reached. Does Autopilot/Flight Director integrate with MCAS; or are they independent systems? Even without touching flight controls; power changes affect pitch forces. I am wondering if consequences of manual power changes on an otherwise automated departure were adequately investigated in the certification of the MCAS. Please excuse my ignorance of these details.
oaf , , March 20, 2019 at 11:18 am
Regulatory elements that have been getting attention include the use of *standard* weights for passengers; IIRC, 170 lbs for US (and possibly ICAO) passengers comes to mind . Many aircraft accidents have an element of disregard for proper weight distribution, either accidental, or negligent. For instance: Tail-heavy bad! Intentional loading outside of subsequently approved C.G. and/or max weight limits is a common, if not ubiquitous part of determining certification limits.There is a safety factor in the certificated limits; but banking on this; using estimates; is proven risky or disastrous when actual weights, and distribution thereof, is uncertain. Cargo with false weight values could also occur. One might find incentive to claim lower weights than actual to save on freight charges. How many 170 lb passengers do you know? I am not familiar with scales being used to check aircraft weight and balance before takeoff; only calculations; based on formulas and charts.
Scales ARE USED during certain maintenance procedures; for airworthiness certificates; and following certain modifications.
Jack , , March 20, 2019 at 11:50 am
Here is an interesting article by a professional pilot blogger Patrick Smith. He calls the 737, "the Frankenplane", and traces its history all the way back to the 707 in 1959. According to Smith, "We wonder if the 737 MAX even needed to exist in the first place. Somewhere deep down, maybe the heart of this whole fiasco is Boeing's determination to keep the 737 line going, variant after variant, seemingly forever. I'm not saying this is the reason for what happened in Indonesia or Ethiopia, but the whole 737 program just seems misguided and unnecessary. Instead of starting from scratch with a new airframe, they took what was essentially conceived as a regional jet in the mid-1960s, and have pushed and pushed and pushed the thing -- bigger and bigger engines, fancier avionics and more seats -- into roles it was never intended for. The "Frankenplane," I call it.
See the article here .
As a pilot myslef, I feel the airlines have a lot to answer for as well. Their constant "dumbing down" of pilots, which comes from making pilots work long hours for low pay, results in pilots not being the best of the best. And training is a cost to airlines. Training doesn't result in revenue. Better to have the pilots actually flying, hence Boeing selling this new version of the 737 as not requiring further training. But, training and practice is everything in flying. Flying a plane is actually a relatively easy skill to acquire. Most people can learn to fly a trainer in 5 hours or so. Most people solo (fly the plane without an instructor) with only 10-20 hours of instruction. It takes a lot longer to learn how to drive a car for most people (45 hours is the average). So it really isn't that difficult .until something goes WRONG. That is when the training kicks in. An often quoted flying truism, is that flying is "99% boredom and 1% stark terror". What happened with these two crashes is that you had some inexperienced pilots who were not fully trained on the systems (a lot of that blame goes to Boeing). When things start going wrong, information overload can easily occur if you have not been properly trained, even with two pilots.
Carey , , March 20, 2019 at 1:44 pm
Maybe this is the link mentioned above:
allan , , March 20, 2019 at 11:57 am
"you had some inexperienced pilots"
The captain, Yared Getachew, had more than 8,000 hours of flying under his belt.
(It is true that the first officer only had 200.)
You have to wonder how the average US commercial pilot would have done under the circumstances.
(Reply to Jack at 11:50 am)
EoH , , March 20, 2019 at 3:15 pm
Thanks for that correction. We can expect a deluge of blame-the-other-guy PR from the aircraft manufacturer and certification agencies. Billions are on the line for Boeing if a cascade of judgments it made materially contributed to these crashes. The usual strategic corporate bankruptcy might follow. I presume Boeing is considered much TBTF by the USG.
JerryDenim , , March 20, 2019 at 12:19 pm
Great job summarizing and connecting dots Lambert. I might add one more bullet point though. Items #5 and #6 were aided, abetted and perhaps somewhat necessitated by 'ye ole NeoLiberal playbook' you spoke of, but more specifically, the current regulatory FAA/Boeing milieu is attributable to years of budget cuts and strategically applied austerity. The old Grover Norquist, ' not destroyed, but small and weak enough to be drowned in a shallow bath' saw. Exact same thing we've witnessed with other formally effective regulators like the EPA, the SEC or the IRS.
I remember having a conversation with an FAA maintenance inspector, an old timer, about ten years ago. He looked to be upwards of seventy, and he told me he was eight years beyond eligibility for a full retirement. He informed me that a few years back he was supervising a team of ten people that was now down to two. Their positions had been cut outright or eliminated after they resigned or transferred when the remaining positions were made miserable by the increased workload and bureaucratic headaches. The inspector said he had not retired yet because he knew he would not be replaced and he felt the work was important. I asked him if his department was atypical and he said it was not. Same thing, across the board, with the exception of the executive level desk jobs in DC and Oklahoma City. Readers can draw their own conclusions but when it comes to funding Federal regulators, I believe you should never attribute anything to incompetence that you could attribute to malice.
No doubt Neo-Liberal ideologues in high places pushing the corrosive "customer/client" model of regulating along with the requisite deference and obsequious to industry played a large role as well.
"Chickens coming home to roost" Indeed.
EoH , , March 20, 2019 at 2:44 pm
I understand the published materials to boil down to this possible scenario:
To remain competitive and profitable, Boeing needed to improve the fuel efficiency and flight characteristics of a mainstay medium-haul aircraft. Instead of designing a new aircraft, it modified an existing airframe. Among other changes, it added more powerful engines, new lift and control surfaces, and enhanced computerized controls.
The modified Max aircraft **did not** fly like the earlier version. That meant Boeing would have to disclose information about those changes. It would need to train pilots in them, in how to integrate new protocols into existing ones, and in what to do if the enhanced computer controls malfunctioned, requiring the pilot to regain manual control.
These steps could have increased cost and time to market, might have involved new certifications, and might have reduced sales. Boeing appears to have relied on enhanced computer flight controls to avoid them.
The newly enhanced computerized controls meant that the computer would do more of the actual flying – the part that was different from the pre-Max version – and the pilot less. It gave the pilot the virtual – but not real – experience of flying the older aircraft, obviating the need, in Boeing's judgment, for additional disclosures and training. That worked except when it didn't. (See, driverless car development.)
One possible failure mode derives from the Max's reliance on a single sensor to detect its angle of attack, the aircraft's nose-up or nose-down deviation from level flight. Reliance on a single sensor would make it harder to detect and correct a fault. (Boeing's version of commitment to "absolute" safety.)
In these two crashes, the sensor may have given a faulty reading, indicating that the aircraft's nose was higher than it should have been for that stage of flight, an attitude that risked a stall. The programmed response was to drop the nose and increase power. A normal reaction to a real stall, this response can become catastrophic when unexpected or when the pilot cannot correct it.
In both crashes, it appears that the pilot did attempt to correct the computer's error. Doing so, however, reset the automated control, leading the computer to reread the faulty sensor to mean "stall." It again dropped the nose and increased speed. The pilot recorrected the error in what would become a deadly loop, a tug of war that ended in a powered dive into the ground.
Seal , , March 20, 2019 at 3:52 pm
This is like #Immelt at #GE
VietnamVet , , March 20, 2019 at 4:17 pm
What is interesting is what comes next. The FAA was drowned in the bath tub along with the EPA, FDA, SEC, etc. It doesn't have the money or staff to recertify the 737 Max. An incompetent Administration that is interested only in extracting resources is in charge. It is clear that Boeing hid the changes to save money and time. Adding a warning indicator that the flight sensors are not in the correct position to the pilot's display, including it in the preflight checklist, plus flight training would have prevented the Indonesian crash. But these changes would have raised questions on the adequacy of the new flight critical system and may have delayed certification overseas. It is easy to overlook problems if your paycheck is at risk. The Boeing managers who pushed this through deserve jail time for manslaughter.
Canada said it will recertify the 737 Max before it flies in their airspace. China won't recertify the Max until the Trump Trade War is over. Also, a delay boosts their replacement airliner. If Chicago and DC paper this over like the 2008 Great Recession; the final nails will have been hammered into the coffin of the hegemon. Trust is gone
Mar 23, 2019 | www.bradford-delong.com
Possibly the finest thing I have read this year: Frank Wilhoit : The Travesty of Liberalism :
"There is only conservatism. No other political philosophy actually exists; by the political analogue of Gresham's Law, conservatism has driven every other idea out of circulation. There might be, and should be, anti-conservatism; but it does not yet exist.
What would it be? In order to answer that question, it is necessary and sufficient to characterize conservatism. Fortunately, this can be done very concisely.
Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect...
Continue reading "" "
Mar 23, 2019 | www.latimes.com
Federal prosecutors are seeking potential deals with some of the wealthy parents charged in the sweeping college admissions scandal as investigators continue to broaden the case, according to multiple sources with knowledge of the situation.
One source said some of the parents are being given a short window to consider a deal or potentially face additional charges.
It's unclear which parents prosecutors hope to seek out for cooperation, but sources said authorities were interested in getting a better picture of how the scam worked. The sources requested anonymity because they were not authorized to speak publicly on the matter.
Mar 23, 2019 | twitter.com
MoveOn 1:32 PM - 21 Mar 2019
& the list of 2020 presidential candidates who have made the decision to
#SkipAIPAC continues to grow. Thank you for your leadership here @PeteButtigieg , @ewarren , @BernieSanders , @KamalaHarris , @JulianCastro , @BetoORourke , @JayInslee ... who is next?
Mar 22, 2019 | www.theamericanconservative.com
The birth lottery determines which of those three bands we'll sink or swim together in, because there is precious little mobility. In that bottom band, 81 percent face flat or falling net worths ( 40 percent of Americans make below $15 an hour) and so aren't going anywhere. Education, once a vehicle, is now mostly a tool for the preservation of current statuses across generations, to the point that it's worth paying bribes for. Class is sticky.
Money, not so much. Since the 9.9 percent have the most (except for the super wealthy at least), they have the most to lose. At their peak in the mid-1980s, the managers and technicians in this group held 35 percent of the nation's wealth. Three decades later, that fell 12 percent, exactly as much as the wealth of the 1 percent rose. A significant redistribution of wealth -- upwards -- took place following the 2008 market collapse, as bailouts, shorts, repossessions, and new laws helped the top end of the economy at cost to the bottom. What some label hardships are to others business opportunities.
The people at the top are throwing nails off the back of the truck to make sure no one else can catch up with them. There is a strong zero sum element to all this. The goal is to eliminate the competition . They'll have it all when society is down to two classes, the 1 percent and the 99 percent, and at that point we'll all be effectively the same color. The CEO of JP Morgan called it a bifurcated economy. Historians will recognize it as feudalism.
You'd think someone would sound a global climate change-level alarm about all this. Instead we divide people into tribes and make them afraid of each other by forcing competition for limited resources like health care. Identity politics sharpens the lines, recognizing increasingly smaller separations, like adding letters to LGBTQQIAAP.
Failed Georgia gubernatorial candidate Stacey Abrams, herself with presidential ambitions, is an example of the loud voices demanding more division . Contrast that with early model Barack Obama at the 2004 Democratic National Convention, who pleaded, "There's not a black America and white America and Latino America and Asian America; there's the United States of America."
The divisions can always be jacked up. "My opponent is a white nationalist!" and so he doesn't just think you're lazy, he wants to kill you. Convince average Americans to vote against their own interests by manipulating them into opposing any program that might benefit black and brown equally or more than themselves. Keep the groups fighting left and right and they'll never notice the real discrimination is up and down, even as massive economic forces consume all equally. Consumption becomes literal as Americans die from alcohol, drugs, and suicide in record numbers .
Meanwhile, no one has caught on to the fact that identity politics is a marketing tool for votes, fruit flavored vape to bring in the kiddies. Keep that in mind as you listen to the opening cries of the 2020 election. Listen for what's missing in the speeches about inequality and injustice. Whichever candidate admits that we've created an apartheid of dollars for all deserves your support.
** The author doesn't really drive for Uber but his conversation with the Spaniard was real.
JeffK March 22, 2019 at 7:39 amMr Van Buren. This piece nails it. The Democrats made a huge mistake focusing on race and LGBTQ instead of class. Their stated goal should be to replace race based affirmative action with class-based programs.Oleg Gark , says: March 22, 2019 at 8:22 am
If there is serious violence coming to America it will come during the next major recession/financial crisis. The ARs will come out of the closet when, during the next financial crisis, the elites are bailed out (again), yet the riff raff lose their homes and pickups to foreclosure.
I am very pessimistic in this area. I believe the elites, in general, are agnostic to SJW issues, abortion, job loss, BLM, religious liberty, and on and on. The look at the riff raff with amusement, sparring over such trivial things. Meanwhile, the river of cash keeps flowing to their bank accounts.
Imagine if the digital transfer of money was abolished. Imagine if everybody had to have their money in a local bank instead of in an investment account of a major bank. Imagine if Americans saw, day after day, armored vehicles showing up at local banks to offload sacks of currency that went to only a few individual accounts held by the very rich.
Instead, the elites receive their financial statements showing an ever increasing hoard of cash at their disposal. They see it, but nobody else does. However, if everybody saw the river of wealth flowing to the elites, I believe things would change. Fast. Right now this transfer of wealth is all digital, hidden from the view of 99.99% of Americans and the IRS. And the elites, the banking industry, and the wealth management cabal prefer it that way.
It's easy to propose the ultimate goal of the elites is to have a utopian society to themselves, where the only interaction they have with the riff raff is with subservient technicians keeping it all running. Like the movie Elysium.
https://youtu.be/QILNSgou5BYWhen feudalism comes to America, it will be justified by Libertarianism. With government defined as the bad guy, there's nothing to stop the 1% from organizing everything to their own benefit.Johann , says: March 22, 2019 at 8:31 am
On the other side of the political spectrum, identity politics emphasizes people's differences and tribal affiliations over their shared citizenship. This prevents them from making common cause.
Fundamentally, these trends make the body politic so weak that it becomes susceptible to takeover by authoritarians that represent narrow interests."His skin was clearly a few shades darker than mine, though he pointed out that was only because my relatives came from the cold part of Europe and he came from the sunny part."John D. Thullen , says: March 22, 2019 at 9:15 am
The Spanish in Europe got their color from the Moorish invasion, not the sun.
More of my annoying trivia that has little to do with the subject of an article.Welp, the Democratic Party, by and large, believes all Americans regardless of class, race, religion, and gender should have guaranteed equal access to affordable healthcare, a substantial minimum wage, education and the rest.TomG , says: March 22, 2019 at 9:44 am
Stacy Abrams wants these items too, along with equal access to the voting franchise.
"Until slavery was ended in the United States, human beings were legally considered capital, just like owning stocks and bonds today. But the Spaniard knew enough about history to wonder what reparations would be offered to the thousands of Chinese treated as animals to build the railroads or the 8,000 Irish who died digging the New Basin Canal or the whole families of Jews living on the Lower East Side of New York who were forced to employ their children to make clothing for uptown "white" stores. Later in the same century, wages were "voluntarily" cut to the bone at factories in Ohio to save jobs that disappeared anyway after the owners had wrung out the last profits."
That would be an excellent point if your inner Spaniard concluded reparations should be offered to the others as well, but ends up being merely tendentious if he contends that no one gets reparations.
But will you like it if the Democratic Party makes that part of their platform too?
I was born in Middletown, Ohio alongside the elegiacal hillbillies, who, by the way, didn't care for the blacks on the other side of the tracks anymore than my Armco-employed grandfather did, and certainly the business owners who disappeared the jobs and cut wages while voting for the so-called free traders were of the same ilk.
I didn't know any Democrats among any of my family's circle and, by the way, Middletown might as well have been south of the Mason Dixon anyway for all the white Democrats in town who gave not a crap about their fellow black citizens, certainly not the business owners who disappeared the jobs while voting for the so-called free traders.
It was the Republican Party (Larry Kudlow, I'm gunning for you) who championed creative destruction and the red tooth and claw of unfettered worldwide competition without asking, in fact jumping for joy, what the unintended consequences would be because the consequences were intended smash the unions for all, cut wages and benefits and hand the booty to shareholders, move operations to lower-tax, lower wage, environmentally unregulated parts of the globe to manufacture them thar high margin MAGA hats for the aggrieved.
What a beautiful grift!
That Democrats jumped on the bandwagon is no credit to them, especially while assuming the prone position as the republican party frayed the safety net.
True, the republicans laid off everyone, regardless of race, gender, and class and then cut everyone's benefits.
How equable of them.As the Spaniard rightly understood, one can look way back into our history and see that the moneyed class has always used identity politics in economic control games to divide and conquer. That the Republicans rail on this as some evil creation of the modern Democrat is laughable at best. That the sheep who follow the party mouth pieces of the moneyed class in this media age can still be so easily manipulated is rather pitiful. Making common cause for the general welfare has never really sunk in as an American value.JoS. S. Laughon , says: March 22, 2019 at 10:12 am
Divide and conquer remains our true ethos. As the dole gets evermore paltry the only seeming options remaining are common cause for a common good or greater violence. One requires us to find a contentment beyond the delusional American dream of becoming that 1 to 10%. The other just requires continued anger, division and despair.Ironically the view that race/culture isn't at all important and should be disregarded in view of the class division (a "distraction"), is pretty much endorsing the classic Marxist critique.ProletroleumCole , says: March 22, 2019 at 10:27 amIt's easy to notice divide and conquer when it's hate against those of the same class but are of a different culture/race.Lynn Robb , says: March 22, 2019 at 10:31 am
But what's *difficult* to notice is identifying with the elites of your race in a positive way.
A lot of people, especially with the onset of realityTV, tend to think rich people are just like them (albeit a little smarter). The methods and systems to keep power aren't considered. They're made non-threatening. So many billionaires and politicians act effete today to stoke this image."Whichever candidate admits that we've created an apartheid of dollars for all deserves your support."Connecticut Farmer , says: March 22, 2019 at 11:30 am
So we're supposed to vote for Bernie Sanders?" Whether your housing is subsidized via a mortgage tax deduction "Connecticut Farmer , says: March 22, 2019 at 11:47 am
This jumped off the screen. I wonder how many people even realize that. Probably the same number who still believe that social security is a "forced savings".Not to put too fine a point on it but clearly we are wasting our time arguing. As long as the current system of government remains in effect it will be same old same old.Lert345 , says: March 22, 2019 at 12:05 pm
Many changes are in order–starting with this archaic remnant of a bygone era called "The Two Party System".Spaniards are indeed Hispanic. The definition of Hispanic relates to a linguistic grouping – that is, relating to Spain or Spanish speaking countries. Your friend would indeed qualify for all sorts of preferences according to the definition.Dave , says: March 22, 2019 at 12:18 pm
As to being a POC, I could not locate any definition as to what threshold of skin tone qualifies someone as a POC. I wager none yet exists but will be forthcoming.
As for the skin tone of Spaniards, many in the south have the Moorish influence,however, in the rest of the country skin tones range from light beige to very fair. Rather similar to Italians, actually.First, kudos to Van Buren for getting a Seamless delivery while driving. That's not easy to coordinate. Second, I look forward to more conservative policies addressing poverty, drug addiction and access to health care. This article adds to the 10-year rant against what Democrats have done or want to do.david , says: March 22, 2019 at 12:31 pm
Like nearly every Republican of the last 10 years, Van Buren offers none here. But I'm sure once the complaining is out of his system, they will arrive." Whether your housing is subsidized via a mortgage tax deduction "Vincent , says: March 22, 2019 at 12:32 pm
Sorry, not taking your money is NOT subsidizing!
I thought this is a "conservative" idea to begin with? Apparently, it is not true even here.
Jealousy that others can keep their money is driving the worse instinct of many republicans.
Sigh.Your Spaniard friend also has it all wrong. The real division line is between those willing to initiate coercion for their own self-righteousness and those who refuse to. Anyone that supports government is one-in-the-same, regardless of color or class.LouB , says: March 22, 2019 at 12:35 pmThirty years ago I'd be asking who printed the canned response pamphlet to give prepared talking points to enable anyone to provide quick sharp tongued witty criticisms of anything they may encounter that didn't tow the party line.JonF , says: March 22, 2019 at 12:42 pm
Now I gotta ask where do I download the Trollware to accomplish the same thing.
Sharp article, thanks.The Moors were a tiny class of invaders who left rather little imprint on the Spanish genome. That was true of the Romans and the Goths as well. Spanish genes are mostly the genes of the pre-Roman population: the Iberians in the south (who maybe migrated from North Africa), Celts in the north, and the indigenous Basques along the Pyrenees.WorkingClass , says: March 22, 2019 at 2:27 pmYes. And thank you. It's a class war and the working class, divided, is a one legged man in an ass kicking contest.Carolyn , says: March 22, 2019 at 3:36 pmOutstanding piece!Dave , says: March 22, 2019 at 3:39 pmWhat happened to "a rising tide lifts all boats"? We've been promised for decades that the wealth generated by those at the very top would "trickle down." This was a cornerstone of Reaganism that has been parroted ever since.Peter Van Buren , says: March 22, 2019 at 4:06 pm
There have been naysayers who say that that theory was fantasy and that all we would have is increased wealth disparity and greater national deficits.
How peculiar.A rising tide lifts all yachts.
-- author Morris Berman
Mar 22, 2019 | sputniknews.com
The American aviation company has recently been immersed in a scandal after the crash of two 737 MAX 8 airliners in a span of less than six months. An official investigation into the catastrophes is ongoing, but some reports suggest that Boeing's automatic anti-stall system and a faulty sensor could be behind them. Boeing has won a three-year contract with the US Navy according to which it will upgrade 78 F/A-18 Super Hornets from Block II modifications to Block III, a company statement reads. The upgrades will include an enhanced network capability, longer range, reduced radar signature, an advanced cockpit system, and an enhanced communication system for the bomber jets. It will also extend the jets' service life from 6,000 hours to 10,000 hours.
Canadian, European Regulators to Hold Independent Reviews of Boeing 737 MAX
The aviation company will commence work on meeting the orders in the $4 billion contract "early in the next decade". The company noted that the contract saves some $395 million in taxpayer money, as it is a multi-year contract and thus the price for the work carried out during this period is fixed and will not be determined on a year-by-year basis.
The signing of the contract comes at a difficult time for Boeing, as its popular 737 MAX planes have wound up at the centre of an investigation after two aircraft in the series crashed in a span of less than six months. The crashes led to a global grounding of the planes, with the US being one of the last countries to do so. Although a probe into the reasons behind crashes is still ongoing, investigators have said that after seeing data from the black boxes, there are certain similarities between the two cases.
READ MORE: Captain on Boeing 737 Max: Pilots Were Fighting Against Aircraft System
The crashes have also forced the US military to start reviewing the training procedures for its pilots of large cargo and transport planes, including the president's Air Force One, citing the need to make sure they can handle emergency situations.
Mar 22, 2019 | www.zerohedge.com
He said the stock market, for now, "likes the fact that they (the Fed) aren't going to give them any problems."
But things could change quickly and dramatically, he said, with his final comment, the most ominous:
"It feels eerily like '07," he said.
" The stock market is near its high and the economy is noticeably weaker - and yet everyone is saying 'Everything is Great! '"
And just in case you wondered how bad the underlying is - despite equity market's enthusiasm - Citi's Economic Data Change index as its worst level since 2009...
Mar 22, 2019 | larrysummers.com
My paper with Lukasz Rachel on secular stagnation and fiscal policy summarized here has attracted a number of interesting responses including from Martin Wolf , David Leonhardt , Martin Sandbu and Brad DeLong and also many participants at the Brookings conference.
I'm gratified that there seems to be general acceptance of the core secular stagnation argument. "Normal" policy settings of real interest rates in the 2 percent range, balanced primary budgets and stable financial markets are a prescription for stagnation and underemployment. Such economic success as the industrial world has enjoyed in recent decades has reflected a combination of very low real rates, big budget deficits, private leveraging up and asset bubbles.
No one from whom I have heard doubts the key conclusion that a combination of meaningfully positive real interest rates and balanced budgets would likely be a prescription for sustained recession if not depression in the industrial world.
Notice that this is a much more fundamental argument than the suggestion that the some effective lower bound on interest rates may impede stabilizing the economy. The argument is that because of chronic private sector tendency towards oversaving, economies may be prone to underemployment and financial stability absent policy responses which are themselves problematic.
This is an argument much more in the spirit of Keynes, the early Keynesians, and today's Post-Keynesians than the New Keynesians who have set the terms for much of contemporary macroeconomic discourse both in academia and in the world's central banks.
The central feature of New Keynesian models is an idea that economies have an equilibrium to which they naturally revert independent of policies pursued. Good central bank policy achieves a desired inflation target (assumed to be feasible) while minimizing the amplitude of fluctuations around that equilibrium.
In contrast contemporary experience, where inflation has been below target almost throughout the industrial world for a decade and is expected by markets to remain below target for decades, and where output is sustained only by large budget deficits or extraordinary monetary policies, suggest that central banks acting alone cannot necessarily attain inflation targets and that misguided policy could easily not just raise the volatility of output but also reduce its average level.
While there seems to be little doubt that real interest rates–short and long, ex ante and ex post -- have declined very substantially even as (other things equal) budget deficits and expanded social security programs should have increased them, there remains debate about how to analyze these trends. Lukasz and I argue that adjustment to balance saving and investment is the best way understand declining real rates. DeLong wonders about changing risk premiums and Wolf cites BIS work arguing that low rates reflect the monetary policy regime. There is no reason why there needs to be only one cause of low real rates so these factors may enter. But as I expect we will illustrate in the revised version of the paper, the largest part of the low frequency variation in ex ante real returns is accounted for by a downward trending factor common to all asset prices. This is illustrated for the US in the figure below. So risk premiums or factors specific to Treasuries are likely not high order.
Figure: Decline in US real asset returns
Granting that secular stagnation is a problem, there is the question of policy response. The right policy response will be the one that assures that full employment is maintained with a minimum of collateral problems. Sandbu argues against the notion of secular stagnation in part because he thinks it may lead in unconstructive directions like protectionism and because he believes that stagnation issues can be feasibly and relatively easily addressed by lowering rates. Wolf, relying on the BIS, is alarmed by the toxic effects of very low rates on financial stability in the short run and economic performance in the long run, and prefers fiscal stimulus. Leonhardt prefers a broad menu of measures to absorb saving and promote investment.
I am not certain of the right approach and I wish there was more evidence to bring to bear on the question. I can certain see the logic of the "zero is just another number" view, that holds that the current environment poses no new fundamental issues but just may require technical changes to make more negative interest rates possible. I am skeptical because (i) I am not sure how large the stimulus effect of rates going more negative is because of damage to banks, reduced interest income for consumers, and because capital cost is already not the barrier to investment; (ii) I wonder about the quality of any investment that was not made at a zero rate but was made at a negative rate; and (iii) I suspect that a world of significantly negative nominal rates if sustained will be a world of leveraging, risk seeking and bubbles. I have trouble thinking about behavior in situations where people and firms are paid to borrow!
I am inclined to prefer more reliance on reasonably managed fiscal policies as a response to secular stagnation: government borrowing at negative real rates and investing seems very attractive in a world where there are many projects with high social returns. Moreover, we are accustomed to thinking in terms of debt levels but it may be more appropriate to think in terms of sustained debt service levels. With near zero rates these are below average in most industrial countries. The content of fiscal policies is crucial. Measures which run up government debt without stimulating demand like large parts of the Trump tax cut are ill advised. In contrast measures which promote investment and raise the tax base down the road are much more attractive.
There are of course other measures beyond stabilization policies like fighting monopolies, promoting a more equal income distribution, and strengthening retirement security for which the desire to maintain macroeconomic stability provides an additional rationale.
Mar 21, 2019 | finance.yahoo.com
The Pentagon's inspector general has formally opened an investigation into a watchdog group's allegations that acting Defense Secretary Patrick Shanahan has used his office to promote his former employer, Boeing Co.
Citizens for Responsibility and Ethics in Washington filed an ethics complaint with the Pentagon's inspector general a week ago, alleging that Shanahan has appeared to make statements promoting Boeing and disparaging competitors, such as Lockheed Martin.
Shanahan, who was traveling with President Donald Trump to Ohio on Wednesday, spent more than 30 years at Boeing, leading programs for commercial planes and missile defense systems. He has been serving as acting Pentagon chief since the beginning of the year, after James Mattis stepped down.
The probe comes as Boeing struggles to deal with a public firestorm over two deadly crashes of the Boeing 737 Max 8 jetliner within the last five months. And it focuses attention on whether Trump will nominate Shanahan as his formal pick for defense chief, rather than letting him languish as an acting leader of a major federal agency.
Dwrena Allen, spokeswoman for the inspector general, said Shanahan has been informed of the investigation. And, in a statement, Pentagon spokesman Tom Crosson said Shanahan welcomes the review.
"Acting Secretary Shanahan has at all times remained committed to upholding his ethics agreement filed with the DoD," said Crosson. "This agreement ensures any matters pertaining to Boeing are handled by appropriate officials within the Pentagon to eliminate any perceived or actual conflict of interest issue(s) with Boeing."
During a Senate hearing last week, Shanahan was asked by U.S. Sen. Richard Blumenthal, D-Conn., about the 737 Max issue. Shanahan said he had not spoken to anyone in the administration about it and had not been briefed on it. Asked whether he favored an investigation into the matter, Shanahan said it was for regulators to investigate.
On Wednesday, Blumenthal said that scrutiny of Shanahan's Boeing ties is necessary. "In fact, it's overdue. Boeing is a behemoth 800-pound gorilla -- raising possible questions of undue influence at DOD, FAA and elsewhere," said Blumenthal.
Shanahan signed an ethics agreement in June 2017, when he was being nominated for the job of deputy defense secretary, a job he held during Mattis' tenure. It outlined the steps he would take to avoid "any actual or apparent conflict of interest," and said he would not participate in any matter involving Boeing.
The CREW ethics complaint, based to a large part on published reports, including one by Politico in January, said Shanahan has made comments praising Boeing in meetings about government contracts, raising concerns about "whether Shanahan, intentionally or not, is putting his finger on the scale when it comes to Pentagon priorities."
One example raised by the complaint is the Pentagon's decision to request funding for Boeing 15EX fighter jets in the 2020 proposed budget. The Pentagon is requesting about $1 billion to buy eight of the aircraft.
Shanahan, 56, joined Boeing in 1986, rose through its ranks and is credited with rescuing a troubled Dreamliner 787 program. He also led the company's missile defense and military helicopter programs.
Trump has seemed attracted to Shanahan partially for his work on one of the president's pet projects -- creating a Space Force. He also has publicly lauded Shanahan's former employer, Boeing, builder of many of the military's most prominent aircraft, including the Apache and Chinook helicopters, the C-17 cargo plane and the B-52 bomber, as well as the iconic presidential aircraft, Air Force One.
This is only the third time in history that the Pentagon has been led by an acting chief, and Shanahan has served in that capacity for longer than any of the others.
Presidents typically take pains to ensure the Pentagon is being run by a Senate-confirmed official, given the grave responsibilities that include sending young Americans into battle, ensuring the military is ready for extreme emergencies like nuclear war and managing overseas alliances that are central to U.S. security.
3 hours ago Why did Trump appoint a former Boeing executive and industry lobbyist to the the Secretary of Defense to replace General Mattis? What in Shananhan's background makes him qualified to lead our nation's military forces? 3 hours ago WITHOUT A DOUBT HE DID., ALSO INVESTIGATE NIKKI HALEY'S APPOINTED ON BOEING'S BOARD TO REPLACE SHANAHAN. FOLLOW THE HOEING KICKBACKS(MONEY), TO DONALD TRUMP'S FAMILY. 3 hours ago Shanahan probably helped Boeing on the promise of a later payback just like Ms. Nikki Haley did while Gov of SC where Boeing built a new plant on her watch. She helped big time to keep the Unions out of the new Boeing plant and now Boeing is going to put her on their board of directors. Nothing like a bit of an obvious payoff. 2 hours ago Reminds me of the Bush Jr days in the White House. During the Gulf War (#2) Vice President #$%$ Cheney awarded oil company Halliburton (Cheney was CEO before accepting the VP job) to deliver meals for the troops. The contract was ?No Bid.? Why was an oil company delivering food to troops with a no bid contract? After Cheney?s Job was over being VP he went back to being CEO at Halliburton and moved Halliburton?s headquarters to Dubai. What an American! 2 hours ago Now we understand why Boeing & the FAA hesitated to ground those planes for few days despite many countries who did grounded those plane which is a precedent for a country to ground & NOT wait for the manufacturer. ONLY after Canada grounded those planes Boeing & the FAA & that's because Canada IS a the #1 flight partner of the US ! 4 hours ago Years ago there was a Boeing procurement scandal and Trump does love the swamp he claims to hate.
Mar 21, 2019 | peakoilbarrel.com
HuntingtonBeach x Ignored says: 03/19/2019 at 1:20 am"Perfect Storm" Drives Oil Prices Higher
"The latest Brent rally has brought prices to our peak forecast of $67.5/bbl, three months early," Goldman Sachs wrote in a note. The investment bank said that "resilient demand growth" and supply outages could push prices up to $70 per barrel in the near future. It's a perfect storm: "supply loses are exceeding our expectations, demand growth is beating low consensus expectations with technicals supportive and net long positioning still depressed," the bank said.
The outages in Venezuela could swamp the rebound in supply from Libya, Goldman noted. But the real surprise has been demand. At the end of 2018 and the start of this year, oil prices hit a bottom and concerns about global economic stability dominated the narrative. But, for now at least, demand has been solid. In January, demand grew by 1.55 million barrels per day (mb/d) year-on-year. "Gasoline in particular is surprising to the upside, helped by low prices, confirming our view that the weakness in cracks at the turn of the year was supply driven," Goldman noted. "This comforts us in our above consensus 1.45 mb/d [year-on-year] demand growth forecast."
Mar 21, 2019 | finance.yahoo.com
Dee 3 hours ago
"President typically take pains to ensure the Pentagon is being run by Senate confirmed official" .Presidents typically don't put incompetent people in cabinet positions or give his kids top security level clearances when they have no need and no experience that requires one...well, no one has accused trump of being presidential or typical - ever
Dianna 4 hours ago
The swamp is now the " Trump Cesspool."
Nonconservative 3 hours ago
Hey deplorables....hows that swamp draining going?...ANYWORD on that great big beautiful health plan with lower premiums and keeping my own doctor?....what about infrastructure?...any idea when the roads in every city will be driveable again...or did we spend all the money from the US govt. paying Trump to stay at his own hotels?........hello?......hello deplorables?......anybody home????
Pierre Escargot 1 hour ago>
Pentagon to probe if Shanahan used office to help Boeing. Why not? Robert Mueller's and James Comey turned government service into self-service.
Mar 21, 2019 | www.wsj.com
Thirty-five Congressional mandates sit unanswered, on everything from minimum seat space to secondary barriers protecting cockpits. The top job at the Federal Aviation Administration has been open for 14 months. Enforcement fines against major U.S. airlines have dropped 88% in the past two years, even as three-hour tarmac delays have more than doubled.
The Transportation Department under Secretary Elaine Chao has seemingly been delayed on a number of issues important to travelers. Even with airlines begging for rules on emotional-support animals , and both Republicans and Democrats expressing concerns about swollen fees, shrunken seating and punitive airline policies, the DOT has been loath to issue new regulations.
Airlines asked the department in late 2017 to kill a bunch of consumer-protection rules -- nothing on that so far, either.
Ethiopian Airlines' Boeing 737 MAX 8 Crash: Three Things to Know An investigation has been launched after an Ethiopian Airlines Boeing 737 MAX 8 crashed shortly after takeoff on Sunday, killing all on board. WSJ aerospace reporter Robert Wall discusses the possible focus of the investigation, and more. Photo: Getty Images
Now Ms. Chao's department, which includes the FAA, faces its toughest regulatory challenge: safety concerns on the Boeing 737 MAX. Two fatal crashes of the new airplane in the past five months have led several nations and some airlines to ground the jet.
So far, the FAA, siding with Boeing and U.S. airlines, says the plane is safe and a software fix is coming by the end of April. Sales of Boeing planes have been important to President Trump's trade and employment objectives. But pressure is mounting, and if investigators find the same system is responsible for both crashes, it will be increasingly difficult for the FAA and Ms. Chao to leave a plane with a fatal flaw in the air.
Consumer advocates say the Transportation Department has been invisible.
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THE MIDDLE SEAT
"There doesn't seem to be any meaningful enforcement going on," says John Breyault, vice president at the National Consumers League. "The DOT under Sec. Chao seems to be even less willing to engage in serious consumer protection efforts than it did under President Obama's watch, which is a pretty low bar."Newsletter Sign-up
The DOT declined to answer specific questions for this story. It offered a general statement saying it has improved its website in the past year and is giving consumers more information by including performance of regional partners with big-airline operating statistics. A DOT spokeswoman says it plans to issue rules on service animals later this year and plans to allow airlines to use electronic payment methods when compensating travelers for bumping them involuntarily from flights.
With its response, the department included a list of seven accomplishments under Ms. Chao, who also oversees surface transportation. None dealt with airline travel.
Airlines and many travelers applaud the Trump administration's aversion to regulation and willingness to let consumer choice discipline unpopular business decisions. Deregulating fares and schedules in 1978, after all, led to a boom in affordable, convenient travel .
In keeping with the push to reduce regulation, Ms. Chao's DOT stopped a number of rule-making efforts in progress at the end of the Obama administration. Among them: imposing requirements on disclosure of baggage and other fees at ticket purchase, as well as a review of how fees in the airline industry were affecting competition.
me title=Transportation Secretary Elaine Chao lists seven accomplishments during her administration, none of which deal with air travel. PHOTO: JIM LO SCALZO/EPA/SHUTTERSTOCK
Airlines applauded those moves. "There is a reluctance to regulate unless there's a market failure or some other type of safety or real unfair and deceptive practice that's going on," says Sharon Pinkerton, senior vice president for legislative and regulatory policy at Airlines for America, the industry's Washington, D.C., lobbying group.
"We're thankful for that, frankly," she added, "that their philosophy isn't to regulate every little thing."
The Transportation Department is the only stop for passenger rights since Congress exempted air travel in 1978 from any state or local regulation.
Recent changes in air travel have led to a host of new issues:
* Airlines have repeatedly asked DOT to adopt the definition of service animals in the Americans With Disabilities Act, which requires specific training for support animals. Cabins are full of untrained pets wearing service-animal vests to avoid high airline fees or shipping in crates in baggage compartments.
"We just think there should be one rule for the entire country," says Ms. Pinkerton of A4A. "There's no reason to have a more lenient approach to emotional-service animals in an environment like an airplane."
* Congress passed a law sponsored by Democrats and Republicans that requires DOT to establish minimum standards for seat size and legroom on planes and make each carrier post the amount of space available for each passenger on its website. The deadline is in October. Airlines and advocates say they've seen no action so far.
* Last year Congress also required that DOT hire a consumer advocate to help travelers resolve service complaints, report on how DOT is handling complaints and recommend improvements to enforce aviation consumer protection rules. The position remains open.
* DOT hasn't conducted compliance inspections at airline headquarters in more than two years, the Government Accountability Office reported in November . Compliance inspections, done routinely in past years, involve checking airline customer-service policies and passenger complaints received by airlines. They also make sure airlines are reporting data properly to DOT.
In its response to the GAO, the department said it has a "robust and multifaceted program" to investigate airlines and enforce consumer protection requirements.
* An aviation consumer-protection advisory committee that is supposed to have one passenger advocate among four members has no one with any consumer aviation experience. The designated consumer advocate appointed by the Trump administration comes from a think tank favoring free markets over regulation, where she works on agriculture and trade issues.A Fine DistinctionAirlines have seen far fewer Transportation Department fines in the first two years of the Trump Administration. They've also experienced more long domestic tarmac delays over that time.
DOT enforcement fines against U.S. major airlines
Domestic three-hour tarmac delays
*2018 tarmac delays are through November only
Sources: WSJ compilation of DOT filings (fines); Bureau of Transportation Statistics (delays)
The tarmac delay rule is an example of one public policy that actually worked. Flights stranded at airports with passengers held on board with no food, water and in some cases limited working bathrooms became a major issue. In 2007, more than 1,600 domestic U.S. flights had tarmac delays of more than three hours, according to the Bureau of Transportation Statistics. Some stretched to 10 hours or more . In 2010, the Transportation Department enacted a rule to levy heavy fines on airlines for tarmac delays of more than three hours on domestic flights and four hours on international flights.
Airlines adjusted , investing in better tracking of flights on the ground and more resources to get people off stranded planes. Though airlines warned of massive cancellations if the rule was imposed, cancellations went down. So did tarmac delays: From 2011 to 2016, there were fewer than 100 a year on domestic flights.
But 2017 and 2018 saw three-hour tarmac delays more than double. At the same time, DOT enforcement against U.S. major airlines declined sharply.
In 2016, DOT levied a total of $4.7 million in fines against U.S. major carriers for all issues, not just tarmac delays. In 2017, that number dropped to $2.7 million, then to $560,000 in 2018. Only one fine, $1.5 million against Frontier Airlines in 2017, was for domestic tarmac delays. DOT did fine several foreign airlines for delays longer than four hours. And it hit American and Delta with tarmac delay fines last month, picking up the pace a bit.
Airlines say the increase in tarmac delays in 2017 and 2018 was a result of an increase in severe weather the past two years, not lax DOT enforcement.
Mar 20, 2019 | www.aol.com
In 2016, Cannon wrote that Warren would indeed bring more warmth than Clinton, pointing to an anecdote she shared on Facebook about how she would bake her mother a "heart shaped cake" as a child. He contrasted that with Clinton's sarcastic "I suppose I could have stayed home and baked cookies" comment from 1992 , which was a response to ongoing questions about why she chose to continue her law practice when her husband was governor of Arkansas.
For some Bernie Sanders supporters, meanwhile, praising Warren was a way to deflect accusations of sexism. In a 2016 Huffington Post opinion piece titled, "I Despise Hillary Clinton And It Has Nothing to Do With Her Gender," Isaac Saul wrote that he "and many Sanders supporters would vote for Elizabeth Warren if she were in the race over Hillary or Bernie." ( Saul apologized to Clinton for being a "smug young journalist" and "Bernie Bro" in a follow up article months later, writing that his views of her changed after he endeavored to learn more about her history).
So what's going on here? Has Warren become incredibly unlikable over the past two years? Or is this change more an indication of her growing power. High-achieving women, sociologist Marianne Cooper wrote in a 2013 Harvard Business Review article , are judged differently than men because "their very success -- and specifically the behaviors that created that success -- violates our expectations about how women are supposed to behave." When women act competitively or assertively rather than warm and nurturing, Cooper writes, they "elicit pushback from others for being insufficiently feminine and too masculine." As a society, she says, "we are deeply uncomfortable with powerful women. In fact, we don't often really like them."
Nov 02, 2017 | www.washingtonpost.com
The former interim head of the Democratic Party just accused Hillary Clinton's campaign of "unethical" conduct that "compromised the party's integrity." The Clinton campaign's alleged sin: A hostile takeover of the Democratic National Committee before her primary with Sen. Bernie Sanders had concluded.
Donna Brazile's op-ed in Politico is the equivalent of taking the smoldering embers of the 2016 primary and throwing some gasoline on them. Just about everything she says in the piece will inflame Sanders's passionate supporters who were already suspicious of the Democratic establishment and already had reason to believe -- based on leaked DNC emails -- that the committee wasn't as neutral in the primary as it was supposed to be.
But the op-ed doesn't break too much new provable, factual ground, relying more upon Brazile's own perception of the situation and hearsay. In the op-ed, Brazile says:
Clinton's campaign took care of the party's debt and "put it on a starvation diet. It had become dependent on her campaign for survival, for which [Clinton] expected to wield control of its operations." She described Clinton's control of the DNC as a "cancer." Gary Gensler, the chief financial officer of Clinton's campaign, told her the DNC was (these are Brazile's words) "fully under the control of Hillary's campaign, which seemed to confirm the suspicions of the Bernie camp." She "couldn't write a news release without passing it by Brooklyn."
Then-Chairwoman Debbie Wasserman Schultz, whose pressured resignation after the leaked emails left Brazile in charge as interim chairwoman, "let Clinton's headquarters in Brooklyn do as it desired" because she didn't want to tell the party's leaders how dire the DNC's financial situation was. Brazile says Wasserman Schultz arranged a $2 million loan from the Clinton campaign without the consent of party officers like herself, contrary to party rules.
Brazile sums it up near the end: "If the fight had been fair, one campaign would not have control of the party before the voters had decided which one they wanted to lead. This was not a criminal act, but as I saw it, it compromised the party's integrity."
None of this is truly shocking. In fact, Brazile is largely writing about things we already knew about. The joint fundraising agreement between the Clinton campaign and the DNC was already known about and the subject of derision among Sanders's supporters. But it's worth noting that Sanders was given a similar opportunity and passed on using it, as Brazile notes.
There were also those emails from the DNC hack released by WikiLeaks that showed some at the DNC were hardly studiously neutral . One email chain discussed bringing Sanders's Jewish religion into the campaign, others spoke of him derisively, and in one a lawyer who worked for both Clinton and the DNC advised the committee on how to respond to questions about the Clinton joint fundraising committee. The emails even cast plenty of doubt on Brazile's neutrality, given she shared with the Clinton campaign details of questions to be asked at a pair of CNN forums for the Democratic candidates in March 2016, before she was interim chair but when she was still a DNC official. Brazile, who was a CNN pundit at the time, lost her CNN job over that.
The timeline here is also important. Many of those emails described above came after it was abundantly clear that Clinton would be the nominee, barring a massive and almost impossible shift in primary votes. It may have been in poor taste and contrary to protocol, but the outcome was largely decided long before Sanders ended his campaign. Brazile doesn't dwell too much on the timeline, so it's not clear exactly how in-the-bag Clinton had the nomination when the alleged takeover began. It's also not clear exactly what Clinton got for her alleged control.
This is also somewhat self-serving for Brazile, given the DNC continued to struggle during and after her tenure, especially financially . The op-ed is excerpted from her forthcoming book, "Hacks: The Inside Story of the Break-ins and Breakdowns That Put Donald Trump in the White House." Losses like the one in 2016 will certainly lead to plenty of finger-pointing, and Brazile's book title and description allude to it containing plenty of that.
But taking on the Clintons is definitely something that most in the party wouldn't take lightly. And Brazile's allegation that Clinton was effectively controlling the DNC is the kind of thing that could lead to some further soul-searching and even bloodletting in the Democratic Party. It's largely been able to paper over its internal divisions since the primary season in 2016, given the great unifier for Democrats that is President Trump.
Sanders himself has somewhat toned down his criticism of the DNC during that span, but what he says -- especially given he seems to want to run again in 2020 -- will go a long way in determining how the party moves forward.
Mar 15, 2019 | www.nytimes.com
... ... ...
Warren is trying to treat not just the symptoms but the underlying disease. She has proposed a universal child-care and pre-K program that echoes the universal high school movement of the early 20th century. She favors not only a tougher approach to future mergers, as many Democrats do, but also a breakup of Facebook and other tech companies that have come to resemble monopolies. She wants to require corporations to include worker representatives on their boards -- to end the era of "shareholder-value maximization," in which companies care almost exclusively about the interests of their shareholders, often at the expense of their workers, their communities and their country.
Warren was also the first high-profile politician to call for an annual wealth tax , on fortunes greater than $50 million. This tax is the logical extension of research by the economist Thomas Piketty and others, which has shown how extreme wealth perpetuates itself. Historically, such concentration has often led to the decline of powerful societies. Warren, unlike some Democrats, comfortably explains that she is not socialist. She is a capitalist and, like Franklin D. Roosevelt, is trying to save American capitalism from its own excesses.
"Sometimes, bigger ideas are more possible to accomplish," Warren told me during a recent conversation about the economy at her Washington apartment. "Because you can inspire people."
... ... ...
Warren's agenda is a series of such bold ideas. She isn't pushing for a byzantine system of tax credits for child care. She wants a universal program of pre-K and child care, administered locally, with higher pay for teachers and affordable tuition for families.
And to anyone who asks, "But how will you pay for that?" Warren has an answer. Her wealth tax would raise more than $250 billion a year, about four times the estimated cost of universal child care. She is, in her populist way, the fiscal conservative in the campaign.
... ... ...
David Leonhardt is a former Washington bureau chief for the Times, and was the founding editor of The Upshot and head of The 2020 Project, on the future of the Times newsroom. He won the 2011 Pulitzer Prize for commentary, for columns on the financial crisis. @DLeonhardt • Facebook [Sign up for David Leonhardt's daily newsletter with commentary on the news and reading suggestions from around the web.]
Mar 20, 2019 | www.zerohedge.com
"Sitting Ambassadors" Participated In Plot To 'Take Trump Down': Meadows
by Tyler Durden Wed, 03/20/2019 - 14:44 422 SHARES
Rep. Mark Meadows (R-NC) revealed that "sitting ambassadors" were involved in a plot to "take down" President Trump.
Sitting down with Fox News host Sean Hannity, Sara Carter and Gregg Jarrett, Meadows said that the release of new documents will "show" that US ambassadors conspired with the DOJ , reports the Washington Examiner .
"It's additional information that is coming out that will show not only was there no collusion, but there was a coordinated effort to take this president down ," said Meadows.
"We talk about the 'Deep State.' There are players now, even ambassadors, that are sitting ambassadors that were involved in part of this with the FBI-DOJ."
"As we look at this, it's time to show that we show the American people what's out there, declassify some of those documents," Meadows added. "I think when the American people see what I've seen, they will judge for themselves and know that this has all been a hoax. "
HillaryOdor , 35 minutes ago link
Deep State really means Inevitable State. This is where coercion and force leads you. No state is immune. No "good" state can possibly last. The people who want to wield the power the most, they don't want to do it to help you. They want it for their own sake, and these are the kind of people that always get it.
847328_3527 , 40 minutes ago linkoddjob , 36 minutes ago link
US Ambassadors = Hillary's State department. My guess is at least 80% of the State dept is still filled with filth and should be cleansed.hooligan2009 , 40 minutes ago link
No dual Citizens either.chrbur , 41 minutes ago link
BREAKING NEWS: anonymouse sauces say Pelosi has agreed to drop Trump impeachment proceedings if Trump drops all charges of treason, sedition, murder, rape, child and drug trafficking, illegal wire-taps, racketeering, voter fraud.... campaign finance violations, wire fraud, embezzlement, selling state secrets to hostile powers, lying under oath, and so on. against the DNC and its embedded cabal of witches and others working for the MSM, the alphabet soup, Hollywood and libtard entertainment hosts..
my sauces tell me Trump said "Get Fucked".Bay of Pigs , 22 minutes ago link
We want names......Mzhen , 49 minutes ago link
Dont know the Ambassadors names.
Brennan, Clapper, Lynch, Comey, McCabe, Yates, Rice, for starters. And where is Rosenstein in all this? Not to mention Barry O, HRC and the pedophile Podesta.carbonmutant , 50 minutes ago link
Jon Huntsman, the Russian ambassador, did not always sing Trump's praises.
https://www.youtube.com/watch?v=xgT2EotydIIVideoEng_NC , 56 minutes ago link
What does one have to do to get arrested around here?FringeImaginigs , 56 minutes ago link
"...that "sitting ambassadors" were involved in a plot to "take down" President Trump."
Both treason & sedition, using foreign elements to take out a standing president. Oh John Kerry, it's going to be a lot more than ketchup that's going to soil your clothes. Kamala, too bad a firing squad or black pill has nothing to do with lynching...nice try. Booms are happening but let's see some follow through.
We don't want the wall. What we want are jails, hangmen, and guillotines. No wall until the priorities are completed.
Mar 20, 2019 | www.nakedcapitalism.com
Trick Shroade , , March 20, 2019 at 9:46 am
The modern GOP has a very brutalist interpretation of Christianity, one where the money changers bring into the church much needed liquidity.
Mar 20, 2019 | www.nakedcapitalism.com
lyman alpha blob , , March 20, 2019 at 8:00 am
They want freedom -- for the wolves to eat the sheep.
PKMKII , March 20, 2019 at 1:08 pm
And then act like it's fair because they don't have laws against the sheep eating the wolves.
jefemt , March 20, 2019 at 9:18 am
Freedom's just another word for nothin' left to lose...
shinola , March 20, 2019 at 1:06 pm
"nothin' ain't worth nothin' but it's free" ;)
Mar 20, 2019 | www.zerohedge.com
Nature_Boy_Wooooo , 57 minutes ago linkKadath , Mar 19, 2019 4:26:41 PM | link
We must stop the Russians plot to put Trump in office the second time so he can increase the US military budget.@13 lgfocus - that sounds suspiciously like something a COMMUNIST would say!!!!!!! During the 1797 XYZ scandal C.C. Pinckney reportedly said "Millions for defense, but not one cent for tribute." which has been quoted by the Military Industrial Complex ad nauseam for the last 70 years to justify massive military budgets to fight the forever wars.
Given the results of the last 70 years of US policies I would say that quote should now be updated to "Trillions for war, but not one cent for the people."
Mar 20, 2019 | www.nakedcapitalism.com
John A , , , March 19, 2019 at 4:34 pm
Maybe they should have appointed aviation expert Nikki Haley to the Boeing board earlier.
A little bit of dignity , , , March 19, 2019 at 4:47 pm
How about seppuku for the entire top management?
Synoia , , , March 19, 2019 at 7:55 pm
Safety is at the core of who we are at Boeing
Yes, after money.
drumlin woodchuckles , , , March 19, 2019 at 8:08 pm
At what point does "crapification" become insufficient to describe Boeing's product and process here? At what point do we have to speak of " ford-pintofication"?
Mar 20, 2019 | www.zerohedge.com
Not The Onion: Scholar Makes "Moral Case" For Letting People Decide Their Own Age
...Says recognition of ' trans-ageism ' would prevent 'severe discrimination'
Mar 20, 2019 | www.nakedcapitalism.com
Yves here. This post focuses on an important slice of history in what "freedom" has meant in political discourse in the US. But I wish it had at least mentioned how a well-funded, then extreme right wing effort launched an open-ended campaign to render US values more friendly to business. They explicitly sought to undo New Deal programs and weaken or end other social safety nets. Nixon Supreme Court Justice Lewis Powell codified the strategy for this initiative in the so-called Powell Memo of 1971.
One of the most effective spokesmen for this libertarian program was Milton Friedman, whose bestseller Free to Choose became the foundation for a ten-part TV series.
By Thom Hartman, a talk-show host and author of more than 25 books in print . He is a writing fellow at the Independent Media Institute . Produced by the Independent Media Institute
America is having a heated debate about the meaning of the word socialism . We'd be better served if, instead, we were debating the meaning of freedom .
The Oregonian reported last week that fully 156,000 families are on the edge of homelessness in our small-population state. Every one of those households is now paying more than 50 percent of its monthly income on rent, and none of them has any savings; one medical bill, major car repair or job loss, and they're on the streets.
While socialism may or may not solve their problem, the more pressing issue we have is an entire political party and a huge sector of the billionaire class who see homelessness not as a problem, but as a symptom of a "free" society.
The words freedom and liberty are iconic in American culture -- probably more so than with any other nation because they're so intrinsic to the literature, declarations and slogans of our nation's founding.
The irony -- of the nation founded on the world's greatest known genocide (the systematic state murder of tens of millions of Native Americans) and over three centuries of legalized slavery and a century and a half of oppression and exploitation of the descendants of those slaves -- is extraordinary. It presses us all to bring true freedom and liberty to all Americans.
But what do those words mean?
If you ask the Koch brothers and their buddies -- who slap those words on pretty much everything they do -- you'd get a definition that largely has to do with being "free" from taxation and regulation. And, truth be told, if you're morbidly rich, that makes a certain amount of sense, particularly if your main goal is to get richer and richer, regardless of your behavior's impact on working-class people, the environment, or the ability of government to function.
On the other hand, the definition of freedom and liberty that's been embraced by so-called "democratic socialist" countries -- from Canada to almost all of Europe to Japan and Australia -- you'd hear a definition that's closer to that articulated by Franklin D. Roosevelt when he proposed, in January 1944, a " second Bill of Rights " to be added to our Constitution.
FDR's proposed amendments included the right to a job, and the right to be paid enough to live comfortably; the right to "adequate food and clothing and recreation"; the right to start a business and run it without worrying about "unfair competition and domination by monopolies"; the right "of every family to a decent home"; the right to "adequate medical care to achieve and enjoy good health"; the right to government-based "protection from the economic fears of old age, sickness, accident, and unemployment"; and the right "to a good education."
Roosevelt pointed out that, "All of these rights spell security." He added, "America's own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens. For unless there is security here at home there cannot be lasting peace in the world."
The other nations mentioned earlier took President Roosevelt's advice to heart. Progressive "social democracy" has kept Europe, Canada, and the developed nations of the East and South Pacific free of war for almost a century -- a mind-boggling feat when considering the history of the developed world since the 1500s.
Just prior to FDR winning the White House in the election of 1932, the nation had been treated to 12 years of a bizarre Republican administration that was the model for today's GOP. In 1920, Warren Harding won the presidency on a campaign of "more industry in government, less government in industry" -- privatize and deregulate -- and a promise to drop the top tax rate of 91 percent down to 25 percent.
He kept both promises, putting the nation into a sugar-high spin called the Roaring '20s, where the rich got fabulously rich and working-class people were being beaten and murdered by industrialists when they tried to unionize. Harding, Coolidge, and Hoover (the three Republican presidents from 1920 to 1932) all cheered on the assaults, using phrases like "the right to work" to describe a union-free nation.
In the end, the result of the " horses and sparrows " economics advocated by Harding ("feed more oats to the horses and there'll be more oats in the horse poop to fatten the sparrows" -- that generation's version of trickle-down economics) was the Republican Great Depression (yes, they called it that until after World War II).
Even though Roosevelt was fabulously popular -- the only president to be elected four times -- the right-wingers of his day were loud and outspoken in their protests of what they called "socialist" programs like Social Security, the right to unionize, and government-guaranteed job programs including the WPA, REA, CCC, and others.
The Klan and American Nazis were assembling by the hundreds of thousands nationwide -- nearly 30,000 in Madison Square Garden alone -- encouraged by wealthy and powerful "economic royalists" preaching "freedom" and " liberty ." Like the Kochs' Freedomworks , that generation's huge and well-funded (principally by the DuPonts' chemical fortune) organization was the Liberty League .
Roosevelt's generation had seen the results of this kind of hard-right "freedom" rhetoric in Italy, Spain, Japan and Germany, the very nations with which we were then at war.
Speaking of "the grave dangers of 'rightist reaction' in this Nation," Roosevelt told America in that same speech that: "[I]f history were to repeat itself and we were to return to the so-called 'normalcy' of the 1920s -- then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home."
Although right-wingers are still working hard to disassemble FDR's New Deal -- the GOP budget for 2019 contains massive cuts to Social Security, as well as to Medicare and Medicaid -- we got halfway toward his notion of freedom and liberty here in the United States:You're not free if you're old and deep in poverty, so we have Social Security (although the GOP wants to gut it). You're not free if you're hungry, so we have food stamps/SNAP (although the GOP wants to gut them). You're not free if you're homeless, so we have housing assistance and homeless shelters (although the GOP fights every effort to help homeless people). You're not free if you're sick and can't get medical care, so we have Medicare, Medicaid, and Obamacare (although the GOP wants to gut them all). You're not free if you're working more than 40 hours a week and still can't meet basic expenses, so we have minimum wage laws and the right to unionize (although the GOP wants to gut both). You're not free if you can't read, so we have free public schools (although the GOP is actively working to gut them). You're not free if you can't vote, so we've passed numerous laws to guarantee the right to vote (although the GOP is doing everything it can to keep tens of millions of Americans from voting).
The billionaire class and their wholly owned Republican politicians keep trying to tell us that "freedom" means the government doesn't provide any of the things listed above.
Instead, they tell us (as Ron Paul famously did in a GOP primary debate years ago) that, if we're broke and sick, we're "free" to die like a feral dog in the gutter.
Freedom is homelessness, in the minds of the billionaires who own the GOP.
Poverty, lack of education, no access to health care, poor-paying jobs, and barriers to voting are all proof of a free society, they tell us, which is why America's lowest life expectancy, highest maternal and childhood death rates, lowest levels of education, and lowest pay are almost all in GOP-controlled states .
America -- particularly the Democratic Party -- is engaged in a debate right now about the meaning of socialism . It would be a big help for all of us if we were, instead, to have an honest debate about the meaning of the words freedom and liberty .
cuibono , , March 20, 2019 at 2:53 am
Know Your Rights: https://www.youtube.com/watch?v=5lfInFVPkQs
WheresOurTeddy , , March 20, 2019 at 12:28 pm
I have been informed by Fox that knowing your rights is un-American
everydayjoe , , March 20, 2019 at 4:26 am
Let us not forget the other propaganda arm of Republican party and big money- Fox news. They spew the freedom nonsense while not adhering to any definition of the word.
I worked in the midwest as an Engineer in the 90s to early 2000s and saw plants being gutted/shifted overseas, Union influence curtailed and mid level and bottom pay stay flat for decades; all in the name of free market.
Sadly the same families that are the worst affected vote Republican! But we know all this and have known it for a while. What will change?
lyman alpha blob , , March 20, 2019 at 8:00 am
They want freedom -- for the wolves to eat the sheep.
PKMKII , , March 20, 2019 at 1:08 pm
And then act like it's fair because they don't have laws against the sheep eating the wolves.
Norb , , March 20, 2019 at 8:39 am
The intro to this post is spot on. The Powell memo outlined a strategy for a corporate coup d'eta. Is was completely successful. Now that the business class rules America, their only vision is to continue the quest and cannibalize the country and enslave its people by any means possible. What tools do they use to achieve these ends? -- debt, fear, violence and pandering to human vanity as a motivator. Again, very successful.
Instead of honest public debate- which is impossible when undertaken with liars and thieves, a good old manifesto or pamphlet like Common Sense is in order. Something calling out concrete action that can be taken by commoners to regain their social respect and power. That should scare the living daylights out of the complacent and smug elite.
Its that, or a lot of public infrastructure is gong to be broken up by the mob- which doesn't work out in the long run. The nations that learn to work with and inspire their populations will prosper- the rest will have a hard time of it. Look no further than America's fall.
Carla , , March 20, 2019 at 12:00 pm
Thank you, Norb. You've inspired me to start by reading Common Sense.
Jamie S , , March 20, 2019 at 9:13 am
This piece raises some important points, but aims too narrowly at one political party, when the D-party has also been complicit in sharing the framing of "freedom" as less government/regulation/taxation. After all, it was the Clinton administration that did welfare "reform", deregulation of finance, and declared the end of the era of "big government", and both Clinton and Obama showed willingness to cut Social Security and Medicare in a "grand bargain".
WJ , , March 20, 2019 at 12:10 pm
If in place of "the GOP," the author had written, "The national Democratic and Republican parties over the past fifty years," his claim would be much more accurate. To believe what he says about "the GOP," you have to pretend that Clinton, and Obama, and Pelosi, and Schumer, and Feinstein simply don't exist and never did. The author's implicit valorization of Obamacare is even more disheartening.
But perhaps this is the *point* of the piece after all? If I were a consultant to the DNC (and I make less than $100,000/yr so I am clearly not), I would advocate that they commission, underscore, and reward pieces exactly like this one. For the smartest ones surely grasp that the rightist oligarchic policy takeover has in fact happened, and that it has left in its wake millions of disaffected, indebted, uneducated, uninsured Americans.
(Suggesting that it hadn't was the worst idiocy of Clinton's 2016 campaign. It would have been much better had she admitted it and blamed it on the Republican Senate while holding dear old Obama up as a hamstrung martyr for the cause. I mean, this is what everybody at DailyKos already believes, and the masses -- being poor and uneducated and desperate -- can be brought around to believe anything, or anyway, enough of them can be.)
I would advocate that the DNC double down on its rightful claims to Roosevelt's inheritance, embrace phrases like "social democracy" and "freedom from economic insecurity," and shift leftward in all its official rhetoric. Admit the evisceration of the Roosevelt tradition, but blame it all on the GOP. Maybe *maybe* even acknowledge that past Democratic leaders were a little naive and idealistic in their pursuit of bipartisanship, and did not understand the truly horrible intentions of the GOP. But today's Democrats are committed to wresting back the rights of the people from the evil clutches of the Koch Republicans. This sort of thing.
Would my advice be followed? Or would the *really* smart ones in the room demure? If so, why do you think they would?
In short, I read this piece as one stage in an ongoing dialectic in the Democratic Party in the run-up to the 2020 election wherein party leaders try to determine how leftward its "official" rhetoric is able to sway before becoming *so* unbelievable (in light of historical facts) that it cannot serve as effective propaganda -- even among Americans!
NotTimothyGeithner , , March 20, 2019 at 1:34 pm
Team Blue elites are the children of Bill Clinton and the Third Way, so the echo chamber was probably terrible. Was Bill Clinton a bad President? He was the greatest Republican President! The perception of this answer is a key. Who rose and joined Team Blue through this run? Many Democrats don't recognize this, or they don't want to rock the boat. This is the structural problem with Team Blue. The "generic Democrat" is AOC, Omar, Sanders, Warren, and a handful of others.
Can the Team Blue elites embrace a Roosevelt identity? The answer is no. Their ideology is so wildly divergent they can't adjust without a whole sale conversion.
More succinctly, the Third Way isn't about helping Democrats win by accepting not every battle can be won. Its about advancing right wing politics and pretending this isn't what its about. If they are too clear about good policy, they will be accused of betrayal.
jefemt , , March 20, 2019 at 9:18 am
Freedom's just another word for nothin' left to lose Kris Kristofferson
shinola , , March 20, 2019 at 1:06 pm
"nothin' ain't worth nothin' but it's free"
Trick Shroade , , March 20, 2019 at 9:46 am
The modern GOP has a very brutalist interpretation of Christianity, one where the money changers bring much needed liquidity to the market.
where , , March 20, 2019 at 12:30 pm
it's been 2 generations, but we assure you, the wealth will eventually trickle down
Dwight , , March 20, 2019 at 1:51 pm
Be patient, the horse has to digest your oat.
The Rev Kev , , March 20, 2019 at 10:13 am
This article makes me wonder if the GOP is still a political party anymore. I know, I know, they have the party structure, the candidates, the budget and all the rest of it but when you look at their policies and what they are trying to do, the question does arise. Are they doing it because this is what they believe is their identity as a party or is it that they are simply a vehicle with the billionaires doing the real driving and recruiting? An obvious point is that among billionaires, they see no need to form their own political party which should be telling clue. Certainly the Democrats are no better.
Maybe the question that American should ask themselves is just what does it mean to be an American in the year 2020? People like Norman Rockwell and his Four Freedoms could have said a lot of what it meant some 60 years ago and his work has been updated to reflect the modern era ( https://www.galeriemagazine.com/norman-rockwell-four-freedoms-modern/ ) but the long and the short of it is that things are no longer working for most people anymore -- and not just in America. But a powerful spring can only be pushed back and held in place for so long before there is a rebound effect and I believe that I am seeing signs of this the past few years.
GF , , March 20, 2019 at 11:06 am
And don't forget FRD's Second Bill of Rights:
" a second Bill of Rights under which a new basis of security and prosperity can be established for all -- regardless of station, race, or creed.
Among these are:
The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
The right to earn enough to provide adequate food and clothing and recreation;
The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
The right of every family to a decent home;
The right to adequate medical care and the opportunity to achieve and enjoy good health;
The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
The right to a good education.
All of these rights spell security."
Frank Little , , March 20, 2019 at 10:20 am
America is having a heated debate about the meaning of the word socialism. We'd be better served if, instead, we were debating the meaning of freedom.
I agree, and we should also be having a debate about capitalism as it actually exists. In the US capitalism is always talked about in rosy non-specific terms (e.g. a preference for markets or support for entrepreneurship) while anybody who says they don't necessarily support capitalism has to answer for Stalin's gulag's or the Khmer Rouge. All the inequalities and injustices that have helped people like Howard Schultz or Jeff Bezos become billionaire capitalists somehow aren't part of capitalism, just different problems to be solved somehow but definitely not by questioning capitalism.
Last night I watched the HBO documentary on Elizabeth Holmes and Theranos and I couldn't help but laugh at all these powerful politicians, investors, and legal giants going along with someone who never once demonstrated or even explained how her groundbreaking innovation actually worked. $900 million was poured into that company before people realized something that a Stanford professor interviewed in the documentary saw when she first met Holmes. Fracking companies have been able to consistently raise funding despite consistently losing money and destroying the environment in the process. Bank balance sheets were protected while working people lost everything in the name of preserving American capitalism. I think it's good to debate socialism and capitalism, but there's not really any point if we aren't going to be talking about Actually Existing Capitalism rather than the hypothetical version that's trotted out anytime someone suggests an alternative.
Trick Shroade , , March 20, 2019 at 10:53 am
There was a great comment here on NC a little while ago, something to the effect of "capitalism has the logic of a cancer cell. It's a pile of money whose only goal is to become a bigger pile of money." Of course good things can happen as a side effect of it becoming a bigger pile of money: innovation, efficiencies, improved standard of living, etc. but we need government (not industry) regulation to keep the bad side effects of capitalism in check (like the cancer eventually killing its host).
Carey , , March 20, 2019 at 12:21 pm
"efficiency" is very often not good for the Commons, in the long term.
Frank Little , , March 20, 2019 at 12:31 pm
Shoot, must have missed that comment but it's a good metaphor. Reminds me of Capital vol. 1, which Marx starts with a long and dense treatment of the nature of commodities and commodification in order to capture this process whereby capitalists produce things people really do want or need in order to get at what they really want: return on their investment.
Jack Gavin , , March 20, 2019 at 12:36 pm
I also agree but I think we need to have a the same heated debate over what capitalism means. Over the years I have been subjected to (exposed) to more flavors of socialism than I can count. Yet, other than an introductory economics class way back when, no debatable words about what 'capitalism' is seems to get attention. Maybe it's time to do that and hope that some agreeable definition of 'freedom' falls out.
jrs , , March 20, 2019 at 12:42 pm
of course maybe socialism is the only thing that ever really could solve homelessness, given that it seems to be at this point a worldwide problem, although better some places than others (like the U.S. and UK).
Stratos , , March 20, 2019 at 11:11 am
This article lets the Dems off the hook. They have actively supported the Billionaire Agenda for decades now; sometimes actively (like when they helped gut welfare) and sometimes by enabling Repubs objectives (like voter suppression).
At this point in time, the Dem leadership is working to deep six Medicare for All.
With 'friends' like the Dems, who needs the Repubs?
WheresOurTeddy , , March 20, 2019 at 12:30 pm
our last democratic president was Carter
thump , , March 20, 2019 at 12:38 pm
1) In the history, a mention of the attempted coup against FDR would be good. See The Plot to Seize the White House by Jules Archer. ( Amazon link )
2) For the contemporary intellectual history, I really appreciated Nancy MacLean's Democracy in Chains . ( Amazon link ) Look her up on youtube or Democracy Now . Her book got a bit of press and she interviews well.
Bob of Newton , , March 20, 2019 at 1:58 pm
Please refer to these folks as 'rightwingers'. There are Democratic as well as Republicans who believe in this type of 'freedom'.
Jerry B , , March 20, 2019 at 2:38 pm
This post seems heavily slanted against the GOP and does not take into account how pro-business the Democrats have become. I tenuously agree with Yves intro that much of the current pro business value system campaign in the US was started with the political far right and the Lewis Powell Memo. And that campaign kicked into high gear during the Reagan Presidency.
But as that "pro business campaign" gained steam, the Democratic Party, IMO, realized that they could partake in the "riches" as well and sold their political soul for a piece of the action. Hartman's quote about the billionaire class should include their "wholly owned Republicans and Democrat politicians".
As Lambert mentions (paraphrasing), "The left puts the working class first. Both liberals and conservatives put markets first, liberals with many more layers of indirection (e.g., complex eligibility requirements, credentialing) because that creates niches from which their professional base benefits".
As an aside, while the pro-business/capitalism on steroids people have sought more "freedom", they have made the US and the world less free for the rest of us.
Also the over focusing on freedom is not uniquely GOP. As Hartman mentions, "the words freedom and liberty are iconic in American culture -- probably more so than with any other nation because they're so intrinsic to the literature, declarations and slogans of our nation's founding." US culture has taken the concept of freedom to an extreme version of individualism.
That is not surprising given our history.
The DRD4 gene is a dopamine receptor gene. One stretch of the gene is repeated a variable number of times, and the version with seven repeats (the "7R" form) produces a receptor protein that is relatively unresponsive to dopamine. Being unresponsive to dopamine means that people who have this gene have a host of related traits -- sensation and novelty seeking, risk taking, impulsivity, and, probably most consistently, ADHD. -- -- Seems like the type of people that would value extreme (i.e. non-collective) forms of freedom
The United States is the individualism poster child for at least two reasons. First there's immigration. Currently, 12 percent of Americans are immigrants, another 12 percent are children of immigrants, and everyone else except for the 0.9 percent pure Native Americans descend from people who emigrated within the last five hundred years.
And who were the immigrants?' Those in the settled world who were cranks, malcontents, restless, heretical, black sheep, hyperactive, hypomanic, misanthropic, itchy, unconventional, yearning to be free, yearning to be rich, yearning to be out of their, damn boring repressive little hamlet, yearning. -- -- Again seems like the type of people that would value freedom in all aspects of life and not be interested in collectivism
Couple that with the second reason -- for the majority of its colonial and independent history, America has had a moving frontier luring those whose extreme prickly optimism made merely booking passage to the New World insufficiently, novel -- and you've got America the individualistic.
The 7R variant mentioned above occurs in about 23 percent of Europeans and European Americans. And in East Asians? 1 percent. When East Asians domesticated rice and invented collectivist society, there was massive selection against the 7R variant. Regardless of the cause, East Asian cultural collectivism coevolved with selection against the 7R variant.
So which came first, 7R frequency or cultural style? The 4R and 7R variants, along with the 2R, occur worldwide, implying they already existed when humans radiated out of Africa 60,000 to 130,000 years ago. A high incidence of 7R, associated with impulsivity and novelty seeking, is the legacy of humans who made the greatest migrations in human history.
So it seems that many of the people who immigrated to the US were impulsive, novelty seeking, risk takers. As a counterpoint, many people that migrated to the US did not do so by choice but were forced from their homes and their countries by wars.
The point of this long comment is that for some people the concept of freedom can be taken to extreme -- a lack of gun control laws, financial regulation, extremes of wealth, etc. After a brief period in the 1940's, 1950's, and early 1960's when the US was more collective, we became greedy, consumerist, and consumption oriented, aided by the political and business elites as mentioned in the post.
If we want the US to be a more collective society we have to initially do so in our behaviors i.e. laws and regulations that rein in the people who would take the concept of freedom to an extreme. Then maybe over an evolutionary time period some of the move impulsive, sensation seeking, ADHDness, genes can be altered to a more balance mix of what makes the US great with more of the collective genes.
IMO, if we do not begin to work on becoming a collective culture now, then climate change, water scarcity, food scarcity, and resource scarcity will do it for us the hard way.
In these days of short attention spans I apologize for the long comment. The rest of my day is busy and I do not have more time to shorten the comment. I wanted to develop an argument for how the evolutionary and dysfunctional forms of freedom have gotten us to this point. And what we need to do to still have some freedom but also "play nice and share in the future sandbox of climate change and post fossil fuel society.
I wrote in 2010 at SST on the characteristics and dangers associated with narcissistic leadership. "Bad Blood' by John Carreyrou chronicles the rise and fall of Theranos, a Silicon Valley healthcare startup founded and run by Elizabeth Holmes, a card carrying narcissist if ever I saw one.
This book, in my opinion, paints such a detailed and comprehensive picture of the way these creatures operate that I thought it worthwhile to bring it to the attention of SST members who may doubt my warnings of the dangers of allowing such folk near the levers of power in business and, worse, Government.
I read this book over two nights and it unfortunately brought back my own experiences of working for a narcissist to the point of causing sleeplessness and indigestion.
Under the direction of the charismatic Holmes, Theranos burned through some $900 million in investors funds before being found out in 2015. Their blood testing business was a sham that endangered patients. The company's key business strengths were the "reality distortion field" Elizabeth Holmes projected over investors and directors and the twin weapons of secrecy and fear they wielded over their employees.
Disbelievers my argue that start up companies sometimes require desperate measures to stay afloat and that you cannot make an omelette, etc. etc. However the pattern of behavior at Theranos was ingrained and consistent - "an orchestrated litany of lies" as a judge has said in another matter.
If you wish to perhaps be a little forearmed against the day that you perhaps must engage with one of these creatures it would be well to understand the cautionary tale of Theranos. https://www.amazon.com/Bad-Blood-Secrets-Silicon-Startup/dp/152473165X https://turcopolier.typepad.com/sic_semper_tyrannis/2010/05/walrus-on-narcissistic-leaders-.html
jnewman , 3 hours agoThis is a similar personality type with a different set of risks. These people are common in finance and medicine: https://www.theatlantic.com...Godfree Roberts , 8 hours agoIn the absence of a moral filter, says Martha Stout, "Politicians are more likely than people in the general population to be sociopaths...That a small minority of human beings literally have no conscience was and is a bitter pill for our society to swallow–but it does explain a great many things, shamelessly deceitful political behavior being one."
My study of Chinese government revealed an important truth -- one that explains much about that country's rapid rise: they find our amateur, promise-driven, personality-based governance repulsive. They would no more vote for amateur politicians than for amateur brain surgeons. To them charm, good looks, quick wits and rhetorical skill signify shallowness, instability and glibness. Altruistic politicians have been fundamental to Chinese governance for two millennia.
Their political stars have always been experienced, scholarly, altruistic problem-solvers chosen on merit after decades of testing.
In 1000 AD, during our Dark Ages, with just one scholar-official for every eight thousand citizens, China was harmonious, technologically advanced and prosperous. Emperors and dynasties came and went while loyal, disciplined–often courageous–civil servants lived far from family, serving in remote regions under terrible conditions.
Confucius' moral meritocracy and the rigors of the job discouraged sociopaths and officials integrity, efficiency and entrepreneurial energy made China the most advanced civilization on earth.
So highly do the Chinese esteem their best politicians that they deified one whose legacy, a water diversion project, has repaid its capital investment every twenty-four hours for 2,270 years. Millions visit his shrine, which is built overlooking his masterpiece, every year to offer incense and sincere thanks.
The altruistic tradition is remembered in a Singapore Government White Paper, "The concept of government by honorable men who have a duty to do right for the people and who have their trust and respect fits us better than the Western idea that government power should be as limited as possible."
And would-be members of China's Communist Party take an oath to "Bear the people's difficulties before the people and enjoy their fruits of their labors after the people". They often fail, obviously, but at least they've got something to shoot for–and a standard that the other 1.3 billion non-members can hold them to.
 The Sociopath Next Door, by Martha Stout Ph.D.
 The Doctrine of the Mean
Mar 18, 2015 | Russia Insider
Washington is betraying the best interests of the American people through its current foreign policy... European democracy is threatened by US, not Russian, foreign policy
The avalanche of commentary since the Ukrainian crisis erupted a year ago has overshadowed any reflections on the immense forgone benefits (technically speaking, the "opportunity cost") of what might have been if Washington had been working for peace and stability instead of war and chaos.
Imagine the following: After the unraveling of the Communist bloc, Europe, in partnership with the US, had forged a new security system in which Russia was treated as a valued and equal partner – one whose interests were respected. Russia, decimated by a century of wars and Communist imperialism, would doubtless have eagerly reciprocated in kind. Most countries of the former Soviet Union would have then proceeded to build a new Eurasian structure of which Russia would have served as the natural umbrella, given its long-standing interaction with the region's diverse nations and cultures.
Indeed, as Putin himself had proposed in his visionary October 2011 article, the Eurasian Union could have become one of the pillars of a huge harmonized economic area stretching from Lisbon to Vladivostok and based on the EU's single-market rules (acquis communautaire).
The rising Far Eastern economic powerhouse, with the world's most populous country, China, at its centre, would have linked up with the world's largest economy (the EU). An enormous Eurasian production and financial bloc would have been created – one that drew primarily on secure supplies of Russian energy and other natural resources. Untold investment opportunities would have opened up in Siberia and Russia's Far East as well as in Central Asia. Hundreds of millions of people in Eurasia and elsewhere would have been lifted out of poverty. And, not least, the EU would have been refashioned as an integral part of the dynamic trans-Eurasian economy (rather than as a German-centred empire, as appears to be the case today), thereby making a major contribution to overcoming the ongoing global economic depression.
All of this was not to be, however. Why not? First and foremost, because the self-proclaimed "exceptional" power (actually, a mere "outlying island" in the Atlantic, according to the founder of geopolitics, Halford Mackinder) and its dysfunctional "deep-state" officialdom did not want it to be. How could they have permitted such a thing? How could they have allowed other countries to get on with improving the lives of their citizens without being obliged to seek Washington's approval every step of the way?
European democracy is threatened by US, not Russian, foreign policy
In order to make sure that they were not side-lined, the US elites had to intervene. The Western propaganda machine started churning out all sorts of nonsense that Putin is a new Hitler who is bent on restoring the Soviet empire and who is bullying Europe, while continuing to bang on about his "increasingly autocratic rule".
Deadly attacks by chauvinistic proxies were launched on the Russophone people in South Ossetia, Georgia in 2008 and more recently in Ukraine.
And in what is eerily reminiscent of Stalinist "bloc discipline", the EU/NATO nomenclature was ordered to implement the absurd strategy of severing the Russian economy from the EU. For their part, the cowering Eurocrats willingly obliged by imposing sanctions on Russia that, perversely, have had a negative impact on their own economies (but, let it be stressed, not that of the US). No questions raised and no public debate on the wisdom of such a strategy permitted.
Stuck in an Orwellian nightmare, Europe has to demonstrate its unfailing loyalty to Big Brother and go along with the view that Russia, an intrinsic and valuable part of the European mainstream both historically and culturally, represents universal evil and that the Earth will not be safe until the Federation has been dismembered and Putinism wiped out once and for all.
This abuse and humiliation of Europe is unparalleled. The continent that gave the world the wonders of the Antiquity, modern democracy, the industrial revolution and what is arguably the greatest tradition of philosophy, fine arts and classical music is being bullied by its oversized offspring. Having self-destructed in two world wars, it has become an easy and even willing prey to an arrogant, ignorant and power-drunk predator that has never experienced the hardships and horrors that Europe has. War and extermination camps are etched into the European DNA. America "knows" about them only from afar – and, not least, from the Hollywood entertainment industry.
Even more terrifying, intellectually third-rate Washington viceroys such as Victoria Nuland and the freelancing armchair warrior Senator McCain are allowed to play God with our continent. The so-called European "leaders" are colluding with them in plunging Europe into the abyss and thereby risking nuclear confrontation.
America, too, is a loser
But this is not just a tragedy for Europe and Eurasia. We are also witnessing the wilful misrule of America and, by default, of the entire West. Indeed, Washington is betraying the best interests of the American people through its current foreign policy. The "democracy-promoters" running Washington's foreign-policy apparatus apparently do not understand that America has nothing to lose and a lot to gain from the Eurasian economic project: the rising tide of global economic welfare would lift everyone's boats, including its own. Why should it matter to Washington if the rising tide comes from other quarters beyond its control?
Indeed, the damage extends beyond the economy. By aligning with the forces of chaos – such as chauvinistic extremists in Ukraine – Washington and its Euro-vassals are corrupting the moral (and intellectual) core of the West. If it continues to support such forces against Russia, united Europe will lose not only its backbone but its very soul. The moral consequences of this loss will be enormous and could lead to the precipitous erosion of Western democracy.
The 'autocrats' want to work with the West, not against it
US and EU leaders believe that the Russian and Chinese "autocrats" are out to destroy the West because the latter hate freedom (as George W. Bush might have put it). And hence, they argue, the autocrats must be stopped in their tracks. The simple truth is that Western leaders are too blinkered to understand that far from desiring to destroy the West, Russia and China want it to prosper so that they can work with it to everyone's benefit. Having enjoyed a privileged position over several centuries and having attained unprecedented prosperity in recent decades, the West simply cannot understand that the rest of humanity has no interest in fomenting the "clash of civilizations" but rather craves peace and stability so that it can finally improve its economic lot.
Perhaps, however, all is not yet lost. It is still possible that reason – and economic forces – will prevail and force the West to correct the errors of its ways. What we need, perhaps, more than ever is the ability to step out of the box, question our fundamental assumptions (not least about Russia and China) and find the courage to change policies that have proved disastrous. After all, critical thought, dispassionate analysis and the ability to be open to new ideas is what made the West so successful in the past. If we are to thrive once again in the future, we must resurrect these most valuable and unsurpassed assets.
Vlad Sobell teaches political economy in Prague and Berlin Europeans Look On as US Sows Discord on the Continent Wed, Nov 2
What I cannot understand is the naive belief that elected politicians would act in the interests of those whom they represent. Under what other circumstances do we see human beings act with disinterested altruism? So why would a bunch of people who have been ruthlessly selected for selfishness, arrogance, and callousness - a bunch of carefully chosen psychopaths, if you will - behave in that way?
'My Ph.D. dissertation chairman, who became a high Pentagon official assigned to wind down the Vietnam war, in answer to my question about how Washington gets Europeans to always do what Washington wants replied: "Money, we give them money." "Foreign aid?" I asked. "No, we give the European political leaders bagfuls of money. They are for sale. We bought them. They report to us." Perhaps this explains Tony Blair's $50 million fortune one year out of office'.
- Paul Craig Roberts
"Washington is betraying the best interests of the American people through its current foreign policy".
Not only it's foreign policy but it's domestic policy as well. Let's call it for what it really is. The Wall Street/Corporate policy which is the driving force behind behind everything the US does
"We, the [CENSORED] people, control America and the Americans know it." -- Benjamin Netanyahu, Prime Minister of [CENSORED]
"When we're done with the U.S. it will shrivel up and blow away." -- Benjamin Netanyahu, Prime Minister of [CENSORED]
The welfare or future of the American people are not part of the equation.
Mar 16, 2019 | peakoilbarrel.com
I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia is slowing down and may have peaked. Canada is slowing down and Brazil is slowing down. OPEC likely peaked in 2016. It is all up to the USA. Can shale oil save us from peak oil?
OPEC + Russia + Canada, about 57% of world oil production.
Jeff says: 03/14/2019 at 1: 50 pm
"I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia is slowing down and may have peaked. Canada is slowing down and Brazil is slowing down. OPEC likely peaked in 2016. It is all up to the USA. Can shale oil save us from peak oil?"
IEA´s Oil 2019 5y forecast has global conventional oil on a plateau, i.e. declines and growth match each other perfectly and net growth will come from LTO, NGL, biofuels and a small amount of other unconventional and "process gains".
Iran is ofc a jocker, since it can quickly add supply. Will be interesting to see how Trump will proceed.
Carlos Diaz x Ignored says: 03/14/2019 at 3:23 pmI am quite original in my opinion about Peak Oil. I think it took place in late 2015. I will explain. If we define Peak Oil as the maximum in production over a certain period of time we will not know it has taken place for a long time, until we lose the hope of going above. That is not practical, as it might take years.Dennis Coyne x Ignored says: 03/14/2019 at 4:57 pm
I prefer to define Peak Oil as the point in time when vigorous growth in oil production ended and we entered an undulating plateau when periods of slow growth and slow decline will alternate, affected by oil price and variable demand by economy until we reach terminal decline in production permanently abandoning the plateau towards lower oil production.
The 12-year rate of growth in C+C production took a big hit in late 2015 and has not recovered. The increase in 2 Mb since is just an anemic 2.5% over 3 years or 0.8% per year, and it keeps going down. This is plateau behavior since there was no economic crisis to blame. It will become negative when the economy sours.
Peak Oil has already arrived. We are not recognizing it because production still increases a little bit, but we are in Peak Oil mode. Oil production will decrease a lot more easily that it will increase over the next decade. The economy is going to be a real bitch.Carlos Diaz,Carlos Diaz x Ignored says: 03/14/2019 at 7:18 pm
Interesting thesis, keep in mind that the price of oil was relatively low from 2015 to 2018 because for much of the period there was an excess of oil stocks built up over the 2013 to 2015 period when output growth outpaced demand growth due to very high oil prices. Supply has been adequate to keep oil prices relatively low through March 2019 and US sanctions on Iran, political instability in Libya and Venezuela, and action by OPEC and several non-OPEC nations to restrict supply have resulted in slower growth in oil output.
Eventually World Petroleum stocks will fall to a level that will drive oil prices higher, there is very poor visibility for World Petroleum Stocks, so there may be a 6 to 12 month lag between petroleum stocks falling to critically low levels and market realization of that fact, by Sept to Dec 2019 this may be apparent and oil prices may spike (perhaps to $90/b by May 2020).
At that point we may start to see some higher investment levels with higher output coming 12 to 60 months later (some projects such as deep water and Arctic projects take a lot of time to become operational, there may be some OPEC projects that might be developed as well, there are also Canadian Oil sands projects that might be developed in a high oil price environment.
I define the peak as the highest 12 month centered average World C+C output, but it can be define many different ways.So Dennis,Dennis Coyne x Ignored says: 03/14/2019 at 9:20 pm
Our capability to store oil is very limited considering the volume being moved at any time from production to consumption. I understand that it is the marginal price of the last barrel of oil that sets the price for oil, but given the relatively inexpensive oil between 2015 and now, and the fact that we have not been in an economical crisis, what is according to you the cause that world oil production has grown so anemically these past three years?
Do you think that if oil had been at 20$/b as it used to be for decades the growth in consumption/production would have been significantly higher?
I'll give you a hint, with real negative interest rates and comparatively inexpensive oil most OECD economies are unable to grow robustly.
To me Peak Oil is an economical question, not a geological one. The geology just sets the cost of production (not the price) too high, making the operation uneconomical. It is the economy that becomes unable to pump more oil. That's why the beginning of Peak Oil can be placed at late 2015.
The economic system has three legs, cheap energy, demographic growth, and debt growth. All three are failing simultaneously so we are facing the perfect storm. Social unrest is the most likely consequence almost everywhere.Carlos,Carlos Diaz x Ignored says: 03/15/2019 at 5:03 am
If prices are low that means there is plenty of oil supply relative to demand. It also means that some oil cannot be produced profitably, so oil companies invest less and oil output grows more slowly.
So you seem to have the story backwards. Low oil prices means low growth in supply.
So if oil prices were $20/b, oil supply would grow more slowly, we have had an oversupply of oil that ls what led to low oil prices. When oil prices increase, supply growth will ne higher. Evause profits will be higher and there will be more investment.No Dennis,Schinzy x Ignored says: 03/15/2019 at 11:18 am
It is you who has it backwards, as you only see the issue from an oil price point of view, and oil price responds to supply and demand, and higher prices are an estimulus to higher production.
But there is a more important point of view, because oil is one of the main inputs of the economy. If the price of oil is sufficiently low it stimulates the economy. New businesses are created, more people go farther on vacation, and so on, increasing oil demand and oil production. If the price is sufficiently high it depresses the economy. A higher percentage of wealth is transferred from consumer countries to producing countries and consumer countries require more debt. During the 2010-2014 period high oil prices were sustained by the phenomenal push of the Chinese economy, while European and Japanese economies suffered enormously and their oil consumption depressed and hasn't fully recovered since.
In the long term it is the economy that pumps the oil, and that is what you cannot understand.
Oil limits → Oil cost → Oil Price ↔ Economy → Oil demand → Oil production
The economy decides when and how Peak Oil takes place. If you knew that you wouldn't bother with all those models.
And in my opinion the economy already decided in late 2015 when the drive to increase oil production to compensate for low oil prices couldn't be sustained.Carlos,Dennis Coyne x Ignored says: 03/15/2019 at 3:01 pm
Your reasoning is close to mine. See https://www.tse-fr.eu/publications/oil-cycle-dynamics-and-future-oil-price-scenarios .Carlos,Mario C Vachon x Ignored says: 03/15/2019 at 6:39 pm
Both supply and demand matter. I understand economics quite well thank you. You are correct that the economy is very important, it will determine oil prices to some degree especially on the demand side of the market. If one looks at the price of oil and economic growth or GDP, there is very little correlation.
The fact is the World economy grew quite nicely from 2011 to 2014 when oil prices averaged over $100/b.
There may be some point that high oil prices are a problem, apparently $100/b in 2014 US$ is below that price. Perhaps at $150/b your argument would be correct. Why would the economy need more oil when oil prices are low? The low price is a signal that there is too much oil being produced relative to the demand for oil.
I agree the economy will be a major factor in when peak oil occurs, but as most economists understand quite well, it is both supply and demand that will determine market prices for oil.
My models are based on the predictions of the geophysicists at the USGS (estimating TRR for tight oil) and the economists at the EIA (who attempt to predict future oil prices). Both predictions are used as inputs to the model along with past completion rates and well productivity and assumptions about potential future completion rates and future well productivity, bounded by the predictions of both the USGS and the EIA along with economic assumptions about well cost, royalties and taxes, transport costs, discount rate, and lease operating expenses.
Note that my results for economically recoverable resources are in line with the USGS TRR mean estimates and are somewhat lower when the economic assumptions are applied (ERR/TRR is roughly 0.85), the EIA AEO has economically recoverable tight oil resources at about 115% of the USGS mean TRR estimate. The main EIA estimate I use is their AEO reference oil price case (which may be too low with oil prices gradually rising to $110/b (2017$) by 2050.
Assumptions for Permian Basin are royalties and taxes 33% of wellhead revenue, transport cost $5/b, LOE=$2.3/b plus $15000/month, annual discount rate is 10%/year and well cost is $10 million, annual interest rate is 7.4%/year, annual inflation rate assumed to be 2.5%/year, income tax and revenue from natural gas and NGL are ignored all dollar costs in constant 2017 US$.You do incredible work Dennis and I believe you are correct. Demand for oil is relatively inelastic which accounts for huge price swings when inventories get uncomfortably high or low. If supply doesn't keep up with our needs, price will rise to levels that will eventually create more supply and create switching into other energy sources which will reduce demand.Carlos Diaz x Ignored says: 03/15/2019 at 6:57 pmDennis Coyne x Ignored says: 03/16/2019 at 7:33 am
Why would the economy need more oil when oil prices are low? The low price is a signal that there is too much oil being produced relative to the demand for oil.
You don't seem to be aware of historical oil prices. For inflation adjusted oil prices since 1946 oil (WTI) spent:
27 years below $30
13 years at ~ $70
18 years at ~ $40
10 years at ~ $90
5 years at ~ $50
And the fastest growth in oil production took place precisely at the periods when oil was cheapest.
You simply cannot be more wrong about that.
And your models are based on a very big assumption, that the geology of the reserves is determinant for Peak Oil. It is not. There is plenty of oil in the world, but the extraction of most of it is unaffordable. The economy will decide (has decided) when Oil Peak takes place and what happens afterwards. Predictions/projections aren't worth a cent as usual. You could save yourself the trouble.Carlos,Dennis Coyne x Ignored says: 03/16/2019 at 7:34 am
I use both geophysics and economics, it is not one or the other it is both of these that will determine peak oil.
Of course oil prices have increased, the cheapest oil gets produced first and oil gradually gets more expensive as the marginal barrel produced to meet demand at the margin is more costly to produce.
Real Oil Prices do not correlate well with real economic growth and on a microeconomic level the price of oil will affect profits and willingness of oil companies to invest which in turn will affect future output. Demand will be a function of both economic output and efficiency improvements in the use of oil.
Thanks Mario.Dennis Coyne x Ignored says: 03/16/2019 at 10:49 amCarlos,HHH x Ignored says: 03/15/2019 at 9:44 pm
Also keep in mind that during the 1945-1975 period economic growth rates were very high as population growth rates were very high and the World economy was expanding rapidly as population grew and the World rebuilt in the aftermath of World War 2. Oil was indeed plentiful and cheap over this period and output grew rapidly to meet expanding World demand for oil. The cheapness of the oil led to relatively inefficient use of the resource, as constraints in output became evident and more expensive offshore, Arctic oil were extracted oil prices increased and there was high volatility due to Wars in the Middle east and other political developments. Oil output (C+C) since 1982 has grown fairly steadily at about an 800 kb/d annual average each year, oil prices move up and down in response to anticipated oil stock movements and are volatile because these estimates are often incorrect (the World petroleum stock numbers are far from transparent.)
On average since the Iran/Iraq crash in output (1982-2017) World output has grown by about 1.2% per year and 800 kb/d per year on average, prices have risen or fallen when there was inadequate or excess stocks of petroleum, this pattern (prices adjusting to stock levels) is likely to continue.
There has been little change when we compare 1982 to 1999 to 1999-2017 (divide overall period of interest in half) for either percentage increase of absolute increase in output.
I would agree that severe shortages of oil supply relative to demand (likely apparent by 2030) is likely to lead to an economic crisis as oil prices rise to levels that the World economy cannot adjust to (my guess is that this level will be $165/b in 2018$). Potentially high oil prices might lead to faster adoption of alternative modes of transport that might avert a crisis, but that is too optimistic a scenario even for me.China will be in outright deflation soon enough. Economic stimulus is starting to fail in China. They can't fill the so called bathtub up fast enough to keep pace with the water draining out the bottom. So to speak.Lightsout x Ignored says: 03/16/2019 at 6:25 am
Interest rates in China will soon be exactly where they are in Europe and Japan. Maybe lower.
In order to get oil to $90-$100 the value of the dollar is going to have to sink a little bit. In order to get oil to $140-$160 the dollar has to make a new all time low. Anybody predicting prices shooting up to $200 needs the dollar index to sink to 60 or below.
The reality is oil is going to $20. Because the rest of the world outside the US is failing. Dennis makes some nice graphs and charts and under his assumptions his charts and graphs are correct. But his assumptions aren't correct.
We got $20 oil and an economic depression coming.
Peak Oil is going to be deflationary as hell. Higher prices aren't in the cards even when a shortage actually shows up. We will get less supply at a lower price. Demand destruction is actually going to happen when economies and debt bubbles implode so we actually can't be totally sure we are ever going to see an actual shortage.
We could very well be producing 20-30% less oil than we do now and still not have a shortage.
Oh and EV's are going to have to compete with $20 oil not $150 oil.You are assuming that the oil is priced in dollars there are moves underway that raise two fingers to that.Dennis Coyne x Ignored says: 03/16/2019 at 7:41 am
https://www.scmp.com/economy/china-economy/article/2174453/china-and-russia-look-ditch-dollar-new-payments-system-moveHHH,Dennis Coyne x Ignored says: 03/16/2019 at 9:56 am
When do you expect the oil price to reach $20/b? We will have to see when this occurs.
It may come true when EVs and AVs have decimated demand for oil in 2050, but not before. EIA's oil price reference scenario from AEO 2019 below. That is a far more realistic prediction (though likely too low especially when peak oil arrives in 2025), oil prices from $100 to $160/b in 2018 US$ are more likely from 2023 to 2035 (for three year centered average Brent oil price).
HHH,HHH x Ignored says: 03/16/2019 at 6:50 pm
My assumptions are based on USGS mean resource estimates and EIA oil price estimates, as well as BIS estimates for the World monetary and financial system.
Your assumption that oil prices are determined by exchange rates only is not borne out by historical evidence. Exchange rates are a minor, not a major determinant of oil prices.Dennis,
Technically speaking. The most relevant trendline on price chart currently comes off the lows of 2016/02/08. It intersects with 2017/06/19. You draw the trendline on out to where price is currently. Currently price is trying to backtest that trendline.
On a weekly price chart i'd say it touches the underside of that trendline sometime in April in the low 60's somewhere between $62-$66 kinda depends on when it arrives there time wise. The later it takes to arrive there the higher price will be. I've been trading well over 20 years can't tell you how many times i've seen price backtest a trendline after it's been broken. It's a very common occurrence. And i wouldn't short oil until after it does.
But back to your question. $20 oil what kind of timetable. My best guess is 2021-2022. Might happen 2020 or 2023. And FED can always step in and weaken the dollar. Fundamentally the only way oil doesn't sink to $20 is the FED finds a way to weaken the dollar.
But understand the FED is the only major CB that currently doesn't have the need to open up monetary policy. It's really the rest of the worlds CB ultra loose monetary policy which is going to drive oil to $20.
Mar 16, 2019 | peakoilbarrel.com
Ignored says: 03/16/2019 at 12:42 am
Iron Mike Asked:
"If that was to happen and no energy source can cover the decline rate, wouldn't the world be pretty fucked economically thereafter? Hence one can assume or take a wild ass guess that the decline after peak would resemble something like Venezuela. So not a smooth short % decline rate."
Energy is the economy, The economy cannot function without energy. Thus its logical that a decline in energy supply will reduce the economy. The only way for this not to apply is if there are efficiency gains that offset the decline. But at this point the majority of cost effective efficiency gains are already in place. At this point gains become increasing expensive with much smaller gains (law of diminishing returns). Major infrastructure changes like modernizing rail lines take many decades to implement and also require lots of capital. Real capital needed will be difficult to obtain do to population demographics (ie boomers dependent on massive unfunded entitlement & pensions).
Realistically the global economy is already in a tight spot. It started back in 2000 when Oil prices started climbing from about $10/bbl in 1998 to about $30/bbl in 2000. Then the World Major Central banks dropped interest which ended triggering the Housing Boom\Bust and carried Oil prices to $147/bbl. Since then Interest rates have remained extremely low while World Debt has soared (expected to top $250T in 2019).
My guess is that global economy will wipe saw in the future as demographics, resource depletion (including Oil) and Debt all merge into another crisis. Gov't will act with more cheap and easy credit (since there is no alterative TINA) as well as QE\Asset buying to avoid a global depression. This creating a wipesaw effect that has already been happening since 2000 with Boom Bust cycles. This current cycle has lasted longer because the Major central banks kept interest rates low, When The Fed started QT and raising rate it ended up triggering a major stock market correction In Dec 2018. I believe at this point the Fed will no longer seek any further credit tightening that will trip the economy back into recession. However its likely they the global economy will fall into another recession as consumers & business even without further credit tighting by CB (Central Banks) Because they've been loading up on cheap debt, which will eventually run into issues servicing their debt. For instance there are about 7M auto loans in delinquency in March of 2019. Stock valuations are largely driven by stock buybacks, which is funded by debt. I presume companies are close to debt limit which is likely going to prevent them from purchase more stock back.
Probably the biggest concern for me is the risking risks for another World war: The US has been targeting all of the major Oil exporters. The two remaining independent targets are Venezuela & Iran. I suspect Venzuela will be the next US take over since it will be a push over compared to Iran. I think once all of remaining independent Oil Exports are seized that is when the major powers start fighting each other. However is possible that some of the proxy nations (Pakastan\India),(Israel\Iran), etc trigger direct war between the US, China, and Russia at any time.
Notice that the US is now withdrawing from all its major arms treaties, and the US\China\Russia are now locked into a Arms race. Nuclear powers are now rebuilding their nuclear capacity (more Nukes) and modernizing their deployment systems (Hypersonic, Very large MIRV ICBMS, Undersea drones, Subs, Bombers, etc.
My guess is that nations like the US & China will duke it out before collapsing into the next Venezuela. If my assessment is correct, The current state of Venezuela will look like the garden of Eden compared to the aftermath of a full scale nuclear war.
Currently the Doomsday clock (2019) is tied with 1953 at 2 minutes:
1953 was the height of the cold war. I presume soon the Doomsday clock will be reduced to less than 2 Minutes later this year, due to recent events in the past few weeks.
"the world's nuclear nations proceeded with programs of "nuclear modernization" that are all but indistinguishable from a worldwide arms race, and the military doctrines of Russia and the United States have increasingly eroded the long-held taboo against the use of nuclear weapons."
" The current international security situation -- what we call the "new abnormal" -- has extended over two years now. It's a state as worrisome as the most dangerous times of the Cold War, a state that features an unpredictable and shifting landscape of simmering disputes that multiply the chances for major military conflict to erupt."
Jan 06, 2017 | economistsview.typepad.comPeter K. -> Chris G ... , January 05, 2017 at 11:59 AMI've heard otherwise. The progressive neoliberals are just putting out disinformation.Peter K. -> Chris Lowery ... , January 05, 2017 at 07:30 AM
"At every point of the race, Mr. Trump was doing better among white voters without a college degree than Mitt Romney did in 2012 - by a wide margin. Mrs. Clinton was also not matching Mr. Obama's support among black voters."
"Mrs. Clinton's gains were concentrated among the most affluent and best-educated white voters, much as Mr. Trump's gains were concentrated among the lowest-income and least-educated white voters."
Trump won the Republican primary and general election.JF -> Chris Lowery ... , January 05, 2017 at 09:02 AM
""Trump dominated - in the primary and general elections - those districts represented by Congress's most conservative members," Tim Alberta wrote in National Review (he is now at Politico):
They once believed they were elected to advance a narrowly ideological agenda, but Trump's success has given them reason to question that belief.
Among these archconservatives, who in the past had been fanatical in their pursuit of ideological purity, the realization that they can no longer depend on unfailing support from their constituents has provoked deep anxiety."
These archconservatives who say that Trump's flimsy mandate is just based on just 80,000 votes in the rustbelt are in for a rude awakening. He won the primary. In Northern States. In Southern States. Everywhere.
It's hilarious that the progressive neoliberals like DeLong, Krugman, Drum, Yglesias etc have said exactly nothing about Trump's tweets at Congressional Republicans over the independent ethics committee.
There is a propaganda technique where you describe straw-person characterizations then undermine them. When in fact the whole longwinded campaign depends on readers and listeners not bothering or too tired to focus and see the mischaracterizations in the straw.Libezkova -> Chris Lowery ... , January 05, 2017 at 09:49 AM
This whole thing is an apologia, for propaganda purposes, as I see it.
We all need to take care. It takes a lot of money and effort to organize such propaganda exercises. Please take care in using and reusing these type things."Trump has converted the GOP into a populist, America First party" is an overstatement. He definitely made some efforts in this direction, but it is premature to declare this "fait accompli".
If we consider two possibilities: "GOP establishment chew up Trump" and "Trump chew up GOP establishment" it is clear that possibility is more probable.
Theoretically that might give Democrats a chance, but I think the Clintonized Party is too corrupt to take this chance. "An honest politician is one who, when he is bought, will stay bought." ;-)
In any case, 2018 elections will be very interesting as I think that the process of a slow collapse of neoliberal ideology and the rise of the US nationalist movements ("far right") will continue unabated.
This is the same process that we see in full force in EU.
Jul 07, 2011 | bloomberg.com
Elizabeth Warren has infuriated bankers and alienated half of Washington, all in the name of a new consumer protection agency she may not get to runElizabeth Warren's admirers often refer to her as a grandmother from Oklahoma. This is technically true. It's also what you might call posturing. Warren, 62, is a Harvard professor and perhaps the country's top expert on bankruptcy law. Over the past four years she has managed to stoke a fervent debate over the government's role in protecting American consumers from what she sees as the predatory practices of financial institutions, and she has positioned herself as the person to oversee a new federal agency to rewrite the rules of lending. Warren is a grandma from Oklahoma in roughly the same way Ralph Nader is a pensioner with a thing about cars.
If the grandmother perception is plausible, it's largely because Warren has a gift for parables and for placing herself in the middle of them as the embodiment of moral force. Thus, her account of the precise moment she realized that changing the way banks lend was going to require a new federal bureaucracy -- and that it was up to her to create it.
Warren begins her tale in the spring of 2007, before the housing crash and the financial crisis. She was on a plane back to Boston after a series of discouraging meetings with credit-card company executives. She had tried to sell them on an idea called the "clean card" that grew out of her academic work and her side gig as a guest on such shows as Dr. Phil , where she dispensed empathy and advice to audience members who were one bad check away from losing everything. The concept was simple: Offer the equivalent of a Good Housekeeping Seal of Approval to any credit-card company that disclosed all of its costs and fees up front, no fine print.
After a few meetings in which she was politely rebuffed, one executive walked Warren to the door and, with his arm around her, let her in on a trade secret: If he admitted that his card's actual rate was 17 percent, while his competitors were still claiming theirs was only 2.9 percent, his customers would desert him for the seemingly cheaper option, seal of approval or not. No credit-card company would ever go along with a clean card unless all of them did. And the only way to get all of them to do it was to require it by law.
At this point, Warren says, the banker made a confession. "We recognize that we have an unsustainable model, and it cannot work forever," she says he told her. "If we told people how much these things cost, they wouldn't use them."
Here she pauses for effect, and to take a sip of herbal tea. Warren is slight and kinetic, with wide, pale blue eyes behind rimless glasses. She punctuates her sentences with exclamations like "Holy guacamole!" It's difficult to tell whether these are spontaneous or deliberately deployed to soften her imposing professorial mien. Warren, who grew up poor and went to college on a debate scholarship, understands the power of expression. When she wants to underline a point, she leans in to conspire with her listener; then her voice goes quiet, as it does when she says she knew instantly the condescending executive was right. Her clean card was a flop.
And so, on the flight home, Warren turned to the problem of how to push those credit-card companies into doing the right thing. By landing time, she says, she had her answer: a powerful new federal agency whose sole mission would be to protect consumers, not only from confusing credit cards but from what she calls the "tricks and traps" of all dangerous financial products. The same way the Consumer Product Safety Commission guards against dangerous household products or the Food and Drug Administration watches out for contaminated produce and quack medications. The way Warren tells it, she pulled a piece of paper out of her backpack and got to work right there on the plane. "I started sketching out the problem and what the agency should look like."
It's a good story, even if the timeline is a little off. Warren's aides say she first pitched the idea of a consumer financial protection agency to then-Senator Barack Obama's office months before her fateful meeting with the executive. Whatever the idea's provenance, there's no doubting its influence. In a summer 2007 article in the journal Democracy , Warren outlined what her guardian agency would look like. "It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house," she wrote. "But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street -- and the mortgage won't even carry a disclosure of that fact to the homeowner." One was effectively regulated. The other was not.
The annals of academia are stuffed with provocative proposals. Most die in the library. A little over four years after she first dreamed it up, Warren's has become a reality. Last summer, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, a package of financial reforms meant to prevent another economic meltdown. One of the bill's pillars is Warren's watchdog agency, now called the Consumer Financial Protection Bureau.
On July 21, exactly a year after Dodd-Frank became law, the CFPB is scheduled to open for business with a broad mandate to root out "unfair, deceptive, or abusive" lending practices. Consolidating functions previously scattered across seven different agencies, the bureau will have the power to dictate the terms of every consumer lending product on the market, from mortgages and credit cards to student, overdraft, and car loans. It will supervise not only banks and credit unions but credit-card companies, mortgage servicers, credit bureaus, debt collectors, payday lenders, and check-cashing shops. Dozens of researchers will track trends in the lending market and keep an eye on new products. Teams of examiners will prowl the halls of financial institutions to ensure compliance. The bureau is already at work on its first major initiative: simplifying the bewildering bank forms you sign when you buy a house.
Warren's life is a blur of building and promoting the agency she dreamed up -- and that she may never get to lead. On leave from Harvard, she has spent hundreds of hours on Capitol Hill visiting with members of Congress, Democrat and Republican, and flown across the country meeting with the heads of the nation's major banks and many smaller ones. If most financial firms have yet to embrace the bureau, she's made some headway, at least, among the community banks. "Some of my colleagues have not gotten there yet because they are convinced she's close to the antichrist," says Roger Beverage, the head of the Oklahoma Bankers Assn. "I don't think she's doing anything but speaking from the heart on community banks."
One other person she has not yet won over: Barack Obama. The President has not nominated her to head the bureau. Instead, last fall he gave her the title of special assistant to the President and special adviser to the Treasury and tasked her with getting the place up and running. For now, she is the non-head of a non-agency. The White House refuses to say whether Obama will eventually put her up for the job, allowing only that he is considering several candidates. In the coded language of appointment politics, it is a signal that they are seriously considering passing Warren over for someone else. A White House official says the Administration would like to have a nominee in place before Congress leaves for its August recess.
There's a reason for their wariness. The White House is reluctant to antagonize congressional Republicans in the middle of contentious negotiations over the federal debt ceiling. Warren's position requires Senate approval, and Republicans, many of whom regard the CFPB as more clumsy government meddling in the free market, are vehemently opposed to allowing its creator to be installed at its helm. Republicans have used a parliamentary maneuver to keep the Senate from officially adjourning for its traditional summer break, thus depriving Obama of the opportunity to sidestep their objections and make Warren a recess appointment.
"She's probably a nice person, as far as I know," says Senator Richard Shelby (R-Ala.), the ranking member of the Banking Committee, which will hold hearings on the eventual nominee for the post. Shelby has said Warren is too ideological to lead the agency, a judgment shared by many of his Republican colleagues. "She's a professor and all this," he says in a tone that makes it clear he is not paying her a compliment. "To think up something, to create something of this magnitude, and then look to be the head of it, I wouldn't do that," Shelby says. "It looks like you created yourself a good job, a good power thing."
Warren is not waiting for permission to do the job she may never get. She and her small team have hired hundreds of people, at a recent clip of more than 80 per month. The agency has already outgrown its office space and is divided between two buildings in downtown Washington -- with branches to be opened across the country. A fledgling staff of researchers is cranking out the CFPB's first reports, and its first bank examiners are being trained. Meanwhile, the office softball team has compiled a 2-3 record.
Above all, an institutional culture is emerging, and it is largely loyal to Warren and her idea of what the agency should be. She has attracted several top hires from outside the federal government. The bureau's chief operating officer, Catherine West, was previously president of Capital One; its head of research, Sendhil Mullainathan, is a behavioral economist and star Harvard professor; the chief of enforcement, Richard Cordray, is the former attorney general of Ohio; Raj Date, her deputy and head of the bureau's Research, Markets and Regulation Div., is a former banker at Capital One and Deutsche Bank. Warren, whose reputation as a scholar rests on her pioneering use of bankruptcy data, has imbued the place with her faith in quantitative analysis. Researchers she recruited and hired have begun to build the bureau's database of financial information, with a broad mandate to keep track of lending markets and find ways to make financial information more easily digestible.
While Washington bickers, Warren has built the CFPB largely to her specs and almost entirely free of interference from Congress and the Administration, which devotes most of its attention to fixing the economy. Few Cabinet secretaries can claim to have left as indelible a mark on the departments they lead as Elizabeth Warren has already left on the one she doesn't.
The CFPB's main offices are on two floors of a russet-colored office building a few blocks northwest of the White House. The government-gray cubicles and hallways spill over with new hires -- many of them young -- working 12- and 14-hour days elbow to elbow, pale and exuding a dogged cheerfulness that suggests that, no, they do not miss the sun. By the elevator bank is a calendar counting down the days until July 21.
Ten years ago, before she became a liberal icon, Warren was a popular Harvard professor known for taking a maternal interest in the students she chose as research assistants. She was famous, but only in the small corner of academia that cared about bankruptcy. "In my opinion she is the best bankruptcy scholar in the country," says Samuel Bufford, a law professor at Penn State who got to know Warren decades ago as a bankruptcy judge in California's Central District.
Work Warren did with Jay Westbrook, a law professor at the University of Texas at Austin, and Teresa Sullivan, a sociologist who is now president of the University of Virginia, reshaped the scholarly understanding of bankruptcy. Analyzing thousands of filings and interviewing many of the debtors themselves, they found that those who go bankrupt weren't, as commonly assumed, primarily poor or financially reckless. A great many of them were solidly middle class and had been driven to bankruptcy by circumstances they did not choose or could not control: the loss of a job, a medical disaster, or a divorce. The explosion in consumer credit in recent decades had only exacerbated the situation -- almost without realizing it, households could now slide faster and further into debt than ever before.
Warren, Westbrook, and Sullivan all saw their bankruptcy findings as a window into the broader travails of the financially fragile middle class. More than her co-authors, though, Warren sought a larger audience for the message. In 2003, along with her daughter, Amelia Warren Tyagi, she wrote The Two-Income Trap: Why Middle-Class Mothers & Fathers Are Going Broke , a book that combined arguments about the political and economic forces eroding middle-class financial stability with practical advice about how households could fight them. The language was sharper than in her academic work: "Subprime lending, payday loans, and the host of predatory, high-interest loan products that target minority neighborhoods should be called by their true names: legally sanctioned corporate plans to steal from minorities," Warren and Tyagi wrote.
The book got attention and Warren became a frequent TV guest. She was invited to give speeches and sit on panels on bankruptcy and debt. She was a regular on comedian Al Franken's radio show on the now defunct Air America network. "She's quite brilliant. She was always just an excellent guest," recalls Franken, now a Democratic U.S. Senator from Minnesota. "She has a very good sense of humor."
In 2003, Warren attended a fundraiser in Cambridge for Barack Obama, then running for U.S. Senate. When she walked up to shake his hand, he greeted her with two words: "predatory lending." As a senator, Obama would occasionally call Warren for her thoughts, though the two never became close.
It was the financial crisis that made Warren a star. In November 2008, in a nod to her growing reputation as a consumer advocate, Senate Majority Leader Harry Reid chose Warren to chair the congressional panel overseeing the TARP financial rescue program. The reports she helped produce over the next two and a half years and the hearings she helped lead gave the panel a higher profile than even its creators had predicted, as she articulated concerns that many Americans had about the wisdom of a massive Wall Street bailout. In perhaps her most famous moment, Warren grilled Treasury Secretary Timothy Geithner on AIG's share of the aid money and how it was that so much of it had ended up simply reimbursing the investment banks the insurer owed money.
Warren used her role on the panel, and the newfound visibility it gave her, to push for her agency. She worked the idea into a special report the committee released in January 2009, among a list of recommendations to head off fut ure financial crises. She wrote op-ed pieces, was on TV constantly, and met with at least 80 members of Congress. She also brought the idea to the Administration. Over a long lunch at an Indian restaurant in Washington, she pitched the concept to White House economic adviser Lawrence Summers, whom she knew from his tenure as Harvard's president. Inside Treasury, the idea was taken up by Michael Barr, a key architect of Dodd-Frank and a lawyer Warren had known for years. At least within the White House, Barr recalls, it wasn't hard to build support. "I think there was a general consensus that built pretty quickly that this was a good option," he says. "I didn't get any significant pushback on the idea." Barr's inside advocacy, combined with Warren's PR blitz, paid off. In June 2009, Obama released a "white paper" laying out his own financial regulatory proposals, and Warren's agency was in it.
Among the CFPB staff there is a strongly held belief that they have the opportunity not only to reshape an industry but reinvent what a government agency can be, to rescue the idea of bureaucracy from its association with sclerosis and timidity. People there emphasize that they are creating a 21st century agency. Still, there's a throwback Great Society feel to the place, with its faith in the abilities of very smart unelected administrators, armed with data, to iron out the inefficiencies and injustices of the world. "Nobody looks at consumer finance regulation as it existed over the past decade and says, 'Yeah, that seemed to work all right, let's do more of that,' " says Raj Date, a square-jawed 40-year-old who speaks in the confident, numbers-heavy parlance of Wall Street.
Regardless of whether the CFPB has a director by its July 21 "transfer date," there are certain things it will immediately begin to do. One is to send teams of examiners into banks and credit unions to make sure they are complying with existing consumer finance regulations. When the bureau is fully staffed up -- initially, it will have some 500 employees and an annual budget of around $500 million -- a majority of the people who work there will be examiners. The bureau has only supervisory power over banks with assets of more than $10 billion, though the rules it writes will still apply to smaller banks. Banks on the low end of the scale will see a team of examiners for a few weeks every two years, unless there are specific complaints to investigate. Most of the biggest banks, those with assets of $100 billion and up, will have CFPB examiners in residence year-round. The examiners will go to work parsing the terms of mortgages and other loans, searching for evidence of consumer harm. They'll look at how the products are marketed and sold to make sure it's done transparently, that costs and fees are disclosed up front.
What the bureau will not be able to do without a director is send its examiners into nonbank financial institutions. Dodd-Frank gives the CFPB jurisdiction over payday lenders, check cashers, mortgage brokers, student loan companies, and the like. Because this is an expansion of regulatory powers, it will not take effect until a permanent director is in place.
The bureau is less willing to discuss the specifics of what will happen when it finds evidence of wrongdoing. The press office refused to make the head of enforcement, Richard Cordray, available for an interview. Like other enforcement agencies, the CFPB will have a variety of measures at its fingertips: It will be able to give firms a talking-to, or issue so-called "supervisory guidance" papers on problematic financial products. It will be able to send cease-and-desist orders. And if all else fails, the bureau will be able to take offenders to court.
The CFPB will also have broad rule-making powers over everything from credit-card marketing campaigns to car loan terms to the size of bank overdraft fees. For now, it has confined itself to initiatives less likely to arouse wide opposition among financial firms. The major one at the moment is developing a clear, simple, two-page mortgage form that merges the two confusing ones borrowers now confront. Bureau staff met with consumer advocates and mortgage brokers last fall, then put up two versions of a possible new form on the bureau's website, where consumers were invited to leave critiques. About 14,000 people weighed in. The forms are now being shown to focus groups around the country. A new version is due out in August.
This lengthy process is meant to demonstrate the bureau's commitment to a sort of radical openness to counter accusations that it's a body of unaccountable bureaucrats. In another gesture, Warren's calendar is posted on the website so that anyone can see who has a claim on her time. The undeniable sense among bureau staffers that they are political targets tempers that commitment to transparency a bit. The press office is jittery about allowing reporters to talk to staff on the record, and Warren agreed to two interviews on the condition that Bloomberg Businessweek allow her to approve quotes before publication.
If the supervision and enforcement division is the long arm of the bureau, its eyes and brain will be Research, Markets and Regulations, headed by Raj Date. Teams of analysts will follow various markets -- credit cards, mortgages, or student loans -- to spot trends and examine new products. Economists and other social scientists on staff will help write financial disclosure forms that make intuitive sense. The benefits of this sort of work, Date argues, will extend beyond just protecting consumers. It will help spot signs of more systemic risks. If the bureau and its market research teams had been in place five years ago, he says, they would have spotted evidence of the coming mortgage meltdown and could have coordinated with the bureau's enforcement division to head it off. "If it was someone's job to be in touch with the marketplace and monitor what was going on," Date says, "it would have been very difficult not to notice that three different kinds of mortgages had gone from nothing to a very surprising share of the overall marketplace in the span of, honestly, like three years."
Were it not for a head of prematurely gray hair, Patrick McHenry could still pass for the college Republican he once was. Elected to Congress from North Carolina seven years ago at age 29, he speaks through an assiduous smile and arches his eyebrows as he listens -- furrowing them quizzically at arguments he disagrees with. In late May, McHenry assumed the role of Warren's chief antagonist in Congress. At an oversight hearing he was chairing, McHenry accused Warren of misleading Congress about whether she had given advice to Treasury and Justice Dept. officials who were investigating companies for mortgage fraud. McHenry said she had concealed her conversations. Warren insisted she had disclosed them.
The hearing then took a bizarre turn. McHenry called for a recess so members of the committee could go to the House floor for a vote. Warren replied that she had agreed to testify for an hour and could not stay any longer. "Congressman, you are causing problems," she said. "We had an agreement." Offended, McHenry shot back: "You're making this up, Ms. Warren. This is not the case." Warren's response, an outraged gasp, was played on cable news.
In a conversation a month later in his Capitol Hill office, McHenry is eager to emphasize that his problem is not with Warren, but with the bureau itself. That's not to say he feels he has anything to apologize for. "I've asked questions of a litany of Administration officials from Democrat and Republican Administrations, and I've never seen an action by any witness like I saw that day," he says.
Like most congressional Republicans -- and a broad array of business groups, including the Chamber of Commerce, the Financial Services Roundtable, and the National Association of Federal Credit Unions -- McHenry opposed the creation of the CFPB and voted against Dodd-Frank. At the time, the bureau's opponents argued that its seemingly noble goals would not only hurt financial firms -- depriving them of the ability to compensate for risky borrowers by charging higher interest rates -- they would also hurt borrowers. The prospect of limits on the sort of rates and fees they could charge would cause banks and payday lenders alike to lend less and to not lend at all to marginal borrowers at a time when the economy needed as much credit as it could get.
Where it's not actively harmful, McHenry argues, the bureau will be redundant. If there's fraud or deceptive marketing in the consumer lending market, the federal government can prosecute it through the Federal Trade Commission. Clearer mortgage forms are all well and good, but Congress can take care of that, he says, noting that he introduced legislation for a simpler mortgage form three years ago. In response to arguments like these, Warren simply points to the record of those existing regulators: the Fed and the Housing & Urban Development Dept. have haggled over a simpler mortgage form for years. As for fears that the bureau will cap the interest rates companies can charge, she notes that Dodd-Frank explicitly prevents it from doing that.
Warren has been uncharacteristically tightlipped about her own ambitions. She refuses to say whether she even wants the job and has never publicly expressed a desire for it. In a way, the White House may do her a favor by not nominating her. If the President decides to go with a compromise candidate to appease Republicans, she will be spared the indignity of being tossed aside. She can't be said to have lost a job she was never offered.
Yet Warren gives the distinct impression that she will not suffer long if the President passes her over. Harvard has more than its share of celebrity professors who have gone to Washington and returned. The experience could also lead to a different kind of life in politics: Democrats in Massachusetts have been urging her to come home to run for Senate against Republican Scott Brown. There would be books to write, television appearances to make, and, who knows, maybe a show of her own. And whatever happens, she will get to tell the second half of the story of how she started a government agency. Whether the story ends with her confirmation or being driven from town, it's almost certain that the character of Elizabeth Warren will come out looking just fine.( Corrects the year Elizabeth Warren moved to Washington to work at the Consumer Financial Protection Bureau )
Oct 09, 2016 | nypost.comJudge gives deadline for arguments relating to unsealing Jeffrey Epstein documents Documents related to pedophile Jeffrey Epstein may be unsealed Pedophile Jeffrey Epstein's deal with feds was illegal: judge Northam has only himself to blame In 2005, the world was introduced to reclusive billionaire Jeffrey Epstein, friend to princes and an American president, a power broker with the darkest of secrets: He was also a pedophile, accused of recruiting dozens of underage girls into a sex-slave network, buying their silence and moving along, although he has been convicted of only one count of soliciting prostitution from a minor. Visitors to his private Caribbean island, known as "Orgy Island," have included Bill Clinton, Prince Andrew and Stephen Hawking.
According to a 2011 court filing by alleged Epstein victim Virginia Roberts Giuffre, she saw Clinton and Prince Andrew on the island but never saw the former president do anything improper. Giuffre has accused Prince Andrew of having sex with her when she was a minor, a charge Buckingham Palace denies.
"Epstein lives less than one mile away from me in Palm Beach," author James Patterson tells The Post. In the 11 years since Epstein was investigated and charged by the Palm Beach police department, ultimately copping a plea and serving 13 months on one charge of soliciting prostitution from a 14-year-old girl, Patterson has remained obsessed with the case.
"He's a fascinating character to read about," Patterson says. "What is he thinking? Who is he?"
Patterson's new book, "Filthy Rich: A Powerful Billionaire, the Sex Scandal That Undid Him, and All the Justice That Money Can Buy," is an attempt to answer such questions. Co-authored with John Connolly and Tim Malloy, the book contains detailed police interviews with girls who alleged sexual abuse by Epstein and others in his circle. Giuffre alleged that Epstein's ex-girlfriend Ghislaine Maxwell, daughter of the late media tycoon Robert Maxwell, abused her. Ghislaine Maxwell has denied allegations of enabling abuse.
Epstein has spent the bulk of his adult life cultivating relationships with the world's most powerful men. Flight logs show that from 2001 to 2003, Bill Clinton flew on Epstein's private plane, dubbed "The Lolita Express" by the press, 26 times. After Epstein's arrest in July 2006, federal tax records show Epstein donated $25,000 to the Clinton Foundation that year.
Epstein was also a regular visitor to Donald Trump's Mar-a-Lago, and the two were friends. According to the Daily Mail, Trump was a frequent dinner guest at Epstein's home, which was often full of barely dressed models. In 2003, New York magazine reported that Trump also attended a dinner party at Epstein's honoring Bill Clinton.
Last year, The Guardian reported that Epstein's "little black book" contained contact numbers for A-listers including Tony Blair, Naomi Campbell, Dustin Hoffman, Michael Bloomberg and Richard Branson.
In a 2006 court filing, Palm Beach police noted that a search of Epstein's home uncovered two hidden cameras. The Mirror reported that in 2015, a 6-year-old civil lawsuit filed by "Jane Doe No. 3," believed to be the now-married Giuffre, alleged that Epstein wired his mansion with hidden cameras, secretly recording orgies involving his prominent friends and underage girls. The ultimate purpose: blackmail, according to court papers.
"Jane Doe No. 3" also alleged that she had been forced to have sex with "numerous prominent American politicians, powerful business executives, a well-known prime minister, and other world leaders."
"We uncovered a lot of details about the police investigation and a lot about the girls, what happened to them, the effect on their lives," Patterson says.
"The reader has to ask: Was justice done here or not?"
Epstein, now 63, has always been something of an international man of mystery. Born in Brooklyn, he had a middle-class upbringing: His father worked for the Parks Department, and his parents stressed hard work and education.
'We uncovered a lot of details about the police investigation and a lot about the girls, what happened to them, the effect on their lives.'- James Patterson
Epstein was brilliant, skipping two grades and graduating Lafayette High School in 1969. He attended Cooper Union but dropped out in 1971 and by 1973 was teaching calculus and physics at Dalton, where he tutored the son of a Bear Stearns exec. Soon, Epstein applied his facility with numbers on Wall Street but left Bear Stearns under a cloud in 1981. He formed his own business, J. Epstein & Co.
The bar for entry at the new firm was high. According to a 2002 profile in New York magazine, Epstein only took on clients who turned over $1 billion, at minimum, for him to manage. Clients also had to pay a flat fee and sign power of attorney over to Epstein, allowing him to do whatever he saw fit with their money.
Still, no one knew exactly what Epstein did, or how he was able to amass a personal billion-dollar-plus fortune. In addition to a block-long, nine-story mansion on Manhattan's Upper East Side, Epstein owns the $6.8 million mansion in Palm Beach, an $18 million property in New Mexico, the 70-acre private Caribbean island, a helicopter, a Gulfstream IV and a Boeing 727.
"My belief is that Jeff maintains some sort of money-management firm, though you won't get a straight answer from him," one high-level investor told New York magazine. "He once told me he had 300 people working for him, and I've also heard that he manages Rockefeller money. But one never knows. It's like looking at the Wizard of Oz -- there may be less there than meets the eye."
"He's very enigmatic," Rosa Monckton told Vanity Fair in 2003. Monckton was the former British CEO of Tiffany & Co. and confidante to the late Princess Diana. She was also a close friend of Epstein's since the 1980s. "He never reveals his hand . . . He's a classic iceberg. What you see is not what you get."
Both profiles intimated that Epstein had a predilection for young women but never went further. In the New York magazine piece, Trump said Epstein's self-professed image as a loner, an egghead and a teetotaler was not wholly accurate.
"I've known Jeff for 15 years," Trump said. "Terrific guy. He's a lot of fun to be with. It is even said that he likes beautiful women as much as I do, and many of them are on the younger side. No doubt about it -- Jeffrey enjoys his social life."
Three years after that profile ran, Palm Beach Police Officer Michele Pagan got a disturbing message. A woman reported that her 14-year-old stepdaughter confided to a friend that she'd had sex with an older man for money. The man's name was Jeff, and he lived in a mansion on a cul-de-sac.
Pagan persuaded the woman to bring her stepdaughter down to be interviewed. In his book, Patterson calls the girl Mary. And Mary, like so many of the other girls who eventually talked, came from the little-known working-class areas surrounding Palm Beach.
A friend of a friend, Mary said, told her she could make hundreds of dollars in one hour, just for massaging some middle-aged guy's feet. Lots of other girls had been doing it, some three times a week.
Mary claimed she had been driven to the mansion on El Brillo Way, where a female staffer escorted her up a pink-carpeted staircase, then into a room with a massage table, an armoire topped with sex toys and a photo of a little girl pulling her underwear off.
Epstein entered the room, wearing only a towel, Mary said.
"He took off the towel," Mary told Pagan. "He was a really built guy. But his wee-wee was very tiny."
Mary said Epstein got on the table and barked orders at her. She told police she was alone in the room with him, terrified.
Pagan wrote the following in her incident report:
"She removed her pants, leaving her thong panties on. She straddled his back, whereby her exposed buttocks were touching Epstein's exposed buttocks. Epstein then turned to his side and started to rub his penis in an up-and-down motion. Epstein pulled out a purple vibrator and began to massage Mary's vaginal area."
Palm Beach assigned six more detectives to the investigation. They conducted a "trash pull" of Epstein's garbage, sifting through paper with phone numbers, used condoms, toothbrushes, worn underwear. In one pull, police found a piece of paper with Mary's phone number on it, along with the number of the person who recruited her.
On Sept. 11, 2005, detectives got another break. Alison, as she's called in the book, told Detective Joe Recarey that she had been going to Epstein's house since she was 16. Alison had been working at the Wellington Green Mall, saving up for a trip to Maine, when a friend told her, "You can get a plane ticket in two hours . . . We can go give this guy a massage and he'll pay $200," according to her statement to the police.
Alison told Recarey that she visited Epstein hundreds of times. She said he had bought her a new 2005 Dodge Neon, plane tickets, and gave her spending money. Alison said he even asked her to emancipate from her parents so she could live with him full-time as his "sex slave."
She said Epstein slowly escalated his sexual requests, and despite Alison's insistence that they never have intercourse, alleged, "This one time . . . he bent me over the table and put himself in me. Without my permission."
Alison then asked if what Epstein had done to her was rape and spoke of her abject fear of him.
An abridged version of her witness statement, as recounted in the book:
Alison : Before I say anything else . . . um, is there a possibility that I'm gonna have to go to court or anything?
Recarey : I mean, what he did to you is a crime. I'm not gonna lie to you.
Alison : Would you consider it rape, what he did?
Recarey : If he put himself inside you without permission . . . That, that is a crime. That is a crime.
Alison : I don't want my family to find out about this . . . 'Cause Jeffrey's gonna get me. You guys realize that, right? . . . I'm not safe now. I'm not safe.
Recarey : Why do you say you're not safe? Has he said he's hurt people before?
Alison : Well, I've heard him make threats to people on the telephone, yeah. Of course.
Recarey : You're gonna die? You're gonna break your legs? Or --
Alison : All of the above!
Alison also told Recarey that Epstein got so violent with her that he ripped out her hair and threw her around. "I mean," she said, "there's been nights that I walked out of there barely able to walk, um, from him being so rough."
Two months later, Recarey interviewed Epstein's former house manager of 11 years, documented in his probable-cause affidavit as Mr. Alessi. "Alessi stated Epstein receives three massages a day . . . towards the end of his employment, the masseuses . . . appeared to be 16 or 17 years of age at the most . . . [Alessi] would have to wash off a massager/vibrator and a long rubber penis, which were in the sink after the massage."
Another house manager, Alfredo Rodriguez, told Recarey that very young girls were giving Epstein massages at least twice a day, and in one instance, Epstein had Rodriguez deliver one dozen roses to Mary, at her high school.
In May 2006, the Palm Beach Police Department filed a probable-cause affidavit, asking prosecutors to charge Epstein with four counts of unlawful sexual activity with a minor -- a second-degree felony -- and one count of lewd and lascivious molestation of a 14-year-old minor, also a second-degree felony.
Today, Jeffrey Epstein is a free man, albeit one who routinely settles civil lawsuits against him, brought by young women, out of court.
Palm Beach prosecutors said the evidence was weak, and after presenting the case to a grand jury, Epstein was charged with only one count of felony solicitation of prostitution. In 2008, he pleaded guilty and nominally served 13 months of an 18-month sentence in a county jail: Epstein spent one day a week there, the other six out on "work release."
Today, Jeffrey Epstein is a free man, albeit one who routinely settles civil lawsuits against him, brought by young women, out of court. As of 2015, Epstein had settled multiple such cases.
Giuffre has sued Ghislaine Maxwell in Manhattan federal court, charging defamation -- saying Maxwell stated Giuffre lied about Maxwell's recruitment of her and other underage girls. Epstein has been called upon to testify in court this month, on Oct. 20.
The true number of Epstein's victims may never be known.
He will be a registered sex offender for the rest of his life, not that it fazes him. "I'm not a sexual predator, I'm an 'offender,' " Epstein told The Post in 2011. "It's the difference between a murderer and a person who steals a bagel."