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Neoliberalism Bulletin 2015

Neoliberalism as a New Form of Corporatism

Neoliberalism Bulletin, 2017

Neoliberalism Bulletin, 2016 Neoliberalism Bulletin, 2015 Neoliberalism Bulletin, 2014 Neoliberalism Bulletin, 2013 Neoliberalism Bulletin, 2011 Neoliberalism Bulletin, 2010 Neoliberalism Bulletin 2009 Neoliberalism Bulletin 2008

2015 was the year when Catholic church extended its attack on neoliberalism.

See Full text of Pope Francis speech before Congress


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Old News ;-)

[Dec 05, 2016] The Trans-Pacific Partnership Permanent Lock In The Obama Agenda For 40% Of The Global Economy

Oct 06, 2015 | Zero Hedge
We have just witnessed one of the most significant steps toward a one world economic system that we have ever seen. Negotiations for the Trans-Pacific Partnership have been completed, and if approved it will create the largest trading bloc on the planet. But this is not just a trade agreement. In this treaty, Barack Obama has thrown in all sorts of things that he never would have been able to get through Congress otherwise. And once this treaty is approved, it will be exceedingly difficult to ever make changes to it. So essentially what is happening is that the Obama agenda is being permanently locked in for 40 percent of the global economy.

The United States, Canada, Japan, Mexico, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam all intend to sign on to this insidious plan. Collectively, these nations have a total population of about 800 million people and a combined GDP of approximately 28 trillion dollars.

Of course Barack Obama is assuring all of us that this treaty is going to be wonderful for everyone

In hailing the agreement, Obama said, "Congress and the American people will have months to read every word" before he signs the deal that he described as a win for all sides.

"If we can get this agreement to my desk, then we can help our businesses sell more Made in America goods and services around the world, and we can help more American workers compete and win," Obama said.

Sadly, just like with every other "free trade" agreement that the U.S. has entered into since World War II, the exact opposite is what will actually happen. Our trade deficit will get even larger, and we will see even more jobs and even more businesses go overseas.

But the mainstream media will never tell you this. Instead, they are just falling all over themselves as they heap praise on this new trade pact. Just check out a couple of the headlines that we saw on Monday…

Overseas it is a different story. Many journalists over there fully recognize that this treaty greatly benefits many of the big corporations that played a key role in drafting it. For example, the following comes from a newspaper in Thailand

You will hear much about the importance of the TPP for "free trade".

The reality is that this is an agreement to manage its members' trade and investment relations - and to do so on behalf of each country's most powerful business lobbies.

These sentiments were echoed in a piece that Zero Hedge posted on Monday

Packaged as a gift to the American people that will renew industry and make us more competitive, the Trans-Pacific Partnership is a Trojan horse. It's a coup by multinational corporations who want global subservience to their agenda. Buyer beware. Citizens beware.

The gigantic corporations that dominate our economy don't care about the little guy. If they can save a few cents on the manufacturing of an item by moving production to Timbuktu they will do it.

Over the past couple of decades, the United States has lost tens of thousands of manufacturing facilities and millions of good paying jobs due to these "free trade agreements". As we merge our economy with the economies of nations where it is legal to pay slave labor wages, it is inevitable that corporations will shift jobs to places where labor is much cheaper. Our economic infrastructure is being absolutely eviscerated in the process, and very few of our politicians seem to care.

Once upon a time, the city of Detroit was the greatest manufacturing city on the planet and it had the highest per capita income in the entire nation. But today it is a rotting, decaying hellhole that the rest of the world laughs at. What has happened to the city of Detroit is happening to the entire nation as a whole, but our politicians just keep pushing us even farther down the road to oblivion.

Just consider what has happened since NAFTA was implemented. In the year before NAFTA was approved, the United States actually had a trade surplus with Mexico and our trade deficit with Canada was only 29.6 billion dollars. But now things are very different. In one recent year, the U.S. had a combined trade deficit with Mexico and Canada of 177 billion dollars.

And these trade deficits are not just numbers. They represent real jobs that are being lost. It has been estimated that the U.S. economy loses approximately 9,000 jobs for every 1 billion dollars of goods that are imported from overseas, and one professor has estimated that cutting our trade deficit in half would create 5 million more jobs in the United States.

Just yesterday, I wrote about how there are 102.6 million working age Americans that do not have a job right now. Once upon a time, if you were honest, dependable and hard working it was easy to get a good paying job in this country. But now things are completely different.

Back in 1950, more than 80 percent of all men in the United States had jobs. Today, only about 65 percent of all men in the United States have jobs.

Why aren't more people alarmed by numbers like this?

And of course the Trans-Pacific Partnership is not just about "free trade". In one of my previous articles, I explained that Obama is using this as an opportunity to permanently impose much of his agenda on a large portion of the globe…

It is basically a gigantic end run around Congress. Thanks to leaks, we have learned that so many of the things that Obama has deeply wanted for years are in this treaty. If adopted, this treaty will fundamentally change our laws regarding Internet freedom, healthcare, copyright and patent protection, food safety, environmental standards, civil liberties and so much more. This treaty includes many of the rules that alarmed Internet activists so much when SOPA was being debated, it would essentially ban all "Buy American" laws, it would give Wall Street banks much more freedom to trade risky derivatives and it would force even more domestic manufacturing offshore.

The Republicans in Congress foolishly gave Obama fast track negotiating authority, and so Congress will not be able to change this treaty in any way. They will only have the opportunity for an up or down vote.

I would love to see Congress reject this deal, but we all know that is extremely unlikely to happen. When big votes like this come up, immense pressure is put on key politicians. Yes, there are a few members of Congress that still have backbones, but most of them are absolutely spineless. When push comes to shove, the globalist agenda always seems to advance.

Meanwhile, the mainstream media will be telling the American people about all of the wonderful things that this new treaty will do for them. You would think that after how badly past "free trade" treaties have turned out that we would learn something, but somehow that never seems to happen.

The agenda of the globalists is moving forward, and very few Americans seem to care.

HedgeAccordingly

CIA Insider: China is About to End the Dollar

two hoots

Bill Clinton on signing NAFTA:

First of all, because NAFTA means jobs. American jobs, and good-paying American jobs. If I didn't believe that, I wouldn't support this agreement.

Freddie

Many of those NeoCon Bibi lovers and Jonathan Pollard conservatives love TPP and H1B Ted Cruz. Ted is also a Goldman Sachs boy.

Squids_In

That giant sucking sound just got gianter.

MrTouchdown

Probably, but here's a thought:

It might be a blowing sound of all things USA deflating down (in USD terms) to what they are actually worth when compared to the rest of the world. For example, a GM assembly line worker will make what an assembly line worker in Vietnam makes.

This will, of course, panic Old Yellen, who will promptly fill her diaper and begin subsidizing wages with Quantitative Pleasing (QP1).

Buckaroo Banzai

If this gets through congress, the Republican Party better not bother asking for my vote ever again.

Chupacabra-322

Vote? You seem to think "voting" will actually influence actions / Globalists plans which have been decades in the making amoungst thse Criminal Pure Evil Lucerferian Psychopaths hell bent on Total Complete Full Spectrum World Domination.

Yea, keep voting. I'll be out hunting down these Evil doers like the dogs that they are.

Buckaroo Banzai

I have no illusions regarding the efficacy of voting. It is indeed a waste of time.

What I said was, they better not dare even ASK for my vote.

Ignatius

Doesn't matter. Diebold is so good at counting that you don't even need to show up at the polls anymore. It's like a miracle of modern technology.

Peter Pan

Did the article say 40%?

I imagine they meant 40% of whatever is left after we all go to hell in a hand basket.

Great day for the multinationals and in particular the pharmaceutical companies.

[Dec 30, 2015] On Pareto Optimality

Notable quotes:
"... the ideal markets that would produce Pareto Optimal allocations dont actually exist ..."
"... moving from actually existing non-ideal markets to ideal markets WOULD NOT BE Pareto Optimal even if it was possible to do so, which it isnt. ..."
"... In short, Pareto Optiimality is a just so story that has absolutely no bearing on the real world other than as an ideological justification for tons of bullshit. ..."
"... The next step in graduate students indoctrination is to teach them that although Pareto Optimal reallocations are implausible, you can get around that with a principle of compensation. The principle, too is based on a same yardstick fallacy. But never mind the Pareto Optimality smokescreen and the compensation smokescreen have constrained economists to think in terms of doing what is best for the wealthiest. Funny how that happens. ..."
Dec 30, 2015 | Economist's View
Sandwichman, December 30, 2015 at 10:06 AM
"Graduate students of economics learn, early in their careers, that markets allocations are Pareto Optimal."

What they don't learn is that

1. the ideal markets that would produce Pareto Optimal allocations don't actually exist and

2. moving from actually existing non-ideal markets to ideal markets WOULD NOT BE Pareto Optimal even if it was possible to do so, which it isn't.

In short, Pareto Optimality is a just so story that has absolutely no bearing on the real world other than as an ideological justification for tons of bullshit.

The next step in graduate students' indoctrination is to teach them that although Pareto Optimal reallocations are implausible, you can get around that with a "principle of compensation." The principle, too is based on a same yardstick fallacy. But never mind the Pareto Optimality smokescreen and the compensation smokescreen have constrained economists to think in terms of doing what is best for the wealthiest. Funny how that happens.

anne said in reply to Sandwichman

Pareto Optimality is a just so story that has absolutely no bearing on the real world other than as an ideological justification for tons of bull----.

[ Agreed completely and I think this an important conclusion. ]

Paine said in reply to anne

Yes

Sandy gets the guts of it

Though

The compensation principle is precisely what Pareto rule is all about

Yes we can scramble the goods all we want so long as in the end everyone is at least as well off as before the scramble

In a pure exchange model this is less exciting then in a one period production model

Going on to an inter temporal model with an infinite horizon gets into real juicy Wonderlands

The academy makes it's living as much by distracting fine minds as training them

anne said in reply to Sandwichman

The next step in graduate students' indoctrination is to teach them that although Pareto Optimal reallocations are implausible, you can get around that with a "principle of compensation." The principle, too is based on a same yardstick fallacy. But never mind the Pareto Optimality smokescreen and the compensation smokescreen have constrained economists to think in terms of doing what is best for the wealthiest....

http://www.nytimes.com/2015/12/30/business/economy/for-the-wealthiest-private-tax-system-saves-them-billions.html

December 29, 2015

Richest in U.S. Shape Private Tax System to Save Billions
By NOAM SCHEIBER and PATRICIA COHEN

The very wealthiest families are able to quietly shape tax policy that will allow them to shield millions, if not billions, of their income using maneuvers available only to several thousand Americans.

anne said in reply to Sandwichman...

Supposing I understand the essay, Roger Farmer is just writing the logical justification to Herbert Spencer's (never Charles Darwin's) "survival of the fittest" rationale that Spencer made wildly popular after Darwin published "On the Origin of Species."

Spencer was the successful ultimate justifier of British "sun-never-setting-on-the-Empire" capitalism. Spencer sold a biological justification, Farmer is selling a logical justification of Empire.

Sandwichman said in reply to anne

No, I think Farmer is dissing Pareto Optimality and using "sunspots" as sarcasm. He seems to do it in a way that opens up space for countless side arguments that leave Pareto Optimality unscathed.

The bottom line is that NO ONE would have ever paid any attention to the not just "weak" but nonsensical concept if it didn't serve the function of justifying and ultimately glorifying great inequalities of wealth and income.
;

anne said in reply to Sandwichman

I understand the argument and I am entirely right:

Roger Farmer is just writing the logical justification to Herbert Spencer's (never Charles Darwin's) "survival of the fittest" rationale that Spencer made wildly popular after Darwin published "On the Origin of Species."

Spencer was the successful ultimate justifier of British "sun-never-setting-on-the-Empire" capitalism. Spencer sold a biological justification, Farmer is selling a logical justification of Empire capitalism.

anne said in reply to Sandwichman

I needed to be sure the argument was as empty morally as I supposed initially, but I supposed correctly. The Roger Farmer essay is an amoral logical justification of imperial capitalism. Plato's "Republic" conceived amorally. ;

anne said in reply to Sandwichman

A mean little essay, carefully subtle and mean.

Paine said in reply to anne

But Anne as sandy points out Roger blows up the use of Pareto by his future generations argument

Those unable to establish their preferences are unaccounted for in the scrum

He uses this to draw a bold distinction between securities markets and fish catch of the day markets

Paine said in reply to Paine

It's not the way I'd make his point

But his distinction is important

Some are impacted that are not participating

Third party effects that can not be resolved even with repeated " games "
Because the players are not yet present

anne said in reply to Sandwichman

Farmer is dissing Pareto Optimality and using "sunspots" as sarcasm. He seems to do it in a way that opens up space for countless side arguments that leave Pareto Optimality unscathed.

The bottom line is that NO ONE would have ever paid any attention to the not just "weak" but nonsensical concept if it didn't serve the function of justifying and ultimately glorifying great inequalities of wealth and income.

[ Agreed completely, but this argument runs with mine. ]

anne said in reply to Sandwichman

Farmer is dissing Pareto Optimality and using "sunspots" as sarcasm. He seems to do it in a way that opens up space for countless side arguments that leave Pareto Optimality unscathed....

[ The issue is that Roger Farmer leaves Pareto Optimality unscathed, and this is an essential point. The essay is beyond the morality of now, but there is no beyond. ]

[Dec 29, 2015] The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed

Notable quotes:
"... The obvious candidate for this dark force [correlation between (rising) inequality and (low) growth] is crony capitalism. When a country succumbs to cronyism, friends of the rulers are able to appropriate large amounts of wealth for themselves -- for example, by being awarded government-protected monopolies over certain markets, as in Russia after the fall of communism. That will obviously lead to inequality of income and wealth. It will also make the economy inefficient, since money is flowing to unproductive cronies. Cronyism may also reduce growth by allowing the wealthy to exert greater influence on political policy, creating inefficient subsidies for themselves and unfair penalties for their rivals. ..."
"... The real problem is that money does not go to where it should go, as we see for example in the United States. The money does not flow into the real economy, because the transmission mechanism is broken. That is why we have a bubble in the financial system. The answer is not to tighten monetary policy, but to reform monetary policy so as to ensure that the money gets to the right place... ..."
"... As Stiglitz notes, the transmission mechanisms are broken. Economists trickle down monetary policy might work in theory, but not in practice, as we have seen for the last seven years, when low rates dont trickle down and were wasted instead on asset speculation by the 1%. ..."
"... Reform of the Fed, and the end of cronyism are essential to making sure that the stimulus of low rates gets to Main Street, to ordinary people, and not primarily to asset speculators. ..."
"... The recent decision by the Fed to raise interest rates is the latest example of the rigged economic system. Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort - not to fight phantom inflation. ..."
"... And in one sentence Summers illustrates exactly why we dodged a bullet in not appointing Summers to be Fed Chair. Preserving the power of the Fed is not the most important policy. Changing the Fed composition so that it is more consumer friendly and not dominated by Wall Street interests is the most important policy change needed. ..."
"... the Balkanized character of US banking regulation is indefensible and would be ended. The worst regulatory idea of the 20th century-the dual banking system-persists into the 21st. The idea is that we have two systems one regulated by the States and the Fed and the other regulated by the OCC so banks have choice. With ambitious regulators eager to expand their reach, the inevitable result is a race to the bottom. ..."
"... Summers is also calling for higher capital requirements. Excellent stuff! ..."
Dec 29, 2015 | Economist's View

'The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed'

This is the beginning of a long response from Larry Summers to an op-ed by Bernie Sanders:
The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed : Bernie Sanders had an op Ed in the New York Times on Fed reform last week that provides an opportunity to reflect on the Fed and financial reform more generally. I think that Sanders is right in his central point that financial policy is overly influenced by financial interests to its detriment and that it is essential that this be repaired.

At the same time, reform requires careful reflection if it is not to be counterproductive. And it is important in approaching issues of reform not to give ammunition to right wing critics of the Fed who would deny it the capacity to engage in the kind of crisis responses that have judged in their totality been successful in responding to the financial crisis.

The most important policy priority with respect to the Fed is protecting it from stone age monetary ideas like a return to the gold standard, or turning policymaking over to a formula, or removing the dual mandate commanding the Fed to worry about unemployment as well as inflation. ...

JohnH said...
Disagree!!! There is more to this than just interest rates. There is the matter of how the policy gets implemented--who gets low rates. Currently the low rates serve mostly the 1%, who profit enormously from them. Case in point: Mort Zuckerberg's 1% mortgage!

"The obvious candidate for this dark force [correlation between (rising) inequality and (low) growth] is crony capitalism. When a country succumbs to cronyism, friends of the rulers are able to appropriate large amounts of wealth for themselves -- for example, by being awarded government-protected monopolies over certain markets, as in Russia after the fall of communism. That will obviously lead to inequality of income and wealth. It will also make the economy inefficient, since money is flowing to unproductive cronies. Cronyism may also reduce growth by allowing the wealthy to exert greater influence on political policy, creating inefficient subsidies for themselves and unfair penalties for their rivals."

http://www.bloombergview.com/articles/2015-12-24/cronyism-causes-the-worst-kind-of-inequality

As we know (although most here steadfastly ignore it) the Fed is rife with crony capitalism. As Bernie pointed out, 4 of the regional governors are from Goldman Sachs. Other examples are abundant. Quite simply, the system is rigged to benefit the few, minimizing any potential trickle down.

If a broad economic recovery is the goal, ending cronyism at the Fed is likely to be far more effective that low interest rates channeled only to the 1%.

JohnH said in reply to JohnH...
Stiglitz:

The real problem is that money does not go to where it should go, as we see for example in the United States. The money does not flow into the real economy, because the transmission mechanism is broken. That is why we have a bubble in the financial system. The answer is not to tighten monetary policy, but to reform monetary policy so as to ensure that the money gets to the right place...

Small and medium enterprises cannot borrow money at zero interest rates - not even a private person, I wish I could do that (laughs). I'm more worried about the loan interest rates, which are still too high. Access for small and medium enterprises to credit is too expensive. That's why it is so important that the transmission mechanism work..."
http://www.cash.ch/news/alle/stiglitz-billiggeld-lost-kein-problem-3393853-448

And let's not forget consumer credit rates, which barely dropped during the Great Recession and are still well above 10%. Even mortgage lending, which primarily benefits the affluent, have been stagnant for years despite historically low rates.

As Stiglitz notes, the transmission mechanisms are broken. Economists' trickle down monetary policy might work in theory, but not in practice, as we have seen for the last seven years, when low rates don't trickle down and were wasted instead on asset speculation by the 1%.

Reform of the Fed, and the end of cronyism are essential to making sure that the stimulus of low rates gets to Main Street, to ordinary people, and not primarily to asset speculators.

Peter K. said in reply to JohnH...

Bernie Sanders:

"The recent decision by the Fed to raise interest rates is the latest example of the rigged economic system. Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort - not to fight phantom inflation. "

http://www.nytimes.com/2015/12/23/opinion/bernie-sanders-to-rein-in-wall-street-fix-the-fed.html

EMichael said in reply to Peter K....

It is hilarious.

"He's right! But his policies are wrong!"

You couldn't make this up......

JF said...
The financial system reform legislation in 2017 will also need to include these matters:

1. Licensure fees and higher and more differential income taxation rates based on the type of financial trading ratios the entities have (in order to direct more emphasis to real-economy lending and away from speculative and leveraged positions used in the financial asset trading marketplaces, so hedge funds probably would face the highest rates in income taxation). For a certain period after enactment these added taxes would be payable by the banks using their excess reserves, which will simply be eliminated until the reserve accounts return to the historically normal period when excess reserves were very small (there would no longer be a need for IOER, as the excess would be eliminated by operation of the taxation statutes). Attaching added ways & means statutes to all the financial service entities also serves to 'cover' some more of huge financial risk held by society and produced by them while the success of this huge sector actually contributes to the financing of self-government - which is also an indirect way to attach high Net Worth being used).

2. New statutory provisions need to reach any and all entities in the financial community regardless of definitions based on the functions they serve or provide (or the way they are named - so yes, the prior separation for deposit-management banking from investing activities can still happen, but this only helps to define which of the differential provisions apply, not help the entity escape them). Perhaps as a result Bank Holding Companies and other large entities won't use a complex network of hundreds of subsidiaries as these would not then serve as a way to avoid taxation, regulatory standards on what are prudent expectations, or supervision; or be used simply to obfuscate -- so investors and regulators can't see the truth of matters.

3. The newly named central bank needs to hold the discretion to buy Treasury bonds directly from the Treasury. This would discipline these fundamental asset-trading marketplaces and the huge primary dealer group of entities, and weaken the fox-and-hen-house influence on public finance.

4. New accounting approaches for the central bank would clarify what happens should the Congress direct redemption amounts or asset sales for the public's purposes. A good portion of the current FRB's book of owned assets can be redeemed or sold without affecting the 'power' of the central bank, and the proceeds used then, for example, to lower payroll taxes via a direct transfer to the social security trust fund's set of accounts).

Senator Sanders, good stuff. Bring out the vote, let us get others in Congress with whom you can work.

BillB said...
Summers: "The most important policy priority with respect to the Fed is protecting it from stone age monetary ideas like a return to the gold standard, or turning policymaking over to a formula, or removing the dual mandate commanding the Fed to worry about unemployment as well as inflation."

And in one sentence Summers illustrates exactly why we dodged a bullet in not appointing Summers to be Fed Chair. Preserving the power of the Fed is not the most important policy. Changing the Fed composition so that it is more consumer friendly and not dominated by Wall Street interests is the most important policy change needed.

Summers argument is the same we always hear from so-called "centrists." "You hippies should shut up because you are helping the opposition."

You hear the same sort of argument with respect to Black Lives Matter.

pgl said in reply to pgl...

On financial regulation - Summers is spot on here:

"the Balkanized character of US banking regulation is indefensible and would be ended. The worst regulatory idea of the 20th century-the dual banking system-persists into the 21st. The idea is that we have two systems one regulated by the States and the Fed and the other regulated by the OCC so banks have choice. With ambitious regulators eager to expand their reach, the inevitable result is a race to the bottom."

It is called regulatory capture.

Summers is also calling for higher capital requirements. Excellent stuff!

[Dec 27, 2015] Summer Rerun Why America Will Need Some Elements of a Welfare State

Notable quotes:
"... Wolf concludes that America cannot do without some form of a welfare state, specifically improved training, education, and universal health care. ..."
"... Our problem is that we are asking for concessions that are beyond the acceptable limit for elites in any historical epoch. We're asking the powerful and the rich to give up their money and power for the greater good of all mankind. This is not likely to happen unless a powerful enough segment of the elite comes to the inescapable conclusion that they're literally dead meat if they don't and therefore opts for survival over position. ..."
"... Welfare etc are social services that can only be funded through the world-wide looting operation of the American empire ..."
Dec 27, 2015 | naked capitalism

An excellent column by Martin Wolf in the Financial Times, where he is the lead economics editor. Starting with principles put forward by Ben Bernanke in his recent speech on income inequality, Wolf concludes that America cannot do without some form of a welfare state, specifically improved training, education, and universal health care.

James Levy, December 26, 2015 at 4:32 pm

I have no idea if Marx was right, in the long run, or wrong–the verdict is still out on the long-term viability of industrial capitalism, which is less than 250 years old and creaking mightily as I write this. It may be that when Rosa Luxemburg said that the choice was between Socialism and Barbarism, she underestimated how likely barbarism was. What I do know is that capitalism today isn't just too ugly to tolerate, it is downright murderous. Its imperatives are driving the despoliation of the planet. It's love of profit over all else is cutting corners and creating externalities that are lethal. But it has made a few percent of the global population comfortable and powerful, and they are holding onto that comfort and that power come hell or high water (and, ironically, if things continue apace both are on the menu).

Our problem is that we are asking for concessions that are beyond the acceptable limit for elites in any historical epoch. We're asking the powerful and the rich to give up their money and power for the greater good of all mankind. This is not likely to happen unless a powerful enough segment of the elite comes to the inescapable conclusion that they're literally dead meat if they don't and therefore opts for survival over position. I am not enthusiastic that this will happen before it is way too late to save more than a fraction of the current world population, and send those people back to the lifestyles and thought patterns of 30 Year's War Europe.

    1. digi_owl

      Its a generational thing. Right after WW2, many of the elite had just that epiphany that unless they have the common people behind them, they are toast. But now they are dead or dying, and their grandkids are basically once more thinking that they can go it alone. This because they have not had the required experiences that help develop the wisdom.

      Reply
  1. Paul Tioxon

    What Marx saw long ago, we can see today, and without relegating ourselves to his analysis, come to our own conclusions. Contradictions, summed up well by Lincoln as a house divided against itself cannot stand is just as true today. Millions of guns to protect the citizenry from tyranny have only resulted in a 1/4 million murders and 5 times as many shootings since Jan 1, 2000, some placing people in wheel chairs and other crippling gunshot afflictions, and more and more institutionalized state oppression, economic exploitation and miserable lives propped up in an alcoholic haze until the liver or brain gives out. We have more food than we know what to do with so we throw away almost as much as we eat. And we have eaten ourselves into morbid obesity, diabetes and heart disease. The contradictions abound from the kitchen table to the kitchen cabinet of the White House where there seems to be nothing passed so freely as bad advice.

    The Welfare State arose from the sacrifices of the population in giving their sweat, blood and tears to defend their nation during war, to be rewarded for their sacrifices, rewards which were demands for power sharing and more in the paycheck, more benefits and more time to enjoy the life spent in a more prosperous world. It seems to me that Obamacare is not simply in death spiral all of its own making, but even more so, because it is the best attempt capitalism can produce in an America that is the most capitalist of societies down to the marrow its bones. Little competition from the Church or the social relations between nobles and subjects set for in the laws that were disestablished to free markets for commodification and money making. Money making enterprises structured the laws from slavery, to the voting franchise with little from the state to cushion any of the hardships of life in America.

    Health care is the largest industry we have. It is approaching 20% of the GNP. I remember the great national freak out in the late 1970s when congress realized it was approaching 10%. Nothing seems to be stopping the costs from spiraling upward and onward. No risk of deflation here where nothing is spared to save a life, operate on some poor little afflicted child, or buy a piece of equipment the size of an office building that shoots a proton beam at cancer, one cancer cell at a time.

    When Obama Care becomes a clear burden to even the democrats who can point to it now as some sort of accomplishment, and it is an accomplishment for the people who finally get to see a doctor, get into a hospital, get that operation or diagnosis that saves their lives, when even those accomplishments number in the millions, it will be part of a health care industry for which $Trillions of dollars can no longer be justified or even funded. As that financial collapse approaches, it would be better for politicians to declare the defeat of a program better rolled into one universal single payer system currently operating as Medicare, than try to reform, shore up or the old tried and true public lie, get rid of its waste and corruption.

    Declare victory with Medicare as the solution and put everyone into it. The only paper work left should be each person's medical history with diagnosis and healing as the happy ending to the story.

    Reply
  2. jgordon

    There is a fundamental error in perception in the Western world that is so pervasive that people can't even see it. As a most basic component of a healthy society people need to be able to survive at a local community level without outside support. Only after that is taken care of should people concern themselves with luxuries, inter-community and international relations.

    Welfare–not to mention other government services–can appear to have positive impacts if one only looks at their effects in isolation, however I think there is a devastating and pernicious impact on people's ability to form community bonds and have local resilience with things like welfare.

    Also, let's also not forget that Americans consume far more of the earth's precious resources than any other group in the world. Welfare etc are social services that can only be funded through the world-wide looting operation of the American empire. Do these recipients of empire benefits have a moral right to share in the loot of empire? Perhaps instead of domestic welfare it would be more ethical for the American empire to provide social benefits for the indigenous peoples who are forced from their lands to work like slaves for the empire's benefit. Although admittedly if the American empire used it's loot for the benefit of the foreign peoples whose lives it destroyed then there'd probably be nothing left to spread around to the military, or to pacify and police the domestic population. So I suppose that's not a serious proposal.

    Reply
    1. Left in Wisconsin

      Welfare etc are social services that can only be funded through the world-wide looting operation of the American empire

      This is obviously not true. Unless every social democratic country in the world is considered as a piece of the American empire. And even then, I would argue that we can easily afford a generous welfare state with a small shift in priorities away from (globally destabilizing) defense spending to social productive spending on human development.

      Reply
      1. jgordon

        Obvious to who? America lavishes so much money on its military not only because of corruption, but also because it has the world reserve currency and is a guarantor of the safety of international shipping. These facts are inextricably linked to the America's status as the world hegemon. The empire provides order and structure, and enforces the extraction of resources from the periphery to the center. The bread and circuses are inextricably linked to the empire's military activities and trying to tease them apart will only lead to collapse of the entire system sooner than it will otherwise happen.

        "Social Democratic"–now that's an interesting phrase. Did you know that Syria is a democracy, and was an extremely prosperous and well-education nation prior to 2011?

        Reply
        1. Vatch

          "Did you know that Syria is a democracy"

          Here's a telling paragraph from the Wikipedia article about Syria:

          Hafez al-Assad died on 10 June 2000. His son, Bashar al-Assad, was elected President in an election in which he ran unopposed.[68] His election saw the birth of the Damascus Spring and hopes of reform, but by autumn 2001 the authorities had suppressed the movement, imprisoning some of its leading intellectuals.[84] Instead, reforms have been limited to some market reforms.

          [Dec 27, 2015] The Sneaky Way Austerity Got Sold to the Public Like Snake Oil

          Notable quotes:
          "... When children don't get good educations, the production of knowledge falls into private control. Power gets consolidated. The official theoretical frameworks that benefit the most powerful get locked in. ..."
          "... Not only were the politicians worried about votes but also the welfare state was a way to head off a left wing revolution. ..."
          "... the change began in 1976 with the election of Rockefeller-funded Jimmy Carter, who immediately launched an austerity program. Support for Keynesian economics was further eroded by the 70's stagflation which we now know was caused by Mid East oil but at the time the "left" were like deer in the headlights, with no clue what to do. ..."
          "... The final nail in the coffin was the fall of the Berlin Wall and the collapse of the USSR, discrediting communism. After that, "there was no alternative" to corporate capitalism. Or more accurately, the left was slow to formulate an alternative and to this day is still struggling with an alternative as we have observed with Syriza. It's not enough to oppose austerity, you have to have a constructive plan to fix things. ..."
          Dec 27, 2015 | naked capitalism
          LP: You indicate that this approach to budgeting was invented as a way of making the New Deal acceptable to the business community. How did that work? Over time, who has benefitted from it? Who has lost?

          OC: Back in the 1940s, workers were fighting for their rights, class struggle was heating up, and soldiers would soon be returning from the fronts. At that point, a new business organization, the Committee for Economic Development (CED), came together. Led by Beardsley Ruml and other influential business figures, the CED played a crucial role in developing a conservative approach to Keynesian economics that helped make policies that would help put all Americans to work acceptable to the business community.

          The idea was that more consumers would translate into more profits - which is good for business. After all, the economic experts and budget technicians said so, not just the politicians. And the business leaders were told that economic growth and price stability would go along with this, which they liked.

          But things changed progressively over the 1970s and early 1980s. Firms went global. They became financialized. The balance of power between workers and owners started to shift more towards the owners, the capitalists. People were told they needed to sacrifice, to accept cuts to social spending and fewer rights and benefits on the job - all in the name of economic science and capitalism. The CAB was turned into a tool for preventing excessive spending - or justifying selected cuts.

          Middle class folks were afraid that inflation would erode their savings, so they were more keen to approve draconian measures to cut wages and reduce public budgets. People on the lower rungs of the economic ladder felt the pain first. But eventually the middle class fell on the wrong side of the fence, too. Most of them became relatively poorer.

          I suppose this shows the limits of democracy when information, knowledge, and ultimately power are unequally distributed.

          LP: You're really talking about birth of austerity and the way lies about public spending and budgets have been sold to the public. Why is austerity such a powerful idea and why do politicians still win elections promoting it?

          OC: Austerity is so powerful today because it feeds off of itself. It makes people uncertain about their lives, their debts, and their jobs. They become afraid. It's a strong disciplinary mechanism. People stop joining forces and the political status quo gets locked down.

          Even the
          name of this tool, the "cyclically adjusted budget," carries an aura of respect. It diverts our attention. We don't question it. It creates a barrier between the individual and the political realm: it undermines democratic participation itself. This obscure theory validates, with its authority, a big economic mistake that sounds like common sense but is actually snake oil - the notion that the federal government budget is like a household budget. Actually, it isn't. Your household doesn't collect taxes. It doesn't print money. It works very differently, yet the nonsense that it should behave exactly like a household budget gets repeated by politicians and policymakers who really just want to squeeze ordinary people.

          LP: How does all this play out in the U.S. and in Europe?

          OC: The European Union requires its members to comply with something called a cyclically adjusted budget constraint. Each country has to review its economic and fiscal plans with the European Commission and prove that those are compatible with the Pact. It's a ceiling on a country's deficit, but it's also much more than that.

          Thanks to the estimate, the governments of Italy or Spain, for example, are supposed to force the economy toward some ideal economic condition, the definition of which is obviously quite controversial and has so far rewarded those countries that have implemented labor market deregulation, cut pensions, and even changed the way elections happen. Again, it's a control mechanism.

          In the U.S. this scenario plays out, too, although less strictly. Talk about the budget often relies on the same shifty and politically-shaded statistical tools to support one argument or the other. Usually we hear arguments that suggest we have to cut social programs and workers' rights and benefits or face economic doom. Tune in to the presidential debates and you'll hear this played out - and it isn't strictly limited to one party.

          LP: How do we stop powerful players from co-opting economics and budgets for their own purposes?

          OC: Our education system is increasingly unequal and deprived of public resources. This is true in the U.S. but also in Europe, where the crisis accelerated a process that was already underway. When children don't get good educations, the production of knowledge falls into private control. Power gets consolidated. The official theoretical frameworks that benefit the most powerful get locked in.

          In the economic field, we need to engage different points of view and keep challenging dominant narratives and frameworks. One day, human curiosity will save us from intellectual prostitution.

          craazyboy, December 25, 2015 at 10:10 am

          Most people don't eat, go to college, use healthcare, rent or buy housing on the east or west coast, or purchase military equipment (except perhaps small time stuff like assault rifles), so the BLS greatly underweights(or hedonics prices, or just pulls rent data outta their butts) these things in the inflation data they create. The Fed then goes into a tizzy if the data comes in a few tenths of a percent below 2%, even if the data spent years above 2%, and floods the country in liquidity so our job creators – banks and large corporations – will hire us and give us raises, and once they finish doing that, the BLS will signal that inflation is 2% and the Fed will then know all our problems are solved. It just takes time.

          See the book "Treasure Island" for how things are going on the revenue side. But more tax breaks for large corporations and the wealthy are needed so we don't force them to do any illegal tax avoidance stuff and they will then happily pay whatever they think their fair should be. Might be zero. They will then have money to buy stuff too, which is a big plus as well, when you think about it.

          So clearly, you can see why deficit spending almost seems inevitable.

          Then the next problem is we still have unemployment, and something needs to be done about that. For instance, lots of room for more government contracts for social purposes. Take Obamacare. Place a single source contract, now estimated between $1 and $2 billion, with a Canadian systems company that employs independent contractor Indian programmers. Eventually, we have Obamacare!

          We can do this if we just get serious about this and say "No More Austerity In America!"

          likbez, December 27, 2015 at 9:31 pm

          Emperor Severus is famously said to have given the advice to his sons: "Be harmonious, enrich the soldiers, and scorn all other men"

          Brooklin Bridge

          Can education provide the solution?

          I suspect that the educational bias occurs at all levels in the sense that much the same misinformation is provided regardless of neighborhood but progressively wrapped in more elegant pedagogical flim-flam-ery for the owner class. Basically, the bias changes, but not the message, as one goes from poor (austerity – this is your lot in life) to wealthy (austerity – you were born to make the tough decisions, it's in your genes – and you'll just have to accept the rewards, man up to your destiny and toss em a quarter on Sundays). The upper class does get a far better education, but the bias is or becomes unconscious over time.

          Basically, aristocracy is a nasty brutish cycle that keeps upping the ante of consequences.

          washunate, December 26, 2015 at 8:09 am

          Yves, INET and NEP and others have been lecturing that topic for years. How many trillions of dollars do we have to deficit spend before the failure of things to improve indicts the hypothesis itself?

          Maybe what matters is not the amount of the spending, but rather, the distribution.

          And what is so bad about deflation? The attachment of moral judgment to inflation and deflation is rather bizarre outside of establishment monetary economics. The basic monetary problem confronting the bottom 80% or so of American households is inflation, not deflation.


          Dan Lynch, December 25, 2015 at 11:27 am

          I don't buy the article's historical narrative.

          Conservatives have ALWAYS opposed spending on social programs and ALWAYS used the deficit as an excuse (unless the deficit was due to war or tax cuts for the rich). This was true during the New Deal; FDR himself was a deficit hawk.

          Nonetheless for years the public supported social programs and no politician dared to cut them. Not only were the politicians worried about votes but also the welfare state was a way to head off a left wing revolution.

          What changed? I would say the change began in 1976 with the election of Rockefeller-funded Jimmy Carter, who immediately launched an austerity program. Support for Keynesian economics was further eroded by the 70's stagflation which we now know was caused by Mid East oil but at the time the "left" were like deer in the headlights, with no clue what to do.

          The final nail in the coffin was the fall of the Berlin Wall and the collapse of the USSR, discrediting communism. After that, "there was no alternative" to corporate capitalism. Or more accurately, the left was slow to formulate an alternative and to this day is still struggling with an alternative as we have observed with Syriza. It's not enough to oppose austerity, you have to have a constructive plan to fix things.

          Vatch, December 25, 2015 at 12:40 pm

          History teaches us that peacetime austerity can be horribly disastrous. Some examples:

          British austerity during the 19th century included the Great Irish Famine of 1845-1849: The Irish population was about 8 million people in 1841, and the death toll of the famine was at least a million. This is a huge percentage loss of life. Due to the combination of deaths with emigration and births that did not occur, the 1851 population of 6.5 million was estimated to be about 2.5 million lower than expected. Since food was exported during the famine, this was definitely an extreme case of austerity.

          Soviet austerity during the 1930s: Millions died, and food was exported during the famine period of 1931-1933. Austerity is often associate with conservatives, so I guess conservative austerity enthusiasts must be pleased with the performance of the eminent conservative Josef Stalin.

          Chinese austerity during the Great Leap Forward of 1958-1962: Tens of millions died - perhaps as many as 45 million. The same irony about conservatives and Stalin is true about conservatives and Mao, but on a far greater scale.

          Merry Christmas.

          ben chifley

          july 24 2015: Krugman:Ignore the 'MIT gang' at US economy's peril Paul Krugman says while economists of the '70s discarded Keynes, he never went away at MIT.‏
          http://www.chron.com/opinion/outlook/article/Krugman-Ignore-the-MIT-gang-at-US-economy-s-6404243.php

          MIT: Libertarian Haven | Independent Political Report‏
          http://www.independentpoliticalreport.com/2011/01/mit-libertarian-haven/

          Soros | MIT Global Education & Career Development‏
          https://gecd.mit.edu/go-abroad/distinguished-fellowships/explore-fellowships/soros

          washunate

          This is a pretty remarkable piece of rambling drivel. To the extent coherent points can be taken away from this, it appears there are at least two major flaws:

          1) There is absolutely no link between public opinion and CAB. Germany chooses to have national healthcare, passenger rail, and renewable energy. The US chooses to have national security, predatory medicine, and car-dependent sprawl.

          2) There is absolutely no link between austerity and concentration of wealth and power. France has a much more equal distribution of wealth than the US. Yet the US has run enormous deficits while France is supposedly constrained by the techno mumbo jumbo nonsense of the EU.

          The notion that 'austerity' is sold to the public is just a blatant falsehood. Americans don't support the budget priorities in Washington. It's a collective action problem, not a public opinion problem.

        2. [Dec 24, 2015] The Fed Has Created A Monster And Just Made A Dangerous Mistake, Stephen Roach Warns

          Zero Hedge
          Stephen Roach is worried that the Fed has set the world up for another financial market meltdown.

          Lower for longer rates and the proliferation of unconventional monetary policy have created "a breeding ground for asset bubbles, credit bubbles, and all-too frequent crises, so the Fed is really a part of the problem of financial instability rather than trying to provide a sense of calm in an otherwise unstable world," Roach told Bloomberg TV in an interview conducted a little over a week ago.

          To be sure, Roach's sentiments have become par for the proverbial course. That is, it may have taken everyone a while (as in five years or so) to come to the conclusion we reached long ago, namely that central banks are setting the world up for a crisis that will make 2008 look like a walk in the park, but most of the "very serious" people are now getting concerned. Take BofAML for instance, who, in a note we outlined on Wednesday, demonstrated the prevailing dynamic with the following useful graphic:

          Perhaps Jeremy Grantham put it best: "..in the Greenspan/ Bernanke/Yellen Era, the Fed historically did not stop its asset price pushing until fully- fledged bubbles had occurred, as they did in U.S. growth stocks in 2000 and in U.S. housing in 2006."

          Indeed. It's with that in mind that we bring you the following excerpts from a new piece by Roach in which the former Morgan Stanley chief economist and Yale fellow recounts the evolution of the Fed and how the FOMC ultimately became "beholden to the monster it had created".

          * * *

          From "The Perils of Fed Gradualism" as posted at Project Syndicate

          By now, it's an all-too-familiar drill. After an extended period of extraordinary monetary accommodation, the US Federal Reserve has begun the long march back to normalization.

          A majority of financial market participants applaud this strategy. In fact, it is a dangerous mistake. The Fed is borrowing a page from the script of its last normalization campaign – the incremental rate hikes of 2004-2006 that followed the extraordinary accommodation of 2001-2003. Just as that earlier gradualism set the stage for a devastating financial crisis and a horrific recession in 2008-2009, there is mounting risk of yet another accident on what promises to be an even longer road to normalization.

          The problem arises because the Fed, like other major central banks, has now become a creature of financial markets rather than a steward of the real economy. This transformation has been under way since the late 1980s, when monetary discipline broke the back of inflation and the Fed was faced with new challenges.

          The challenges of the post-inflation era came to a head during Alan Greenspan's 18-and-a-half-year tenure as Fed Chair. The stock-market crash of October 19, 1987 – occurring only 69 days after Greenspan had been sworn in – provided a hint of what was to come. In response to a one-day 23% plunge in US equity prices, the Fed moved aggressively to support the brokerage system and purchase government securities.

          In retrospect, this was the template for what became known as the "Greenspan put" – massive Fed liquidity injections aimed at stemming financial-market disruptions in the aftermath of a crisis. As the markets were battered repeatedly in the years to follow – from the savings-and-loan crisis (late 1980s) and the Gulf War (1990-1991) to the Asian Financial Crisis (1997-1998) and terrorist attacks (September 11, 2001) – the Greenspan put became an essential element of the Fed's market-driven tactics.

          The Fed had, in effect, become beholden to the monster it had created. The corollary was that it had also become steadfast in protecting the financial-market-based underpinnings of the US economy.

          Largely for that reason, and fearful of "Japan Syndrome" in the aftermath of the collapse of the US equity bubble, the Fed remained overly accommodative during the 2003-2006 period. The federal funds rate was held at a 46-year low of 1% through June 2004, before being raised 17 times in small increments of 25 basis points per move over the two-year period from mid-2004 to mid-2006. Yet it was precisely during this period of gradual normalization and prolonged accommodation that unbridled risk-taking sowed the seeds of the Great Crisis that was soon to come.

          Today's Fed inherits the deeply entrenched moral hazard of the Asset Economy. The longer the Fed remains trapped in this mindset, the tougher its dilemma becomes – and the greater the systemic risks in financial markets and the asset-dependent US economy.

          Full post here

          * * *

          Roach goes on to say that we're already seeing the beginnings of what may very well turn out to be a dramatic unwind as high yield rolls over and the emerging world struggles to cope with a soaring dollar (remember, even though EM has largely avoided "original sin" i.e. borrowing in dollars, at the sovereign level, corporates are another story).

          As an aside, those interested in a comprehensive account of what Roach covers in the article cited above are encouraged to reach David Stockman's "The Great Deformation."

          [Dec 24, 2015] A big hint about why so many people support Donald Trump might come from Germany

          An interesting and plausible hypothesis: Trump as a candidate who answers voters frustration with neoliberalism.
          Notable quotes:
          "... The data suggest theres some kind of connection. According to polls, whites with a high school degree or less disproportionately favor Trump. These are the same people who have seen their economic opportunities decline the most in recent years. This group also disproportionately favors tough restrictions on immigration. ..."
          "... A new study released this week showed that in Germany, the economic frustrations of trade nudged many people into becoming right-wing extremists over the past two decades - throwing their support behind the country's neo-Nazi parties. ..."
          "... Still, these far-right parties have consistently earned a percentage point or two of the German national vote. And the economists found that they have been particularly popular with people who have been negatively impacted by trade. ..."
          "... using German data on elections, employment, and commerce, they showed that places where trade caused the most pain also had the largest increases in support for far-right parties. Over the past 20 years, Germanys exports and imports have both skyrocketed, first thanks to the fall of the Iron Curtain, then due to Chinas rise as a major manufacturer. ..."
          "... Workers whose industries were hurt by trade were were more likely to say they would start voting for one of the extreme right parties. Even workers whose own industries were unaffected by trade were more likely to support a neo-Nazi political party if they lived in a region hurt by trade. ..."
          "... Christian Dippel, one of the authors of the study, says it's also important to look at the context in each country. The neo-Nazi parties happen to be the voice of anti-globalization in Germany. But in Spain, for instance, these views are the trademark of Podemos, a far-left party "known for its rants against globalization and the tyranny of markets," according to Foreign Affairs. ..."
          "... The larger lesson, Dippel says, is that globalization creates a class of angry voters who will reward whoever can tap into their frustrations. These are usually extremist parties, because the mainstream tends to recognize the overall benefits of trade. "When the mainstream parties are all, in a loose sense, pro-globalization, there's room for fringe groups to latch onto this anti-globalization sentiment and profit from it," he says. ..."
          "... Author has shown that in America, recent trends in trade have hurt low-wage workers the most. With his co-authors David Dorn, Gordon Hanson and Jae Song, he published a widely-cited 2014 paper measuring the negative impacts of manufacturing imports from China, America's largest trading partner. Most of those ill-effects - like unemployment and lower earnings - were borne by the workers with the lowest wages. ..."
          "... "Immigration always seems to be the most tangible evidence of the impingement of others on your economic turf," Author adds. ..."
          "... "In Germany, these three things get bundled up in these far-right platforms in a way that's very difficult to unpack," he says. "It could be that you're bundling these ideas together for a reason. It could be that you're bundling together what's really happening with an idea that's more tangible, that you could sell more easily to angry voters." ..."
          The Washington Post

          A popular theory for Donald Trump's success emphasizes the economic anxiety of less-educated whites, who have struggled badly over the past few decades.

          Hit hard by factory closings and jobs moving abroad to China and other places, the story goes, blue-collar voters are channeling their anger at immigrants, who have out-competed them for what jobs remain. Trump, with his remarks about Mexicans being rapists, has ridden this discontent to the top of the polls.

          The data suggest there's some kind of connection. According to polls, whites with a high school degree or less disproportionately favor Trump. These are the same people who have seen their economic opportunities decline the most in recent years. This group also disproportionately favors tough restrictions on immigration.

          But just because there appears to be a connection doesn't mean there is one. Has globalization pushed working-class voters to the right? Nobody has proven that globalization has in fact pushed working-class voters to the right or made them more extreme, at least not in the United States, where the right kind of data aren't being collected. But unique records from Germany have allowed economists to show how free trade trade changes people's political opinions.

          A new study released this week showed that in Germany, the economic frustrations of trade nudged many people into becoming right-wing extremists over the past two decades - throwing their support behind the country's neo-Nazi parties. Written by economists Christian Dippel, of University of California, Los Angeles, Stephan Heblich, of the University of Bristol, and Robert Gold of the Kiel Institute for the World Economy, the paper was released by the National Bureau of Economic Research.

          Germany's far-right politicians, it should be noted, are not garden-variety nationalists. German intelligence keeps tabs on these people, who frequently use racist and anti-Semitic language. They say things like: "Europe is the continent of white people and it should remain that way." Many believe in a global Jewish conspiracy. They are much more radical than, say, Marine Le Pen's National Front party in France.

          Still, these far-right parties have consistently earned a percentage point or two of the German national vote. And the economists found that they have been particularly popular with people who have been negatively impacted by trade.

          How they measured the radicalizing power of trade

          The economists took two different approaches to measure the connection between globalization and right-wing extremism.

          First, using German data on elections, employment, and commerce, they showed that places where trade caused the most pain also had the largest increases in support for far-right parties. Over the past 20 years, Germany's exports and imports have both skyrocketed, first thanks to the fall of the Iron Curtain, then due to China's rise as a major manufacturer.

          The researchers looked individually at Germany's 408 local districts, which are roughly equivalent to counties in the United States. Each of these places was affected by increasing trade in different ways. Areas that specialized in high-end cars, for instance, saw a happy boost from expanded exports. Areas that specialized in, say, textiles, were stomped on by cheap Chinese and Eastern European imports.

          This map shows changes in imports (bad!) compared to exports (good!). The dark blue regions are places where imports increased a lot more than exports. These are the places where trade made things worse, where people lost jobs and factories were shuttered.

          These also happen to be the places where far-right parties made the most gains, on average. This is true after controlling for demographics in each county, the size of the manufacturing sector, and what part of the country the county was in.

          The researchers argue that this relationship is more than just a correlation. To prove that trade caused far-right radicalization, they only look at changes to the German economy inflicted by external forces - say, a sudden increase in Chinese manufacturing capacity.

          (Also, to get around the problem of German reunification, which happened in 1990, the researchers split up the analysis into two time periods. From 1987 to 1998, they only looked at West Germany. From 1998 to 2009, they looked at both regions.)

          This evidence from patterns of trade and voting records is convincing, but there is one major hole. The turmoil from trade caused certain counties to become friendlier to extremist parties - but was it because the people living there became radicalized? Or did all the moderate voters flee those places, leaving behind only the crusty xenophobes?

          So, to follow up, the researchers used a special German survey that has been interviewing some of the same people every year since the 1980s. This is a massively expensive project - the U.S. doesn't have anything quite like it - and it allowed the researchers to actually observe people changing their minds.

          Workers whose industries were hurt by trade were were more likely to say they would start voting for one of the extreme right parties. Even workers whose own industries were unaffected by trade were more likely to support a neo-Nazi political party if they lived in a region hurt by trade.

          In part this is because trade affects more than just the people who lose their jobs when the shoe factory closes. Those assembly line workers need to find new jobs, and they put pressure on people in similar occupations, say, at the garment factory or the tweezer factory.

          What this means for the U.S.

          All in all, the power of trade to radicalize people was rather small, measured in changes of a fraction of a percent. This makes makes sense, because, again, Germany's far-right parties are way out there. It takes a lot of economic suffering to cause someone to start voting with these neo-Nazis.

          Christian Dippel, one of the authors of the study, says it's also important to look at the context in each country. The neo-Nazi parties happen to be the voice of anti-globalization in Germany. But in Spain, for instance, these views are the trademark of Podemos, a far-left party "known for its rants against globalization and the tyranny of markets," according to Foreign Affairs.

          The larger lesson, Dippel says, is that globalization creates a class of angry voters who will reward whoever can tap into their frustrations. These are usually extremist parties, because the mainstream tends to recognize the overall benefits of trade. "When the mainstream parties are all, in a loose sense, pro-globalization, there's room for fringe groups to latch onto this anti-globalization sentiment and profit from it," he says.


          But is there an analogy between the far-right radicals in Germany and the wider group of disaffected working class Americans who, say, support Donald Trump or the tea party? Certainly leaders on the left also capitalize on anti-trade sentiment, but they usually use less harsh rhetoric or seldom attack immigration.

          David Autor, a labor economist at MIT, has been working to address the question of whether the same dynamics are at play in the U.S. But it's a tough one, he says.

          "What [Dippel and his colleagues] are doing is totally sensible, and I think the results are plausible as well - that these trade shocks lead to activity on the extreme right, that they bring about ultranationalism," Autor says.

          "We actually started on this hypothesis years ago for the U.S. to see if it could help to explain the rise of angry white non-college males," he said. "But so far, we just don't have the right kind of data."

          Author has shown that in America, recent trends in trade have hurt low-wage workers the most. With his co-authors David Dorn, Gordon Hanson and Jae Song, he published a widely-cited 2014 paper measuring the negative impacts of manufacturing imports from China, America's largest trading partner. Most of those ill-effects - like unemployment and lower earnings - were borne by the workers with the lowest wages.

          The higher-paid (and probably higher-skilled workers) were able to find new jobs when their companies went bust. Often, they found jobs outside of the manufacturing industry. (An accountant, for instance, can work anywhere.) But the lower-paid workers were trapped, doomed to fight over the ever-dwindling supply of stateside manufacturing jobs.

          China, of course, has been in Trump's crosshairs. He accuses the country of being a "currency manipulator," which may have once been true, but not any more. He has threatened to impose a 25 percent tax on Chinese imports to punish China.

          But Trump has attracted the most attention for his disparaging remarks about immigrants - which is something of puzzle. While it's true that non-college workers are increasingly competing with immigrants for the same construction or manufacturing jobs, Author points out that there's little evidence that immigrants are responsible for the woes of the working class.

          "There's an amazing discrepancy between the data and the perception that I still find very hard to reconcile," he says. "The data do not strongly support the view that immigration has had big effects [on non-college workers], but I don't think that's how people perceive it."

          "Immigration always seems to be the most tangible evidence of the impingement of others on your economic turf," Author adds.

          Dippel says that conflating these ideas could be a political strategy. He makes a distinction between three different kinds of globalization - there's the worldwide movement of capital, goods, and people.

          "In Germany, these three things get bundled up in these far-right platforms in a way that's very difficult to unpack," he says. "It could be that you're bundling these ideas together for a reason. It could be that you're bundling together what's really happening with an idea that's more tangible, that you could sell more easily to angry voters."

          Jeff Guo is a reporter covering economics, domestic policy, and everything empirical. He's from Maryland, but outside the Beltway. Follow him on Twitter: @_jeffguo.

          [Dec 24, 2015] Obama's foreign policy goals get a boost from plunging oil prices

          Notable quotes:
          "... At a time of tension for U.S. international relations, cheap oil has dovetailed with some of the Obama administration's foreign policy goals: pressuring Russian President Vladimir Putin, undermining the popularity of Venezuelan President Nicolás Maduro and tempering the prospects for Iranian oil revenue. At the same time, it is pouring cash into the hands of consumers, boosting tepid economic recoveries in Europe, Japan and the United States. ..."
          The Washington Post

          Plunging crude oil prices are diverting hundreds of billions of dollars away from the treasure chests of oil-exporting nations, putting some of the United States' adversaries under greater stress.

          After two years of falling prices, the effects have reverberated across the globe, fueling economic discontent in Venezuela, changing Russia's economic and political calculations, and dampening Iranian leaders' hopes of a financial windfall when sanctions linked to its nuclear program will be lifted next year.

          At a time of tension for U.S. international relations, cheap oil has dovetailed with some of the Obama administration's foreign policy goals: pressuring Russian President Vladimir Putin, undermining the popularity of Venezuelan President Nicolás Maduro and tempering the prospects for Iranian oil revenue. At the same time, it is pouring cash into the hands of consumers, boosting tepid economic recoveries in Europe, Japan and the United States.

          "Cheap oil hurts revenues for some of our foes and helps some of our friends. The Europeans, South Koreans and Japanese - they're all winners," said Robert McNally, director for energy in President George W. Bush's National Security Council and now head of the Rapidan Group, a consulting firm. "It's not good for Russia, that's for sure, and it's not good for Iran."

          ... ... ...

          In Iran, cheap oil is forcing the government to ratchet down expectations.

          The much-anticipated lifting of sanctions as a result of the deal to limit Iran's nuclear program is expected to result in an additional half-million barrels a day of oil exports by the middle of 2016.

          But at current prices, Iran's income from those sales will still fall short of revenue earned from constrained oil exports a year ago.

          Moreover, low prices are making it difficult for Iran to persuade international oil companies to develop Iran's long-neglected oil and gas fields, which have been off limits since sanctions were broadened in 2012.

          "Should Iran come out of sanctions, they will face a very different market than the one they had left in 2012," Amos Hochstein, the State Department's special envoy and coordinator for international energy affairs, said in an interview. "They were forced to recede in a world of over $100 oil, and sanctions will be lifted at $36 oil. They will have to work harder to convince companies to come in and take the risk for supporting their energy infrastructure and their energy production."

          Meanwhile, in Russia, low oil prices have compounded damage done by U.S. and European sanctions that were designed to target Russia's energy and financial sectors. And when Iran increases output, its grade of crude oil will most likely go to Europe, where it will compete directly with Russia's Urals oil, McNally said.

          Steven Mufson covers the White House. Since joining The Post, he has covered economics, China, foreign policy and energy.

          [Dec 23, 2015] The Big Short Every American Should See This Movie

          Notable quotes:
          "... Enjoyed the movie, but in typical Hollywood fashion, the role of the Federal Reserve and government in pushing housing down to those unable to afford it was not even mentioned once. ..."
          Zero Hedge
          The Big Short opens nationwide today. But it happened to have one showing last night at a theater near me. My youngest son and I hopped in the car and went to see it. I loved the book by Michael Lewis. The cast assembled for the movie was top notch, but having the director of Anchorman and Talledaga Nights handle a subject matter like high finance seemed odd.

          The choice of Adam McKay as director turned out to be brilliant. The question was how do you make a movie about the housing market, mortgage backed securities, collateralized debt obligations, collateralized debt swaps, and synthetic CDOs interesting for the average person. He succeeded beyond all expectations.

          Interweaving pop culture icons, music, symbols of materialism, and unforgettable characters, McKay has created a masterpiece about the greed, stupidity, hubris, and arrogance of Wall Street bankers gone wild. He captures the idiocy and complete capture of the rating agencies (S&P, Moodys). He reveals the ineptitude and dysfunction of the SEC, where the goal of these regulators was to get a high paying job with banks they were supposed to regulate. He skewers the faux financial journalists at the Wall Street Journal who didn't want to rock the boat with the truth about the greatest fraud ever committed.

          ...Ultimately, it is a highly entertaining movie with the right moral overtone, despite non-stop profanity that captures the true nature of Wall Street traders. This is a dangerous movie for Wall Street, the government, and the establishment in general. They count on the complexity of Wall Street to confuse the average person and make their eyes glaze over. That makes it easier for them to keep committing fraud and harvesting the nation's wealth.

          This movie cuts through the crap and reveals those in power to be corrupt, greedy weasels who aren't really as smart as they want you to think they are. The finale of the movie is sobering and infuriating. After unequivocally proving that Wall Street bankers, aided and abetted by the Federal Reserve, Congress, the SEC, and the mainstream media, destroyed the global financial system, put tens of millions out of work, got six million people tossed from their homes, and created the worst crisis since the Great Depression, the filmmakers are left to provide the depressing conclusion.

          No bankers went to jail. The Too Big To Fail banks were not broken up – they were bailed out by the American taxpayers. They actually got bigger. Their profits have reached new heights, while the average family has seen their income fall. Wall Street is paying out record bonuses, while 46 million people are on food stamps. Wall Street and their lackeys at the Federal Reserve call the shots in this country. They don't give a fuck about you. And they're doing it again.

          Every American should see this movie and get fucking pissed off. The theater was deathly silent at the end of the movie. The audience was stunned by the fact that the criminals on Wall Street got away with the crime of the century, and they're still on the loose. I had a great discussion with my 16 year old son on the way home. At least there is one millennial who understand how bad his generation is getting screwed.

          wee-weed up

          I read the book last year... It is outstanding! Highest recommendation. If you have not read this book, you cannot understand how today's market really works.

          JRobby

          This subject matter has to be put in a form that can be understood by the masses. Hopefully the popular actors and this director is a step in that direction.

          Main stream Hollywood as an informer? Hmmmmm? This adds to the current assumptions and rumors of fractures among the elite groups.

          We are reasonable people. If the banking elite is sacrificed and the other corporate oligarchs come into a more socially acceptable line, we may be satisfied. However, the banking elite must be sacrificed. There is no negotiation on that point.

          Of course some will say I am over optimistic, they are throwing it in our faces to make $$$ and it ends up a total police state so enjoy your "entertainment" for now.

          Time goes on. Time will tell.

          chunga

          First you'd have to believe that politicians give a fuck about any damn thing but themselves. REAL concern for minorities or communities LOL! Then you'd have to believe banks were forced to do *anything* they don't want.

          Then, you'd have to fall right to sleep and miss the part where all this crap was sold on Wall Street while at the same time betting against all the "shitty deals" they made, then the whole thing getting bailed out @ par. With par being at the absurd fraudulent property appraisals that were made by the lenders or their agents. It's just nuts.

          This was all planned, beginning with Greenspan. AIG's Greenberg KNEW their CDS paper was no damn good, but didn't care because the also KNEW there would be a bailout. The only problem for him was Paulson and Blankfein conspired to steal the bailout money...and they did!

          That's why all this money went looking for people...it was all planned.

          chunga

          Hundreds of scandals have gone by since then, thoroughly unpunished, so I wonder why this movie is coming out now. I looked into some of the cronies calling the shots at the GSE's back then and saved it. A lot is outdated by now. Seems like a fairly bi-partisan effort.

          FRANKLIN RAINES [D] – FNMA CEO (1999 – 2004) Raines accepted "early retirement" from his CEO position while the SEC pretended to investigate accounting irregularities. Fannie's own OHFHEO also accused him of abetting widespread accounting errors, including the shifting of losses, so he and his fellow execs could "earn" large bonuses. The WSJ reported back in 2008 that Raines was one of several cronies that received below market rates for mortgages from Countrywide. Raines alone receive loans for over $3 million while CEO of FNMA. Raines' compensation for his "work" at FNMA - $90 million.

          RAINES GRADE – F

          DANIEL MUDD [R] – FNMA CEO (2005 – 2008) Before becoming CEO of FNMA, Mudd worked at the Office of the Secretary of Defense, was an advisor to Asia-Pacific Economic Corp., "served" on the board of the Council of Foreign Relations, "consulted" at the World Bank, and held many positions at GE Capital including president and CEO. Mudd was dismissed as CEO of FNMA when FHFA became conservator in 2008. In 2011 Mudd and other GSE execs were charged by SEC with securities fraud. After his career at FNMA Mudd became CEO of a NYC hedge fund named "Fortress". Fortress invested in purchasing tax liens on delinquent property taxes from local governments under many benign corporate names such as "Pleasant Valley Capital" and "Travis Farm Investments". Cozy. Mudd's compensation for his "work" at FNMA - $80 million.

          MUDD GRADE – F

          NEEL KASHKARI [R] – FNMA CEO (Tenure is murky) Kashkari was a former investment banker for Goldman Sachs, was tapped by Hank "The Shank" Paulson to lend his skills over at TARP HQ, and now rather ironically, continues God's work as a Managing Director at PIMCO. Kashkari's compensation for his "work" at FNMA is also murky; I'll just assume it was too much.

          KASHKARI GRADE - F

          HERB ALLISON [D] – FNMA CEO (2008 – 2009) The esteemed Mr. Allison was quickly whisked off to oversee the wildly successful TARP program. I didn't find much on his compensation during his brief stint as FNMA CEO. Allison served in various positions at Merrill Lynch and became a member of the board in 1997. He was a director of the NYSE from 2003 – 2005.

          ALLISON GRADE – F

          MICHAEL WILLIAMS [?] – FNMA CEO (2009 – Jan 1, 2012) Mr. Williams is a 20 year veteran at FNMA. While "serving" as FNMA CEO, Williams managed to scrape by on less than $6 million in 2011 alone. This could and should be considered a hardship, given the complexities involved in purloining ~ $60 billion of Fed bailout money.

          WILLIAMS GRADE – F

          FANNIE'S MAJOR DANCE PARTNER, FREDDIE MAC, HAS ALSO PERFORMED VERY POORLY.

          Charles (my friends call me "Ed") Haldeman has announced his retirement plans but intends to be a good sport and stay on with insolvent FHLMC until another crony can be found to fill his wing-tips.

          That might take a while. "Serving" as CEO of the ultimate backstops for the lion's share of the MBS Ponzi is very stressful.

          We'll have to accept former Freddie exec David Kellermann's testimony posthumously. Mr. Kellermann was found hanging by the neck in the basement of his posh Vienna, VA home in the affluent suburb of Washington. D.C. way back in April of 2009. It is presumed he had no help and local police have stated there was no evidence of foul play.

          Urban Redneck

          GREED is non-partisan. And all sides agreed MOAR "home ownership" was desirable. The left got its SJW colorblind automation, while the underwriters were able to increase volumes by thousands of percent while reducing overall headcount. Securitization wasn't actually "automated" since the fuckwits were using MS-Excel, but it was commoditized with Blackrock's pricing model.

          These were the days of the original algorithms of mass financial destruction, which were primitive and largely FICO-centric, but everyone wanted to minimize the cost (of logic coding and external data sources) so they coding decisioning based solely on information contained in the mortgage application and the applicant's electronic credit report.

          khakuda

          Enjoyed the movie, but in typical Hollywood fashion, the role of the Federal Reserve and government in pushing housing down to those unable to afford it was not even mentioned once.

          Keynesians

          Wall Street is laughing at all the clowns who think this movie will "wake up America". It would have never came out if it was any kind of danger to Wall Street, the FED, or the establishment.

          Agent P

          Directed by Adam McKay (Anchorman, Step Brothers, The Other Guys....), so ... yeah I'm going to go see it. Remember the end credits for The Other Guys? He hates Wall Street....

          GoldenDonuts

          Perhaps you should read the book. These are real characters from a non fiction book. They may have changed a name or two but these are real people. I will lend you my copy if you can't afford one.

          conraddobler

          Yeah I can't imagine a commercially successful movie out of this that would actually tell the truth and make it to the screens.

          What someone should do is write one of those fantastical novels where everything is a symbol for something else and jazz it up, put some romance, danger, intrigue and of course big boobs in it.

          The real message ala the olden days usually had to be hidden to avoid the wrath of those it was really aimed at.

          [Dec 23, 2015] Jewish neocons and the romance of nationalist armageddon

          Notable quotes:
          "... The Pity of It All : A Portrait of the German-Jewish Epoch, 1743-1933 ..."
          "... Perhaps you are making too much of the so called decline of the neocons. At the strategic level, there is little difference between the neocon "Project for a the New American Century" and Brzezinski's "The Grand Chessboard," both of which are consistent with US policy and actions in the Ukraine. ..."
          "... The most significant difference seems to me to be the neocon emphasis on American unilateral militarism versus Obama's emphasis on multilateralism, covert operations and financial warfare to achieve the desired results. ..."
          "... Perhaps another significant difference is the neocon emphasis on the primacy of the American nation-state versus the neoliberal emphasis on an American dominated global empire. ..."
          "... Interesting to juxtapose Brzezinski and the neocons. In a Venn diagram they would over-lap 90%. ..."
          "... Right now, their interests have diverged over the Ukraine crisis. Though many of the American neocons do support subverting Ukraine as does Brzezinski it looks like Israel itself is leaning towards supporting Russia. ..."
          "... Right Sector militias are the fighting force that led the coup against the legally elected Yanukovich government and were almost certainly involved in the recent massacre in Odessa. And you support them for their fight for freedom? You should be ashamed. Zionism is sinking to new lows that they feel the need to identify with open neo-Nazis. ..."
          "... Well, the point is that Zionists in Israel do not identify with that particular set of open neo-Nazis. I suspect that this is simply a matter of the headcount of Jewish business tycoons that are politically aligned with (western) Ukraine and Russia. Or you can count their billions. ..."
          "... The problem with your reasoning, Yonah, is that you are espousing the Neocon line while not apparently recognizing that embarrassing fact. You lament that the US is no longer playing the role of the world's superpower, and acting as the world's cop, confronting militarily Russia, China, Iran and anyone else. It is precisely that mentality that got us into Iraq, could yet have us in a war with Iran, would like to see us defending Ukraine, and thinks we should confront China militarily over bits of rock it and its neighbors are quibbling over. That is a neocon, American supremacy mentality. ..."
          "... Zionism under Likud has played a major role in promoting the neocon approach to foreign policy in the US. It was heavily involved in the birth of that approach, and has helped fund and promote the policy and its supporters and advocates in this country. They (Likud Zionists and Neocons) played a major role in getting us into the Iraq war and are playing a major role in trying to get us involved in a war with Iran, a war in Syria, and even potential wars in Eastern Europe. That is a very dangerous trend and one folks as intelligent as you are, should be focusing on. ..."
          "... "nationalist Armageddon that is nowhere found in the article by Sleeper" ..."
          "... "The misadventure in Iraq has cost the US and the world a lot. The US a loss in humans and money and willingness to play the role of superpower, and the world has lost its cop. " ..."
          "... Tough. Meanwhile hundreds of thousands of innocent Iraqi lives don't rate a mention. ..."
          "... " (let the Russians have their sphere of influence, let the Iranians have their bomb, let the Chinese do whatever they want to do in their part of the world, for after all they hold a trillion dollars in US government debt and so let them act like the boss, for in fact they have been put in that role by feckless and destructive and wasteful US policy). But Sleeper does not say that." ..."
          "... But even if we do focus on neocons, neocons don't have opinions about foreign policy and USA dominance that are much distinct from what most Republican interventionists have. How much difference is there between David Frum and Mitt Romney or between Paul Wolfowitz and Donald Rumsfeld? ..."
          "... Don't look to the US to get any justice in the ME, nor to regain US good reputation in the world. This will situation will not change because US political campaign fiancé system won't change–it just gets worse, enhanced by SCOTUS. ..."
          "... But neoocns have the confidence that if they could impose the neocon's theology on the rest of the world, they can do it here as well on American street . They call it education, motivation, duty, responsibility, moral burden, and above all the essence of the manifest destiny. ..."
          mondoweiss.net
          May 6, 2014 | mondoweiss.net

          At the Huffington Post, Jim Sleeper addresses "A Foreign-Policy Problem No One Speaks About," and it turns out to Jewish identity, the need to belong to the powerful nation on the part of Jewish neoconservatives. Sleeper says this is an insecurity born of European exclusion that he understands as a Jew, even if he's not a warmongering neocon himself. The Yale lecturer's jumping-off point are recent statements by Leon Wieseltier and David Brooks lamenting the decline of American power.

          In addition to Wieseltier and Brooks, the "blame the feckless liberals" chorus has included Donald Kagan, Robert Kagan, David Frum, William Kristol, Paul Wolfowitz, Richard Perle, Douglas Feith, and many other American neoconservatives. Some of them have been chastened, or at least been made more cautious, by their grand-strategic blunders of a few years ago…..

          I'm saying that they've been fatuous as warmongers again and again and that there's something pathetic in their attempts to emulate Winston Churchill, who warned darkly of Hitler's intentions in the 1930s. Their blind spot is their willful ignorance of their own complicity in American deterioration and their over-compensatory, almost pre-adolescent faith in the benevolence of a statist and militarist power they still hope to mobilize against the seductions and terrors rising all around them.

          At bottom, the chorus members' recurrent nightmares of 1938 doom them to reenact other nightmares, prompted by very similar writers in 1914, on the eve of World War I. Those writers are depicted chillingly, unforgettably, in Chapter 9, "War Fever," of Amos Elon's The Pity of It All: A Portrait of the German-Jewish Epoch, 1743-1933. Elon's account of Germany's stampede into World War I chronicles painfully the warmongering hysterics of some Jewish would-be patriots of the Kaiserreich who exerted themselves blindly, romantically, to maneuver their state into the Armageddon that would produce Hitler himself.

          This is the place to emphasize that few of Wilhelmine German's warmongers were Jews and that few Jews were or are warmongers. (Me, for example, although my extended-family history isn't much different from Brooks' or Wieseltier's.) My point is simply that, driven by what I recognize as understandable if almost preternatural insecurities and cravings for full liberal-nationalist belonging that was denied to Jews for centuries in Europe, some of today's American super-patriotic neo-conservatives hurled themselves into the Iraq War, and they have continued, again and again, to employ modes of public discourse and politics that echo with eerie fidelity that of the people described in Elon's book. The Americans lionized George W. Bush, Dick Cheney, Donald Rumsfeld, and many others as their predecessors lionized Kaiser Wilhelm, von Bethmann-Hollweg, and far-right nationalist associates who hated the neo-cons of that time but let them play their roles….

          Instead of acknowledging their deepest feelings openly, or even to themselves, the writers I've mentioned who've brought so much folly and destruction upon their republic, are doubling down, more nervous and desperate than ever, looking for someone else to blame. Hence their whirling columns and rhythmic incantations. After Germany lost World War I, many Germans unfairly blamed their national folly on Jews, many of whom had served in it loyally but only a few of whom had been provocateurs and cheerleaders like the signatories of [Project for New American Century's] letter to Bush. Now neo-cons, from Wieseltier and Brooks to [Charles] Hill, are blaming Obama and all other feckless liberals. Some of them really need to take a look in Amos Elon's mirror.

          Interesting. Though I think Sleeper diminishes Jewish agency here (Sheldon Adelson and Haim Saban are no one's proxy) and can't touch the Israel angle. The motivation is not simply romantic identification with power, it's an ideology of religious nationalism in the Middle East, attachment to the needs of a militarist Sparta in the Arab world. That's another foreign policy problem no one speaks about.

          Krauss, May 6, 2014, 2:11 pm

          "Democracy in in the Middle East" was always just a weasel-word saying of "let's try to improve Israel's strategic position by changing their neighbours".

          The neocons basically took a hardline position on foreign interventionism based out of dual loyalty. This is the honest truth. For anti-Semites, a handful of neocons will always represent "The Jews" as a collective. For many Jews, the refusal to come to grips with the rise of the neocons and how the Jewish community (and really by "community" I mean the establishment) failed to prevent them in their own midst, is also a blemish.

          Of course, Jim Sleeper is doing these things now. He should have done them 15-20 years ago or so. But better late than never, I guess.

          Krauss, May 6, 2014, 2:16 pm

          P.S. While we talk a lot about neocons as a Jewish issue, it's also important to put them in perspective. The only war that I can truly think of that they influenced was the Iraq war, which was a disaster, but it also couldn't have happened without 9/11, which was a very rare event in the history of America. You have to go back to Pearl Harbor to find something similar, and that wasn't technically a terrorist attack but rather a military attack by Japan.

          Leading up to the early 2000s, they were mostly ignored during the 1990s. They did take over the GOP media in the early 90s, using the same tactics used against Hagel, use social norms as a cover but in actuality the real reason is Israel.

          Before the 90s, in the 70s and 80s, the cold war took up all the oxygen.
          So yeah, the neocons need to be talked about. But comparing what they are trying to do with a World War is a bit of a stretch.

          Finally, talking about Israel – which Sleeper ignored – and the hardline positions that the political class in America have adopted, if you want to look who have ensured the greatest slavishness to Israel, liberal/centrist groups like ADL, AJC and AIPAC(yes, they are mostly democrats!) have played a far greater role than the neocons.

          But I guess, Sleeper wasn't dealing with that, because it would ruin his view of the neocons as the bogeymen.

          Just like "liberal" Zionists want to blame Likud for everything, overlooking the fact that Labor/Mapai has had a far greater role in settling/colonizing the Palestinian land than the right has, and not to speak about the ethnic cleansing campaigns of '48 and '67 which was only done by the "left", so too the neocons often pose as a convenient catch-all target for the collective Jewish failure leading up to Iraq.

          And I'm using the words "collective Jewish failure" because I actually don't believe, unlike Mearsheimer/Walt, that the war would not have gone ahead unless there was massive support by the Israel/Jewish lobby. If Jews had decided no, it would still have gone ahead. This is also contrary to Tom Friedman's famous saying of "50 people in DC are responsible for this war".
          I also think that's an oversimplification.

          But I focus more on the Jewish side because that's my side. And I want my community to do better, and just blaming the neocons is something I'm tired of hearing in Jewish circles. The inability to look at liberal Jewish journalists and their role in promoting the war to either gentile or Jewish audiences.

          Kathleen, May 6, 2014, 6:53 pm

          There was talk about this last night (Monday/5th) on Chris Matthew's Hardball segment on Condi "mushroom cloud" Rice pulling out of the graduation ceremonies at Rutger's. David Corn did not say much but Eugene Robinson and Chris Matthews were basically talking about Israel and the neocons desires to rearrange the middle east "the road to Jerusalem runs through Baghdad" conversation.

          Bumblebye, May 6, 2014, 2:33 pm

          "some of today's American super-patriotic neo-conservatives hurled themselves into the Iraq War"

          Have to take issue with that – the neo-cons hurled young American (and foreign) servicemen and women into that war, many to their deaths, along with throwing as much taxpayer money as possible. They stayed ultra safe and grew richer for their efforts.

          Citizen, May 7, 2014, 9:03 am

          @ Bumblebye

          Good point. During WW1, as I read the history, the Jewish Germans provided their fair share of combat troops. If memory serves, despite Weimar Germany's later "stab in the back" theory, e.g., Hitler himself was given a combat medal thanks to his Jewish senior officer. In comparison to the build-up to Shrub Jr's war on Iraq, the Jewish neocons provided very few Jewish American combat troops.

          It's hard to get reliable stats on Jewish American participation in the US combat arms during the Iraq war. For all I've been able to ascertain, more have joined the IDF over the years. At any rate, it's common knowledge that Shrub's war on Iraq was instigated and supported by chicken hawks (Jew or Gentile) at a time bereft of conscription. They built their sale by ignoring key facts, and embellishing misleading and fake facts, as illustrated by the Downing Street memo.

          Keith, May 6, 2014, 7:47 pm

          PHIL- Perhaps you are making too much of the so called decline of the neocons. At the strategic level, there is little difference between the neocon "Project for a the New American Century" and Brzezinski's "The Grand Chessboard," both of which are consistent with US policy and actions in the Ukraine.

          The most significant difference seems to me to be the neocon emphasis on American unilateral militarism versus Obama's emphasis on multilateralism, covert operations and financial warfare to achieve the desired results.

          Perhaps another significant difference is the neocon emphasis on the primacy of the American nation-state versus the neoliberal emphasis on an American dominated global empire.

          So yes, the nationalistic emphasis is an anachronism, however, the decline of the US in conjunction with the extension of a system of globalized domination should hardly be of concern to elite power-seekers who will benefit. In fact, the new system of corporate/financial control will be beyond the political control of any nation, even the US. If they can pull it off. An interesting topic no doubt, but one which I doubt is suitable for extended discussion on Mondoweiss. As for power-seeking as a consequence of a uniquely Jewish experience, perhaps the less said the better.

          ToivoS, May 7, 2014, 8:10 pm
          Interesting to juxtapose Brzezinski and the neocons. In a Venn diagram they would over-lap 90%. The Ukraine crisis exposes that 10% difference. Brzezinski I very much doubt has any emotional attachment to Israel though he is happy to work in coalition with them to further his one true goal which is to isolate and defeat Russian influence in the world. In the 1980s both were on the same page in the "let my people go" campaign against the Soviet Union. Brzezinski saw it as a propaganda opportunity to attack Russia and the neocons saw it has a source of more Jews to settle Palestine.

          Right now, their interests have diverged over the Ukraine crisis. Though many of the American neocons do support subverting Ukraine as does Brzezinski it looks like Israel itself is leaning towards supporting Russia. When it comes down to it it is hard for many Jews, right wing or not, to support the political movement inside Ukraine that identifies with Bandera. Now that was one nasty antisemite whose followers killed many thousands of Ukrainian Jews during the holocaust. My wife's family immigrated from Galicia and the Odessa region and those left behind perished during the holocaust. The extended family includes anti-zionists and WB settlers. There is no way that any of them would identify with Ukrainian fascist movements now active there.

          In any case, there does seem to be a potential split among the neocons over Ukraine. It would be the ultimate in hypocrisy for all of those eastern European Jews who became successful in the US in the last few generations to enter into coalition with the Bandera brigades.

          RudyM, May 7, 2014, 9:36 pm
          Interesting, meaty analysis here of the various players in Ukraine. This is unequivocally from a Russian perspective, incidentally:

          link to wikispooks.com

          (I know I'm always grabbing OT threads of discussion, but when it comes down to it, I know much less about Zionism and Israel/Palestine than many, if not most of the regular commenters here.)

          I also am going to drift further off-topic by saying there is strong evidence that the slaughter in Odessa last Friday was highly orchestrated and not solely the result of spontaneous mob violence. Very graphic and disturbing images in all of these links:

          I have only glanced at these:

          American, May 6, 2014, 9:23 pm
          " and it turns out to Jewish identity, the need to belong to the powerful nation on the part of Jewish neoconservatives. Sleeper says this is an insecurity born of European exclusion that he understands as a Jew,…..>>

          Stop it Sleeper. Do not continue to use the victim card ' to explain' the trauma, the insecurities, the nightmares, the angst, the feelings, the sensitivities, blah blah, blah of Zionist or Israel.

          That is not what they are about. These are power mad psychos like most neocons, period.

          And even if it were, and even if all the Jews in the world felt the same way, the bottom line would still be they do not have the right to make others pay in treasure and blood for their nightmares and mental sickness.

          Citizen May 7, 2014, 9:46 am
          @ yonah fredman

          "The freedom of Ukraine is a worthy goal."

          As near as I can tell (correct me if I'm wrong), the Ukrainians themselves are about half and half pro Russia and Pro NATO. Your glance at the history of the region as to why this is so, and your text on historical Ukranian suffering and POTV on MW commentary on this –did not help your analysis and its conclusion.

          There's a difference between isolationism and defensive intervention, and even more so, re isolationism v. pro-active interventionism "in the name of pursuing the democratic ideal". See Ron Paul v. PNAC-style neocons and liberal Zionists.

          Also, if you were Putin, how would you see the push of NATO & US force posts ever creeping towards Russia and its local environment? Look at the US military postings nearing Russia per se & those surrounding Iran. Compare Russia's.

          And note the intent to wean EU from Russian oil, and as well, the draconian sanctions on Iran, and Obama's latest partnering sanctions on Russia.

          Imagine yourself in Putin's shoes, and Iran's.

          Don't abuse your imagination only by imagining yourself in Netanyahu's shoes, which is the preoccupation of AIPAC and its whores in the US Congress.

          ToivoS, May 7, 2014, 8:49 pm

          Interesting to juxtapose Brzezinski and the neocons. In a Venn diagram they would over-lap 90%. The Ukraine crisis exposes that 10% difference. Brzezinski I very much doubt has any emotional attachment to Israel though he is happy to work in coalition with them to further his one true goal which is to isolate and defeat Russian influence in the world. In the 1980s both were on the same page in the "let my people go" campaign against the Soviet Union. Brzezinski saw it as a propaganda opportunity to attack Russia and the neocons saw it has a source of more Jews to settle Palestine.

          Right now, their interests have diverged over the Ukraine crisis. Though many of the American neocons do support subverting Ukraine as does Brzezinski it looks like Israel itself is leaning towards supporting Russia. When it comes down to it it is hard for many Jews, right wing or not, to support the political movement inside Ukraine that identifies with Bandera. Now that was one nasty anti-Semite whose followers killed many thousands of Ukrainian Jews during the holocaust. My wife's family immigrated from Galicia and the Odessa region and those left behind perished during the holocaust. The extended family includes anti-Zionists and WB settlers. There is no way that any of them would identify with Ukrainian fascist movements now active there.

          In any case, there does seem to be a potential split among the neocons over Ukraine. It would be the ultimate in hypocrisy for all of those eastern European Jews who became successful in the US in the last few generations to enter into coalition with the Bandera brigades.

          ToivoSMay 7, 2014, 9:39 pm
          Yonah writes The freedom of Ukraine is a worthy goal. If the US is not able to back up our attempt to help them gain their freedom it is not something to celebrate, but something to lament.

          What are you saying? Ukraine has been an independent nation for 22 years. What freedom is this? What we have witnessed is that one half of Ukraine has gotten tired that the other half keeps on electing candidates that represent those Ukrainians that identify with Russian culture. They (the western half) successfully staged a coup and purged the other (eastern half) from the government. You call that "freedom". Doesn't it embarrass you, Yonah, that the armed militias that conducted that coup are descendants of the Bandera organization.

          Does that ring a bell? These are the Ukrainians that were involved in the holocaust. Does Babi Yar stir any memories Yohan? It was a massacre of 40,000 Jews just outside of Kiev in 1942. It was the single largest massacre of Jews during WWII. The massacre was led by the Germans ( Einsatzgruppe C officers) but was carried out with the aid of 400 Ukrainian Auxillary Police. These were later incorporated into the 14th SS-Volunteer Division "Galician" made up mostly Ukrainians. The division flags are to this day displayed at Right Sector rallies in western Ukraine.

          Right Sector militias are the fighting force that led the coup against the legally elected Yanukovich government and were almost certainly involved in the recent massacre in Odessa. And you support them for their fight for freedom? You should be ashamed. Zionism is sinking to new lows that they feel the need to identify with open neo-Nazis.

          piotrMay 7, 2014, 10:18 pm
          Well, the point is that Zionists in Israel do not identify with that particular set of open neo-Nazis. I suspect that this is simply a matter of the headcount of Jewish business tycoons that are politically aligned with (western) Ukraine and Russia. Or you can count their billions. In any case, the neutral posture is sensible for Israel here. Which is highly uncharacteristic for that government.

          yonah fredman, May 7, 2014, 10:38 pm

          Toivo S- The history of Jew hatred by certain anti Russian elements in the Ukraine is not encouraging and nothing that I celebrate. Maybe I have been swayed by headlines and a superficial reading of the situation.

          If indeed I am wrong regarding the will of the Ukrainian people, I can only be glad that my opinion is just that, my opinion and not US or Israel or anyone's policy but my own. I assume that a majority of Ukrainians want to maintain independence of Russia and that the expressions of rebellion are in that vein.

          My people were murdered by the einsatzgruppen in that part of the world and so maybe I have overcompensated by trying not to allow my personal history to interfere with what I think would be the will of the majority of the Ukraine.

          But Toivo S. please skip the "doesn't it embarrass you" line of thought. Just put a sock in it and skip it.

          ToivoSMay 8, 2014, 12:51 am

          Well thanks for that Yonah. My wife's family descended from Jewish communities in Odessa and Galicia. They emigrated to the US between 1900 and 1940. After WWII none of their relatives left behind were ever heard from again. Perhaps you have family that experienced similar stories. What caused me to react to your post above is that you are describing the current situation in Ukraine as a "freedom" movement by the Ukrainians when the political forces there descended from the same people that killed my inlaws family (and apparently yours to). Why do you support them?

          yonah fredmanMay 8, 2014, 1:30 am

          ToivoS- I support them because I trust/don't trust Putin. I trust him to impose his brand of leadership on Ukraine, I don't trust him to care a whit about freedom. It is natural that the nationalist elements of Ukraine would descend from the elements that expressed themselves the last time they had freedom from the Soviet Union, that is those forces that were willing to join with the Nazis to express their hatred for the communist Soviet Union's rule over their freedom. That's how history works. The nationalists today descend from the nationalists of yesterday.

          But it's been 70 years since WWII and the Ukrainians ought to be able to have freedom even if the parties that advocate for freedom are descended from those that supported the Nazis. (I know once i include the Nazi part of history any analogies are toxic, but if I am willing to grant Hamas its rights as an expression of the Palestinian desire for freedom, why would I deny the Ukrainian foul nationalist parties their rights to express their people's desire for freedom.)

          Political parties are not made in a sterile laboratory, they evolve over history and most specifically they emerge from the past. I accept that Ukrainian nationalism has not evolved much, but nonetheless not having read any polls I assume that the nationalists are the representatives of the people's desire for freedom. And because Putin strikes me as something primitive, I accept the Ukrainian desire for freedom.

          CitizenMay 8, 2014, 9:18 am

          @ yonah f

          What are you supporting? Let me refresh your historic memory: Black's Transfer Agreement. Now apply analogy, responding to ToivoS. Might help us all to understand, explore more skillfully, Israel's current stance on the Putin-Ukranian matter….?

          (I think Nuland's intervention caught on tape, combined with who she is married to, already explores with great clarification what the US is doing.

          irishmosesMay 8, 2014, 12:32 pm

          Yonah said:

          "The misadventure in Iraq has cost the US and the world a lot. The US a loss in humans and money and willingness to play the role of superpower, and the world has lost its cop. Most people here would probably disagree with Sleeper, because he does not deny that the world needs a cop, nor that the US would play a positive role, if it only had the means and the desire to do so. People here (overwhelmingly) see the US role as a negative one (let the Russians have their sphere of influence, let the Iranians have their bomb, let the Chinese do whatever they want to do in their part of the world,"

          The problem with your reasoning, Yonah, is that you are espousing the Neocon line while not apparently recognizing that embarrassing fact. You lament that the US is no longer playing the role of the world's superpower, and acting as the world's cop, confronting militarily Russia, China, Iran and anyone else. It is precisely that mentality that got us into Iraq, could yet have us in a war with Iran, would like to see us defending Ukraine, and thinks we should confront China militarily over bits of rock it and its neighbors are quibbling over. That is a neocon, American supremacy mentality.

          Contrast that with the realist or realism approach recommended by George Kennan, and followed by this country successfully through the end of the Cold War. That approach is conservative and contends we should stay out of wars unless the vital national security interests of the US are at stake, like protecting WESTERN Europe, Japan, Australia, and the Western Hemisphere. This meant we could sympathize with the plight of all the eastern Europeans oppressed by the Soviets, but would not defend militarily the Hungarians (1956) or the Czechs (1968). It also meant we wouldn't send US troops into North Vietnam because we didn't want to go to war with the Chinese over a country that was at best tangential to US interests. When we varied from that policy (Vietnam and Iraq wars, Somalia) we paid a very heavy price while doing nothing to advance or protect our vital national security interests.

          The sooner this country can return to our traditional realism-based foreign policy the better. Part of that policy would be to disassociate the US from its entangling alliance with Likud Israel and its US Jewish supporters that espouse the Likud Greater Israel line.

          Zionism under Likud has played a major role in promoting the neocon approach to foreign policy in the US. It was heavily involved in the birth of that approach, and has helped fund and promote the policy and its supporters and advocates in this country. They (Likud Zionists and Neocons) played a major role in getting us into the Iraq war and are playing a major role in trying to get us involved in a war with Iran, a war in Syria, and even potential wars in Eastern Europe. That is a very dangerous trend and one folks as intelligent as you are, should be focusing on.

          Please note, my criticism is directed neither at all Jews in general, Jews in the US, nor or all Israeli Jews. It is directed at a particular subset of Zionists who support Likud policies, and their supporters, many of whom are not Jews. It is also directed at Neoconservative foreign policy advocates, comprised of Jews and non-Jews, and overlap between the two groups. Please also note my use of the term "major role", and that I am not saying the Neocons and their supporters (Jewish or non) were solely responsible for our involvement in the Iraq war. I am offering these caveats in the hope that the usual changes of antisemitism can be avoided in your or anyone else's response to my arguments.

          The influence of Neocons on US foreign policy has been very harmful to this country and poses a grave danger to its future. It would be wise for you to reflect on that harm and those dangers and decide whether you belong in the realist camp or want to continue running with the Neocons.

          seanmcbride, May 8, 2014, 1:01 pm

          irishmoses,

          Please note, my criticism is directed neither at all Jews in general, Jews in the US, nor or all Israeli Jews. It is directed at a particular subset of Zionists who support Likud policies, and their supporters, many of whom are not Jews.

          What about the role of *liberal Zionists*, like Hillary Clinton, in supporting and promoting the Iraq War? Clinton still hasn't offered an apology for helping to drive the United States in a multi-trillion dollar foreign policy disaster - and she has threatened to "totally obliterate" Iran.

          What about Harry Reid's lavish praise of Sheldon Adelson?

          "Senate Majority Leader Harry Reid has for some time billed the Koch brothers as public enemy No.1 .

          But billionaire Republican donor Sheldon Adelson? He's just fine, Reid says.

          "I know Sheldon Adelson. He's not in this for money," the Nevada Democrat said of Adelson, the Vegas casino magnate who reportedly spent close to $150 million to support Republicans in the 2012 presidential election."

          link to politico.com

          Are there really any meaningful distinctions between neoconservatives in the Republican Party and liberal Zionists in the Democratic Party?

          talknic, May 7, 2014, 3:24 am

          @ yonah fredman "nationalist Armageddon that is nowhere found in the article by Sleeper"

          Strange

          "state into the Armageddon .. "

          "The misadventure in Iraq has cost the US and the world a lot. The US a loss in humans and money and willingness to play the role of superpower, and the world has lost its cop. "

          Tough. Meanwhile hundreds of thousands of innocent Iraqi lives don't rate a mention.

          " (let the Russians have their sphere of influence, let the Iranians have their bomb, let the Chinese do whatever they want to do in their part of the world, for after all they hold a trillion dollars in US government debt and so let them act like the boss, for in fact they have been put in that role by feckless and destructive and wasteful US policy). But Sleeper does not say that."

          You do tho, without quoting anyone "here".

          BTW Pajero, strawmen no matter how lengthy and seemingly erudite, rarely walk anywhere

          JeffB, May 7, 2014, 9:06 am

          I'm going to put this down as Jewish navel gazing.

          Jews are disproportionately liberal. Jews make up a huge chunk of the peace movement. Jews are relative to their numbers on the left of most foreign policy positions.

          Iraq was unusual in that Jews were not overwhelming opposed to the invasion, but it is worth noting the invasion at the time was overwhelming popular. Frankly given the fact that Jews are now considered white people and the fact that Jews are almost all middle class they should be biased conservative. There certainly is no reason they should be more liberal than Catholics. Yet they are. It is the degree of Jewish liberalism not the degree of Jewish conservatism that is striking.

          But even if we do focus on neocons, neocons don't have opinions about foreign policy and USA dominance that are much distinct from what most Republican interventionists have. How much difference is there between David Frum and Mitt Romney or between Paul Wolfowitz and Donald Rumsfeld?

          lysias, May 7, 2014, 10:55 am

          The neocons lost one last night: Antiwar Rep. Walter Jones Beats Neocon-Backed GOP Rival:

          Strongly antiwar incumbent Rep. Walter Jones (R – NC) has won a hotly contested primary tonight, defeating a challenge from hawkish challenger and former Treasury Dept. official Taylor Griffin 51% to 45%.

          American, May 7, 2014, 11:24 am

          Yep.

          Voter turn out was light ….. tea party types did a lot of lobbying for Griffin here….but Jones prevailed. Considering the onslaught of organized activity against him by ECI and the tea partiers for the past month he did well.

          Citizen, May 8, 2014, 9:24 am

          @ lysias
          Let's refresh our look at what Ron Paul had to say about foreign policy and foreign aid. Then, let's compare what his son has said, and take a look of his latest bill in congress to cut off aid to Palestine. Yes, you read that right; it's not a bill to cut off any aid to Israel.

          Don't look to the US to get any justice in the ME, nor to regain US good reputation in the world. This will situation will not change because US political campaign fiancé system won't change–it just gets worse, enhanced by SCOTUS.

          traintosiberia, May 8, 2014, 9:12 am

          Stockman's Corner

          Bravo, Rep. Walter Jones -- Primary Win Sends Neocons Packing

          by David Stockman • May 7, 2014 link to davidstockmanscontracorner.com

          The heavy artillery included the detestable Karl Rove, former Governor and RNC Chair Haley Barber and the War Party's highly paid chief PR flack, Ari Fleischer.

          But it was Neocon central that hauled out the big guns. Bill Kristol was so desperate to thwart the slowly rising anti-interventionist tide within the GOP that he even trotted out Sarah Palin to endorse Jones's opponent"

          But neoocns have the confidence that if they could impose the neocon's theology on the rest of the world, they can do it here as well on American street . They call it education, motivation, duty, responsibility, moral burden, and above all the essence of the manifest destiny.

          [Dec 23, 2015] The Neocons - Masters of Chaos

          Notable quotes:
          "... It's now clear that if Obama had ordered a major bombing campaign against Assad's military in early September 2013, he might have opened the gates of Damascus to a hellish victory by al-Qaeda-affiliated extremists or the even more brutal Islamic State, since these terrorist groups have emerged as the only effective fighters against Assad. ..."
          "... By late September 2013, the disappointed neocons were acting out their anger by taking aim at Putin. They recognized that a particular vulnerability for the Russian president was Ukraine and the possibility that it could be pulled out of Russia's sphere of influence and into the West's orbit. ..."
          "... But Gershman added that Ukraine was really only an interim step to an even bigger prize, the removal of the strong-willed and independent-minded Putin, who, Gershman added, "may find himself on the losing end not just in the near abroad [i.e. Ukraine] but within Russia itself." In other words, the new neocon hope was for "regime change" in Kiev and Moscow. [See Consortiumnews.com's " Neocons' Ukraine/Syria/Iran Gambit. "] ..."
          "... Putin also had sidetracked that possible war with Iran by helping to forge an interim agreement constraining but not eliminating Iran's nuclear program. So, he became the latest target of neocon demonization, a process in which the New York Times and the Washington Post eagerly took the lead. ..."
          "... As the political violence in Kiev escalated – with the uprising's muscle supplied by neo-Nazi militias from western Ukraine – neocons within the Obama administration discussed how to "midwife" a coup against Yanukovych. Central to this planning was Victoria Nuland, who had been promoted to assistant secretary of state for European affairs and was urging on the protesters, even passing out cookies to protesters at Kiev's Maidan square. ..."
          "... When the coup went down on Feb. 22 – spearheaded by neo-Nazi militias who seized government buildings and forced Yanukovych and his officials to flee for their lives – the U.S. State Department quickly deemed the new regime "legitimate" and the mainstream U.S. media dutifully stepped up the demonization of Yanukovych and Putin. ..."
          "... Although Putin's position had been in support of Ukraine's status quo – i.e., retaining the elected president and the country's constitutional process – the crisis was pitched to the American people as a case of "Russian aggression" with dire comparisons made between Putin and Hitler, especially after ethnic Russians in the east and south resisted the coup regime in Kiev and Crimea seceded to rejoin Russia. ..."
          "... Pressured by the Obama administration, the EU agreed to sanction Russia for its "aggression," touching off a tit-for-tat trade war with Moscow which reduced Europe's sale of farming and manufacturing goods to Russia and threatened to disrupt Russia's natural gas supplies to Europe. ..."
          "... While the most serious consequences were to Ukraine's economy which went into freefall because of the civil war, some of Europe's most endangered economies in the south also were hit hard by the lost trade with Russia. Europe began to stagger toward the third dip in a triple-dip recession with European markets experiencing major stock sell-offs. ..."
          Oct 17, 2014 | consortiumnews.com

          If you're nervously watching the stock market gyrations and worrying about your declining portfolio or pension fund, part of the blame should go to America's neocons who continue to be masters of chaos, endangering the world's economy by instigating geopolitical confrontations in the Middle East and Eastern Europe.

          Of course, there are other factors pushing Europe's economy to the brink of a triple-dip recession and threatening to stop America's fragile recovery, too. But the neocons' "regime change" strategies, which have unleashed violence and confrontations across Iraq, Syria, Libya, Iran and most recently Ukraine, have added to the economic uncertainty.

          This neocon destabilization of the world economy began with the U.S.-led invasion of Iraq in 2003 under President George W. Bush who squandered some $1 trillion on the bloody folly. But the neocons' strategies have continued through their still-pervasive influence in Official Washington during President Barack Obama's administration.

          The neocons and their "liberal interventionist" junior partners have kept the "regime change" pot boiling with the Western-orchestrated overthrow and killing of Libya's Muammar Gaddafi in 2011, the proxy civil war in Syria to oust Bashar al-Assad, the costly economic embargoes against Iran, and the U.S.-backed coup that ousted Ukraine's elected President Viktor Yanukovych last February.

          All these targeted governments were first ostracized by the neocons and the major U.S. news organizations, such as the Washington Post and the New York Times, which have become what amounts to neocon mouthpieces. Whenever the neocons decide that it's time for another "regime change," the mainstream U.S. media enlists in the propaganda wars.

          The consequence of this cascading disorder has been damaging and cumulative. The costs of the Iraq War strapped the U.S. Treasury and left less government maneuvering room when Wall Street crashed in 2008. If Bush still had the surplus that he inherited from President Bill Clinton – rather than a yawning deficit – there might have been enough public money to stimulate a much-faster recovery.

          President Obama also wouldn't have been left to cope with the living hell that the U.S. occupation brought to the people of Iraq, violent chaos that gave birth to what was then called "Al-Qaeda in Iraq" and has since rebranded itself "the Islamic State."

          But Obama didn't do himself (or the world) any favors when he put much of his foreign policy in the hands of Democratic neocon-lites, such as Secretary of State Hillary Clinton, and Bush holdovers, including Defense Secretary Robert Gates and Gen. David Petraeus. At State, Clinton promoted the likes of neocon Victoria Nuland, the wife of arch-neocon Robert Kagan, and Obama brought in "liberal interventionists" like Samantha Power, now the U.S. ambassador to the United Nations.

          In recent years, the neocons and "liberal interventionists" have become almost indistinguishable, so much so that Robert Kagan has opted to discard the discredited neocon label and call himself a "liberal interventionist." [See Consortiumnews.com's "Obama's True Foreign Policy 'Weakness.'"]

          Manipulating Obama

          Obama, in his nearly six years as president, also has shied away from imposing his more "realistic" views about world affairs on the neocon/liberal-interventionist ideologues inside the U.S. pundit class and his own administration. He has been outmaneuvered by clever insiders (as happened in 2009 on the Afghan "surge") or overwhelmed by some Official Washington "group think" (as was the case in Libya, Syria, Iran and Ukraine).

          Once all the "smart people" reach some collective decision that a foreign leader "must go," Obama usually joins the chorus and has shown only rare moments of toughness in standing up to misguided conventional wisdoms.

          The one notable case was his decision in summer 2013 to resist pressure to destroy Syria's military after a Sarin gas attack outside Damascus sparked a dubious rush to judgment blaming Assad's regime. Since then, more evidence has pointed to a provocation by anti-Assad extremists who may have thought that the incident would draw in the U.S. military on their side. [See Consortiumnews.com's "Was Turkey Behind Syrian Sarin Attack?"]

          It's now clear that if Obama had ordered a major bombing campaign against Assad's military in early September 2013, he might have opened the gates of Damascus to a hellish victory by al-Qaeda-affiliated extremists or the even more brutal Islamic State, since these terrorist groups have emerged as the only effective fighters against Assad.

          But the neocons and the "liberal interventionists" seemed oblivious to that danger. They had their hearts set on Syrian "regime change," so were furious when their dreams were dashed by Obama's supposed "weakness," i.e. his failure to do what they wanted. They also blamed Russian President Vladimir Putin who brokered a compromise with Assad in which he agreed to surrender all of Syria's chemical weapons while still denying a role in the Sarin attack.

          By late September 2013, the disappointed neocons were acting out their anger by taking aim at Putin. They recognized that a particular vulnerability for the Russian president was Ukraine and the possibility that it could be pulled out of Russia's sphere of influence and into the West's orbit.

          So, Carl Gershman, the neocon president of the U.S.-funded National Endowment for Democracy, took to the op-ed page of the neocon-flagship Washington Post to sound the trumpet about Ukraine, which he called "the biggest prize."

          But Gershman added that Ukraine was really only an interim step to an even bigger prize, the removal of the strong-willed and independent-minded Putin, who, Gershman added, "may find himself on the losing end not just in the near abroad [i.e. Ukraine] but within Russia itself." In other words, the new neocon hope was for "regime change" in Kiev and Moscow. [See Consortiumnews.com's "Neocons' Ukraine/Syria/Iran Gambit."]

          Destabilizing the World

          Beyond the recklessness of plotting to destabilize nuclear-armed Russia, the neocon strategy threatened to shake Europe's fragile economic recovery from a painful recession, six years of jobless stress that had strained the cohesion of the European Union and the euro zone.

          Across the Continent, populist parties from the Right and Left have been challenging establishment politicians over their inability to reverse the widespread unemployment and the growing poverty. Important to Europe's economy was its relationship with Russia, a major market for agriculture and manufactured goods and a key source of natural gas to keep Europe's industries humming and its houses warm.

          The last thing Europe needed was more chaos, but that's what the neocons do best and they were determined to punish Putin for disrupting their plans for Syrian "regime change," an item long near the top of their agenda along with their desire to "bomb, bomb, bomb Iran," which Israel has cited as an "existential threat."

          Putin also had sidetracked that possible war with Iran by helping to forge an interim agreement constraining but not eliminating Iran's nuclear program. So, he became the latest target of neocon demonization, a process in which the New York Times and the Washington Post eagerly took the lead.

          To get at Putin, however, the first step was Ukraine where Gershman's NED was funding scores of programs for political activists and media operatives. These efforts fed into mass protests against Ukrainian President Yanukovych for balking at an EU association agreement that included a harsh austerity plan designed by the International Monetary Fund. Yanukovych opted instead for a more generous $15 billion loan deal from Putin.

          As the political violence in Kiev escalated – with the uprising's muscle supplied by neo-Nazi militias from western Ukraine – neocons within the Obama administration discussed how to "midwife" a coup against Yanukovych. Central to this planning was Victoria Nuland, who had been promoted to assistant secretary of state for European affairs and was urging on the protesters, even passing out cookies to protesters at Kiev's Maidan square.

          According to an intercepted phone call with U.S. Ambassador to Ukraine Geoffrey Pyatt, Nuland didn't think EU officials were being aggressive enough. "Fuck the EU," she said as she brainstormed how "to help glue this thing." She literally handpicked who should be in the post-coup government – "Yats is the guy," a reference to Arseniy Yatsenyuk who would indeed become prime minister.

          When the coup went down on Feb. 22 – spearheaded by neo-Nazi militias who seized government buildings and forced Yanukovych and his officials to flee for their lives – the U.S. State Department quickly deemed the new regime "legitimate" and the mainstream U.S. media dutifully stepped up the demonization of Yanukovych and Putin.

          Although Putin's position had been in support of Ukraine's status quo – i.e., retaining the elected president and the country's constitutional process – the crisis was pitched to the American people as a case of "Russian aggression" with dire comparisons made between Putin and Hitler, especially after ethnic Russians in the east and south resisted the coup regime in Kiev and Crimea seceded to rejoin Russia.

          Starting a Trade War

          Pressured by the Obama administration, the EU agreed to sanction Russia for its "aggression," touching off a tit-for-tat trade war with Moscow which reduced Europe's sale of farming and manufacturing goods to Russia and threatened to disrupt Russia's natural gas supplies to Europe.

          While the most serious consequences were to Ukraine's economy which went into freefall because of the civil war, some of Europe's most endangered economies in the south also were hit hard by the lost trade with Russia. Europe began to stagger toward the third dip in a triple-dip recession with European markets experiencing major stock sell-offs.

          The dominoes soon toppled across the Atlantic as major U.S. stock indices dropped, creating anguish among many Americans just when it seemed the hangover from Bush's 2008 market crash was finally wearing off.

          Obviously, there are other reasons for the recent stock market declines, including fears about the Islamic State's victories in Syria and Iraq, continued chaos in Libya, and exclusion of Iran from the global economic system – all partly the result of neocon ideology. There have been unrelated troubles, too, such as the Ebola epidemic in western Africa and various weather disasters.

          But the world's economy usually can withstand some natural and manmade challenges. The real problem comes when a combination of catastrophes pushes the international financial system to a tipping point. Then, even a single event can dump the world into economic chaos, like what happened when Lehman Brothers collapsed in 2008.

          It's not clear whether the world is at such a tipping point today, but the stock market volatility suggests that we may be on the verge of another worldwide recession. Meanwhile, the neocon masters of chaos seem determined to keep putting their ideological obsessions ahead of the risks to Americans and people everywhere.

          Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s. You can buy his new book, America's Stolen Narrative, either in print here or as an e-book (from Amazon and barnesandnoble.com). For a limited time, you also can order Robert Parry's trilogy on the Bush Family and its connections to various right-wing operatives for only $34. The trilogy includes America's Stolen Narrative. For details on this offer, click here.

          [Dec 21, 2015] Weak president, neoliberal Obama and housing bubble

          Notable quotes:
          "... The relationship between low interest rates and bubbles has nothing to do with the above. Low interest rates RAISE asset prices. Through the magic of low discount rates, the future earnings and cash flows are worth a lot higher today. This is why Bernanke cut rates and kept them low. Raising asset prices and the resultant higher net worth was supposed to lead to higher spending today. But outsized returns also attracts speculation. what is so difficult to understand? John Williams of SF Fed has shown how positive returns in asset markets raises the speculators expected returns. when this dynamic gets out of control, it is a bubble. ..."
          "... That is exactly the point. Expected returns in stocks have nothing to do with earnings growth. http://www.frbsf.org/our-district/press/presidents-speeches/williams-speeches/2013/september/asset-price-bubbles-tomorrow-yesterday-never-today/ ..."
          "... You think a rise in stock prices created by a fall in the cost of capital is a bubble. ..."
          "... keeping the risk free rate at zero for 7 years is not a change in fundamentals. and if it is and it rises leading to a large fall in equity prices, you will be the first one crying uncle. so why put the economy through this? ..."
          "... Rising stock prices allow corporations to raise debt, because the stock is put up as collateral. This makes funding easier, but it doesnt favor any particular purpose of the funding. It could be to buy back stock, for example. Said buy back can raise the stock price even more, which in turn can pay off the borrowing. Didnt cost a dime. ..."
          "... It always seem to me that right wing economists credit businessmen with superhuman foresight and sophistication, except when it comes to the actions of the Fed and then something addles their brains and they become completely stupid. As I once put, it seems investors cant understand what the Fed is doing, even though they tell you. ..."
          "... Thats it exactly. Markets are efficient, unless the government does anything, and then markets lose their minds and its the governments fault. ..."
          "... Here is how they evaluate models: Good model; one that reaches the right good conclusions. Bad model; one that ends up saying stuff nobody should believe in. ..."
          "... Obama could have at least made the investigations a high priority...but he let Holder, a Wall Street attorney, consign them to the lowest. ..."
          "... Democrats filibuster-proof majority consisted of 58 Democrats and two independents who caucused with them. Only an inept President and Senate majority leader could have failed to take advantage of such a majority to implement significant parts of the party platform. ..."
          "... Gullible folks like pgl and his coterie believe what these Democrats say and waste our time defending their neoliberal behavior. ..."
          economistsview.typepad.com
          reason said... December 18, 2015 at 02:20 AM
          I wish Krugman would attack the view that is being propagated at the moment that low nominal interest rates (it seems irrespective of the reason for them) foster bubbles. It doesn't make the slightest bit of sense - leverage doesn't just magnify the gains, it magnifies the losses as well - what really counts is expectations regardless of nominal interest rates.)

          The distribution of the use of credit between pure financial speculation and productive investment is not a function of interest rates, but of things like bank culture, bank regulation and macro-economic and technological prospects.

          JF said in reply to reason... December 18, 2015 at 05:19 AM

          Great comment. I especially liked this point: "The distribution of the use of credit between pure financial speculation and productive investment is not a function of" ....

          Supervising regulators need to look carefully at the ratio of credit used for financial trading compared to credit used for what we've called real-economy matters. They should adjust the level of monitoring based on this view while they also inform policy makers including those in the legislature.

          There may be an opportunity in 2017 to revise the statutes so the public plainly says what the rules of Commerce are in these financial 'inter-mediation' areas - society is better served if more of such credit offerings go to investments in the real economy where inputs are real things like employees, supplies, equipment/technologies. The public's law can effect this change.

          david said in reply to JF...

          except that a significant chunk of institutional investors have sticky nominal targets for return thanks to the politics of return expectation setting (true for pension fund and endowments) -- low interest rates do encourage chasing phantoms or looking to extract some rents, for those subject to that kind of pressure

          sanjait said in reply to david... December 18, 2015 at 02:47 PM

          Are there enough of those to dominate securities prices?

          I don't see how there possibly could be. For everyone trying to reach for yield there are a lot of people happy to arbitrage or otherwise exploit those inefficiencies.

          pgl said in reply to reason... December 18, 2015 at 05:53 AM

          Nice comment. I think Krugman is letting others take out the bubble brains. But if he's reading your excellent comment - maybe he will go the fray.

          BenIsNotYoda said in reply to reason... December 18, 2015 at 06:35 AM

          "The distribution of the use of credit between pure financial speculation and productive investment is not a function of interest rates, but of things like bank culture, bank regulation and macro-economic and technological prospects."

          The relationship between low interest rates and bubbles has nothing to do with the above. Low interest rates RAISE asset prices. Through the magic of low discount rates, the future earnings and cash flows are worth a lot higher today. This is why Bernanke cut rates and kept them low. Raising asset prices and the resultant higher net worth was supposed to lead to higher spending today. But outsized returns also attracts speculation. what is so difficult to understand? John Williams of SF Fed has shown how positive returns in asset markets raises the speculator's expected returns. when this dynamic gets out of control, it is a bubble.

          Sanjait said in reply to BenIsNotYoda... December 18, 2015 at 07:35 AM

          It's hard to see how to your claim that expected returns are high when earnings yields across the board are historically low.

          BenIsNotYoda said in reply to Sanjait... December 18, 2015 at 07:38 AM

          That is exactly the point. Expected returns in stocks have nothing to do with earnings growth. http://www.frbsf.org/our-district/press/presidents-speeches/williams-speeches/2013/september/asset-price-bubbles-tomorrow-yesterday-never-today/

          BenIsNotYoda said in reply to BenIsNotYoda... December 18, 2015 at 07:38 AM

          I mean earnings yields not earnings growth.

          Sanjait said in reply to BenIsNotYoda... December 18, 2015 at 07:48 AM

          So you say. And yet, stock values today conform very well with the standard model Williams says doesn't historically fit the data. While you are talking bubbles, the equity risk premium is parked in the normal range.

          How do you explain that?

          BenIsNotYoda said in reply to Sanjait... December 18, 2015 at 07:54 AM

          so says Williams. dividend yields, earnings yields and risk premiums are not necessarily weighted heavily in investors' formation of expected returns. past returns do, to a great extent. that is what Williams shows.

          BenIsNotYoda said in reply to BenIsNotYoda... December 18, 2015 at 07:56 AM

          our prehistoric brains are wired to trend follow patterns.

          pgl said in reply to BenIsNotYoda... December 18, 2015 at 09:13 AM

          Williams actually tries to model the rise in stock prices and defines any increase the model cannot explain a bubble. Of course maybe his modeling is not entirely spot on and fundamentals can explain the rise stock prices.

          But this is not what you do as you see any asset price increase as a bubble. Which is beyond stupid. Of course it would help if you ever bothered to do what Williams attempted - use a basic model of financial economics. Then again my guess is that is beyond your understanding of basic financial economics. So troll on!

          BenIsNotYoda said in reply to pgl... December 18, 2015 at 10:40 AM

          You think a rise in stock prices created by a fall in the cost of capital is a bubble. But no - it is a change in fundamentals.

          keeping the risk free rate at zero for 7 years is not a change in fundamentals. and if it is and it rises leading to a large fall in equity prices, you will be the first one crying uncle. so why put the economy through this?

          JohnH said in reply to pgl... December 18, 2015 at 04:22 PM

          The first thing pgl did when stocks corrected this summer was to call for QE4...he panicked because his portfolio was threatened...but claimed that he was only worried about workers!

          Fred C. Dobbs said in reply to reason... December 18, 2015 at 10:57 AM

          It does not seem reasonable or
          fair to pay practically no interest
          on savings, which is a consequence
          of Fed policy.

          A consequence of this is that people
          go into risky investments that lead
          to catastrophe, sometimes widespread.

          If the goal was to get people to spend
          (i.e. consume) more, it seems that they
          are persistently & stubbornly frugal.

          Chris Herbert said in reply to Fred C. Dobbs... December 18, 2015 at 02:31 PM

          Rising stock prices allow corporations to raise debt, because the stock is put up as collateral. This makes funding easier, but it doesn't favor any particular purpose of the funding. It could be to buy back stock, for example. Said buy back can raise the stock price even more, which in turn can pay off the borrowing. Didn't cost a dime.

          sanjait said in reply to reason...

          Let me be the fourth person to compliment that comment.

          "leverage doesn't just magnify the gains, it magnifies the losses as well - what really counts is expectations regardless of nominal interest rates."

          QFT!

          The one hypothetical caveat (as BINY alluded to, knowingly or not) is that expectations often get out of whack based on momentum trading. So hypothetically, lowering rates could possibly feed that.

          But guess what? Rates are already at zero. They can't go lower. It's not even a question of lowering rates, but rather whether to keep them where they are. So a bubbles-from-monetary-fed-momentum argument falls completely flat. We've been at zero for 7 years now!

          reason said...

          It always seem to me that right wing economists credit businessmen with superhuman foresight and sophistication, except when it comes to the actions of the Fed and then something addles their brains and they become completely stupid. As I once put, it seems investors can't understand what the Fed is doing, even though they tell you.

          Sanjait said in reply to reason...

          That's it exactly. Markets are efficient, unless the government does anything, and then markets lose their minds and it's the government's fault.

          And somehow the RW economists see no problem with this model

          DeDude said in reply to Sanjait...

          Here is how they evaluate models: Good model; one that reaches the "right" good conclusions. Bad model; one that ends up saying stuff nobody should believe in.
          likbez said in reply to Sanjait...
          "Markets are efficient, unless the government does anything"

          This is a dangerous neoliberal dogma. Total lie.

          === quote ===
          The efficient market hypothesis (EMH) is a flavor of economic Lysenkoism which became popular for the last 30 years in the USA. It is a pseudo scientific theory or, in more politically correct terms, unrealistic idealization of market behavior. Like classic Lysenkoism in the past was supported by Stalin's totalitarian state, it was supported by the power of neoliberal state, which is the state captured by financial oligarchy (see Casino Capitalism and Quiet coup for more details).

          Among the factors ignored by EMH is the positive feedback loop inherent in any system based on factional reserve banking, the level of market players ignorance, unequal access to the real information about the markets, the level of brainwashing performed on "lemmings" by controlled by elite MSM and market manipulation by the largest players and the state.

          Economics, it is said, is the study of scarcity. There is, however, one thing that certainly isn't scarce, but which deserves the attention of economists - ignorance.
          ...Conventional economics analyses how individuals choose - maybe rationally, maybe not - from a range of options. But this raises the question: how do they know what these options are? Many feasible - even optimum - options might not occur to them. This fact has some important implications. ...
          Slightly simplifying, we can say that (financial) markets are mainly efficient in separation of fools and their money... And efficient market hypothesis mostly bypasses important question about how the inequity of resources which inevitably affects the outcomes of market participants. For example, the level of education of market players is one aspect of the inequity of resources. Herd behavior is another important, but overlooked in EMH factor.

          http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Pseudo_theories/Permanent_equilibrium_fallacy/Efficient_market_hypothesys/index.shtml

          Peter K. said in reply to reason...

          And/or the markets are telling the Fed something, like they don't believe the Fed's forecasts about growth and inflation and are betting otherwise, but the hawks at the Fed dismiss the markets and say we need to raise rates now.

          It's all very convenient reasoning about markets.

          Vile Content said...

          "
          constant repetition, especially in captive media, keeps this imaginary history in circulation no matter how often it is shown to be false.
          "
          ~~pK~

          ... ... ...

          anne said...

          http://krugman.blogs.nytimes.com/2015/11/23/shorts-subject/

          November 23, 2015

          Shorts Subject
          By Paul Krugman

          Last night I was invited to a screening of "The Big Short," which I thought was terrific; who knew that collateralized debt obligations and credit default swaps could be made into an edge-of-your-seat narrative (with great acting)?

          But there was one shortcut the narrative took, which was understandable and possibly necessary, but still worth noting.

          In the film, various eccentrics and oddballs make the discovery that subprime-backed securities are garbage, which is pretty much what happened; but this is wrapped together with their realization that there was a massive housing bubble, which is presented as equally contrary to anything anyone respectable was saying. And that's not quite right.

          It's true that Greenspan and others were busy denying the very possibility of a housing bubble. And it's also true that anyone suggesting that such a bubble existed was attacked furiously - "You're only saying that because you hate Bush!" Still, there were a number of economic analysts making the case for a massive bubble. Here's Dean Baker in 2002. * Bill McBride (Calculated Risk) was on the case early and very effectively. I keyed off Baker and McBride, arguing for a bubble in 2004 and making my big statement about the analytics in 2005, ** that is, if anything a bit earlier than most of the events in the film. I'm still fairly proud of that piece, by the way, because I think I got it very right by emphasizing the importance of breaking apart regional trends.

          So the bubble itself was something number crunchers could see without delving into the details of mortgage-backed securities, traveling around Florida, or any of the other drama shown in the film. In fact, I'd say that the housing bubble of the mid-2000s was the most obvious thing I've ever seen, and that the refusal of so many people to acknowledge the possibility was a dramatic illustration of motivated reasoning at work.

          The financial superstructure built on the bubble was something else; I was clueless about that, and didn't see the financial crisis coming at all.

          * http://www.cepr.net/documents/publications/housing_2002_08.pdf

          ** http://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html

          anne said in reply to anne...

          http://www.nytimes.com/2002/08/16/opinion/mind-the-gap.html

          August 16, 2002

          Mind the Gap
          By PAUL KRUGMAN

          More and more people are using the B-word about the housing market. A recent analysis * by Dean Baker, of the Center for Economic Policy Research, makes a particularly compelling case for a housing bubble. House prices have run well ahead of rents, suggesting that people are now buying houses for speculation rather than merely for shelter. And the explanations one hears for those high prices sound more and more like the rationalizations one heard for Nasdaq 5,000.

          If we do have a housing bubble, and it bursts, we'll be looking a lot too Japanese for comfort....

          * http://www.cepr.net/documents/publications/housing_2002_08.pdf

          anne said in reply to anne...

          http://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html

          August 8, 2005

          That Hissing Sound
          By PAUL KRUGMAN

          This is the way the bubble ends: not with a pop, but with a hiss.

          Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.

          So the news that the U.S. housing bubble is over won't come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.

          Of course, some people still deny that there's a housing bubble. Let me explain how we know that they're wrong.

          One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller "Dow 36,000" are now among the most vocal proponents of the view that there is no housing bubble.

          Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

          In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

          But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

          And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble....

          EMichael said in reply to anne...

          Yeah, the only thing he missed was the timing of the collapse.

          The day he wrote this the Fed had already raised rates 250% in one year, on the way to a total of 400% in the next 6 months.

          Yet prices accelerated until the top was reached a year after the column.

          anne said in reply to EMichael...

          http://www.nytimes.com/2006/08/25/opinion/25krugman.html

          August 25, 2006

          Housing Gets Ugly
          By PAUL KRUGMAN

          Bubble, bubble, Toll's in trouble. This week, Toll Brothers, the nation's premier builder of McMansions, announced that sales were way off, profits were down, and the company was walking away from already-purchased options on land for future development.

          Toll's announcement was one of many indications that the long-feared housing bust has arrived. Home sales are down sharply; home prices, which rose 57 percent over the past five years (and much more than that along the coasts), are now falling in much of the country. The inventory of unsold existing homes is at a 13-year high; builders' confidence is at a 15-year low.

          A year ago, Robert Toll, who runs Toll Brothers, was euphoric about the housing boom, declaring: "We've got the supply, and the market has got the demand. So it's a match made in heaven." In a New York Times profile of his company published last October, he dismissed worries about a possible bust. "Why can't real estate just have a boom like every other industry?" he asked. "Why do we have to have a bubble and then a pop?"

          The current downturn, Mr. Toll now says, is unlike anything he's seen: sales are slumping despite the absence of any "macroeconomic nasty condition" taking housing down along with the rest of the economy. He suggests that unease about the direction of the country and the war in Iraq is undermining confidence. All I have to say is: pop! ...

          EMichael said in reply to anne...

          "Mr. Toll now says, is unlike anything he's seen: sales are slumping despite the absence of any "macroeconomic nasty condition""

          You gotta love builders and RE agents. It wasn't macro that caused it, it was default rates across the board on supposedly safe investments that caused mortgage money supply to totally disappear.

          One day people will understand that payments are the key to all finance.

          JohnH said...

          "and it is an outrage that basically nobody ended up being punished ."

          Yes, indeed. And who do we have to blame for that? Obama and Holder, of course. They made the investigation of mortgage securities fraud DOJ's lowest priority. Krugman's Democratic proclivities prevent him from stating the obvious.

          I' m sure that pgl and his band of merry Obamabots will try to spin this in Obama's favor...I.e. Congress prevented him from implementing the law, even though Congress has nothing to do with it.

          Fact is, Obama has intentionally been a lame duck ever since he took office. He was even clueless on how to capitalize on a filibuster-proof majority in the midst of an economic crisis...which brings us to Trump. Many are so desperate for leadership after Obama's hollow presidency that they'll even support a racist demagogue to avoid another empty White House.

          JohnH said in reply to anne...

          Oh, please...Krugman could barely criticize Obama, even when Obama introduced an austerity budget back in 2011.

          The tendency of people like Krugman to overlook Democrats' bad behavior only encourages more bad behavior. If Krugman really cared about the policies he champions, he would let the chips fall wherever...and not let empty suits like Obama get away with austerity and failure to enforce the law when Wall Street willfully violates it.

          pgl said in reply to JohnH...

          Did you forgot to read the post before firing off your usual hate filled fact free rant? Here - let me help you out:

          "some members of the new commission had a different goal. George Santayana famously remarked that "those who cannot remember the past are condemned to repeat it." What he didn't point out was that some people want to repeat the past - and that such people have an interest in making sure that we don't remember what happened, or that we remember it wrong. Sure enough, some commission members sought to block consideration of any historical account that might support efforts to rein in runaway bankers."

          It seems Krugman indeed bashed how the government sort of let this crooks off the hook. We know you have an insane hatred for President Obama. But do you also hate your poor mom? Why else would you continue to write such incredibly stupid things?

          JohnH said in reply to pgl...

          As I expected, rationalizations for Obama's refusal to enforce the law...since when does the buck no longer stop at the White House? And what's with trying to defend people who refuse to do their job and uphold the rule of law?

          pgl said in reply to JohnH...

          Krugman did not rationalize that. Neither have I.

          Either you know you are lying or you flunked preK reading.

          JohnH said in reply to pgl...

          Of course pgl rationalizs Obama's failures...he spent a lot of time denying that Obama introduced and signed off on austerity...and that he proposed cutting Social Security. And now he can't admit that Obama and Holder have refused to defend the rule of law by not prosecuting...or even seriously investigating...Wall Street criminality.

          RGC said in reply to William...

          Prosecutions don't require congressional action.

          Most of the New Deal was accomplished in 100 days.

          Promotion by a president can galvanize action.

          pgl said in reply to EMichael...

          The lack of prosecutions was a bad thing. Of course any prosecutor would tell you putting rich people in jail for anything is often difficult. Rich people get to hire expensive, talented, and otherwise slimy defense attorneys. I have to laugh at the idea that JohnH thinks he could have pulled this off. The slimy defense attorneys would have had his lunch before the judge's gavel could come down.

          JohnH said in reply to pgl...

          Obama could have at least made the investigations a high priority...but he let Holder, a Wall Street attorney, consign them to the lowest.

          pgl is intent on explaining away Obama's failure to enforce the law...thereby encouraging more lawlessness.

          JohnH said in reply to William...

          Democrats' filibuster-proof majority consisted of 58 Democrats and two independents who caucused with them. Only an inept President and Senate majority leader could have failed to take advantage of such a majority to implement significant parts of the party platform. Even Lieberman had a good record on many issues. Except for ACA, it turned out to be a do-nothing Congress, reflecting an abject lack of leadership...which is why many are so desperate for leadership. Having lacked it for seven years, many are willing to turn to anybody, even Trump, to provide it. Pathetic!

          RGC said in reply to William...

          No vitriol, just facts. And Obama had the example of FDR to follow - why didn't he follow it? I have been deeply disappointed in Obama.

          JohnH said in reply to pgl...

          pgl conveniently forgets my choice words about Bill Clinton, Harry Reid and Nancy Pelosi. What I object to is Democrats who position themselves to sound like FDR and then prosecute a neo-liberal agenda.

          Gullible folks like pgl and his coterie believe what these Democrats say and waste our time defending their neoliberal behavior.

          [Dec 21, 2015] Monetalism is dead but remains of monetarist thinking are still lingering

          Notable quotes:
          "... Summers is right that bubbles are usually accompanied by some kind of financial euphoria. ..."
          "... There will be massive pushback because so many have wasted many years and resources building mathematically elegant but fatally flawed models that do not make accurate predictions on even represent the fundamentals of any economy. ..."
          economistsview.typepad.com
          Peter K. said in reply to pgl... December 16, 2015 at 10:07 AM
          "It seems to me looking at a year when the stock market has gone down a bit, credit spreads have widened substantially and the dollar has been very strong it is hard to say that now is the time to fire a shot across the bow of financial euphoria. Looking especially at emerging markets I would judge that under-confidence and excessive risk aversion are a greater threat over the next several years than some kind of financial euphoria."

          Summers is right that bubbles are usually accompanied by some kind of financial euphoria.

          ... ... ...

          Peter K. said in reply to Benedict@Large...

          I disagree with your assessment. People (elite?) are talking about unusual solutions because fiscal policy is being blocked politically.

          MMT doesn't seem that different from Keynesianism, except proponents have very big chips on their shoulders for some reason.

          Right now the Keynesians are arguing that the Fed shouldn't raise rates. Are the MMTers arguing any differently? Or are they merely giving us the blue prints for utopia. Blue prints don't help much if the politics are against you.

          Syaloch said in reply to Peter K....

          Great question.

          If I have two black boxes that always produce exactly the same outputs, does it matter whether their internal mechanisms are different?

          Dan Kervick said in reply to Syaloch...
          "Or maybe they would be effective because people believe they ought to be effective."

          Possibly. I think back in the 80's when monetarism was the super-sexy new view, there were a lot of people who thought inflation was mainly a function of the monetary base, so if the Fed made a big public stink about pumping up the monetary base, that could be counted on the boost inflation expectations, at least in some quarters, and the high expectations would in turn help to boost actual inflation. That doesn't seem to be the case any longer.

          Dan Kervick said in reply to pgl...
          The heyday of monetarism was the late 70's and early 80's. That's when Friedman's monetary theory of inflation caught the public imagination, and it's the only time the Fed ever attempted (briefly) to target the money supply.

          Conservative spear-carrier Niall Ferguson knows how important monetarism was to the neoliberal movement, and how big a deal it was during the Thatcher-Reagan era.

          http://www.niallferguson.com/journalism/finance-economics/friedman-is-dead-monetarism-is-dead-but-what-about-inflation

          Other references to the heyday of monetarism abound:

          http://www.voxeu.org/article/nominal-gdp-targeting-developing-nations

          Dan Kervick said in reply to pgl...
          The heyday of monetarism was the late 70's and early 80's. That's when Friedman's monetary theory of inflation caught the public imagination, and it's the only time the Fed ever attempted (briefly) to target the money supply.

          Conservative spear-carrier Niall Ferguson knows how important monetarism was to the neoliberal movement, and how big a deal it was during the Thatcher-Reagan era.

          http://www.niallferguson.com/journalism/finance-economics/friedman-is-dead-monetarism-is-dead-but-what-about-inflation

          Other references to the heyday of monetarism abound:

          http://www.voxeu.org/article/nominal-gdp-targeting-developing-nations

          bakho said... December 16, 2015 at 05:45 AM
          Kevin Hoover, The emperor has no clothes!

          "Given what we know about representative-agent models…there is not the slightest reason for us to think that the conditions under which they should work are fulfilled. The claim that representative-agent models provide microfundations succeeds only when we steadfastly avoid the fact that representative-agent models are just as aggregative as old-fashioned Keynesian macroeconometric models. They do not solve the problem of aggregation; rather they assume that it can be ignored."

          This the reason Macro needs to move into more data driven empirics.

          There will be massive pushback because so many have wasted many years and resources building mathematically elegant but fatally flawed models that do not make accurate predictions on even represent the fundamentals of any economy.

          Syaloch said... December 16, 2015 at 05:50 AM

          The Advantages of Higher Inflation - The New York Times

          From the article:

          "A critical problem with aiming for higher inflation is how to get from here to there. The Fed has spent enormous effort anchoring people's expectations to 2 percent. Even economists sympathetic to a higher target are wary of what such a shift might do to its credibility.

          "'A perfect world, where you could commit to 4 percent and everybody believed it, would be great,' Mr. Mishkin told me. 'We are not in a perfect world. Moving much higher than 2 percent raises the risk that expectations become unanchored.'

          "So here is an alternative proposal. If the Fed is too cautious to risk unhinging inflationary expectations, how about just delivering what it has promised? Among economists and investors, the problem with the Fed's 2 percent target is that just about everybody believes it is really a ceiling. That makes it even harder for inflation to rise to that level. The market expects the Fed to act pre-emptively to ensure it never goes over that line - which is what it seems to be doing now.

          "If the Fed is not going to aim for higher inflation, the least it could do is re-anchor expectations to the goal it established, allowing inflation to fluctuate above and below a 2 percent average. That alone might help deal with the next economic crisis.

          "'We haven't fully tested whether we can deal with this kind of crisis with a 2 percent inflation target,' said David H. Romer of the University of California, Berkeley. 'Central banks have lots of tools. If they say they are willing to keep using them until they get where they want, they can eventually do it.'"

          This highlights a confusing aspect of inflation targets. If the Fed simply announces a higher inflation target without taking any other action, have they really done anything? What's more, they not only need to announce the new target, they need to convince markets that they are willing to do whatever it takes to hit that target -- it's all about credibility and re-anchoring expectations. And while engaging in QE to push down longer-term rates might help make that statement more convincing, it doesn't seem to be strictly necessary for the new target to be effective.

          Thus inflation targets seem in at least some cases to operate purely through psychological manipulation, as a sort of placebo effect: inflation rises not because the Fed has injected money into the economy today or changed the cost of lending today, but rather because the Fed is able to "trick" markets into believing it will rise in the future.

          Peter K. said in reply to Syaloch...

          And the reverse is true. The markets are skeptical that the Fed will hit its 2 percent ceiling target any time soon.

          Inflation expectations are becoming un-anchored on the downside but nobody cares because .... oil.

          Dan Kervick said in reply to Peter K....
          I guess we'll all have to wait for Yellen's future memoirs to know the thinking that was going on inside the Fed during 2015. But it's interesting that both Yellen and Stanley Fischer, both formerly held in gigantic respect by the more prominent liberal economists, are now the targets of ire for apparently not seeing eye-to-eye with their opinionated friends on the outside. Despite the fact that BoG members have access to mountains of internal research and policy input that people on the outside can only guess at, the default position of the outsiders is that the insiders have been corrupted by power and fast-talking bankers or something.

          Here's my conjecture about what the Fed's thinking is: The Fed recognizes that keeping policy interest rates down at an unprecedentedly low basement level for years on end sends this message to the global economy: the US economy is a sick basket case. It needs the permanent life support of extraordinary monetary policy intervention to be kept from flat-lining.

          I think the people who actually work inside the Fed think that is total bunk, and that as they gradually wean the financial sector off of the monetary ventilator, nothing bad is going to happen at all. The patient is going to get up, walk around and breathe normally. And when that happens, it will say, "Wow, maybe I should have tried that earlier!" Business confidence will spurt; people will think, "Hey, I guess we're not in that gloomy post-2008 depression any more!", and the country will get on with its business more cheerfully.

          The Fed has had a devil of a time getting back to normal, because despite its best intentions it has inadvertently re-defined a condition of zero rates and excess reserves bleeding from bankers's ears as the new normal, and created an out-of-control public fixation on monetary policy intervention. Fed communications strategies aimed at guiding the market have turned back on them in a reflexive and self-defeating cycle. They got themselves into a terrible pattern for a while where every time there was good economic news, the markets would respond negatively because they interpreted the good news as evidence that the Fed would "taper" - which they regarded as bad news! And if there was bad news, the markets would respond favorably because they saw the bad news as evidence that the fed would "remain aggressive" - which is good news! Obviously that's a pretty pathological cycle to be in: it's a mechanism fro economic self-stultification. Indicating a move toward normalization too suddenly in 2013 caused the irrational "taper tantrum", so they have had to go more slowly this time around with the hand-holding and by building a longer "guidance" runway.

          Their chief need now is to push back against the monetary maniacs and hyperventilators who keep trying to convince impressionable business people and consumers that the Fed has somehow been "keeping the economy" afloat, and that when interest rates go up - from 1/4 to 1/2 of a percent! - we're all going to drown. If you have enough ambulance chasers convincing people they are sick and damaged, they will act sick and damaged.

          [Dec 20, 2015] Paul Krugman: The Big Short, Housing Bubbles and Retold Lies

          Notable quotes:
          "... I get the feeling that if doing a film review of The Force Awakens , most economists would be rooting for the Empire to win - after all the empire will bring free trade within its borders, like the EU. ..."
          "... In market fundamentalist world, markets dont fail. They can only be failed. Though its still not clear how they think a little bit of government incentive for loans to low income borrowers caused the entire financial sector to lose its mind wrt CDOs. ..."
          "... The distribution of the use of credit between pure financial speculation and productive investment is not a function of interest rates, but of things like bank culture, bank regulation and macro-economic and technological prospects. ..."
          "... ....Supervising regulators need to look carefully at the ratio of credit used for financial trading compared to credit used for what weve called real-economy matters. They should adjust the level of monitoring based on this view while they also inform policy makers including those in the legislature. ..."
          "... except that a significant chunk of institutional investors have sticky nominal targets for return thanks to the politics of return expectation setting (true for pension fund and endowments) -- low interest rates do encourage chasing phantoms or looking to extract some rents, for those subject to that kind of pressure ..."
          "... The relationship between low interest rates and bubbles has nothing to do with the above. Low interest rates RAISE asset prices. Through the magic of low discount rates, the future earnings and cash flows are worth a lot higher today. This is why Bernanke cut rates and kept them low. Raising asset prices and the resultant higher net worth was supposed to lead to higher spending today. But outsized returns also attracts speculation. what is so difficult to understand? John Williams of SF Fed has shown how positive returns in asset markets raises the speculators expected returns. when this dynamic gets out of control, it is a bubble. ..."
          "... Yes, indeed. And who do we have to blame for that? Obama and Holder, of course. They made the investigation of mortgage securities fraud DOJs lowest priority. Krugmans Democratic proclivities prevent him from stating the obvious. ..."
          "... Fact is, Obama has intentionally been a lame duck ever since he took office. He was even clueless on how to capitalize on a filibuster-proof majority in the midst of an economic crisis...which brings us to Trump. Many are so desperate for leadership after Obamas hollow presidency that theyll even support a racist demagogue to avoid another empty White House. ..."
          "... Yes you are correct. From 2001 into 2008 when all of the liar and ninja loans were being made, not one government official stepped forward to investigate the possibility of fraud, the predatory lending, the misrepresentation of loans taking place, the loans with teaser rates which later ballooned, the packing of loans with deceptive fees, the illegal kick backs, etc. Not one. To make matters worst, the administration from 2001-2008 aligned itself with the banks along with the maestro hisself Greenspan. ..."
          "... When state AGs took on the burden of investigating the flagrant violations, the administration moves to block them saying they had no jurisdiction to do so. It did this through the OCC issuing rules preventing the states from prosecuting the banks. Besides blocking any investigation, the OCC failed in its mission to audit the banks for which it was by law to do. ..."
          economistsview.typepad.com

          Why are Murdoch-controlled newspapers attacking "The Big Short?"

          'The Big Short,' Housing Bubbles and Retold Lies, by Paul krugman, Commentary, NY Times: In May 2009 Congress created a special commission to examine the causes of the financial crisis. The idea was to emulate the celebrated Pecora Commission of the 1930s, which used careful historical analysis to help craft regulations that gave America two generations of financial stability.

          But some members of the new commission had a different goal. ... Peter Wallison of the American Enterprise Institute, wrote to a fellow Republican on the commission ... it was important that what they said "not undermine the ability of the new House G.O.P. to modify or repeal Dodd-Frank"...; the party line, literally, required telling stories that would help Wall Street do it all over again.

          Which brings me to a new movie the enemies of financial regulation really, really don't want you to see.

          "The Big Short" ... does a terrific job of making Wall Street skulduggery entertaining, of exploiting the inherent black humor of how it went down. ... But you don't want me to play film critic; you want to know whether the movie got the underlying ... story right. And the answer is yes, in all the ways that matter. ...

          The ...housing ... bubble ... was inflated largely via opaque financial schemes that in many cases amounted to outright fraud - and it is an outrage that basically nobody ended up being punished ... aside from innocent bystanders, namely the millions of workers who lost their jobs and the millions of families that lost their homes.

          While the movie gets the essentials of the financial crisis right, the true story ... is deeply inconvenient to some very rich and powerful people. They and their intellectual hired guns have therefore spent years disseminating an alternative view ... that places all the blame ... on ... too much government, especially government-sponsored agencies supposedly pushing too many loans on the poor.

          Never mind that the supposed evidence for this view has been thoroughly debunked..., constant repetition, especially in captive media, keeps this imaginary history in circulation no matter how often it is shown to be false.

          Sure enough, "The Big Short" has already been the subject of vitriolic attacks in Murdoch-controlled newspapers...

          The ... people who made "The Big Short" should consider the attacks a kind of compliment: The attackers obviously worry that the film is entertaining enough that it will expose a large audience to the truth. Let's hope that their fears are justified.

          btg said in reply to pgl...

          I get the feeling that if doing a film review of "The Force Awakens", most economists would be rooting for the Empire to win - after all the empire will bring free trade within its borders, like the EU. Krugman would not, however.

          Sanjait said...

          In market fundamentalist world, markets don't fail. They can only be failed. Though it's still not clear how they think a little bit of government incentive for loans to low income borrowers caused the entire financial sector to lose its mind wrt CDOs.

          Are markets efficient or not? I feel like the fundiesndont really have a coherent explanation for what happened, other than insisting the government somehow did it.

          reason said...

          I wish Krugman would attack the view that is being propagated at the moment that low nominal interest rates (it seems irrespective of the reason for them) foster bubbles. It doesn't make the slightest bit of sense - leverage doesn't just magnify the gains, it magnifies the losses as well - what really counts is expectations regardless of nominal interest rates.)

          The distribution of the use of credit between pure financial speculation and productive investment is not a function of interest rates, but of things like bank culture, bank regulation and macro-economic and technological prospects.

          reason said... December 18, 2015 at 02:32 AM

          It always seem to me that right wing economists credit businessmen with superhuman foresight and sophistication, except when it comes to the actions of the Fed and then something addles their brains and they become completely stupid. As I once put, it seems investors can't understand what the Fed is doing, even though they tell you.

          Sanjait said in reply to reason... December 18, 2015 at 08:06 AM

          That's it exactly. Markets are efficient, unless the government does anything, and then markets lose their minds and it's the government's fault.

          And somehow the RW economists see no problem with this model

          DeDude said in reply to Sanjait... December 18, 2015 at 08:18 AM

          Here is how they evaluate models:

          Good model; one that reaches the "right" good conclusions. Bad model; one that ends up saying stuff nobody should believe in.

          likbez said in reply to Sanjait...

          "Markets are efficient, unless the government does anything"

          This is a dangerous neoliberal dogma. Total lie.

          === quote ===
          The efficient market hypothesis (EMH) is a flavor of economic Lysenkoism which became popular for the last 30 years in the USA. It is a pseudo scientific theory or, in more politically correct terms, unrealistic idealization of market behavior. Like classic Lysenkoism in the past was supported by Stalin's totalitarian state, it was supported by the power of neoliberal state, which is the state captured by financial oligarchy (see Casino Capitalism and Quiet coup for more details).

          Among the factors ignored by EMH is the positive feedback loop inherent in any system based on factional reserve banking, the level of market players ignorance, unequal access to the real information about the markets, the level of brainwashing performed on "lemmings" by controlled by elite MSM and market manipulation by the largest players and the state.

          Economics, it is said, is the study of scarcity. There is, however, one thing that certainly isn't scarce, but which deserves the attention of economists - ignorance.
          ...Conventional economics analyses how individuals choose - maybe rationally, maybe not - from a range of options. But this raises the question: how do they know what these options are? Many feasible - even optimum - options might not occur to them. This fact has some important implications. ...
          Slightly simplifying, we can say that (financial) markets are mainly efficient in separation of fools and their money... And efficient market hypothesis mostly bypasses important question about how the inequity of resources which inevitably affects the outcomes of market participants. For example, the level of education of market players is one aspect of the inequity of resources. Herd behavior is another important, but overlooked in EMH factor.

          http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Pseudo_theories/Permanent_equilibrium_fallacy/Efficient_market_hypothesys/index.shtml

          JF said in reply to reason...

          Great comment. I especially liked this point: "The distribution of the use of credit between pure financial speculation and productive investment is not a function of"

          ....Supervising regulators need to look carefully at the ratio of credit used for financial trading compared to credit used for what we've called real-economy matters. They should adjust the level of monitoring based on this view while they also inform policy makers including those in the legislature.

          There may be an opportunity in 2017 to revise the statutes so the public plainly says what the rules of Commerce are in these financial 'inter-mediation' areas - society is better served if more of such credit offerings go to investments in the real economy where inputs are real things like employees, supplies, equipment/technologies. The public's law can effect this change.

          david said in reply to JF...

          except that a significant chunk of institutional investors have sticky nominal targets for return thanks to the politics of return expectation setting (true for pension fund and endowments) -- low interest rates do encourage chasing phantoms or looking to extract some rents, for those subject to that kind of pressure

          BenIsNotYoda said in reply to reason...

          "The distribution of the use of credit between pure financial speculation and productive investment is not a function of interest rates, but of things like bank culture, bank regulation and macro-economic and technological prospects."

          The relationship between low interest rates and bubbles has nothing to do with the above. Low interest rates RAISE asset prices. Through the magic of low discount rates, the future earnings and cash flows are worth a lot higher today. This is why Bernanke cut rates and kept them low. Raising asset prices and the resultant higher net worth was supposed to lead to higher spending today. But outsized returns also attracts speculation. what is so difficult to understand? John Williams of SF Fed has shown how positive returns in asset markets raises the speculator's expected returns. when this dynamic gets out of control, it is a bubble.

          Sanjait said in reply to BenIsNotYoda...

          It's hard to see how to your claim that expected returns are high when earnings yields across the board are historically low.

          BenIsNotYoda said in reply to Sanjait...

          That is exactly the point. Expected returns in stocks have nothing to do with earnings growth.

          http://www.frbsf.org/our-district/press/presidents-speeches/williams-speeches/2013/september/asset-price-bubbles-tomorrow-yesterday-never-today/

          Fred C. Dobbs said in reply to reason...

          It does not seem reasonable or fair to pay practically no interest on savings, which is a consequence of Fed policy. A consequence of this is that people go into risky investments that lead to catastrophe, sometimes widespread. If the goal was to get people to spend (i.e. consume) more, it seems that they are persistently & stubbornly frugal.

          anne, December 18, 2015 at 06:37 AM

          http://krugman.blogs.nytimes.com/2015/11/23/shorts-subject/

          November 23, 2015

          Shorts Subject
          By Paul Krugman

          Last night I was invited to a screening of "The Big Short," which I thought was terrific; who knew that collateralized debt obligations and credit default swaps could be made into an edge-of-your-seat narrative (with great acting)?

          But there was one shortcut the narrative took, which was understandable and possibly necessary, but still worth noting.

          In the film, various eccentrics and oddballs make the discovery that subprime-backed securities are garbage, which is pretty much what happened; but this is wrapped together with their realization that there was a massive housing bubble, which is presented as equally contrary to anything anyone respectable was saying. And that's not quite right.

          It's true that Greenspan and others were busy denying the very possibility of a housing bubble. And it's also true that anyone suggesting that such a bubble existed was attacked furiously - "You're only saying that because you hate Bush!" Still, there were a number of economic analysts making the case for a massive bubble. Here's Dean Baker in 2002. * Bill McBride (Calculated Risk) was on the case early and very effectively. I keyed off Baker and McBride, arguing for a bubble in 2004 and making my big statement about the analytics in 2005, ** that is, if anything a bit earlier than most of the events in the film. I'm still fairly proud of that piece, by the way, because I think I got it very right by emphasizing the importance of breaking apart regional trends.

          So the bubble itself was something number crunchers could see without delving into the details of mortgage-backed securities, traveling around Florida, or any of the other drama shown in the film. In fact, I'd say that the housing bubble of the mid-2000s was the most obvious thing I've ever seen, and that the refusal of so many people to acknowledge the possibility was a dramatic illustration of motivated reasoning at work.

          The financial superstructure built on the bubble was something else; I was clueless about that, and didn't see the financial crisis coming at all.

          * http://www.cepr.net/documents/publications/housing_2002_08.pdf

          ** http://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html

          anne said in reply to anne... December 18, 2015 at 06:43 AM

          http://www.nytimes.com/2002/08/16/opinion/mind-the-gap.html

          August 16, 2002

          Mind the Gap
          By PAUL KRUGMAN

          More and more people are using the B-word about the housing market. A recent analysis * by Dean Baker, of the Center for Economic Policy Research, makes a particularly compelling case for a housing bubble. House prices have run well ahead of rents, suggesting that people are now buying houses for speculation rather than merely for shelter. And the explanations one hears for those high prices sound more and more like the rationalizations one heard for Nasdaq 5,000.

          If we do have a housing bubble, and it bursts, we'll be looking a lot too Japanese for comfort....

          * http://www.cepr.net/documents/publications/housing_2002_08.pdf

          anne said in reply to anne... December 18, 2015 at 06:44 AM

          http://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html

          August 8, 2005

          That Hissing Sound
          By PAUL KRUGMAN

          This is the way the bubble ends: not with a pop, but with a hiss.

          Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.

          So the news that the U.S. housing bubble is over won't come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.

          Of course, some people still deny that there's a housing bubble. Let me explain how we know that they're wrong.

          One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller "Dow 36,000" are now among the most vocal proponents of the view that there is no housing bubble.

          Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

          In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

          But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

          And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble....

          EMichael said in reply to anne... December 18, 2015 at 06:59 AM

          Yeah, the only thing he missed was the timing of the collapse. The day he wrote this the Fed had already raised rates 250% in one year, on the way to a total of 400% in the next 6 months.

          Yet prices accelerated until the top was reached a year after the column.

          anne said in reply to EMichael... December 18, 2015 at 07:43 AM

          http://www.nytimes.com/2006/08/25/opinion/25krugman.html

          August 25, 2006

          Housing Gets Ugly
          By PAUL KRUGMAN

          Bubble, bubble, Toll's in trouble. This week, Toll Brothers, the nation's premier builder of McMansions, announced that sales were way off, profits were down, and the company was walking away from already-purchased options on land for future development.

          Toll's announcement was one of many indications that the long-feared housing bust has arrived. Home sales are down sharply; home prices, which rose 57 percent over the past five years (and much more than that along the coasts), are now falling in much of the country. The inventory of unsold existing homes is at a 13-year high; builders' confidence is at a 15-year low.

          A year ago, Robert Toll, who runs Toll Brothers, was euphoric about the housing boom, declaring: "We've got the supply, and the market has got the demand. So it's a match made in heaven." In a New York Times profile of his company published last October, he dismissed worries about a possible bust. "Why can't real estate just have a boom like every other industry?" he asked. "Why do we have to have a bubble and then a pop?"

          The current downturn, Mr. Toll now says, is unlike anything he's seen: sales are slumping despite the absence of any "macroeconomic nasty condition" taking housing down along with the rest of the economy. He suggests that unease about the direction of the country and the war in Iraq is undermining confidence. All I have to say is: pop! ...

          EMichael said in reply to anne... December 18, 2015 at 07:52 AM

          "Mr. Toll now says, is unlike anything he's seen: sales are slumping despite the absence of any "macroeconomic nasty condition""

          You gotta love builders and RE agents. It wasn't macro that caused it, it was default rates across the board on supposedly safe investments that caused mortgage money supply to totally disappear.

          One day people will understand that payments are the key to all finance.

          JohnH said...

          "and it is an outrage that basically nobody ended up being punished ."

          Yes, indeed. And who do we have to blame for that? Obama and Holder, of course. They made the investigation of mortgage securities fraud DOJ's lowest priority. Krugman's Democratic proclivities prevent him from stating the obvious.

          I' m sure that pgl and his band of merry Obamabots will try to spin this in Obama's favor...I.e. Congress prevented him from implementing the law, even though Congress has nothing to do with it.

          Fact is, Obama has intentionally been a lame duck ever since he took office. He was even clueless on how to capitalize on a filibuster-proof majority in the midst of an economic crisis...which brings us to Trump. Many are so desperate for leadership after Obama's hollow presidency that they'll even support a racist demagogue to avoid another empty White House.

          run75441 said in reply to JohnH...

          Yes you are correct. From 2001 into 2008 when all of the liar and ninja loans were being made, not one government official stepped forward to investigate the possibility of fraud, the predatory lending, the misrepresentation of loans taking place, the loans with "teaser" rates which later ballooned, the packing of loans with deceptive fees, the illegal kick backs, etc. Not one. To make matters worst, the administration from 2001-2008 aligned itself with the banks along with the maestro hisself "Greenspan."

          When state AGs took on the burden of investigating the flagrant violations, the administration moves to block them saying they had no jurisdiction to do so. It did this through the OCC issuing rules preventing the states from prosecuting the banks. Besides blocking any investigation, the OCC failed in its mission to audit the banks for which it was by law to do.

          What was the SEC doing during this time period? What was the administration doing with Enron in 2002? Didn't Cheney get sued by the GAO to find out who he was talking to at Enron?

          Yes there is the matter of not prosecuting banking execs after 2008; however, the issue was allowed to grow during the prior administration and left on the next administration's doorstep. Closing the barn door after the perps have escaped is a bit late and it should have been stopped dead in its tracks during the prior 8 years.

          So keep going down that path and we can also talk about fraud with tranching, CDS, Naked CDs, reserves, etc.

          So, where was the administration during this time period?

          DeDude said...

          Subprime loans in poor communities represented a very small fraction of the total subprime volume and defaulted loans. I mean talk about the mouse and the elephant. Yet the FoxBots are being convinced to look at those scary mice and all that thundering noise they are making.

          Alex H said in reply to Peter K....
          In the book, one of the supposed villains went to the division of AIG that was selling CDSes (i.e. "insuring" the toxic crap) and explained to a direct subordinate of the division exactly how his bank and the other companies of Wall Street were suckering them into taking on absurd risks. In *2005*.

          Because he was massively short in this market, and AIG pulling the plug would have popped the bubble. Nobody else was selling CDSes (then), and Wall Street couldn't have pretended that their risks were covered without them. That doesn't make him a hero, but seriously, if AIG had listened, no collapse.

          Several of the characters effectively called up the ratings agencies to shout at them. Others called NYT and WSJ reporters, who ignored them. Then they called the SEC's enforcement division, who ignored them.

          Besides, if the other side in all of those bets were foreign "widows and orphans", then it wouldn't have wrecked the financial system. If Bear Stearns had been sitting as the middleman between a Korean pension fund and Steve Eisman, they'd have just taken their cut and moved on.

          [Dec 19, 2015] The Enduring Relevance of "Manias, Panics, and Crashes"

          Notable quotes:
          "... Manias, Panics, and Crashes ..."
          "... The New International Money Game ..."
          "... Manias, Panics and Crashes ..."
          "... Why Minsky Matters ..."
          "... Manias, Panics and Crashes ..."
          "... Manias, Panics and Crashes ..."
          December 17, 2015 | Angry Bear

          by Joseph Joyce

          The Enduring Relevance of "Manias, Panics, and Crashes"

          The seventh edition of Manias, Panics, and Crashes has recently been published by Palgrave Macmillan. Charles Kindleberger of MIT wrote the first edition, which appeared in 1978, and followed it with three more editions. Robert Aliber of the Booth School of Business at the University of Chicago took over the editing and rewriting of the fifth edition, which came out in 2005. (Aliber is also the author of another well-known book on international finance, The New International Money Game.) The continuing popularity of Manias, Panics and Crashes shows that financial crises continue to be a matter of widespread concern.

          Kindleberger built upon the work of Hyman Minsky, a faculty member at Washington University in St. Louis. Minsky was a proponent of what he called the "financial instability hypothesis," which posited that financial markets are inherently unstable. Periods of financial booms are followed by busts, and governmental intervention can delay but not eliminate crises. Minsky's work received a great deal of attention during the global financial crisis (see here and here; for a summary of Minksy's work, see Why Minsky Matters by L. Randall Wray of the University of Missouri-Kansas City and the Levy Economics Institute).

          Kindleberger provided a more detailed description of the stages of a financial crisis. The period preceding a crisis begins with a "displacement," a shock to the system. When a displacement improves the profitability of at least one sector of an economy, firms and individuals will seek to take advantage of this opportunity. The resulting demand for financial assets leads to an increase in their prices. Positive feedback in asset markets lead to more investments and financial speculation, and a period of "euphoria," or mania develops.

          At some point, however, insiders begin to take profits and withdraw from the markets. Once market participants realize that prices have peaked, flight from the markets becomes widespread. As prices plummet, a period of "revulsion" or panic ensues. Those who had financed their positions in the market by borrowing on the promise of profits on the purchased assets become insolvent. The panic ends when prices fall so far that some traders are tempted to come back into the market, or trading is limited by the authorities, or a lender of last resort intervenes to halt the decline.

          In addition to elaborating on the stages of a financial crisis, Kindleberger also placed them in an international context. He wrote about the propagation of crises through the arbitrage of divergences in the prices of assets across markets or their substitutes. Capital flows and the spread of euphoria also contribute to the simultaneous rises in asset prices in different countries. (Piero Pasotti and Alessandro Vercelli of the University of Siena provide an analysis of Kindleberger's contributions.)

          Aliber has continued to update the book, and the new edition has a chapter on the European sovereign debt crisis. (The prior edition covered the events of 2008-09.) But he has also made his own contributions to the Minsky-Kindleberger (and now –Aliber) framework. Aliber characterizes the decades since the early 1980s as "…the most tumultuous in monetary history in terms of the number, scope and severity of banking crises." To date, there have been four waves of such crises, which are almost always accompanied by currency crises. The first wave was the debt crisis of developing nations during the 1980s, and it was followed by a second wave of crises in Japan and the Nordic countries in the early 1990s. The third wave was the Asian financial crisis of 1997-98, and the fourth is the global financial crisis.

          Aliber emphasizes the role of cross-border investment flows in precipitating the crises. Their volatility has risen under flexible exchange rates, which allow central banks more freedom in formulating monetary policies that influence capital allocation. He also draws attention to the increases in household wealth due to rising asset prices and currency appreciation that contribute to consumption expenditures and amplify the boom periods. The reversal in wealth once investors revise their expectations and capital begins to flow out makes the resulting downturn more acute.

          These views are consistent in many ways with those of Claudio Borio of the Bank for International Settlements (see also here). He has written that the international monetary and financial system amplifies the "excess financial elasticity," i.e., the buildup of financial imbalances that characterizes domestic financial markets. He identifies two channels of transmission. First, capital inflows contribute to the rise in domestic credit during a financial boom. The impact of global conditions on domestic financial markets exacerbates this development (see here). Second, monetary regimes may facilitate the expansion of monetary conditions from one country to others. Central bankers concerned about currency appreciation and a loss of competitiveness keep interest rates lower than they would otherwise, which furthers a domestic boom. In addition, the actions of central banks with international currencies such as the dollar has international ramifications, as the current widespread concern about the impending rise in the Federal Funds rate shows.

          Aliber ends the current edition of Manias, Panics and Crashes with an appendix on China's financial situation. He compares the surge in China's housing markets with the Japanese boom of the 1980s and subsequent bust that initiated decades of slow economic growth. An oversupply of new housing in China has resulted in a decline in prices that threatens the solvency of property developers and the banks and shadow banks that financed them. Aliber is dubious of the claim that the Chinese government will support the banks, pointing out that such support will only worsen China's indebtedness. The need for an eighth edition of Manias, Panics and Crashes may soon be apparent.

          cross posted with Capital Ebbs and Flows

          [Dec 19, 2015] The Washington Post's Non-Political Fed Looks a Lot Like Wall Street's Fed

          Notable quotes:
          "... Any serious discussion of Fed policy would note that the banking industry appears to have a grossly disproportionate say in the country's monetary policy. ..."
          Dec 19, 2015 | Beat the Press

          ... ... ...

          But what is even more striking is the Post's ability to treat the Fed a neutral party when the evidence is so overwhelming in the opposite direction. The majority of the Fed's 12 district bank presidents have long been pushing for a rate hike. While there are some doves among this group, most notably Charles Evans, the Chicago bank president, and Narayana Kocherlakota, the departing president of the Minneapolis bank, most of this group has publicly pushed for higher rate hikes for some time. By contrast, the governors who are appointed through the democratic process, have been far more cautious about raising rates.

          It should raise serious concerns that the bank presidents, who are appointed through a process dominated by the banking industry, has such a different perspective on the best path forward for monetary policy. With only five of the seven governor slots currently filled, there are as many presidents with voting seats on the Fed's Open Market Committee as governors. In total, the governors are outnumbered at meetings by a ratio of twelve to five.

          Any serious discussion of Fed policy would note that the banking industry appears to have a grossly disproportionate say in the country's monetary policy. Furthermore, it seems determined to use that influence to push the Fed on a path that slows growth and reduces the rate of job creation. The Post somehow missed this story or at least would prefer that the rest of us not take notice.

          * https://www.washingtonpost.com/opinions/the-federal-reserve-makes-a-good-judgment-call-in-raising-interest-rates/2015/12/18/7954e1c6-a4f8-11e5-ad3f-991ce3374e23_story.html

          -- Dean Baker

          [Dec 18, 2015] The Upward Redistribution of Income: Are Rents the Story?

          Looks like growth of financial sector represents direct threat to the society
          Notable quotes:
          "... Perhaps the financialization of the economy and rising inequality leads to a corruption of the political process which leads to monetary, currency and fiscal policy such that labor markets are loose and inflation is low. ..."
          "... Growth of the non-financial-sector == growth in productivity ..."
          "... In complex subject matters, even the most competent person joining a company has to become familiar with the details of the products, the industry niche, the processes and professional/personal relationships in the company or industry, etc. All these are not really teachable and require between months and years in the job. This represents a significant sunk cost. Sometimes (actually rather often) experience within the niche/industry is in a degree portable between companies, but some company still had to employ enough people to build this experience, and it cannot be readily bought by bringing in however competent freshers. ..."
          December 18, 2015 | cepr.netDean Baker:
          Working Paper: : In the years since 1980, there has been a well-documented upward redistribution of income. While there are some differences by methodology and the precise years chosen, the top one percent of households have seen their income share roughly double from 10 percent in 1980 to 20 percent in the second decade of the 21st century. As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period.

          This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.

          Flash | PDF

          RC AKA Darryl, Ron said in reply to Fair Economist, December 18, 2015 at 11:34 AM

          "...the growth of finance capitalism was what would kill capitalism off..."

          "Financialization" is a short-cut terminology that in full is term either "financialization of non-financial firms" or "financialization of the means of production." In either case it leads to consolidation of firms, outsourcing, downsizing, and offshoring to reduce work force and wages and increase rents.

          Consolidation, the alpha and omega of financialization can only be executed with very liquid financial markets, big investment banks to back necessary leverage to make the proffers, and an acute capital gains tax preference relative to dividends and interest earnings, the grease to liquidity.

          It takes big finance to do "financialization" and it takes "financialization" to extract big rents while maintaining low wages.

          RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron, December 18, 2015 at 11:42 AM
          [THANKS to djb just down thread who supplied this link:]

          http://www.democraticunderground.com/10021305040

          Finance sector as percent of US GDP, 1860-present: the growth of the rentier economy

          [graph]

          Financialization is a term sometimes used in discussions of financial capitalism which developed over recent decades, in which financial leverage tended to override capital (equity) and financial markets tended to dominate over the traditional industrial economy and agricultural economics.

          Financialization is a term that describes an economic system or process that attempts to reduce all value that is exchanged (whether tangible, intangible, future or present promises, etc.) either into a financial instrument or a derivative of a financial instrument. The original intent of financialization is to be able to reduce any work-product or service to an exchangeable financial instrument... Financialization also makes economic rents possible...financial leverage tended to override capital (equity) and financial markets tended to dominate over the traditional industrial economy and agricultural economics...

          Companies are not able to invest in new physical capital equipment or buildings because they are obliged to use their operating revenue to pay their bankers and bondholders, as well as junk-bond holders. This is what I mean when I say that the economy is becoming financialized. Its aim is not to provide tangible capital formation or rising living standards, but to generate interest, financial fees for underwriting mergers and acquisitions, and capital gains that accrue mainly to insiders, headed by upper management and large financial institutions. The upshot is that the traditional business cycle has been overshadowed by a secular increase in debt.

          Instead of labor earning more, hourly earnings have declined in real terms. There has been a drop in net disposable income after paying taxes and withholding "forced saving" for social Security and medical insurance, pension-fund contributions and–most serious of all–debt service on credit cards, bank loans, mortgage loans, student loans, auto loans, home insurance premiums, life insurance, private medical insurance and other FIRE-sector charges. ... This diverts spending away from goods and services.

          In the United States, probably more money has been made through the appreciation of real estate than in any other way. What are the long-term consequences if an increasing percentage of savings and wealth, as it now seems, is used to inflate the prices of already existing assets - real estate and stocks - instead of to create new production and innovation?

          http://en.wikipedia.org/wiki/Financialization

          pgl said in reply to RC AKA Darryl, Ron, December 18, 2015 at 03:25 PM
          Your graph shows something I've been meaning to suggest for a while. Take a look at the last time that the financial sector share of GDP rose. The late 1920's. Which was followed by the Great Depression which has similar causes as our Great Recession. Here is my observation.

          Give that Wall Street clowns a huge increase in our national income and we don't get more services from them. What we get is screwed on the grandest of scales.

          BTW - there is a simple causal relationship that explains both the rise in the share of financial sector income/GDP and the massive collapses of the economy (1929 and 2007). It is called stupid financial deregulation. First we see the megabanks and Wall Street milking the system for all its worth and when their unhanded and often secretive risk taking falls apart - the rest of bear the brunt of the damage.

          Which is why this election is crucial. Elect a Republican and we repeat this mistake again. Elect a real progressive and we can put in place the types of financial reforms FDR was known for.

          Peter K. said in reply to RC AKA Darryl, Ron, December 18, 2015 at 11:50 AM

          " and it takes "financialization" to extract big rents while maintaining low wages."

          It takes governmental macro policy to maintain loose labor markets and low wages. Perhaps the financialization of the economy and rising inequality leads to a corruption of the political process which leads to monetary, currency and fiscal policy such that labor markets are loose and inflation is low.

          djb said...

          http://www.democraticunderground.com/10021305040

          I don't know about the last couple years but this chart indicates a large growth in financials as a share of gdp over the years since the 40's

          RC AKA Darryl, Ron said in reply to djb, December 18, 2015 at 12:03 PM
          [Anne gave you FIRE sector profits as a share of GDP while this gives FIRE sector profits as a share of total corporate profits.]

          *

          [Smoking gun excerpt:]

          "...The financial system has grown rapidly since the early 1980s. In the 1950s, the financial sector accounted for about 3 percent of U.S. gross domestic product. Today, that figure has more than doubled, to 6.5 percent. The sector's yearly rate of growth doubled after 1980, rising to a peak of 7.5 percent of GDP in 2006. As finance has grown in relative size it has also grown disproportionately more profitable. In 1950, financial-sector profits were about 8 percent of overall U.S. profits-meaning all the profit earned by any kind of business enterprise in the country. By the 2000s, they ranged between 20 and 40 percent...

          [Ouch!]

          [Now the whole enchilada:]

          http://www.washingtonmonthly.com/magazine/novemberdecember_2014/features/frenzied_financialization052714.php?page=all

          If you want to know what happened to economic equality in this country, one word will explain a lot of it: financialization. That term refers to an increase in the size, scope, and power of the financial sector-the people and firms that manage money and underwrite stocks, bonds, derivatives, and other securities-relative to the rest of the economy.

          The financialization revolution over the past thirty-five years has moved us toward greater inequality in three distinct ways. The first involves moving a larger share of the total national wealth into the hands of the financial sector. The second involves concentrating on activities that are of questionable value, or even detrimental to the economy as a whole. And finally, finance has increased inequality by convincing corporate executives and asset managers that corporations must be judged not by the quality of their products and workforce but by one thing only: immediate income paid to shareholders.

          The financial system has grown rapidly since the early 1980s. In the 1950s, the financial sector accounted for about 3 percent of U.S. gross domestic product. Today, that figure has more than doubled, to 6.5 percent. The sector's yearly rate of growth doubled after 1980, rising to a peak of 7.5 percent of GDP in 2006. As finance has grown in relative size it has also grown disproportionately more profitable. In 1950, financial-sector profits were about 8 percent of overall U.S. profits-meaning all the profit earned by any kind of business enterprise in the country. By the 2000s, they ranged between 20 and 40 percent. This isn't just the decline of profits in other industries, either. Between 1980 and 2006, while GDP increased five times, financial-sector profits increased sixteen times over. While financial and nonfinancial profits grew at roughly the same rate before 1980, between 1980 and 2006 nonfinancial profits grew seven times while financial profits grew sixteen times.

          This trend has continued even after the financial crisis of 2008 and subsequent financial reforms, including the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Financial profits in 2012 were 24 percent of total profits, while the financial sector's share of GDP was 6.8 percent. These numbers are lower than the high points of the mid-2000s; but, compared to the years before 1980, they are remarkably high.

          This explosion of finance has generated greater inequality. To begin with, the share of the total workforce employed in the financial sector has barely budged, much less grown at a rate equivalent to the size and profitability of the sector as a whole. That means that these swollen profits are flowing to a small sliver of the population: those employed in finance. And financiers, in turn, have become substantially more prominent among the top 1 percent. Recent work by the economists Jon Bakija, Adam Cole, and Bradley T. Heim found that the percentage of those in the top 1 percent of income working in finance nearly doubled between 1979 and 2005, from 7.7 percent to 13.9 percent.

          If the economy had become far more productive as a result of these changes, they could have been worthwhile. But the evidence shows it did not. Economist Thomas Philippon found that financial services themselves have become less, not more, efficient over this time period. The unit cost of financial services, or the percentage of assets it costs to produce all financial issuances, was relatively high at the dawn of the twentieth century, but declined to below 2 percent between 1901 and 1960. However, it has increased since the 1960s, and is back to levels seen at the early twentieth century. Whatever finance is doing, it isn't doing it more cheaply.

          In fact, the second damaging trend is that financial institutions began to concentrate more and more on activities that are worrisome at best and destructive at worst. Harvard Business School professors Robin Greenwood and David Scharfstein argue that between 1980 and 2007 the growth in financial-industry revenues came from two things: asset management and loan origination. Fees associated either with asset management or with household credit in particular were responsible for 74 percent of the growth in financial-sector output over that period.

          The asset management portion reflects the explosion of mutual funds, which increased from $134 billion in assets in 1980 to $12 trillion in 2007. Much of it also comes from "alternative investment vehicles" like hedge funds and private equity. Over this time, the fee rate for mutual funds fell, but fees associated with alternative investment vehicles exploded. This is, in essence, money for nothing-there is little evidence that hedge funds actually perform better than the market over time. And, unlike mutual funds, alternative investment funds do not fully disclose their practices and fees publicly.

          Beginning in 1980 and continuing today, banks generate less and less of their income from interest on loans. Instead, they rely on fees, from either consumers or borrowers. Fees associated with household credit grew from 1.1 percent of GDP in 1980 to 3.4 percent in 2007. As part of the unregulated shadow banking sector that took over the financial sector, banks are less and less in the business of holding loans and more and more concerned with packaging them and selling them off. Instead of holding loans on their books, banks originate loans to sell off and distribute into this new type of banking sector.

          Again, if this "originate-to-distribute" model created value for society, it could be a worthwhile practice. But, in fact, this model introduced huge opportunities for fraud throughout the lending process. Loans-such as "securitized mortgages" made up of pledges of the income stream from subprime mortgage loans-were passed along a chain of buyers until someone far away held the ultimate risk. Bankers who originated the mortgages received significant commissions, with virtually no accountability or oversight. The incentive, in fact, was perverse: find the worst loans with the biggest fees instead of properly screening for whether the loans would be any good for investors.

          The same model made it difficult, if not impossible, to renegotiate bad mortgages when the system collapsed. Those tasked with tackling bad mortgages on behalf of investors had their own conflicts of interests, and found themselves profiting while loans struggled. This process created bad debts that could never be paid, and blocked attempts to try and rework them after the fact. The resulting pool of bad debt has been a drag on the economy ever since, giving us the fall in median wages of the Great Recession and the sluggish recovery we still live with.

          And of course it's been an epic disaster for the borrowers themselves. Many of them, we now know, were moderate- and lower-income families who were in no financial position to borrow as much as they did, especially under such predatory terms and with such high fees. Collapsing home prices and the inability to renegotiate their underwater mortgages stripped these folks of whatever savings they had and left them in deep debt, widening even further the gulf of inequality in this country.

          Moreover, financialization isn't just confined to the financial sector itself. It's also ultimately about who controls, guides, and benefits from our economy as a whole. And here's the last big change: the "shareholder revolution," started in the 1980s and continuing to this very day, has fundamentally transformed the way our economy functions in favor of wealth owners.

          To understand this change, compare two eras at General Electric. This is how business professor Gerald Davis describes the perspective of Owen Young, who was CEO of GE almost straight through from 1922 to 1945: "[S]tockholders are confined to a maximum return equivalent to a risk premium. The remaining profit stays in the enterprise, is paid out in higher wages, or is passed on to the customer." Davis contrasts that ethos with that of Jack Welch, CEO from 1981 to 2001; Welch, Davis says, believed in "the shareholder as king-the residual claimant, entitled to the [whole] pot of earnings."

          This change had dramatic consequences. Economist J. W. Mason found that, before the 1980s, firms tended to borrow funds in order to fuel investment. Since 1980, that link has been broken. Now when firms borrow, they tend to use the money to fund dividends or buy back stocks. Indeed, even during the height of the housing boom, Mason notes, "corporations were paying out more than 100 percent of their cash flow to shareholders."

          This lack of investment is obviously holding back our recovery. Productive investment remains low, and even extraordinary action by the Federal Reserve to make investments more profitable by keeping interest rates low has not been able to counteract the general corporate presumption that this money should go to shareholders. There is thus less innovation, less risk taking, and ultimately less growth. One of the reasons this revolution was engineered in the 1980s was to put a check on what kinds of investments CEOs could make, and one of those investments was wage growth. Finance has now won the battle against wage earners: corporations today are reluctant to raise wages even as the economy slowly starts to recover. This keeps the economy perpetually sluggish by retarding consumer demand, while also increasing inequality.

          How can these changes be challenged? The first thing we must understand is the scope of the change. As Mason writes, the changes have been intellectual, legal, and institutional. At the intellectual level, academic research and conventional wisdom among economists and policymakers coalesced around the ideas that maximizing returns to shareholders is the only goal of a corporation, and that the financial markets were always right. At the legal level, laws regulating finance at the state level were overturned by the Supreme Court or preempted by federal regulators, and antitrust regulations were gutted by the Reagan administration and not taken up again.

          At the institutional level, deregulation over several administrations led to a massive concentration of the financial sector into fewer, richer firms. As financial expertise became more prestigious than industry-specific knowledge, CEOs no longer came from within the firms they represented but instead from other firms or from Wall Street; their pay was aligned through stock options, which naturally turned their focus toward maximizing stock prices. The intellectual and institutional transformation was part of an overwhelming ideological change: the health and strength of the economy became identified solely with the profitability of the financial markets.

          This was a bold revolution, and any program that seeks to change it has to be just as bold intellectually. Such a program will also require legal and institutional changes, ones that go beyond making sure that financial firms can fail without destroying the economy. Dodd-Frank can be thought of as a reaction against the worst excesses of the financial sector at the height of the housing bubble, and as a line of defense against future financial panics. Many parts of it are doing yeoman's work in curtailing the financial sector's abuses, especially in terms of protecting consumers from fraud and bringing some transparency to the Wild West of the derivatives markets. But the scope of the law is too limited to roll back these larger changes.

          One provision of Dodd-Frank, however, suggests a way forward. At the urging of the AFL-CIO, Dodd-Frank empowered the Securities and Exchange Commission to examine the activities of private equity firms on behalf of their investors. At around $3.5 trillion, private equity is a massive market with serious consequences for the economy as a whole. On its first pass, the SEC found extensive abuses. Andrew Bowden, the director of the SEC's examinations office, stated that the agency found "what we believe are violations of law or material weaknesses in controls over 50 percent of the time."

          Lawmakers could require private equity and hedge funds to standardize their disclosures of fees and holdings, as is currently the case for mutual funds. The decline in fees for mutual funds noted above didn't just happen by itself; it happened because the law structured the market for actual transparency and price competition. This will need to happen again for the broader financial sector.

          But the most important change will be intellectual: we must come to understand our economy not as simply a vehicle for capital owners, but rather as the creation of all of us, a common endeavor that creates space for innovation, risk taking, and a stronger workforce. This change will be difficult, as we will have to alter how we approach the economy as a whole. Our wealth and companies can't just be strip-mined for a small sliver of capital holders; we'll need to bring the corporation back to the public realm. But without it, we will remain trapped inside an economy that only works for a select few.

          [Whew!]

          Puerto Barato said in reply to RC AKA Darryl, Ron,
          "3 percent of U.S. gross domestic product. Today, that figure has more than doubled, to 6.5"
          ~~RC AKA Darryl, Ron ~

          Growth of the non-financial-sector == growth in productivity

          Growth of the financial-sector == growth in upward transfer of wealth

          Ostensibly financial-sector is there to protect your money from being eaten up by inflation. Closer inspection shows that the prevention of *eaten up* is by the method of rent collection.

          Accountants handle this analysis poorly, but you can see what is happening. Boiling it down to the bottom line you can easily see that wiping out the financial sector is the remedy to the Piketty.

          Hell! Financial sector wiped itself out in 008. Problem was that the GSE and administration brought the zombie back to life then put the vampire back at our throats. What was the precipitating factor that snagged the financial sector without warning?

          Unexpected
          deflation
          !

          Gimme some
          of that

          pgl said in reply to djb...

          People like Brad DeLong have noted this for a while. Twice as many people making twice as much money per person. And their true value to us - not a bit more than it was back in the 1940's.

          Rock O Sock O Choco said in reply to djb... December 18, 2015 at 06:26 PM

          JEC - MeanSquaredErrors said...

          Wait, what?

          Piketty looks at centuries of data from all over the world and concludes that capitalism has a long-run bias towards income concentration. Baker looks at 35 years of data in one country and concludes that Piketty is wrong. Um...?

          A little more generously, what Baker actually writes is:

          "The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to **this** rapid rise in inequality, as for example argued by Thomas Piketty." (emphasis added)

          But Piketty has always been very explicit that the recent rise in US income inequality is anomalous -- driven primarily by rising inequality in the distribution of labor income, and only secondarily by any shift from labor to capital income.

          So perhaps Baker is "correctly" refuting Straw Thomas Piketty. Which I suppose is better than just being obviously wrong. Maybe.

          tew said...

          Some simple math shows that this assertion is false "As a result of this upward redistribution, most workers have seen little improvement in living standards" unless you think an apprx. 60% in per-capita real income (expressed as GDP) among the 99% is "little improvement".

          Real GDP 2015 / Real GDP 1980 = 2.57 (Source: FRED)
          If the income share of the 1% shifted from 10% to 20% then The 1%' real GDP component went up 410% while that of The 99% went up 130%. Accounting for a population increase of about 41% brings those numbers to a 265% increase and a 62% increase.

          Certainly a very unequal distribution of the productivity gains but hard to call "little".

          I believe the truth of the statement is revealed when you look at the Top 5% vs. the other 95%.

          cm said in reply to tew...

          For most "working people", their raises are quickly eaten up by increases in housing/rental, food, local services, and other nondiscretionary costs. Sure, you can buy more and better imported consumer electronics per dollar, but you have to pay the rent/mortgage every months, how often do you buy a new flat screen TV? In a high-cost metro, a big ass TV will easily cost less than a single monthly rent (and probably less than your annual cable bill that you need to actually watch TV).

          pgl said in reply to tew...

          Are you trying to be the champion of the 1%? Sorry dude but Greg Mankiw beat you to this.

          anne said...

          In the years since 1980, there has been a well-documented upward redistribution of income. While there are some differences by methodology and the precise years chosen, the top one percent of households have seen their income share roughly double from 10 percent in 1980 to 20 percent in the second decade of the 21st century. As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period....

          -- Dean Baker

          anne said in reply to anne...

          http://www.census.gov/hhes/www/income/data/historical/household/

          September 16, 2015

          Real Median Household Income, 1980 & 2014


          1980 ( 48,462)

          2014 ( 53,657)


          53,657 - 48,462 = 5,195

          5,195 / 48,462 = 10.7%


          Between 1980 and 2014 real median household income increased by a mere 10.7%.

          anne said in reply to don...

          I would be curious to know what has happened to the number of members per household....

          http://www.census.gov/hhes/www/income/data/historical/household/

          September 16, 2015

          Household Size

          2014 ( 2.54)
          1980 ( 2.73)

          [ The difference in household size to real median household incomes is not statistically significant. ]

          anne said in reply to anne...

          http://www.census.gov/hhes/www/income/data/historical/families/index.html

          September 16, 2015

          Real Median Family Income, 1948-1980-2014


          1948 ( 27,369)

          1980 ( 57,528)

          2014 ( 66,632)


          57,528 - 27,369 = 30,159

          30,159 / 27,369 = 110.2%


          66,632 - 57,528 = 9,104

          9,104 / 57,528 = 15.8%


          Between 1948 and 1980, real median family income increased by 110.2%, while between 1980 and 2014 real median family income increased by a mere 15.8%.

          cm said...

          "protectionist measures that have boosted the pay of doctors and other highly educated professionals"

          Protectionist measures (largely of the variety that foreign credentials are not recognized) apply to doctors and similar accredited occupations considered to be of some importance, but certainly much less so to "highly educated professionals" in tech, where the protectionism is limited to annual quotas for some categories of new workers imported into the country and requiring companies to pay above a certain wage rate for work visa holders in jobs claimed to have high skills requirements.

          A little mentioned but significant factor for growing wages in "highly skilled" jobs is that the level of foundational and generic domain skills is a necessity, but is not all the value the individual brings to the company. In complex subject matters, even the most competent person joining a company has to become familiar with the details of the products, the industry niche, the processes and professional/personal relationships in the company or industry, etc. All these are not really teachable and require between months and years in the job. This represents a significant sunk cost. Sometimes (actually rather often) experience within the niche/industry is in a degree portable between companies, but some company still had to employ enough people to build this experience, and it cannot be readily bought by bringing in however competent freshers.

          This applies less so e.g. in medicine. There are of course many heavily specialized disciplines, but a top flight brain or internal organ surgeon can essentially work on any person. The variation in the subject matter is large and complex, but much more static than in technology.

          That's not to knock down the skill of medical staff in any way (or anybody else who does a job that is not trivial, and that's true for many jobs). But specialization vs. genericity follow a different pattern than in tech.

          Another example, the legal profession. There are similar principles that carry across, with a lot of the specialization happening along different legislation, case law, etc., specific to the jurisdiction and/or domain being litigated.

          [Dec 18, 2015] How low can oil prices go? Opec and El Niño take a bite out of crudes cost

          Oil is a valuable chemical resource that is now wasted because of low prices... "The obvious follow-up question is, how long will the sane people of the world continue to allow so much fossil-fuel combustion to continue? An exercise for readers."
          Notable quotes:
          "... Iran wont flood the market in 2016. Right now Iran is losing production. It takes time to reverse decline and make a difference. ..."
          "... Those who predict very low prices dont understand the industry (I do). The low price environment reduces capital investment, which has to be there just to keep production flat (the decline is 3 to 5 million barrels of oil per day per year). At this time capacity is dropping everywhere except for a few select countries. The USA is losing capacity, and will never again reach this years peak unless prices double. Other countries are hopeless. From Norway to Indonesia to Colombia to Nigeria and Azerbaijan, peak oil has already taken place. ..."
          "... If oil prices remain very low until 2025 itll either be because you are right or because the world went to hell. ..."
          "... But Im with Carambaman - prices will go up again. Demand is and will still be there. The excess output will eventually end, and the prices stabilises. And then move up again. ..."
          "... Time to examine the real question: how long can the Saudis maintain their current production rates? Theyre currently producing more than 10 Mbarrels/day, but lets take the latter figure as a lower bound. They apparently have (per US consulate via WikiLeaks--time for a followup?) at least 260 Gbarrels (though it seems no one outside Saudi really knows). You do the math: 260 Gbarrels / (10 Mbarrels/day) = 26 kdays ~= 70 years. @ 15 Mbarrels/day - 47.5 years. @ 20 Mbarrels/day - 35 years. ..."
          "... The obvious follow-up question is, how long will the sane people of the world continue to allow so much fossil-fuel combustion to continue? An exercise for readers. ..."
          "... Saudi Arabia, a US ally, using oil production and pricing to crush US oil shale industry? Did I read that correctly? ..."
          "... Yeah, but I suspect it was *written* incorrectly. Im betting the Saudis real target is the Russians. ..."
          "... In 1975 dollars, thats $8.31 / bbl (with a cumulative inflation factor of 342% over 40 years), or $.45 / gal for gas (assuming a current price of $2.00 / gal). ..."
          "... I spent 30 years in the oil industry and experienced many cycles. When it is up people cannot believe it will go down and when it is down people cannot believe it will go up. It is all a matter of time ..."
          Dec 16, 2015 | The Guardian

          Fernando Leza -> jah5446 15 Dec 2015 06:12

          Iran won't flood the market in 2016. Right now Iran is losing production. It takes time to reverse decline and make a difference.

          Those who predict very low prices don't understand the industry (I do). The low price environment reduces capital investment, which has to be there just to keep production flat (the decline is 3 to 5 million barrels of oil per day per year). At this time capacity is dropping everywhere except for a few select countries. The USA is losing capacity, and will never again reach this year's peak unless prices double. Other countries are hopeless. From Norway to Indonesia to Colombia to Nigeria and Azerbaijan, peak oil has already taken place.

          Fernando Leza -> SonOfFredTheBadman 15 Dec 2015 06:05

          If oil prices remain very low until 2025 it'll either be because you are right or because the world went to hell. I prefer your vision, of course. But I'm afraid most of your talk is wishful thinking. Those of us who do know how to put watts on the table can't figure out any viable solutions. Hopefully something like cheap fusion power will rise. Otherwise you may be eating human flesh in 2060.

          Fernando Leza -> p26677 15 Dec 2015 06:00

          Keep assuming. I'll keep buying Shell stock.

          MatCendana -> UnevenSurface 14 Dec 2015 03:36

          Regardless of the breakeven price, producers with the wells already running or about to will keep pumping. Better to have some income, even if the operation is at a loss, than no income. This will go on and on right until the end, which is either prices eventually go up or they run out of oil and can't drill new wells.

          But I'm with Carambaman - prices will go up again. Demand is and will still be there. The excess output will eventually end, and the prices stabilises. And then move up again.

          Billy Carnes 13 Dec 2015 19:52

          Also this hurts the states...Louisiana is now in the hole over 1.5 Billion or more

          TomRoche 13 Dec 2015 12:31

          @Guardian: Time to examine the real question: how long can the Saudis maintain their current production rates? They're currently producing more than 10 Mbarrels/day, but let's take the latter figure as a lower bound. They apparently have (per US consulate via WikiLeaks--time for a followup?) at least 260 Gbarrels (though it seems no one outside Saudi really knows). You do the math: 260 Gbarrels / (10 Mbarrels/day) = 26 kdays ~= 70 years. @ 15 Mbarrels/day -> 47.5 years. @ 20 Mbarrels/day -> 35 years.

          That's just Saudi (allegedly) proven reserves. But it's plenty long enough to push atmospheric GHG levels, and associated radiative forcing, to ridiculously destructive excess.

          The obvious follow-up question is, how long will the sane people of the world continue to allow so much fossil-fuel combustion to continue? An exercise for readers.

          TomRoche -> GueroElEnfermero 13 Dec 2015 12:14

          @GueroElEnfermero: 'Saudi Arabia, a US ally, using oil production and pricing to crush US oil shale industry? Did I read that correctly?'

          Yeah, but I suspect it was *written* incorrectly. I'm betting the Saudis' real target is the Russians.

          Sieggy 13 Dec 2015 11:49

          In 1975 dollars, that's $8.31 / bbl (with a cumulative inflation factor of 342% over 40 years), or $.45 / gal for gas (assuming a current price of $2.00 / gal).

          Carambaman 13 Dec 2015 10:25

          I spent 30 years in the oil industry and experienced many cycles. When it is up people cannot believe it will go down and when it is down people cannot believe it will go up. It is all a matter of time

          [Dec 17, 2015] Neocon Influence on Angela Merkel

          February 21, 2007 | Dialog International
          Is Angela Merkel getting bad advice from Washington neocons through their representative in Berlin? Now we read that Jeff Gedmin - the head of the Aspen Institute in Berlin - is meeting on a regular basis with the Chancellor to instruct her on the Bush administration's line:

          Angela Merkel relies on the advice of Jeffrey Gedmin, specially dispatched to Berlin to assist her by the Bush clan. This lobbyist first worked at the American Enterprise Institute (AEI) [2] under Richard Perle and Mrs. Dick Cheney. He enthusiastically encouraged the creation of a Euro with Dollar parity exchange rate. Within the AEI, he led the New Atlantic Initiative (NAI), which brought together all the America-friendly generals and politicians in Europe. He was then involved in the Project for a New American Century (PNAC) and wrote the chapter on Europe in the neocon programme. He argued that the European Union should remain under NATO authority and that this would only be possible by "discouraging European calls for emancipation." [3] Finally he became the administrator of the Council of the Community of Democracies (CCD), which argues in favour of a two-speed UN, and became director of the Aspen Institute in Berlin [4]. Subsequently he turned down the offer from his friend John Bolton [5] of the post of deputy US ambassador to the UN so as to be able to devote himself exclusively to Angela Merkel.

          Elsewhere we read that Chancellor Merkel receives daily briefings from the neocon stalwart Gedmin:

          Gedmin "brieft" die Kanzlerin täglich: Er hat damit die Rolle inne, die bei der Stasi die Führungsoffiziere hatten. Wenn wir uns noch Demokratie nennen wollen, dann muss Merkel gezwungen werden, die Inhalte dieser täglichen "Briefings" dem Land offenzulegen. In anderen Ländern gibt es dafür Gesetze, die "Freedom of Information Act" heissen.

          Could this be true? I hope not. Gedmin is known for his columns in the conservative daily Die Welt where he reports on the marvelous successes the Iraq War. And who can forget Gedmin's column during last summer' s Israel/Lebanon War where he wrote about how Hezbollah fighters drank the blood of their victims in Lebanon? If Angela Merkel is looking for good advice, there are much more honest and intelligent resources than Jeff Gedmin.

          [Dec 17, 2015] Why Merkel betrays Europe and Germany

          Note that the quality of translation from German of this article is low.
          Notable quotes:
          "... Frankfurter Allgemeine Zeitung ..."
          "... Bild and Die Welt ..."
          "... In 2003, Chancellor Gerhard Schröder opposed the Anglo-American intervention in Ira q. Angela Merkel then published a courageous article in the Washington Post ..."
          "... As Stanley Payne, the famous American historian said about Spain (or any western democracy) that now politicians are not elected but chosen by apparatus, agencies and visible hands of the markets ..."
          "... Merkel is publicly supported by Friede Springer , widow of West German press baron, Axel Springer , whos publishing conglomerate, the Springer Group secretly received around $7 million from the CIA in the early 1950s. ..."
          "... She is counseled by Jeffrey Gedmin. Gedmin is a regular columnist in Die Welt , a publication of the Springer Group. After becoming administrator of the Council of the Community of Democracies and director of the Aspen Institute in Berlin in 2001, Gedmin devoted himself exclusively to Merkel . Gedmin was too involved in the infamous Project for a New American Century (PNAC) and wrote the chapter on Europe in the neocon programme. He argued that the European Union should remain under NATO authority and that this would only be possible by discouraging European calls for emancipation . ..."
          "... In a few years, Merkel has destroyed European solidarity, annihilated the German nuclear power plants (an old American obsession too), impoverished Germans and their once efficient Rheinisch and solitary economy, backed the mad dog American diplomacy and created along with an irresponsible American administration (irresponsible because America will never win this kind of conflict) a dangerous crisis against Russia than can end on a war or a scandalous European partition. ..."
          Mar 06, 2015 | PravdaReport

          One must understand the reasons of Angela Merkel's behaviour. She obeys America and her Israeli mentor ('Israel is Germany's raison d'être'???), she threatens and mistreats Europe; she attacks Russia and now she builds a new sanitary cordon (like in 1919) in order to deconstruct Eurasia and reinforce American agenda in our unlucky continent. Now Merkel advocates for the rapid adoption on the most infamous and perilous treaty of commerce in history, the TPP (Trans-Pacific Partnership). Dr Roberts has recently explained the meaning of 'Fast Track' expression and a courageous Guardian, last 27th may, has exposed the corruption of American Congress on this incredible yet terrible matter.

          Why is Merkel so pro-American and anti-European?

          Let us explain with the data we know the reasons of such nihilist and erratic behaviour.

          • Angela Merkel is not from East Germany (east-Germans are pro-Russian indeed, see lately the declaration of generals). She was born in Hamburg in 1954 (Federal Republic of Germany). Shortly after her birth, her family made the unusual choice of moving to the East. Her father, a pastor in the Lutheran church, founded a seminary in the German Democratic Republic and became director of a home for handicapped persons. He enjoyed a privileged social status, making frequent trips to the West.
          • She became politically involved in the Freie Deutsche Jugend (Free German Youth), the state organisation for young people. She rose within the organisation to the post of Secretary of the Agitprop department, becoming one of the main experts in political communication in the communist system. She enjoys selling her convictions.
          • In November 1989 The CIA attempted to take over by recruiting senior individuals. One month later, Merkel changed sides and joined the Demokratischer Aufbruch (Democratic Revival), a movement inspired by the West German Christian Democrat party. As we know from history, these political parties in Europe are neither Christian nor democratic. They just serve American and business agendas. In order to avoid a mass exodus from the East to the West, Merkel argued strongly in favour of getting the GDR to join the market economy and the Deutschmark zone. Ultraliberal but never popular in Germany, her thesis finally imposed itself in Germany, like that of Sarkozy, her fellow neocon in France who definitely ousted any rest of Gaullism in this country.
          • Her second husband, Joachim Sauer, was recruited by the US Company Biosym Technology, spending a year at San Diego at the laboratory of this Pentagon contractor. He then joined Accelrys, another San Diego company carrying out contracts for the Pentagon. Of course Accelrys is traded on NASDAQ...
          • Helmut Kohl and his closest associates had apparently accepted money from obscure sources for the CDU. Angela Merkel then published a heroic-comical article in the Foreign Frankfurter Allgemeine Zeitung in which she distanced herself from her mentor. One can check that she repeatedly betrays her protectors... and electors (whose median age is of sixty).

          Angela Merkel was then publicly supported by two press groups. Firstly, she was able to count on the support of Friede Springer, who had inherited the Axel Springer group (180 newspapers and magazines, including Bild and Die Welt). The group's journalists are required to sign an editorial agreement which lies down that they must work towards developing transatlantic links and defending the state of Israel. The other group is Bertelsmann.

          Angela Merkel radically rejects European independence

          In 2003, Chancellor Gerhard Schröder opposed the Anglo-American intervention in Iraq. Angela Merkel then published a 'courageous' article in the Washington Post in which she rejected the Chirac-Schröder doctrine of European independence, affirmed her gratitude and friendship for "America" and supported this scandalous and ridiculous war. I quote some lines of this interesting act of submission to her American lords:

          • Because of decisive events, Europe and the United States now must redefine the nucleus of their domestic, foreign and security policy principles.

          • Aid to Turkey, our partner in the alliance, is blocked for days in the NATO Council by France, Belgium and Germany, a situation that undermines the very basis of NATO's legitimacy.

          • The Eastern European candidate countries for membership in the European Union were attacked by the French government because they have declared their commitment to the transatlantic partnership between Europe and the United States. She then threatens France, then a free country run by Chirac and Villepin, and advocates for what Gore Vidal quoted 'the perpetual war'... involving a 'perpetual peace':

          • Anyone who rejects military action as a last resort weakens the pressure that needs to be maintained on dictators and consequently makes a war not less but more likely.

          • Germany needs its friendship with France, but the benefits of that friendship can be realized only in close association with our old and new European partners, and within the transatlantic alliance with the United States.

          Yet Merkel won the elections in 2007. She announced the abolition of graduated income tax, proposing that the rate should be the same for those who only just have what is necessary and those who live in luxury: maybe this is the a result of her Christian education?

          The outgoing Chancellor, Gerhard Schröder, severely criticized this proposal in a televised debate. The CDU's lead was decimated, and in the actual election, the CDU polled 35% of the votes and the SPD 34%, the remainder being spread amongst a number of small parties. The Germans didn't want Schröder any longer, but nor did they want Merkel. I repeat that she was imposed more than elected. As Stanley Payne, the famous American historian said about Spain (or any western democracy) that now politicians are 'not elected but chosen' by apparatus, agencies and 'visible hands' of the markets

          These last weeks, "Mother" Merkel tries to re-launch the proposed merger of the North American Free Trade Area and the European Free Trade Area, thereby creating a "great transatlantic market" to use the words once pronounced by Sir Leon Brittan, a famous paedophile involved in scandals and bribes since, and mysteriously found dead a couple of months ago.

          Let us se now some of their connections:

          • Merkel is publicly supported by Friede Springer, widow of West German press baron, Axel Springer, who's publishing conglomerate, the Springer Group secretly received around $7 million from the CIA in the early 1950's.
          • She is counseled by Jeffrey Gedmin. Gedmin is a regular columnist in Die Welt, a publication of the Springer Group. After becoming administrator of the Council of the Community of Democracies and director of the Aspen Institute in Berlin in 2001, Gedmin devoted himself exclusively to Merkel. Gedmin was too involved in the infamous Project for a New American Century (PNAC) and wrote the chapter on Europe in the neocon programme. He argued that the European Union should remain under NATO authority and that this would only be possible by "discouraging European calls for emancipation".

          We have never been so far from 'emancipation' now in Europe, and never been so near to a war with Russia and maybe (in order to satisfy American gruesome appetite) with Central Asia and China. In France, 61% of the people who had witnessed the war asserted in 1945 that we were saved by the Russian Army. Now, thanks to American propaganda backed by European collaborators, we are hardly 10% to know that fact. The rest is misled by propaganda, media, TV and films. Daniel Estulin speaks of a remade, of a re-fabricated past by US television and media agencies.

          In a few years, Merkel has destroyed European solidarity, annihilated the German nuclear power plants (an old American obsession too), impoverished Germans and their once efficient Rheinisch and solitary economy, backed the 'mad dog' American diplomacy and created along with an irresponsible American administration (irresponsible because America will never win this kind of conflict) a dangerous crisis against Russia than can end on a war or a scandalous European partition.

          See also: Germany Americanizes Europe

          [Dec 14, 2015] Barack Obama warns leaders of Islamic State in speech: 'you are next'

          Notable quotes:
          "... There is no far left in Europe any more. Since the Merkels, Hollandes, Blairs and Rasmussens of this world were planted in prominent positions because of their excruciatingly statusquo orientation, even the moderate left has practically ceased to exist. We now have rabid right or moderately rabid right to choose from, except for a few notable exceptions. ..."
          "... Obama does not have a clue, he has lost the plot. He is backing Saudi Arabia who are the biggest instigators of terrorism in the Middle East. Saudi Arabia is announcing a 34-state military alliance to fight terrorism. ..."
          "... Seems to me that IS was created, either accidentally or deliberately, by the US and its success has gone beyond the US administrations worst nightmare? When the US refuses slam Turkey for it's recent shoot-down of the Russian plane, and do anything to support Iraq in getting rid of unwanted Turkish military near Mosul, within Iraq and near the IS capital, nor wanting to know about Turkish involvement supplying Sarin gas agents to IS, or stopping Turkey supplying food and arms to IS, and receiving stolen Syrian and Iraqi oil as payment, nor preventing Turkey from being the transit centre and R R centre for IS recruits, then maybe its time to assume that IS is the deliberate brainchild of the US, and that Turkey is playing to the US tune and protection, for promises of territory in a future carve up of Iraq and or Syria. ..."
          "... Seems that ISIL, ISIS, IS and Daesh are all names invented by the US to spread the narrative through the media. They all mean US proxy army to me. Just my opinion. ..."
          "... Perhaps that is because ISIS doesn't actually occupy territory as such. As Mr. Knight says, they are an ideology, an idea. An idea, unfortunately in this case, doesn't live in houses in prescribed areas any more than Republicanism lives in Chicago. The way forward has to involve NOT creating another 10,000 new mortal enemies in the Middle East every day. Even if only twelve innocent people had died in Iraq in 2003, instead of the hundreds of thousands who actually did, one could understand very large groups of people related to the victims cursing the US for its irresponsible meddling. ..."
          "... Incredibly ignorant of the president. The US lives in sin with the Saudis. As long as the Saudis keep importing Wahhabism out of their country to others, the problem will exist. ..."
          "... We bombed the Taliban. We bombed Al Qaeda. Neither lead to anything more than establishing the rise of ISIS in the destabilised areas we had bombed. ..."
          "... The biggest contribution America can make to getting rid of Isis is to persuade its friends and allies - Saudi Arabia, Qatar and Turkey mainly - to turn off the tap of finance, munitions and logistics to Isis, Al Qaeda in Syria (Al Nusra) and its allies like Ahrar Al Sham. No American ground troops needed; they would be counter-productive. ..."
          "... The secular Syrian government, with women in its ranks, is fighting for its life against a most ruthless and abominable enemy: fanatical jihadist mercenaries financed by an execrable mediaeval tyranny, Saudi Barbaria. This is the enemy of all we stand for, the enemy that perpetrated 9/11 and 7/7 and their latest clone that bombed Paris concert-goers and Russian holiday-makers. They are paid and trained by Riyadh. And armed to the teeth with modern American weapons, passed to them by the newest demagogue, Turkey's Erdo an. ..."
          "... The sworn enemy of all these head-chopping bigots is Assad's secular republic of Syria because it challenges the ideological dogmatism of Sharia Law. This law is as rigid as Hitler's Nazism or Stalin's communism. ..."
          "... I wonder if because 'a few weeks' was finally taken to supposedly destroy this critical infrastructure - if the 'evasive' ISIL oil business - along with revenues - will suffer? I also wonder why the air campaign hasn't been extended to include the purchasers of ISIL's oil supplies - at sea and in their home countries. ..."
          "... Isis must ultimately be defeated by Muslim forces, or we'll be manufacturing radical faster than we can kill them. ..."
          "... The Muslims seem to be manufacturing radicals quickly enough without any help from us. ..."
          "... What have they been doing for the last two years then? No attacks on ISIS trucks transporting oil, no sanctions on countries that have been buying that oil. We only get some action now that Russia has been attacking ISIS in Syria and of course there is minimal reporting of the successes of the Russians in Western media. As far as Libya is concerned, there are very ominous signs that ISIS is moving to set up headquarters in that country, a country a lot closer to Europe than Syria or Iraq are. There is also the problem that the Russians will not be involved in Libya, unlike Syria, they do not have a functioning government to ask them in. Libya is the nightmare created by NATO and the US, they will have to take full responsibility for their dreadful actions there and fight the barbarians they created, no sitting back and allowing them to flourish this time. ..."
          "... What a farce, who does Obama think he's kidding? If the US was serious about ISIS it would have been finished off a year ago, now that Russia has called the US's bluff they now have to pretend to step up to the plate. Pathetic. ..."
          "... More drivel from the counterfeit president. His allies in the middle east are disgusting butchers. Take Turkey: it is a great shame for Turkey that 32 journalists are imprisoned in the 21st century. Some were arrested on Nov. 26 after being charged in May with espionage, revealing confidential documents and membership in a terrorist organization. The charges are related to a report published by a leading newspaper claiming weapons-loaded trucks that were discovered in January 2014 en route to Syria actually belonged to the National Intelligence Organization (M T) and had been sent to provide support to rebel groups. ..."
          The Guardian


          ricohflex 14 Dec 2015 22:26

          Talk big but no action. Hot air. Everybody knows now.
          After the Syria red line fiasco, the whole world knows US president makes empty promises.
          In the next TV broadcast, he will give excuses why he cannot do it. Then he will repeat "No Boots On The Ground". Then the US president will blame Congress for not giving him permission to do the most basic things.
          ...
          Now in end-2015 Obama has only ONE thing on his mind.
          He wants to preserve the legacy of his presidency.
          He does not want to do anything to risk the presidency being blamed.
          He does not want to take any mis-step.
          It is a Zero Risk environment in the White House now.
          He dares not even reveal the truth on what country's air space the SU-24 was flying in, when it was shot down.
          It will just be TALK from now on until the next president takes over in 2016.


          wardropper -> LupusCanis 14 Dec 2015 22:21

          There is no "far left" in Europe any more. Since the Merkels, Hollandes, Blairs and Rasmussens of this world were planted in prominent positions because of their excruciatingly statusquo orientation, even the moderate "left" has practically ceased to exist. We now have rabid right or moderately rabid right to choose from, except for a few notable exceptions.


          GerdT 14 Dec 2015 22:21

          Looking out the window I can see the hills that mark the border to Cambodia and not far away Vietnam. I still remember the speeches given during the Vietnam War and how close victory was. The bombs dropped on these countries including North Vietnam during the war exceeded what was dropped during WWII in the Atlantic/European and the Pacific theater of war. Still, it was a US helicopter that left from the American Embassy in Saigon that concluded that war, with the US going home and into denial about the outcome of that war.

          The apocalypse foreseen by the prophets of doomsday painting a picture of an Asian continent that would turn into a communist infested threat to human kind didn't happen.

          I have been recently in Vietnam and Cambodia and seen that people get on with their lives and economies that try to improve for the coming ASEAN community. Without help from western countries they have started to rebuild what was left of their countries after the champion of democracy had left. As the peanut farmer and former President Jimmy Carter said, the destruction was mutual and hence Vietnam didn't deserve any compensation for the unbelievable collateral damage caused by US intervention in this country. If the US was really trying to protect democracy or as Bill Clinton described it protecting National Security, which he defined as US business interests and given the US a right to interfere in any country that tries to threaten them, is a debatable point.

          During the following decades the US again would raise terror and war in countries to ensure that the branding of democracy they preferred would be exported. South Vietnam hadn't been a democracy when the US decided to send troops across and the political leaders of that country came from the military, granting themselves the titles of president and minister, but holding the country in the same grip as in the North the communist did. From South America to the Middle East the US supported groups and leaders that were favorable to US business interests. The Taliban were a useful tool to drive out the Soviet Union only to become a haven for Bin Laden and his followers. Iraq has turned into a political and humanitarian nightmare and ISIL that was as a startup supplied with weapons and training by the US to drive out Assad from Syria is now the greatest threat to world peace according to the US.

          We only have to take a look at the close friends and allies of the US in the Middle East and South America to understand how they spell democracy and human rights. Maybe it is time to listen to the millions of people with families that want to live in peace and are tired of foreign interference in their countries. Instead of supplying arms and support to people that favor the western or eastern political view, we should start to invest and rebuild these countries to ensure they can become equal and respected partners within the global community.

          Phil Atkinson 14 Dec 2015 22:18

          What a joke! Ashton Carter to visit the Middle East to jockey along the Arab states - the same people that the USA supplies weapons to, that end up with terrorists. Or Turkey, that erstwhile NATO member which has been stealing Syrian oil and selling it to Israel and speaking of Israel, that country still illegally occupying the Golan Heights in Syria and aiding and abetting Al-Nusra Front fighters and bombing inside Syria.

          Ashton Carter is a dangerous fool, who believes his own government's propaganda. He should be kept at home.

          SomersetApples 14 Dec 2015 22:08

          Obama does not have a clue, he has lost the plot. He is backing Saudi Arabia who are the biggest instigators of terrorism in the Middle East. Saudi Arabia is announcing a 34-state military alliance to fight terrorism.

          Informed17 14 Dec 2015 22:08

          If ISIS does not do what Obama says, US-led coalition of 60+ countries will destroy another pair of Islamist excavators. I am sure ISIS leaders are scared shitless.

          RocketSurgeon 14 Dec 2015 22:03

          Seems to me that IS was created, either accidentally or deliberately, by the US and its success has gone beyond the US administrations worst nightmare?
          When the US refuses slam Turkey for it's recent shoot-down of the Russian plane, and do anything to support Iraq in getting rid of unwanted Turkish military near Mosul, within Iraq and near the IS capital, nor wanting to know about Turkish involvement supplying Sarin gas agents to IS, or stopping Turkey supplying food and arms to IS, and receiving stolen Syrian and Iraqi oil as payment, nor preventing Turkey from being the transit centre and R & R centre for IS recruits, then maybe its time to assume that IS is the deliberate brainchild of the US, and that Turkey is playing to the US tune and protection, for promises of territory in a future carve up of Iraq and or Syria.

          Seems that ISIL, ISIS, IS and Daesh are all names invented by the US to spread the narrative through the media. They all mean US proxy army to me.
          Just my opinion.

          readerofgrauniad -> Stephen_Sean 14 Dec 2015 22:01

          But who are the good boys in this? To end the war, Asad is probably the best option, and compared to IS he looks like a saint.


          wardropper -> Lech1980 14 Dec 2015 21:59

          Perhaps that is because ISIS doesn't actually occupy "territory" as such. As Mr. Knight says, they are an ideology, an idea. An idea, unfortunately in this case, doesn't live in houses in prescribed areas any more than Republicanism lives in Chicago. The way forward has to involve NOT creating another 10,000 new mortal enemies in the Middle East every day. Even if only twelve innocent people had died in Iraq in 2003, instead of the hundreds of thousands who actually did, one could understand very large groups of people related to the victims cursing the US for its irresponsible meddling. I would imagine our enemies over there number about 50 million by now, and nobody in human history has been able to survive having that many enemies...

          Thomas Hancock 14 Dec 2015 21:55

          Incredibly ignorant of the president. The US lives in sin with the Saudis. As long as the Saudis keep importing Wahhabism out of their country to others, the problem will exist. The thing you learn from history is that no one learns anything from history. Maybe someone can get a time machine and go back to kill Ho Chi Minh, and Vietnam will be a capitalist paradise. This is the same strategy that helped create ISIS in the first place.

          Bernard Knight 14 Dec 2015 21:55

          We bombed the Taliban. We bombed Al Qaeda. Neither lead to anything more than establishing the rise of ISIS in the destabilised areas we had bombed. What is the point?

          1ClearSense -> Stephen_Sean 14 Dec 2015 21:48

          Is that right? You mean when they hit 1050 oil tanker trucks, that's nothing? US followed up hitting 300. They stopped oil revenues for ISIS, and reduced their revenues by 50 %. The number of sorties they have run on ISIS has been considerably more than US. They have also hit other terrorists to secure the rear, so Syrian troops can move on ISIS. You guys are brainwashed.


          Budovski Ximples -> AaronClausen 14 Dec 2015 21:42

          http://www.independent.co.uk/news/world/middle-east/syria-crisis-turkey-and-saudi-arabia-shock-western-countries-by-supporting-anti-assad-jihadists-10242747.html


          pierotg LupusCanis 14 Dec 2015 21:42

          "the US has killed 23,000 ISIL members in airstrikes"

          Who told you? Disney Channel? Anyone can lie to you as long as you are behind a TV screen. It's quite an easy task (having sufficient intelligence resources and money of course)... It's incredibly obvious it would be sufficient hitting the financing of those mercenaries or not to buy the oil they are selling. You know all that "intelligence resources, analysts, linguists, SIGINT experts...". If only the US government wanted really. And yet what is ISIS? Quite a volatile entity... looks like franchising terror... IS/ISIS/ISIL/Daesh will "desappear" when it won't be useful anymore. And they will only find a new name whenever a new proxy ground army should be required.

          "Kremlinbot"? The cold war revamping has seduced you. Let me rimand you this facts:

          • In 2014 the USA has spent in its military expenditure more than 600 Bn $.
          • Russia is around 80.
          • It's been estimated that after WWII the USA caused the death of about 30 million people all over the planet (challenging Stalin scores).

          You'll find the facts... Not on Disnet Channel though.

          After the dissolution of USSR it was clear that it was not "the enemy" anymore. Yet the Ministry of Defence (and its industry) need powerful and fearsome enemies!
          Et voilà, despite what the Ministry fo Truth says, after 20 years of tranquillity it's Russia getting sourranded by military bases along its borders, losing Ukraine (and possibly its strategic Crimea) and now directly challenged in Syria (where they have military bases). Doesn't Russia have the right to "defend" itself and have allies? They have a Ministry of Defense too...

          What if Russia had intervened to topple king Salman of Suadi Arabia because of him being a fearsome dictator? Yet no one did nothing when the "arab spring" was brutally repressed in the region (with the help of the USA).

          It's quite hard not to admit the USA has been quite agressive and active ... So whose to blame for this warfare and new cold war tensions? You might be more biased and less Whitehousebot.

          PS
          Of course I'm not russian.

          Bernard Knight 14 Dec 2015 21:40

          At it's core ISIS, ISL, DEASH, call them what you will, are a murderous death cult using jihad and the establishment of a califate as their raison d'etre. They are an ideology, an idea. No amounts of bombing or taking territory will annihilate that idea. Perhaps it should be the Islamic world that tackles this threat, starting with first and foremost, our foremost arms purchasers, Saudi Arabia.

          Shatford Shatford 14 Dec 2015 21:34

          Asked if Obama had consciously chosen to make his rhetoric more aggressive for public benefit, White House spokesman Josh Earnest said when the president meets the national security council, "he is not looking at public opinion polls".

          Obvious bullshit. It's this kind of Hilary Clinton-like waffling rhetoric and pandering to opinion polls is what is driving the popularity of Donald Trump's campaign.

          Nolan Harding 14 Dec 2015 21:25

          The Islamic state is surrounded by hostile forces, they are under siege so how are they getting ammunition, refined gasoline, food, internet service and all thier Toyota trucks. Obviously the forces surrounding them are not that hostile. A real siege would have seen them starving to death years ago. Like in Leningrad...now THAT was a siege and REAL war, not this strategic game the deluded masses think is a ' war'.


          JMWong 14 Dec 2015 21:24

          Obama has missed the opportunity to announce that hw would the bunch of criminals consisting of Bush, Cheney, Blair, Rumsfeld, Allbright, McCain, Cameron, Hollande, etc. to the International Tribunal for trial for their crimes against humanity. They have murdered millions of people.


          bunkusmystic -> burnel 14 Dec 2015 21:18

          Have a look at the latest Isis videos they have all the latest American weapons ... How do you think they get them? Is it private citizens in Saudi who buy them or the government ... The Saudis want the Iraqi and Syrian oil fields and they are using this Isis fabrication to get them. If the coalition is so serious about fighting Isis how is it that thousands of oil tankers pass through turkey each day? With no one noticing??? It's only Russia who is taking real action


          tjmars 14 Dec 2015 21:17

          This is to draw the heat-seeker foreign press away from the Mad Turk Erdogan who is fake-begging the Russians to prove the accusations that Erdogan Jr is running "red-stained oil" to major buyers on the Turkish black market...
          Ooops!...don't want to know who those 'terrorist supporting capitalists" are!...
          Is this an example of 'laissez-faire" in Late Capitalism...a "bubble" for risk-taking investors?
          Whew! Its a good thing "Soylent Green" was a fictional commodity in movies or the funeral homes would be void of any "dead meat" for ritual burials..
          Thanlks to Capitalism, we will one day see the mythical "dog-eat-dog" aphorism come to light with "god-damned" good profits...
          The western central bankers weren't 'standing behind the curtain" pulling the levers of power again were they?
          Do a litmus test on their 'red tooth and claw' mentality...
          Hey where did they go?
          Obama made them disappear with his speech!


          clashcr 14 Dec 2015 21:14

          Hmm, not a word about Assad. Well US policy about radical Islam - take your pick there are nearly 20 groups in Syria - is about it being overt and not covert. So, they are pleased when radicals show their faces and establish territory because it attracts more radicals to leave the west to go there to be killed. The other result may be that the moderates like the Muslim Brotherhood who may seriously have been talking about a pan-Islamic Caliphate and Sharia law have seen their cause put back by decades.


          JMWong -> sage10 14 Dec 2015 21:12


          If the USA wants to fight ISIS, it must attack ISIS at its source, that is, the countries where the ISIS fighters originate. This means Turkey, Saudi Arabia, the USA itself, UK, France, etc. Bomb these countries and the sources of ISIS fighters will dry up.

          sashasmirnoff 14 Dec 2015 21:09

          I apologize for deviating slightly from this story, but I have a link to share concerning what would usually be considered a sensational story, but this paper has neglected to cover it. A Turkish Parliamentarian has come forward with documented proof that in 2013 Turkey supplied IS with the components to manufacture Sarin gas and facilitated their transport to the IS in Syria. I have no idea why the Guardian doesn't consider this to be newsworthy.

          https://www.rt.com/news/325825-sarin-gas-syria-turkey/

          sage10 14 Dec 2015 20:59

          I still see nothing but a PR blitz here. The strategy has not changed. The claims of success are over-rated. ISIS still controls large swathes of territory; and more importantly, it has shown it can project power internationally...all the way to the US...through sleeper cells and lone wolf attacks. The only way to deal with such a pernicious organization is a full on-the-ground massive combined arms assault: armor, air power, and heavy infantry. It won't take a Desert Storm type campaign, as ISIS is no where near as large as Saddam's army; but it will take a real coordinated military campaign with boots-on-the-ground to seize and hold territory. No question about that. Obama won't commit to that type strategy, so it will be up to the next President to do so, as ISIS will still be around by then, given Obama's reliance solely on air power.


          giorgio16 14 Dec 2015 20:59

          ...is Obama aware that Russia is already fighting isis,...and from the right side?... or he is pretending he is in charge now?
          ...Saudis are fighting shias in Yemen on one side, creating a humanitarian disaster no one wants to acknowledge, and Assad in Sirya on the other creating another disaster convenniently blamed on Assad by Obama and co...interesting times ahead...


          TomGray 14 Dec 2015 20:43

          Obama used the same decapitation tactic against Al Queda. Al Queda destabilized because of it and morphed into ISIS. There is no shortage of people who want to become leaders in any organization. Obama's tactics may hinder ISIS but they will not cause the organized violence that it currently represents to disappear. The players may change but the game remains the same.

          Decapitation can only be part of an effective strategy and so far Obama has not demonstrated that he has the capability to draw together the other essential elements


          ID4352889 -> DogsLivesMatter 14 Dec 2015 20:41

          Saudi flew thousands of Jihadists out of Syria a while ago and sent them to Libya. It is well documented. The West did not interfere. Presumably for the same reasons they didn't interfere with the Turkey/Daesh oil scam.


          DelOrtoyVerga 14 Dec 2015 20:35

          Hurry up Obama before the Ruskies steal your thunder! or the few sparks that are left by now that is...
          Mwahahaha...

          I'm sure these special forces, these token "boots on the ground" you are sending will be exclusively focusing on ISIL and are not being sent to undermine the Syrian government or their allies, I repeat the special forces ARE NOT BEING SENT TO UNDERMINE THE SYRIAN GOVERNMENT OR THEIR ALLIES.

          HowSicklySeemAll 14 Dec 2015 20:26

          Why did the US wait until now to 'drop more bombs than ever before'?

          Russian foreign minister recently stated that:

          "We have noticed that the US-led coalition stepped up its fight against IS only after Russia dispatched a combat air group…to Syria. The coalition efforts undertaken in Syria earlier could be described as odd, to say the least… This brings to mind NATO's operations in Afghanistan… We don't want the fight…to be feigned."

          DomesticExtremist 14 Dec 2015 20:13

          Can we assume from this that the fix is in: Kilary has been selected for Pres and Obomber has to roll the pitch on her behalf so that she can hit the ground running?

          "We came, we saw, they died. (insane cackle)."

          Look out for some killer blow to be landed on the Donald soon.

          Sualdam -> meewaan 14 Dec 2015 20:10

          The biggest contribution America can make to getting rid of Isis is to "persuade" its friends and allies - Saudi Arabia, Qatar and Turkey mainly - to turn off the tap of finance, munitions and logistics to Isis, Al Qaeda in Syria (Al Nusra) and its allies like Ahrar Al Sham. No American ground troops needed; they would be counter-productive.

          MrJanuary 14 Dec 2015 19:55

          Well done Russia for mobilizing the worlds second largest military force, the USA, in Syria against ISIS.


          robertthebruce2014 -> MasonInNY 14 Dec 2015 19:48

          We love Putin here in Europe, at least he defends European interests. The USA is only defending Saudi and Israeli interest. We are currently in the process of breaking up the NATO coalition. The USA can stick with Turkey, Israel, and the Saudis.


          pierotg 14 Dec 2015 19:43

          December 2015: "We are hitting Isil harder than ever" .

          July 2015: https://www.youtube.com/watch?v=p2NkjNvwuaU

          !!! Look at the eys of that general behind, please! He was falling almost asleep and then ... frozen! Is it just my impression? That would be really hilarious if we weren't talking about war and crimes against humanity.

          Please, stop lying this way.
          This is far too much. This is alienating.

          The USA and UK governments are loosing all that was left of their credibility and reliability in the last decade and the only strategy left seems to make the big lie bigger than ever. This is like shouting at the world "I can do whatever suits me and f**k the rest!"
          Even their relationships with their EU partners have proved slick.

          I've been listening to politicians speeches and interviews lately and found myself thinking: "That autocrat and ex KGB agent ruling Russia sounds much less hypocrite and far more competent". What if you could choose between Putin or Trump to represent your country (just as if they were sport pros you could hire for your team)?

          This is far too much. This won't do any good and nuclear weapons can still destroy our planet in 30 minutes. Whoever is behind this mess what's going to profit then? This is obscene incompetence and fearsome irresponsibility.

          In my teens Steve Stevens's Top Gun Theme got me goosebumps... On my Strat guitar there has been a Union Jack pickguard for 25 years... What shall I tell my son when he will ask me why I removed the original white one? I'm getting quite embarrassed.

          Is it the End of the World as We know it? Yet I don't feel fine.


          1ClearSense 14 Dec 2015 19:40

          Yemen is the poorest Arab country with limited resources. The Saudis, along with a slew of other Arab regimes have been bombing the Yemeni military and Houthi militia who were clearing up Al Qaeda out of Yemen pretty good, for 9 months.

          In the summer the Saudis and UAE sheiks decided to send ground forces to "liberate" Yemen. Other than taking some part of southern Yemen with the help of separatists and jihadis of all sort, they failed in their mission. A single attack on Saudi military caused dozens of Saudi and Emarati dead. The Emaratis decided on Colombian mercenaries, the Saudi paid Sudanese military to send troops. Yesterday the Yemenis killed a large number of these mercenaries (anywhere between 80 to 150) including the Saudi commander and another high official and a Emarati officer.

          Southern Yemen, the "Saudi liberated" areas is being taken over by al Qaeda piece by piece, and also ISIS has become very active. The idea that these Arab regimes can be productive in anything to defeat jihadi terror is a pipe dream. It is all about public relations and having "Sunni Arabs" along to defeat "Sunni Arabs" jihadis. This is so completely miscalculation that will backfire. Saudis and their crew have no desire or ability to defeat the wahhabi terrorists. The time has come to see it as what it is, the only way to defeat the jihadi terrorists is teaming up with the people who are being successful, and that doesn't include the Arab tyrannies.


          Panda Bear -> Steven Wallace 14 Dec 2015 19:33

          Did your father know offices controlled by the \British at Suez were apparently given over to the Moslem Brotherhood? UK used Islamic extremists back then and US has continued the policy it appears.

          I was recently reminded of Churchill's speech about the possibility of Germans invading Britain... "We'll fight them on the beeches" etc. Wonder if the Germans would have considered the British fighters terrorists if they had managed to occupy Britain?
          Occupation by foreign forces is ok if it's our forces or our allies and our enemies cannot resist or they are designated as terrorists... National Sovereignty is disregarded whole sale by US/NATO and allies.

          One rule for us, another for 'them'! Hypocrisy reigns supreme.


          Steven Wallace -> Zara Thustra 14 Dec 2015 19:32

          haha ok well thats too simplistic Mr Zarathustra . The issue with Islamic fundamentalism is that it uses a religion to kill innocents without targeting anyone of any real importance . The Koran has not changed like the New Testament but I really do not believe that modern day Muslims who pray would all wish to kill me because I am not a Muslim .

          That scare mongering is simply a distraction ,as George Bush said " Who is this Bin Laden ?" Well I would have said " You know him George ,his family financed your oil business ,they are friends of your family ".

          All Muslims are scary to us while the real issues are being ignored 24/7

          The Bible is full of evil concepts ,why not consider ourselves in the West as evil Christians ?

          Not me though ,I'm an atheist


          LewisFriend -> Miramon 14 Dec 2015 19:32

          Well Assad wasn't massacring people either till their was an uprising.. Yet in Syria people were a lot more free than Saudi.. They also don't have the CIA on the ground encouraging one. Be under no illusions the ruling Saudi clique are animals.


          WatchEm 14 Dec 2015 19:30

          Barack Obama warns leaders of Islamic State in speech: 'you are next'

          Threats like that are enough to get my parrot squawking with laughter - forget any "terrorists" or anyone with a live brain cell.

          Yet more tries to reassure a domestic audience, who unlike the majority of nations, apparently live in fear, and need convincing that the USG is doing something and "leading the way" in their declared "War on Terrorism". It's like having to tolerate listening to the banality of what purports to be US "news networks".

          Unfortunately, after around 10,000 bombing runs and predictable time-wasting talk, the message is still not sinking in that the Grand Master Plan of 'leading the way' is a failure and reduced to hope that they can stop terrorism by 'taking out' some leadership. Yep, heard that one before. The USG 'defeated terrorism' by 'taking out' Al Queda leaders - a number of them 34+ times. Al Queda no longer exists - not.

          Instead of 'leading from the rear' and expecting other nations to clean up the carnage and havoc left over by US adventures into the Middle East, perhaps the USG could find a few non-torturers, non rapists and no members of US death squads and clean the region up with their own trash collectors as 'boots on the ground'. Well... no harm in dreaming and fantasising it might work and "we can win, win, win" ...

          So, bottom line, order more bombs with taxpayers funds Carter, and pretend you matter while the 'leader' continues the infantile rhetoric for US consumption, just as his predecessor did. May the US people and people in other victim nations be saved from US 'little men' - both 'generals' and politicians.


          PS Try not to bomb innocent men, women and children on the ground during the bombing runs. They never deserved your slaughter, carnage, death squads and torture the last time around and don't need a US euphemism, "collateral damage", to justify their deaths. But of course, counting bodies is not a topic of conversation in the Rogue Regime of the West. It only matters if it is US men, women and children who are slaughtered while the US regime role play fighting for "democracy and freedom" by "leading from the rear".


          Panda Bear -> MRModeratedModerate 14 Dec 2015 19:21

          Some of them are very busy bombing Yemen to destruction and recruiting mercenaries in places such as Columbia to help! The situation for citizens in Yemen is dire, some areas described as on the verge of famine partly due to the embargo that is also imposed.

          JMWong 14 Dec 2015 19:09

          This speech shows the hypocrisy of the Americans. In fact, as it was made clear many times before, the real objective of the USA is to invade Syria, to destroy Syria and to murder as many Syrians as possible, including its President, Assad. The USA had the same objective with regards to Iraq and Lybia. Iraq was invaded and destroyed. Hundreds of thousands of Iraqis were murdered by the coalition of the willing led by the USA. The lives of tens of millions Iraqis have been destroyed. Its President, Saddam Hussein was murdered. In the case of Libya, the same coalition of the willing, led by the same USA, bombed Libya for six months. It was the greatest terrorist attack over the last ten years. It was six months of terror for millions of Libyans everyday for over six months. More than thirty thousand Libyans were murdered in this exceptional terror attack, including its President, Kaddafi. Now, the USA is leading the same coalition of the willing to murder hundreds of thousand Syrians. Assad must go, chant the USA and its f...king partners. We heard the same chant with regrda to Saddam Hussein and Kaddafi. Saddam Hussein must go. Kaddafi must go. As if the USA with its f.. Partners are the ones to choose who should and should not rule Iraq, Libya and Syria. ISIS was created, is funded, trained armed and supported by the USA and its willing partners. For more than one year that they are bombing Syria, they did not see the thousands and thousands of trucks carrying robbed oil from Syria to Turkey. And now Obama, flanked by thecriminal Ash Carter, a creature of McCain, claims that he is determined to fight ISIS. Since many of the ISIS fighters come from the USA, UK, France, why do you not start by bombing the USA, UK, France. Why start with Syria?

          Steven Wallace 14 Dec 2015 19:05

          Because truth has no place in the modern political theatre . Truth is down to perception and when you control the media you control the truth .Remember NORID ,when the US funded the IRA against the UK ? The IRA used bombs to kill many innocents in their resistance to the British occupation . My brother was a soldier in the British Army and believed he was doing the right thing by going to Northern Ireland . After reflection he now feels he was wrong to be a part of that situation .My father served in Egypt during the Suez Crisis and felt he was right to be there and later questioned why so many young lads were sent to such a inhospitable foreign land . The reason always comes down to money .

          MRModeratedModerate 14 Dec 2015 19:04

          "in recent weeks we've unleashed a new wave of strikes on their lifeline, on their oil infrastructure..."

          I don't see no bombs falling on Turkey?

          illbthr22 -> ObambiBot 14 Dec 2015 18:54

          Your country provides nothing positive to the world. I watch American movies, eat American food, listen to American music. Russia doesn't exist to me. The only time i hear Russia mentioned is when Russia is threatening war with someone or 2 drunks are beating each other up on youtube.


          supercool -> BG Davis 14 Dec 2015 18:49

          Again read my comment. The way the war on drugs is waged and fought. It is never ending, murky and with so many dubious allegiances.

          The war on terror is never ending, murky and with so many dubious allegiance. For example we exported Jihadism to Afghanistan to defeat the invading communist Soviet's, they eventually morphed to the Taliban who then gave sanctuary to Al-Qaeda. Which formed an affiliate branch in Iraq after our invasion in 2003 and which morphed into the Islsmic state.


          HollyOldDog -> stonedage 14 Dec 2015 18:48

          Obama is the first black American President but that doesn't mean that he is the first sensible one.


          Whitt -> supercool 14 Dec 2015 18:46

          As someone who is old enough to have lived under two great Presidents and three great-but-flawed Presidents, I'm saying that Obama is a 2nd-rater at best. A hundred years from now he'll be a triva-question President like Millard Fillmore or Grover Cleaveland.

          OscarAwesome 14 Dec 2015 18:44

          Sure, this is typical political spruiking. Obama doing the Commander in Chief thing, proclaiming PROGRESS, reaffirming how bad the 'enemy' are, saying tough things as a response to the accusations of weakness by US conservatives (who are coy about what their actual alternative to Obama's approach is because it probably looks very much like catastrophic full invasion foolishness of George W's Iraq war), blah, blah, we've seen it all before on countless occasions.

          The situation in Syria in particular is ridiculously complex and consists of a plethora of detail and options for action about which we will all have wildly divergent opinions.

          But there is a part of this that is simple. There are practically zero options for dealing with ISIL/IS/ISIS/whatever besides killing them. They seek no negotiations, offer no potential compromise position and their take on politics is to simply kill everyone who isn't them. The lack of alternate, peaceful/diplomatic options ISIS and similar groups offer, with their preposterous Dark Ages philosophies, is in a macabre way almost refreshing.

          The hard bit is how to kill/capture/degrade their capability without a) slaughtering bystanders and b) causing such carnage as to act as an ISIS recruitment agency.
          For all the great many faults and excesses of the West and the larger Muslin world, ISIS

          do not in any way offer a comprehensive socio-political alternate system of government with a vestige of logical appeal to humanity (unlike, say the threat communism represented in the 20th century). They have some vague pipe dream of apocalyptic conflict where the other 99.999% of the human race is either slaughtered or magically converted to embracing the reversal of human history by 1,500 years. Not going to happen. Silly.

          The threat ISIS represent is largely emotional. Unless you are lightning-strike like unfortunate (or they get hold of nuclear weapons) ISIS disturb our assumptions of physical safety in a symbolic way only. The histrionics generated by that fear is our real enemy.

          Popeyes 14 Dec 2015 18:44

          What a disappointment, I was waiting for Obama to explain just why he didn't bomb IS oil facilities, and why the U.S. are still best buddies with Saudi who it seems supplies and finances most of the terrorists in Syria and Iraq. Nothing new here move along.

          Horst Faranelli 14 Dec 2015 18:43

          ...but the spot oil price is squeezing the heart out of Russia.

          Panda Bear -> GustavoB 14 Dec 2015 18:43

          There have been reports for a while (since Russia began bombing) that Isis have been fleeing Syria and many commanders have relocated to Libya. Isis have overtaken one of the so called governments and are making gains, oil assets their next target I read yesterday.


          Seasuka -> DoomGlitter 14 Dec 2015 18:41

          Whatever America's position now, for decades they have supported and helped to arm Salafist jihadis through Saudi and the Muslim World league in opposition to any secular or perceived communist movements in the region which might threaten oil supplies. Ditto uk.


          jmNZ 14 Dec 2015 18:40

          The secular Syrian government, with women in its ranks, is fighting for its life against a most ruthless and abominable enemy: fanatical jihadist mercenaries financed by an execrable mediaeval tyranny, Saudi Barbaria. This is the enemy of all we stand for, the enemy that perpetrated 9/11 and 7/7 and their latest clone that bombed Paris concert-goers and Russian holiday-makers. They are paid and trained by Riyadh. And armed to the teeth with modern American weapons, passed to them by the newest demagogue, Turkey's Erdoğan.

          The sworn enemy of all these head-chopping bigots is Assad's secular republic of Syria because it challenges the ideological dogmatism of Sharia Law. This law is as rigid as Hitler's Nazism or Stalin's communism.

          And we wonder whether we should support Assad?
          For the record, here are some undisputed facts:

          30 countries, including South Africa, sent election observers to Syria and found them to be "reasonably free and fair". This was in 2014 when Basher al-Assad got 88% of the vote in the first multi-party presidential elections. Nearly half the population of Syria actually made it to the polls. Not half the electorate, half the population.

          Syria is governed by 5 parties in coalition opposed by a 2 party coalition of 5 members and 77 "Independents". Assad's Baqath Party has a majority, 134 out of 250.

          Syria is today's Czechoslovakia.


          Whitt -> supercool 14 Dec 2015 18:34

          "Compare his Presidency with George Bush or most previous American President's if recent years." - supercool
          *
          Considering that most of the Presidents that we've had over the last few decades have been mediocrities and that Bush Jr. was downright incompetent, that is truly an example of damning with faint praise.
          *
          *
          "Obama goes into the history books as a great President who achieved so many first's"
          *
          To paraphrase the immortal Douglas Adams, this is obviously some strange usage of the word "great" that I was not previously aware of.


          ByThePeople 14 Dec 2015 18:10

          "in recent weeks'...'destroying hundreds of their (ISIL's) tanker trucks, wells and refineries. So far, ISIL has lost about 40% of the populated area it once controlled n Iraq."

          Anyone else a bit shocked that after having several countries dropping bombs on ISIL for an extended period of time - that ISIL would still be in possession of hundreds of tanker trucks, wells and refineries - their 'life line'....?

          A full fledged oil business in up, running and in the market to sell oil - which is obviously all being bought up and these revenues, combined with other revenue streams, have been supporting ISIL's efforts for an extended period of time.

          I wonder if because 'a few weeks' was finally taken to supposedly destroy this critical infrastructure - if the 'evasive' ISIL oil business - along with revenues - will suffer? I also wonder why the air campaign hasn't been extended to include the purchasers of ISIL's oil supplies - at sea and in their home countries.

          Panda Bear -> supercool 14 Dec 2015 18:10

          Homs has a cease fire, the 'moderate' terrorists have left. Syrian Arab Army and it's allies are making gains, an airport retaken yesterday. Much Isis oil trading infrastructure destroyed.
          https://www.youtube.com/watch?v=PauFSKZafr4
          http://www.middleeasteye.net/news/syrian-army-retakes-key-airbase-rebel-forces-eastern-ghouta-1589655831
          I'm fascinated to know what the Henry Jackson Society is doing there/reporting...


          ohhaiimark -> JackGC 14 Dec 2015 18:03

          And here in lies the problem. The US is not serious about taking down ISIS. They are a convient bunch of psychopaths that can be used for various agendas the US has in mind. Including but not limited to weakening/removing Assad, getting Iran embroiled in costly war, terrifying domestic populations into giving up freedoms, justifying more military interventions that go against international law.

          The list goes on


          1ClearSense 14 Dec 2015 17:59

          The cult of Wahhabi terrorist supported by Saudi Arabia, Qatar, UAE and Turkey need to be defeated. With all the public information available, we are here because of all the wrong moves by the US. It is about time to nip this in the bud. The root problem is in Saudi Arabia. In no uncertain terms US needs to tell the Arab tyrannies to stop the jihadi terror. It is obviouse US has listened to the Saudis and Qataris to create a Sunni militia in Iraq, Syria to "confront" Iran. The imaginary ghost that constantly scares Saudi tyranny. The result has been all the various head chopping terror groups. The "Sunni" Arab tyrannies will never supply troops to take over areas occupied by terrorists. Qatar demands sanitizing al Qaeda terrorist in Syria and giving them a say. It is stupid to even consider these as allies in fight against the wahhabi Islamist terrorists. Time has come to forget about removing Assad, just cooperate with Russia, Syria, Iran and Iraq to take back land from all terrorists step by step, and have the legitimate government in Syria and Iraq, with their pro government militia control the ground.

          TheBorderGuard -> gunnison 14 Dec 2015 17:55

          Isis must ultimately be defeated by Muslim forces, or we'll be manufacturing radical faster than we can kill them.

          The Muslims seem to be manufacturing radicals quickly enough without any help from us.

          TonyBlunt 14 Dec 2015 17:51

          "We are hitting Isil harder than ever."

          Here is how hard the US and their regional allies have been hitting ISIL and the other jihadi terrorists:

          bolobo -> impartial12 14 Dec 2015 17:50

          Good docu about that recently. Might still be available on BBCiplayer. The Americans bought Saudi drilling rights for 2cents and the Brits bought Iraqi rights for tuppence. Twenty years later the middle easterns thought "hold on a minute," and offered a fifty-fifty split. The Americans pragmatically accepted, thus their relationship with the House of Saud, the Brits got all uppity at the natives and got kicked out.

          TheSindhiAbbasi -> gunnison 14 Dec 2015 17:45

          What about billions of US military equipment in Iraq, that was captured by Daesh?

          gunnison 14 Dec 2015 17:40

          Freeze Saudi assets and blockade all their exports until they send all that gee-whiz military equipment we sold them into this fight, and all the Saudi military we trained too.

          Isis must ultimately be defeated by Muslim forces, or we'll be manufacturing radical faster than we can kill them.

          Panda Bear -> Jools12 14 Dec 2015 17:36

          "We only get some action now that Russia has been attacking ISIS in Syria and of course there is minimal reporting of the successes of the Russians in Western media."

          Exactly. Russia is the old enemy, it is interfering and questioning US actions and has huge natural resources. Putin called them out in his speech at the UN...
          US has been provoking Russia for some time, and is also provoking China. This may not end well for any of us and no one will stand up and demand it stops!

          HAGGISANCHIPS -> ame1ie 14 Dec 2015 17:34

          The nazi ideology was removed militarily. It couldn't survive because it was morally wrong and repugnant, like Daesh.

          Edward Frederick Ezell 14 Dec 2015 17:27

          Sending our professional agents of coercion and terror to kill people in foreign countries over which we somehow more or less claim jurisdiction is not something that is clearly beneficial in the long term although it does respond appropriately to the call for vengeance and blood from our own political actors.

          Panda Bear -> Taku2 14 Dec 2015 17:27

          US has turned it into a proxy war with Russia and Iran and has called in the NATO allies to back them up. Obama seems to work differently to previous presidents like Bush, he seems to like to work quietly using drones and not much publicized actions and calls in the NATO and allied troops to cover their actions.

          Taku2 14 Dec 2015 17:23

          America will do this America will do that. Well, guess what; you cannot do it on your own. You cannot make a successful strategic plan to fight Daesh without the Russians, Iranians and Syrian government forces being integral elements of such a plan.

          Daesh is like an Hydra, so bombing alone cannot defeat it, it just spread it to new areas. You need to do an honest review of how Daesh was created; albeit, unintentionally, by ill-conceived American and EU/NATO policies in the Middle East and Africa.

          America and EU/NATO cannot effective fight the war being waged by Daesh and Al Qaeda, until they have learned the lessons to be learned from their misguided policies, and openly acknowledged the mistakes they have made.

          Sunrise_Song 14 Dec 2015 17:18

          What would it be like to live in a truly peaceful and free world? All it takes is strength, foresight and the guts to be honest.

          All the things the West is failing at. Obama like most Western leaders is a weaver of lies and half-truths.

          How can we ever have peace until we challenge the core issue? This is an ideological fight. It's a war of minds. ISIS believe the West is a basin of sin. That our liberal and secular ways need to be destroyed and replaced by their ideologies and way of life.

          Only, we can see they're wrong. That even with our faults and flaws, our belief in freedom, democracy and equality is the best way, still we defend that same ideology in our own nations.

          Obama is failing the American people. Just like Merkel and Co are failing the European people.

          Bombs won't stop IS.


          Jools12 14 Dec 2015 17:18

          What have they been doing for the last two years then? No attacks on ISIS trucks transporting oil, no sanctions on countries that have been buying that oil. We only get some action now that Russia has been attacking ISIS in Syria and of course there is minimal reporting of the successes of the Russians in Western media. As far as Libya is concerned, there are very ominous signs that ISIS is moving to set up headquarters in that country, a country a lot closer to Europe than Syria or Iraq are. There is also the problem that the Russians will not be involved in Libya, unlike Syria, they do not have a functioning government to ask them in. Libya is the nightmare created by NATO and the US, they will have to take full responsibility for their dreadful actions there and fight the barbarians they created, no sitting back and allowing them to flourish this time.


          TheBorderGuard 14 Dec 2015 17:13

          Obama told reporters: "This continues to be a difficult fight. Isil is dug in, including in urban areas, and they hide behind civilians, using defenceless men, women and children as human shields. So even as we're relentless, we have to be smart, targeting Isil surgically, with precision."

          Good luck, boss. Ask Netanyahu how it went for the Israelis when they tried to end Hamas' rocket attacks from Gaza. Because that's the kind of foe you'll be up against.


          poechristy 14 Dec 2015 17:10

          Someone has obviously told Obama that his Mr Nice Guy act was merely encouraging Islamic State and their supporters in the US. It's time for all Western nations to make clear that anyone involved in any way with Islamic State-funding them, promoting them, or returning from fighting for them- will feel the full force of the law. I can't understand why those returning from Syria are not immediately arrested and held to account.
          I rather suspect we wouldn't be seeing the same appeasement if white supremacists were returning from a foreign land having been involved in the torture,rape and murder of ethnic minorities.


          lefthalfback2 DogsLivesMatter 14 Dec 2015 17:06

          NYT said a few days back that ISIS are looking to Surt in Libya as the spot to which they can decamp if the Heat comes down in Iraq. Does not seem likely to me since it is on the coast and could easily be struck from the sea.


          Whitt DogsLivesMatter 14 Dec 2015 17:03

          Weren't you paying attention?

          (1) We have a coalition of the willing in the international War on Terror.
          (2) ISIS is on their last legs. There's nothing left but a bunch of dead-enders.
          (3) We're squeezing their heart in Iraq, their balls in Syria, and their spleen in Libya.
          (4) There's a light at the end of the tunnel.
          (5) Ve are vinning ze var!

          Now get with the program and quit interfering with the narrative or it's off to Gitmo with you, me lad!


          ohhaiimark 14 Dec 2015 16:58

          Want to stop ISIS? It's rather simple. Sanction those who fund them. Sanction those who spread Wahhabism. Sanction those who buy oil off them....Basically sanction all of America's allies in the region.

          Then work together with the Russians, the Syrians, the Iranians and whoever else is willing to send ground troops in to take each town and city occupied by these scumbags one by one.

          You can't defeat ISIS if your goal is also to remove Assad. That will only help ISIS. It's time to wake up from that delusion that Assad is going anywhere. Once the war is over, then we can let the Syrian people decide who will lead them through democratic elections.


          Djinn666 14 Dec 2015 16:56

          They've squeezed so hard that it oozed into Libya and other points on the compass, including San Bernardino.

          Note to CIC Obama, However beautiful the strategy, you should occasionally look at the results (Winston Churchill).


          Fence2 14 Dec 2015 16:54

          What a farce, who does Obama think he's kidding? If the US was serious about ISIS it would have been finished off a year ago, now that Russia has called the US's bluff they now have to pretend to step up to the plate. Pathetic.


          DogsLivesMatter 14 Dec 2015 16:50

          Meanwhile in Libya....http://www.aljazeera.com/news/2015/12/world-leaders-push-libya-peace-isil-fills-vacuum-151214044020934.html
          Apparently there are 3,000 ISIL fighters in Libya at the moment. It's time President Obama and John Kerry gave us the whole story, but I guess with Saudi Arabia and Turkey being allies the US can't rock the boat too much.


          dikcheney 14 Dec 2015 16:48

          More drivel from the counterfeit president. His allies in the middle east are disgusting butchers. Take Turkey: it is a great shame for Turkey that 32 journalists are imprisoned in the 21st century. Some were arrested on Nov. 26 after being charged in May with espionage, revealing confidential documents and membership in a terrorist organization. The charges are related to a report published by a leading newspaper claiming weapons-loaded trucks that were discovered in January 2014 en route to Syria actually belonged to the National Intelligence Organization (MİT) and had been sent to provide support to rebel groups.

          The USA has been seduced and conned for decades until its entire policy is focused on fighting proxy wars to keep the middle east ablaze in the interests of others. SHAME on the dumb USA.

          laguerre 14 Dec 2015 16:39

          A load of rubbish. US supports the Saudis, who support ISIS. US attacks on ISIS are not serious, as the speech suggests.

          [Dec 14, 2015] Marine Le Pen is not alone, and that is a real problem for the EU

          European nationalism is an allergic reaction to neoliberalism. Guardian does not mention Ukraine and Baltic states. also far right nationalist goverment with Baltic states imposing "Baltic version of apartheid" to Russian speaking minority.
          Dec 07, 2015 | The Guardian

          Such is the picture in western Europe. In eastern Europe, the nationalist right is already in power in Hungary and in Poland. Viktor Orbán in Budapest is the pioneering cheerleader. He has no opposition to speak of. His main "opposition" comes not from the centre-left but from the neo-fascist Jobbik movement. In Poland, Jarosław Kaczyński and his Law and Justice party in Poland are wasting little time in aping Orbán's constitutional trickery to entrench itself in power.

          On the critical issues of the day – immigration, security and Euroscepticism – there is little to separate Orbán and Kaczyński from President Miloš Zeman in Prague and Robert Fico, prime minister of Slovakia, both on the left. Besides, on economics, the role of the state and welfare, the far-right parties are way to the left of social democracy, seeking to turn the clock back to state interventionism, full employment, generous pensions and welfare systems (for native whites, not immigrants).

          What these far-right parties in east and west all share are chipped shoulders heaving with grievance – summed up as hostility to and rejection of globalisation and multiculturalism. They do not like modern life. They are anti-Muslim, anti-immigration, anti-EU, anti-American (Poland excepted), illiberal. And they like Vladimir Putin (again, except Kaczyński).

          They are nationalists. This also militates against making common cause despite all the similarities in outlook, because nationalists usually see foes rather than friends in other nationalists.

          ... It is a tall order. The European Union has never looked so temporary and fragile.

          [Dec 14, 2015] No Turkish fabric to make anti-Turkish T-shirts, say Russian designers

          There are two possibilities here: iether Guardian pressitutes sometimes try to play degenarates or they consider their readers to be degenerates...
          Notable quotes:
          "... Typical The Moscow Times garbage. ..."
          "... Hmmm, some really sophisticated comments and analysis apropos of current issues in geopolitics and international relations. Nuanced, objective, and informative. Excuse me but I have to go watch some more esoteric reportage from Fox News. ..."
          www.theguardian.com

          cvneuves 13 Dec 2015 21:12

          Typical The Moscow Times garbage.

          Scipio1 13 Dec 2015 18:54

          Hmmm, some really sophisticated comments and analysis apropos of current issues in geopolitics and international relations. Nuanced, objective, and informative.

          Excuse me but I have to go watch some more esoteric reportage from Fox News.

          [Dec 13, 2015] Deregulation of exotic financial instruments like derivatives and credit-default swaps and corruption of Congress and government

          Notable quotes:
          "... Can you list all of the pro- or anti- Wall Street reforms and actions Bill Clinton performed as President including nominating Alan Greenspan as head regulator? Cutting the capital gains tax? Are you aware of Greenspans record? ..."
          "... Its actually pro-neoliberalism crowd vs anti-neoliberalism crowd. In no way anti-neoliberalism commenters here view this is a character melodrama, although psychologically Hillary probably does has certain problems as her reaction to the death of Gadhafi attests. The key problem with anti-neoliberalism crowd is the question What is a realistic alternative? Thats where differences and policy debate starts. ..."
          "... Events do not occur in isolation. GLBA increased TBTF in AIG and Citi. TBTF forced TARP. GLBA greased the skids for CFMA. Democrats gained majority, but not filibuster proof, caught between Iraq and a hard place following their votes for TARP and a broader understanding of their participation in the unanimous consent passage of the CFMA, over objection by Senators James Inhofe (R-OK) and Paul Wellstone (D-MN). ..."
          "... It certainly fits the kind of herd mentality that I always saw in corporate Amerika until I retired. The William Greider article posted by RGC was very consistent in its account by John Reed with the details of one or two books written about AIG back in 2009 or so. I dont have time to hunt them up now. Besides, no one would read them anyway. ..."
          "... GS was one of several actions taken by the New Deal. That it wasnt sufficient by itself doesnt equate to it wasnt beneficial. ..."
          "... "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," said then-Treasury Secretary Lawrence Summers. "This historic legislation will better enable American companies to compete in the new economy." ..."
          "... The repeal of Glass Steagal was a landmark victory in deregulation that greased the skids for the passage of CFMA once Democrats had been further demoralized by the SCOTUS decision on Bush-v-Gore. The first vote on GLBA was split along party lines, but passed because Republicans had majority and Clinton was willing to sign which was clear from the waiver that had been granted to illegal Citi merger with Travelers. Both Citi and AIG mergers contributed to too big to fail. The CFMA was the nail in the coffin that probably would have never gotten off the ground if Democrats had held the line on the GLBA. Glass-Steagal was insufficient as a regulatory system to prevent the 2008 mortgage crisis, but it was giant as an icon of New Deal financial system reform. Its loss institutionalized too big to fail ..."
          "... Gramm Leach Biley was a mistake. But it was not the only failure of US regulatory policies towards financial institutions nor the most important. ..."
          "... It was more symbolic caving in on financial regulation than a specific technical failure except for making too big to fail worse at Citi and AIG. It marked a sea change of thinking about financial regulation. Nothing mattered any more, including the CFMA just a little over one year later. Deregulation of derivatives trading mandated by the CFMA was a colossal failure and it is not bizarre to believe that GLBA precipitated the consensus on financial deregulation enough that after the demoralizing defeat of Democrats in Bush-v-Gore then there was no New Deal spirit of financial regulation left. Social development is not just a series of unconnected events. It is carried on a tide of change. A falling tide grounds all boats. ..."
          "... We had a financial dereg craze back in the late 1970s and early 1980s which led to the S L disaster. One would have thought we would have learned from that. But then came the dereg craziness 20 years later. And this disaster was much worse. ..."
          "... This brings us to Lawrence Summers, the former Treasury Secretary of the United States and at the time right hand man to then Treasury Security Robert Rubin. Mr. Summers was widely credited with implementation of the aggressive tactics used to remove Ms. Born from her office, tactics that multiple sources describe as showing an old world bias against women piercing the glass ceiling. ..."
          "... According to numerous published reports, Mr. Summers was involved in. silencing those who questioned the opaque derivative product's design. ..."
          "... The Tax Policy Center estimated that a 0.1 percent tax on stock trades, scaled with lower taxes on other assets, would raise $50 billion a year in tax revenue. The implied reduction in trading revenue was even larger. Senator Sanders has proposed a tax of 0.5 percent on equities (also with a scaled tax on other assets). This would lead to an even larger reduction in revenue for the financial industry. ..."
          "... Great to see Bakers acknowledgement that an updated Glass-Steagall is just one component of the progressive wings plan to rein in Wall Street, not the sum total of it. Besides, if Wall Street types dont think restoring Glass-Steagall will have any meaningful effects, why do they expend so much energy to disparage it? Methinks they doth protest too much. ..."
          "... Yes thats a good way to look it. Wall Street gave the Democrats and Clinton a lot of campaign cash so that they would dismantle Glass-Steagall. ..."
          "... Slippery slope. Ya gotta find me a business of any type that does not protest any kind of regulation on their business. ..."
          "... Yeah, but usually because of all the bad things they say will happen because of the regulation. The question is, what do they think of Clintons plan? Ive heard surprisingly little about that, and what I have heard is along these lines: http://money.cnn.com/2015/10/08/investing/hillary-clinton-wall-street-plan/ ..."
          "... Hillary Clinton unveiled her big plan to curb the worst of Wall Streets excesses on Thursday. The reaction from the banking community was a shrug, if not relief. ..."
          "... Iceland's government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled "A better monetary system for Iceland". ..."
          economistsview.typepad.com

          RGC said...

          Hillary Clinton Is Whitewashing the Financial Catastrophe

          She has a plan that she claims will reform Wall Street-but she's deflecting responsibility from old friends and donors in the industry.

          By William Greider
          Yesterday 3:11 pm

          Hillary Clinton's recent op-ed in The New York Times, "How I'd Rein In Wall Street," was intended to reassure nervous Democrats who fear she is still in thrall to those mega-bankers of New York who crashed the American economy. Clinton's brisk recital of plausible reform ideas might convince wishful thinkers who are not familiar with the complexities of banking. But informed skeptics, myself included, see a disturbing message in her argument that ought to alarm innocent supporters.

          Candidate Clinton is essentially whitewashing the financial catastrophe. She has produced a clumsy rewrite of what caused the 2008 collapse, one that conveniently leaves her husband out of the story. He was the president who legislated the predicate for Wall Street's meltdown. Hillary Clinton's redefinition of the reform problem deflects the blame from Wall Street's most powerful institutions, like JPMorgan Chase and Goldman Sachs, and instead fingers less celebrated players that failed. In roundabout fashion, Hillary Clinton sounds like she is assuring old friends and donors in the financial sector that, if she becomes president, she will not come after them.

          The seminal event that sowed financial disaster was the repeal of the New Deal's Glass-Steagall Act of 1933, which had separated banking into different realms: investment banks, which organize capital investors for risk-taking ventures; and deposit-holding banks, which serve people as borrowers and lenders. That law's repeal, a great victory for Wall Street, was delivered by Bill Clinton in 1999, assisted by the Federal Reserve and the financial sector's armies of lobbyists. The "universal banking model" was saluted as a modernizing reform that liberated traditional banks to participate directly and indirectly in long-prohibited and vastly more profitable risk-taking.

          Exotic financial instruments like derivatives and credit-default swaps flourished, enabling old-line bankers to share in the fun and profit on an awesome scale. The banks invented "guarantees" against loss and sold them to both companies and market players. The fast-expanding financial sector claimed a larger and larger share of the economy (and still does) at the expense of the real economy of producers and consumers. The interconnectedness across market sectors created the illusion of safety. When illusions failed, these connected guarantees became the dragnet that drove panic in every direction. Ultimately, the federal government had to rescue everyone, foreign and domestic, to stop the bleeding.

          Yet Hillary Clinton asserts in her Times op-ed that repeal of Glass-Steagall had nothing to do with it. She claims that Glass-Steagall would not have limited the reckless behavior of institutions like Lehman Brothers or insurance giant AIG, which were not traditional banks. Her argument amounts to facile evasion that ignores the interconnected exposures. The Federal Reserve spent $180 billion bailing out AIG so AIG could pay back Goldman Sachs and other banks. If the Fed hadn't acted and had allowed AIG to fail, the banks would have gone down too.

          These sound like esoteric questions of bank regulation (and they are), but the consequences of pretending they do not matter are enormous. The federal government and Federal Reserve would remain on the hook for rescuing losers in a future crisis. The largest and most adventurous banks would remain free to experiment, inventing fictitious guarantees and selling them to eager suckers. If things go wrong, Uncle Sam cleans up the mess.

          Senator Elizabeth Warren and other reformers are pushing a simpler remedy-restore the Glass-Steagall principles and give citizens a safe, government-insured place to store their money. "Banking should be boring," Warren explains (her co-sponsor is GOP Senator John McCain).
          That's a hard sell in politics, given the banking sector's bear hug of Congress and the White House, its callous manipulation of both political parties. Of course, it is more complicated than that. But recreating a safe, stable banking system-a place where ordinary people can keep their money-ought to be the first benchmark for Democrats who claim to be reformers.

          Actually, the most compelling witnesses for Senator Warren's argument are the two bankers who introduced this adventure in "universal banking" back in the 1990s. They used their political savvy and relentless muscle to seduce Bill Clinton and his so-called New Democrats. John Reed was CEO of Citicorp and led the charge. He has since apologized to the nation. Sandy Weill was chairman of the board and a brilliant financier who envisioned the possibilities of a single, all-purpose financial house, freed of government's narrow-minded regulations. They won politically, but at staggering cost to the country.

          Weill confessed error back in 2012: "What we should probably do is go and split up investment banking from banking. Have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail."

          John Reed's confession explained explicitly why their modernizing crusade failed for two fundamental business reasons. "One was the belief that combining all types of finance into one institution would drive costs down-and the larger institution the more efficient it would be," Reed wrote in the Financial Times in November. Reed said, "We now know that there are very few cost efficiencies that come from the merger of functions-indeed, there may be none at all. It is possible that combining so much in a single bank makes services more expensive than if they were instead offered by smaller, specialised players."

          The second grave error, Reed said, was trying to mix the two conflicting cultures in banking-bankers who are pulling in opposite directions. That tension helps explain the competitive greed displayed by the modernized banking system. This disorder speaks to the current political crisis in ways that neither Dems nor Republicans wish to confront. It would require the politicians to critique the bankers (often their funders) in terms of human failure.

          "Mixing incompatible cultures is a problem all by itself," Reed wrote. "It makes the entire finance industry more fragile…. As is now clear, traditional banking attracts one kind of talent, which is entirely different from the kinds drawn towards investment banking and trading. Traditional bankers tend to be extroverts, sociable people who are focused on longer term relationships. They are, in many important respects, risk averse. Investment bankers and their traders are more short termist. They are comfortable with, and many even seek out, risk and are more focused on immediate reward."

          Reed concludes, "As I have reflected about the years since 1999, I think the lessons of Glass-Steagall and its repeal suggest that the universal banking model is inherently unstable and unworkable. No amount of restructuring, management change or regulation is ever likely to change that."

          This might sound hopelessly naive, but the Democratic Party might do better in politics if it told more of the truth more often: what they tried do and why it failed, and what they think they may have gotten wrong. People already know they haven't gotten a straight story from politicians. They might be favorably impressed by a little more candor in the plain-spoken manner of John Reed.

          Of course it's unfair to pick on the Dems. Republicans have been lying about their big stuff for so long and so relentlessly that their voters are now staging a wrathful rebellion. Who knows, maybe a little honest talk might lead to honest debate. Think about it. Do the people want to hear the truth about our national condition? Could they stand it?

          http://www.thenation.com/article/hillary-clinton-is-whitewashing-the-financial-catastrophe/

          EMichael -> RGC...
          "She claims that Glass-Steagall would not have limited the reckless behavior of institutions like Lehman Brothers or insurance giant AIG, which were not traditional banks."

          Of course this claim is absolutely true. Just like GS would not have affected the other investment banks, whatever their name was. And just like we would have had to bail out those other banks whatever their name was.

          Peter K. -> EMichael...
          Can you list all of the pro- or anti- Wall Street "reforms" and actions Bill Clinton performed as President including nominating Alan Greenspan as head regulator? Cutting the capital gains tax? Are you aware of Greenspan's record?

          Yes Hillary isn't Bill but she hasn't criticized her husband specifically about his record and seems to want to have her cake and eat it too.

          Of course Hillary is much better than the Republicans, pace Rustbucket and the Green Lantern Lefty club. Still, critics have a point.

          I won't be surprised if she doesn't do much to rein in Wall Street besides some window dressing.

          sanjait -> Peter K....
          "Can you list all of the pro- or anti- Wall Street "reforms" and actions Bill Clinton performed..."

          That, right there, is what's wrong with Bernie and his fans. They measure everything by whether it is "pro- or anti- Wall Street". Glass Steagall is anti-Wall Street. A financial transactions tax is anti-Wall Street. But neither has any hope of controlling systemic financial risk in this country. None.

          You guys want to punish Wall Street but not even bother trying to think of how to achieve useful policy goals. Some people, like Paine here, are actually open about this vacuity, as if the only thing that were important were winning a power struggle.

          Hillary's plan is flat out better. It's more comprehensive and more effective at reining in the financial system to limit systemic risk. Period.

          You guys want to make this a character melodrama rather than a policy debate, and I fear the result of that will be that the candidate who actually has the best plan won't get to enact it.

          likbez -> sanjait...

          "You guys want to make this a character melodrama rather than a policy debate, and I fear the result of that will be that the candidate who actually has the best plan won't get to enact it."

          You are misrepresenting the positions. It's actually pro-neoliberalism crowd vs anti-neoliberalism crowd. In no way anti-neoliberalism commenters here view this is a character melodrama, although psychologically Hillary probably does has certain problems as her reaction to the death of Gadhafi attests. The key problem with anti-neoliberalism crowd is the question "What is a realistic alternative?" That's where differences and policy debate starts.

          RGC -> EMichael...
          "Her argument amounts to facile evasion"

          Fred C. Dobbs -> RGC...

          'The majority favors policies to the left of Hillary.'

          Nah. I don't think so.

          No, Liberals Don't Control the Democratic Party http://www.theatlantic.com/politics/archive/2014/02/no-liberals-dont-control-the-democratic-party/283653/
          The Atlantic - Feb 7, 2014

          ... The Democrats' liberal faction has been greatly overestimated by pundits who mistake noisiness for clout or assume that the left functions like the right. In fact, liberals hold nowhere near the power in the Democratic Party that conservatives hold in the Republican Party. And while they may well be gaining, they're still far from being in charge. ...

          Paine -> RGC...

          What's not confronted ? Suggest what a System like the pre repeal system would have done in the 00's. My guess we'd have ended in a crisis anyway. Yes we can segregate the depository system. But credit is elastic enough to build bubbles without the depository system involved

          EMichael -> Paine ...

          Exactly.

          Most people think of lending like the Bailey Brothers Savings and Loan still exists.

          RC AKA Darryl, Ron -> EMichael...

          Don't be such a whistle dick. Just because you cannot figure out why GLBA made such an impact that in no way means that people that do understand are stupid. See my posted comment to RGC on GLBA just down thread for an more detailed explanation including a linked web article. No, GS alone would not have prevented the mortgage bubble, but it would have lessened TBTF and GS stood as icon, a symbol of financial regulation. Hell, if we don't need GS then why don't we just allow unregulated derivatives trading? Who cares, right? Senators Byron Dorgan, Barbara Boxer, Barbara Mikulski, Richard Shelby, Tom Harkin, Richard Bryan, Russ Feingold and Bernie Sanders all voted against GLBA to repeal GS for some strange reason and Dorgan made a really big deal out of it at the time. I doubt everyone on that list of Senators was just stupid because they did not see it your way.

          RC AKA Darryl, Ron -> EMichael...
          I ran all out of ceteris paribus quite some time ago. Events do not occur in isolation. GLBA increased TBTF in AIG and Citi. TBTF forced TARP. GLBA greased the skids for CFMA. Democrats gained majority, but not filibuster proof, caught between Iraq and a hard place following their votes for TARP and a broader understanding of their participation in the unanimous consent passage of the CFMA, over "objection" by Senators James Inhofe (R-OK) and Paul Wellstone (D-MN). We have had a Republican majority in the House since the 2010 election and now they have the Senate as well. If you are that sure that voters just choose divided government, then aren't we better off to have a Republican POTUS and Democratic Congress?

          sanjait -> RC AKA Darryl, Ron...

          "I ran all out of ceteris paribus quite some time ago. Events do not occur in isolation. GLBA increased TBTF in AIG and Citi. TBTF forced TARP. GLBA greased the skids for CFMA. "

          I know you think this is a really meaningful string that evidences causation, but it just looks like you are reaching, reaching, reaching ...

          RC AKA Darryl, Ron -> sanjait...

          Maybe. No way to say for sure. It certainly fits the kind of herd mentality that I always saw in corporate Amerika until I retired. The William Greider article posted by RGC was very consistent in its account by John Reed with the details of one or two books written about AIG back in 2009 or so. I don't have time to hunt them up now. Besides, no one would read them anyway.

          I am voting for whoever wins the Democratic nomination for POTUS. Bernie without a like-minded Congress would not do much good. But when we shoot each other down here at EV without offering any agreement or consideration that we might not be 100% correct, then that goes against Doc Thoma's idea of an open forum. Granted, with my great big pair then I am willing to state my opinion with no consideration for validation or acceptance, but not everyone has that degree of a comfort zone. Besides, I am so old an cynical that shooting down the overdogs that go after the underdogs is one of the few things that I still care about.

          RGC -> Paine ...

          GS was one of several actions taken by the New Deal. That it wasn't sufficient by itself doesn't equate to it wasn't beneficial.

          RC AKA Darryl, Ron -> RGC...

          [Lock and load.]

          http://www.occasionalplanet.org/2015/05/13/glass-steagall-one-democratic-senator-who-got-it-right/

          Glass-Steagall: Warren and Sanders bring it back into focus

          Madonna Gauding / May 13, 2015

          Senators Bernie Sanders and Elizabeth Warren are putting a new focus on the Glass-Steagall Act, which was, unfortunately, repealed in 1999 and led directly to the financial crises we have faced ever since. Here's a bit of history of this legislative debacle from an older post on Occasional Planet published several years ago :

          On November 4, 1999, Senator Byron Dorgan (D-ND) took to the floor of the senate to make an impassioned speech against the repeal of the Glass-Steagall Act, (alternately known as Gramm Leach Biley, or the "Financial Modernization Act") Repeal of Glass-Steagall would allow banks to merge with insurance companies and investments houses. He said "I want to sound a warning call today about this legislation, I think this legislation is just fundamentally terrible."

          According to Sam Stein, writing in 2009 in the Huffington Post, only eight senators voted against the repeal. Senior staff in the Clinton administration and many now in the Obama administration praised the repeal as the "most important breakthrough in the world of finance and politics in decades"

          According to Stein, Dorgan warned that banks would become "too big to fail" and claimed that Congress would "look back in a decade and say we should not have done this." The repeal of Glass Steagall, of course, was one of several bad policies that helped lead to the current economic crisis we are in now.

          Dorgan wasn't entirely alone. Sens. Barbara Boxer, Barbara Mikulski, Richard Shelby, Tom Harkin, Richard Bryan, Russ Feingold and Bernie Sanders also cast nay votes. The late Sen. Paul Wellstone opposed the bill, and warned at the time that Congress was "about to repeal the economic stabilizer without putting any comparable safeguard in its place."

          Democratic Senators had sufficient knowledge about the dangers of the repeal of Glass Steagall, but chose to ignore it. Plenty of experts warned that it would be impossible to "discipline" banks once the legislation was passed, and that they would get too big and complex to regulate. Editorials against repeal appeared in the New York Times and other mainstream venues, suggesting that if the new megabanks were to falter, they could take down the entire global economy, which is exactly what happened. Stein quotes Ralph Nader who said at the time, "We will look back at this and wonder how the country was so asleep. It's just a nightmare."

          According to Stein:

          "The Senate voted to pass Gramm-Leach-Bliley by a vote of 90-8 and reversed what was, for more than six decades, a framework that had governed the functions and reach of the nation's largest banks. No longer limited by laws and regulations commercial and investment banks could now merge. Many had already begun the process, including, among others, J.P. Morgan and Citicorp. The new law allowed it to be permanent. The updated ground rules were low on oversight and heavy on risky ventures. Historically in the business of mortgages and credit cards, banks now would sell insurance and stock.

          Nevertheless, the bill did not lack champions, many of whom declared that the original legislation - forged during the Great Depression - was both antiquated and cumbersome for the banking industry. Congress had tried 11 times to repeal Glass-Steagall. The twelfth was the charm.

          "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," said then-Treasury Secretary Lawrence Summers. "This historic legislation will better enable American companies to compete in the new economy."

          "I welcome this day as a day of success and triumph," said Sen. Christopher Dodd, (D-Conn.).

          "The concerns that we will have a meltdown like 1929 are dramatically overblown," said Sen. Bob Kerrey, (D-Neb.).

          "If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world," said Sen. Chuck Schumer, D-N.Y. "There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive."

          Unfortunately, the statement by Chuck Schumer sounds very much like it was prepared by a lobbyist. This vote underscores the way in which our elected officials are so heavily swayed by corporate and banking money that our voices and needs become irrelevant. It is why we need publicly funded elections. Democratic senators, the so-called representatives of the people, fell over themselves to please their Wall Street donors knowing full well there were dangers for the country at large, for ordinary Americans, in repealing Glass-Steagall.

          It is important to hold Democratic senators (along with current members of the Obama administration) accountable for the significant role they have played in the current economic crisis that has caused so much suffering for ordinary Americans. In case you were wondering, the current Democratic Senators who voted yes to repeal the Glass-Steagall act are the following:

          Daniel Akaka – Max Baucus – Evan Bayh – Jeff Bingaman – Kent Conrad – Chris Dodd – Dick Durbin – Dianne Feinstein – Daniel Inouye – Tim Johnson – John Kerry – Herb Kohl – Mary Landrieu – Frank Lautenberg – Patrick Leahy – Carl Levin – Joseph Lieberman – Blanche Lincoln – Patty Murray – Jack Reed – Harry Reid – Jay Rockefeller – Chuck Schumer – Ron Wyden

          Former House members who voted for repeal who are current Senators.

          Mark Udall [as of 2010] – Debbie Stabenow – Bob Menendez – Tom Udall -Sherrod Brown

          No longer in the Senate, or passed away, but who voted for repeal:

          Joe Biden -Ted Kennedy -Robert Byrd

          These Democratic senators would like to forget or make excuses for their enthusiastic vote on the repeal of Glass Steagall, but it is important to hold them accountable for helping their bank donors realize obscene profits while their constituents lost jobs, savings and homes. And it is important to demand that they serve the interests of the American people.

          *

          [The repeal of Glass Steagal was a landmark victory in deregulation that greased the skids for the passage of CFMA once Democrats had been further demoralized by the SCOTUS decision on Bush-v-Gore. The first vote on GLBA was split along party lines, but passed because Republicans had majority and Clinton was willing to sign which was clear from the waiver that had been granted to illegal Citi merger with Travelers. Both Citi and AIG mergers contributed to too big to fail. The CFMA was the nail in the coffin that probably would have never gotten off the ground if Democrats had held the line on the GLBA. Glass-Steagal was insufficient as a regulatory system to prevent the 2008 mortgage crisis, but it was giant as an icon of New Deal financial system reform. Its loss institutionalized too big to fail.]

          pgl -> RC AKA Darryl, Ron...

          Gramm Leach Biley was a mistake. But it was not the only failure of US regulatory policies towards financial institutions nor the most important. I think that is what Hillary Clinton is saying.

          RC AKA Darryl, Ron -> pgl...

          It was more symbolic caving in on financial regulation than a specific technical failure except for making too big to fail worse at Citi and AIG. It marked a sea change of thinking about financial regulation. Nothing mattered any more, including the CFMA just a little over one year later. Deregulation of derivatives trading mandated by the CFMA was a colossal failure and it is not bizarre to believe that GLBA precipitated the consensus on financial deregulation enough that after the demoralizing defeat of Democrats in Bush-v-Gore then there was no New Deal spirit of financial regulation left. Social development is not just a series of unconnected events. It is carried on a tide of change. A falling tide grounds all boats.

          pgl -> RC AKA Darryl, Ron...

          We had a financial dereg craze back in the late 1970's and early 1980's which led to the S&L disaster. One would have thought we would have learned from that. But then came the dereg craziness 20 years later. And this disaster was much worse.

          I don't care whether Hillary says 1999 was a mistake or not. I do care what the regulations of financial institutions will be like going forward.

          RC AKA Darryl, Ron -> pgl...

          I cannot disagree with any of that.

          sanjait -> RC AKA Darryl, Ron...

          "Deregulation of derivatives trading mandated by the CFMA was a colossal failure and it is not bizarre to believe that GLBA precipitated the consensus"

          Yeah, it is kind of bizarre to blame one bill for a crisis that occurred largely because another bill was passed, based on some some vague assertion about how the first bill made everyone think crazy.

          RC AKA Darryl, Ron -> sanjait...
          Democrats did not vote for GLBA until after reconciliation between the House and Senate bills. Democrats were tossed a bone in the Community Reinvestment Act financing provisions and given that Bill Clinton was going to sign anyway and that Republicans were able to pass the bill without a single vote from Democrats then all but a few Democrats bought in. They could not stop it, so they just bought into it. I thought there was supposed to be an understanding of behaviorism devoted to understanding the political economy. For that matter Republicans did not need Democrats to vote for the CFMA either, but they did. That gave Republicans political cover for whatever went wrong later on. No one with a clue believed things would go well from the passage of either of these bills. It was pure Wall Street driven kleptocracy.
          likbez -> sanjait...
          It was not one bill or another. It was a government policy to get traders what they want.

          See

          Bruce E. Woych | August 6, 2013 at 5:45 pm |

          http://www.imackgroup.com/mathematics/989981-the-untold-story-brooksley-born-larry-summers-the-truth-about-unlimited-risk-potential/

          The Untold Story: Brooksley Born, Larry Summers & the Truth …
          http://www.imackgroup.com/mathematics/989981-the-untold-story-brooksley-born-larry...
          Oct 5, 2012 … Larry Summers is attempting to re-write history at the expense of … and they might just find one critical point revealed in Mr. Cohan's article.
          [PERTINENT EXCERPT]: Oct 5, 2012

          "As the western world wakes to the fact it is in the middle of a debt crisis spiral, intelligent voices are wondering how this manifested itself? As we speak, those close to the situation could be engaging in historical revisionism to obfuscate their role in the design of faulty leverage structures that were identified in the derivatives markets in 1998 and 2008. These same design flaws, first identified in 1998, are persistent today and could become graphically evident in the very near future under the weight of a European debt crisis.

          Author and Bloomberg columnist William Cohan chronicles the fascinating start of this historic leverage implosion in his recent article Rethinking Robert Rubin. Readers may recall it was Mr. Cohan who, in 2004, noted leverage issues that ultimately imploded in 2007-08.

          At some point, market watchers will realize the debt crisis story will literally change the world. They will look to the root cause of the problem, and they might just find one critical point revealed in Mr. Cohan's article.

          This point occurs in 1998 when then Commodity Futures Trading Commission (CFTC) ChairwomanBrooksley Born identified what now might be recognized as core design flaws in leverage structure used in Over the Counter (OTC) transactions. Ms. Born brought her concerns public, by first asking just to study the issue, as appropriate action was not being taken. She issued a concept release paper that simply asked for more information. "The Commission is not entering into this process with preconceived results in mind," the document reads.

          Ms. Born later noted in, the PBS Frontline documentary on the topic speculation at the CFTC was the unregulated OTC derivatives were opaque, the risk to the global economy could not be determined and the risk was potentially catastrophic. As a result of this inquiry, Ms. Born was ultimately forced from office.

          This brings us to Lawrence Summers, the former Treasury Secretary of the United States and at the time right hand man to then Treasury Security Robert Rubin. Mr. Summers was widely credited with implementation of the aggressive tactics used to remove Ms. Born from her office, tactics that multiple sources describe as showing an old world bias against women piercing the glass ceiling.

          According to numerous published reports, Mr. Summers was involved in. silencing those who questioned the opaque derivative product's design. "

          RC AKA Darryl, Ron -> Paine ...

          TBTF on steroids, might as well CFMA - why not?

          Bubbles with less TBTF and a lot less credit default swaps would have been a lot less messy going in. Without TARP, then Congress might have still had the guts for making a lesser New Deal.

          EMichael -> RC AKA Darryl, Ron...

          TARP was window dressing. The curtain that covered up the FED's actions.

          pgl -> RGC...

          Where have I heard about William Greider? Oh yea - this critique of something stupid he wrote about a Supreme Court decision:

          www.washingtonpost.com/news/volokh-conspiracy/wp/2014/06/06/how-many-errors-can-william-greider-make-in-two-sentences-describing-lochner-v-new-york/

          pgl -> RGC...

          "Exotic financial instruments like derivatives and credit-default swaps flourished, enabling old-line bankers to share in the fun and profit on an awesome scale."

          These would have flourished even if Glass-Steagall remained on the books. Leave it to RGC to find some critic of HRC who knows nothing about financial markets.

          RGC -> pgl...

          Derivatives flourished because of the other deregulation under Clinton, the CFMA. The repeal of GS helped commercial banks participate.

          RGC -> pgl...

          The repeal of GS helped commercial banks participate.

          Fred C. Dobbs -> pgl...

          Warren Buffet used to rail about how risky derivative investing is, until he realized they are *extremely* important in the re-insurance biz, which is a
          big part of Berkshire Hathaway.

          Peter K. said...

          http://cepr.net/blogs/beat-the-press/hillary-clinton-bernie-sanders-and-cracking-down-on-wall-street

          Hillary Clinton, Bernie Sanders, and Cracking Down on Wall Street
          by Dean Baker

          Published: 12 December 2015

          The New Yorker ran a rather confused piece on Gary Sernovitz, a managing director at the investment firm Lime Rock Partners, on whether Bernie Sanders or Hillary Clinton would be more effective in reining in Wall Street. The piece assures us that Secretary Clinton has a better understanding of Wall Street and that her plan would be more effective in cracking down on the industry. The piece is bizarre both because it essentially dismisses the concern with too big to fail banks and completely ignores Sanders' proposal for a financial transactions tax which is by far the most important mechanism for reining in the financial industry.

          The piece assures us that too big to fail banks are no longer a problem, noting their drop in profitability from bubble peaks and telling readers:

          "not only are Sanders's bogeybanks just one part of Wall Street but they are getting less powerful and less problematic by the year."

          This argument is strange for a couple of reasons. First, the peak of the subprime bubble frenzy is hardly a good base of comparison. The real question is should we anticipate declining profits going forward. That hardly seems clear. For example, Citigroup recently reported surging profits, while Wells Fargo's third quarter profits were up 8 percent from 2014 levels.

          If Sernovitz is predicting that the big banks are about to shrivel up to nothingness, the market does not agree with him. Citigroup has a market capitalization of $152 billion, JPMorgan has a market cap of $236 billion, and Bank of America has a market cap of $174 billion. Clearly investors agree with Sanders in thinking that these huge banks will have sizable profits for some time to come.

          The real question on too big to fail is whether the government would sit by and let a Goldman Sachs or Citigroup go bankrupt. Perhaps some people think that it is now the case, but I've never met anyone in that group.

          Sernovitz is also dismissive on Sanders call for bringing back the Glass-Steagall separation between commercial banking and investment banking. He makes the comparison to the battle over the Keystone XL pipeline, which is actually quite appropriate. The Keystone battle did take on exaggerated importance in the climate debate. There was never a zero/one proposition in which no tar sands oil would be pumped without the pipeline, while all of it would be pumped if the pipeline was constructed. Nonetheless, if the Obama administration was committed to restricting greenhouse gas emissions, it is difficult to see why it would support the building of a pipeline that would facilitate bringing some of the world's dirtiest oil to market.

          In the same vein, Sernovitz is right that it is difficult to see how anything about the growth of the housing bubble and its subsequent collapse would have been very different if Glass-Steagall were still in place. And, it is possible in principle to regulate bank's risky practices without Glass-Steagall, as the Volcker rule is doing. However, enforcement tends to weaken over time under industry pressure, which is a reason why the clear lines of Glass-Steagall can be beneficial. Furthermore, as with Keystone, if we want to restrict banks' power, what is the advantage of letting them get bigger and more complex?

          The repeal of Glass-Steagall was sold in large part by boasting of the potential synergies from combining investment and commercial banking under one roof. But if the operations are kept completely separate, as is supposed to be the case, where are the synergies?

          But the strangest part of Sernovitz's story is that he leaves out Sanders' financial transactions tax (FTT) altogether. This is bizarre, because the FTT is essentially a hatchet blow to the waste and exorbitant salaries in the industry.

          Most research shows that trading volume is very responsive to the cost of trading, with most estimates putting the elasticity close to one. This means that if trading costs rise by 50 percent, then trading volume declines by 50 percent. (In its recent analysis of FTTs, the Tax Policy Center assumed that the elasticity was 1.5, meaning that trading volume decline by 150 percent of the increase in trading costs.) The implication of this finding is that the financial industry would pay the full cost of a financial transactions tax in the form of reduced trading revenue.

          The Tax Policy Center estimated that a 0.1 percent tax on stock trades, scaled with lower taxes on other assets, would raise $50 billion a year in tax revenue. The implied reduction in trading revenue was even larger. Senator Sanders has proposed a tax of 0.5 percent on equities (also with a scaled tax on other assets). This would lead to an even larger reduction in revenue for the financial industry.

          It is incredible that Sernovitz would ignore a policy with such enormous consequences for the financial sector in his assessment of which candidate would be tougher on Wall Street. Sanders FTT would almost certainly do more to change behavior on Wall Street then everything that Clinton has proposed taken together by a rather large margin. It's sort of like evaluating the New England Patriots' Super Bowl prospects without discussing their quarterback.

          Syaloch -> Peter K....

          Great to see Baker's acknowledgement that an updated Glass-Steagall is just one component of the progressive wing's plan to rein in Wall Street, not the sum total of it. Besides, if Wall Street types don't think restoring Glass-Steagall will have any meaningful effects, why do they expend so much energy to disparage it? Methinks they doth protest too much.

          Peter K. -> Syaloch...

          Yes that's a good way to look it. Wall Street gave the Democrats and Clinton a lot of campaign cash so that they would dismantle Glass-Steagall. If they want it done, it's probably not a good idea.

          EMichael -> Syaloch...

          Slippery slope. Ya' gotta find me a business of any type that does not protest any kind of regulation on their business.

          Syaloch -> EMichael...

          Yeah, but usually because of all the bad things they say will happen because of the regulation. The question is, what do they think of Clinton's plan? I've heard surprisingly little about that, and what I have heard is along these lines: http://money.cnn.com/2015/10/08/investing/hillary-clinton-wall-street-plan/

          "Hillary Clinton unveiled her big plan to curb the worst of Wall Street's excesses on Thursday. The reaction from the banking community was a shrug, if not relief."

          pgl -> Syaloch...

          Two excellent points!!!

          sanjait -> Syaloch...

          "Besides, if Wall Street types don't think restoring Glass-Steagall will have any meaningful effects, why do they expend so much energy to disparage it? Methinks they doth protest too much."

          It has an effect of shrinking the size of a few firms, and that has a detrimental effect on the top managers of those firms, who get paid more money if they have larger firms to manage. But it has little to no meaningful effect on systemic risk.

          So if your main policy goal is to shrink the compensation for a small number of powerful Wall Street managers, G-S is great. But if you actually want to accomplish something useful to the American people, like limiting systemic risk in the financial sector, then a plan like Hillary's is much much better. She explained this fairly well in her recent NYT piece.

          Paine -> Peter K....

          There is absolutely NO question Bernie is for real. Wall Street does not want Bernie. So they'll let Hillary talk as big as she needs to . Why should we believe her when an honest guy like Barry caved once in power

          Paine -> Paine ...

          Bernie has been anti Wall Street his whole career . He's on a crusade. Hillary is pulling a sham bola

          Paine -> Paine ...

          Perhaps too often we look at Wall Street as monolithic whether consciously or not. Obviously we know it's no monolithic: there are serious differences

          When the street is riding high especially. Right now the street is probably not united but too cautious to display profound differences in public. They're sitting on their hands waiting to see how high the anti Wall Street tide runs this election cycle. Trump gives them cover and I really fear secretly Hillary gives them comfort

          This all coiled change if Bernie surges. How that happens depends crucially on New Hampshire. Not Iowa

          EMichael -> Paine ...

          If Bernie surges and wins the nomination, we will all get to watch the death of the Progressive movement for a decade or two. Congress will become more GOP dominated, and we will have a President in office who will make Hoover look like a Socialist.

          Syaloch -> EMichael...

          Of course. In politics, as they say in the service, one must always choose the lesser of two evils. https://www.youtube.com/watch?v=e4PzpxOj5Cc

          pgl -> EMichael...

          You should like the moderate Democrats after George McGovern ran in 1972. I'm hoping we have another 1964 with Bernie leading a united Democratic Congress.

          EMichael -> pgl...

          Not a chance in the world. And I like Sanders much more than anyone else. It just simply cannot, and will not, happen. He is a communist. Not to me, not to you, but to the vast majority of American voters.

          pgl -> EMichael...

          He is not a communist. But I agree - Hillary is winning the Democratic nomination. I have only one vote and in New York, I'm badly outnumbered.

          ilsm -> Paine ...

          I believe Hillary will be to liberal causes after she is elected as LBJ was to peace in Vietnam. Like Bill and Obomber.

          pgl -> ilsm...

          By 1968, LBJ finally realized it was time to end that stupid war. But it seems certain members in the State Department undermined his efforts in a cynical ploy to get Nixon to be President. The Republican Party has had more slime than substance of most of my life time.

          pgl -> Peter K....

          Gary Sernovitz, a managing director at the investment firm Lime Rock Partners? Why are we listening to this guy too. It's like letting the fox guard the hen house.

          sanjait -> Peter K....

          "The piece is bizarre both because it essentially dismisses the concern with too big to fail banks and completely ignores Sanders' proposal for a financial transactions tax which is by far the most important mechanism for reining in the financial industry."

          This is just wrong. Is financial system risk in any way correlated with the frequency of transactions? Except for market volatility from HFT ... no. The financial crisis wasn't caused by a high volume of trades. It was caused by bad investments into highly illiquid assets. Again, great example of wanting to punish Wall Street but not bothering to think about what actually works.

          Peter K. said...

          Robert Reich to the Fed: this is not the time to raise rates.

          https://www.facebook.com/video.php?v=1116088268403768

          RGC said...

          Iceland's Radical Money Plan

          Iceland, too, is looking at a radical transformation of its money system, after suffering the crushing boom/bust cycle of the private banking model that bankrupted its largest banks in 2008. According to a March 2015 article in the UK Telegraph:

          Iceland's government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled "A better monetary system for Iceland".

          "The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy," Prime Minister Sigmundur David Gunnlaugsson said. The report, commissioned by the premier, is aimed at putting an end to a monetary system in place through a slew of financial crises, including the latest one in 2008.

          Under this "Sovereign Money" proposal, the country's central bank would become the only creator of money. Banks would continue to manage accounts and payments and would serve as intermediaries between savers and lenders. The proposal is a variant of the Chicago Plan promoted by Kumhof and Benes of the IMF and the Positive Money group in the UK.

          Public Banking Initiatives in Iceland, Ireland and the UK

          A major concern with stripping private banks of the power to create money as deposits when they make loans is that it will seriously reduce the availability of credit in an already sluggish economy. One solution is to make the banks, or some of them, public institutions. They would still be creating money when they made loans, but it would be as agents of the government; and the profits would be available for public use, on the model of the US Bank of North Dakota and the German Sparkassen (public savings banks).

          In Ireland, three political parties – Sinn Fein, the Green Party and Renua Ireland (a new party) - are now supporting initiatives for a network of local publicly-owned banks on the Sparkassen model. In the UK, the New Economy Foundation (NEF) is proposing that the failed Royal Bank of Scotland be transformed into a network of public interest banks on that model. And in Iceland, public banking is part of the platform of a new political party called the Dawn Party.

          December 11, 2015
          Reinventing Banking: From Russia to Iceland to Ecuador

          by Ellen Brown

          http://www.counterpunch.org/2015/12/11/reinventing-banking-from-russia-to-iceland-to-ecuador/

          pgl -> RGC...

          "Banks would continue to manage accounts and payments and would serve as intermediaries between savers and lenders."

          OK but that means they issue bank accounts which of course we call deposits. So is this just semantics? People want checking accounts. People want savings accounts. Otherwise they would not exist. Iceland plans to do what to stop the private sector from getting what it wants?

          I like the idea of public banks. Let's nationalize JPMorganChase so we don't have to listen to Jamie Dimon anymore!

          sanjait -> pgl...

          I don't know for sure (not bothering to search and read the referenced proposals), but I assumed the described proposal was for an end to fractional reserve banking. Banks would have to have full reserves to make loans. Or something. I could be wrong about that.

          Syaloch said...

          Sorry, but Your Favorite Company Can't Be Your Friend

          http://www.nytimes.com/2015/12/13/upshot/sorry-but-your-favorite-company-cant-be-your-friend.html?partner=rss&emc=rss&_r=0

          To think that an artificial person, whether corporeal or corporate, can ever be your friend requires a remarkable level of self-delusion.

          A commenter on the Times site aptly quotes Marx in response:

          "The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his "natural superiors", and has left remaining no other nexus between man and man than naked self-interest, than callous "cash payment". It has drowned the most heavenly ecstasies of religious fervour, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom - Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.

          "The bourgeoisie has stripped of its halo every occupation hitherto honoured and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage labourers."

          https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm

          [Dec 12, 2015] Guyenot Who are the Neocons

          Notable quotes:
          "... The American Neocons are Zionists (Their goal is expanding political / military power. Initially this is focused on the state of Israel.) ..."
          "... Obviously , if Zionism is synonymous with patriotism in Israel, it cannot be an acceptable label in American politics, where it would mean loyalty to a foreign power. This is why the neoconservatives do not represent themselves as Zionists on the American scene. Yet they do not hide it all together either. ..."
          "... He points out dual-citizen (Israel / USA) members and self proclaimed Zionists throughout cabinet level positions in the US government, international banking and controlling the US military. In private writings and occasionally in public, Neocons admit that America's war policies are actually Israel's war goals. (Examples provided.) ..."
          "... American Jewish Committee ..."
          "... Contemporary Jewish Record ..."
          "... If there is an intellectual movement in America to whose invention Jews can lay sole claim, neoconservatism is it. It's a thought one imagines most American Jews, overwhelmingly liberal, will find horrifying . And yet it is a fact that as a political philosophy, neoconservatism was born among the children of Jewish immigrants and is now largely the intellectual domain of those immigrants' grandchildren ..."
          "... Goyenot traces the Neocon's origins through its influential writers and thinkers. Highest on the list is Leo Strauss. (Neocons are sometimes called "the Straussians.") Leo Strauss is a great admirer of Machiavelli with his utter contempt for restraining moral principles making him "uniquely effective," and, "the ideal patriot." He gushes over Machiavelli praising the intrepidity of his thought, the grandeur of his vision, and the graceful subtlety of his speech. ..."
          "... believes that Truth is harmful to the common man and the social order and should be reserved for superior minds. ..."
          "... nations derive their strength from their myths , which are necessary for government and governance. ..."
          "... national myths have no necessary relationship with historical reality: they are socio-cultural constructions that the State has a duty to disseminate . ..."
          "... to be effective, any national myth must be based on a clear distinction between good and evil ; it derives its cohesive strength from the hatred of an enemy nation. ..."
          "... deception is the norm in political life ..."
          "... Office of Special Plans ..."
          "... The Zionist/Neocons are piggy-backing onto, or utilizing, the religious myths of both the Jewish and Christian world to consolidate power. This is brilliant Machiavellian strategy. ..."
          "... the "chosen people" myth (God likes us best, we are better than you) ..."
          "... the Holy Land myth (one area of real estate is more holy than another) ..."
          "... General Wesley Clark testified on numerous occasions before the cameras, that one month after September 11th, 2001 a general from the Pentagon showed him a memo from neoconservative strategists "that describes how we're gonna take out seven countries in five years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia and Sudan and finishing off with Iran". ..."
          "... Among them are brilliant strategists ..."
          "... They operate unrestrained by the most basic moral principles upon which civilization is founded. They are undisturbed by compassion for the suffering of others. ..."
          "... They use consciously and skillfully use deception and "myth-making" to shape policy ..."
          "... They have infiltrated the highest levels of banking, US military, NATO and US government. ..."
          Peak Prosperity

          Mememonkey pointed my to a 2013 essay by Laurent Guyenot, a French historian and writer on the deep state, that addresses the question of "Who Are The Neoconservatives." If you would like to know about that group that sends the US military into battle and tortures prisoners of war in out name, you need to know about these guys.

          First, if you are Jewish, or are a GREEN Meme, please stop and take a deep breath. Please put on your thinking cap and don't react. We are NOT disrespecting a religion, spiritual practice or a culture. We are talking about a radical and very destructive group hidden within a culture and using that culture. Christianity has similar groups and movements--the Crusades, the KKK, the Spanish Inquisition, the Salem witch trials, etc.

          My personal investment: This question has been a subject of intense interest for me since I became convinced that 9/11 was an inside job, that the Iraq war was waged for reasons entirely different from those publically stated. I have been horrified to see such a shadowy, powerful group operating from a profoundly "pre-moral" developmental level-i.e., not based in even the most rudimentary principles of morality foundational to civilization.

          Who the hell are these people?!

          Goyenot's main points (with a touch of personal editorializing):

          1. The American Neocons are Zionists (Their goal is expanding political / military power. Initially this is focused on the state of Israel.)

          Neoconservativism is essentially a modern right wing Jewish version of Machiavelli's political strategy. What characterizes the neoconservative movement is therefore not as much Judaism as a religious tradition, but rather Judiasm as a political project, i.e. Zionism, by Machiavellian means.

          This is not a religious movement though it may use religions words and vocabulary. It is a political and military movement. They are not concerned with being close to God. This is a movement to expand political and military power. Some are Christian and Mormon, culturally.

          Obviously , if Zionism is synonymous with patriotism in Israel, it cannot be an acceptable label in American politics, where it would mean loyalty to a foreign power. This is why the neoconservatives do not represent themselves as Zionists on the American scene. Yet they do not hide it all together either.

          He points out dual-citizen (Israel / USA) members and self proclaimed Zionists throughout cabinet level positions in the US government, international banking and controlling the US military. In private writings and occasionally in public, Neocons admit that America's war policies are actually Israel's war goals. (Examples provided.)

          2. Most American Jews are overwhelmingly liberal and do NOT share the perspective of the radical Zionists.

          The neoconservative movement, which is generally perceived as a radical (rather than "conservative") Republican right, is, in reality, an intellectual movement born in the late 1960s in the pages of the monthly magazine Commentary, a media arm of the American Jewish Committee, which had replaced the Contemporary Jewish Record in 1945. The Forward, the oldest American Jewish weekly, wrote in a January 6th, 2006 article signed Gal Beckerman: "If there is an intellectual movement in America to whose invention Jews can lay sole claim, neoconservatism is it. It's a thought one imagines most American Jews, overwhelmingly liberal, will find horrifying. And yet it is a fact that as a political philosophy, neoconservatism was born among the children of Jewish immigrants and is now largely the intellectual domain of those immigrants' grandchildren".

          3. Intellectual Basis and Moral developmental level

          Goyenot traces the Neocon's origins through its influential writers and thinkers. Highest on the list is Leo Strauss. (Neocons are sometimes called "the Straussians.") Leo Strauss is a great admirer of Machiavelli with his utter contempt for restraining moral principles making him "uniquely effective," and, "the ideal patriot." He gushes over Machiavelli praising the intrepidity of his thought, the grandeur of his vision, and the graceful subtlety of his speech.

          Other major points:

          • believes that Truth is harmful to the common man and the social order and should be reserved for superior minds.
          • nations derive their strength from their myths, which are necessary for government and governance.
          • national myths have no necessary relationship with historical reality: they are socio-cultural constructions that the State has a duty to disseminate.
          • to be effective, any national myth must be based on a clear distinction between good and evil; it derives its cohesive strength from the hatred of an enemy nation.
          • As recognized by Abram Shulsky and Gary Schmitt in an article "Leo Strauss and the World of Intelligence" (1999), for Strauss, "deception is the norm in political life" – the rule they [the Neocons] applied to fabricating the lie of weapons of mass destruction by Saddam Hussein when working inside the Office of Special Plans.
          • George Bushes speech from the national cathedral after 9/11 exemplifies myth-making at its finest: "Our responsibility to history is already clear: to answer these attacks and rid the world of Evil. War has been waged against us by stealth and deceit and murder. This nation is peaceful, but fierce when stirred to anger. . . .[W]e ask almighty God to watch over our nation, and grant us patience and resolve in all that is to come. . . . And may He always guide our country. God bless America.

          4. The Zionist/Neocons are piggy-backing onto, or utilizing, the religious myths of both the Jewish and Christian world to consolidate power. This is brilliant Machiavellian strategy.

          • the "chosen people" myth (God likes us best, we are better than you)
          • the Holy Land myth (one area of real estate is more holy than another)
          • the second coming of Christ myth
          • the establishment of God's Kingdom on Earth through global destruction/war (nuclear war for the Glory of God)

          [The]Pax Judaica will come only when "all the nations shall flow" to the Jerusalem temple, from where "shall go forth the law" (Isaiah 2:1-3). This vision of a new world order with Jerusalem at its center resonates within the Likudnik and neoconservative circles. At the Jerusalem Summit, held from October 12th to 14th, 2003 in the symbolically significant King David Hotel, an alliance was forged between Zionist Jews and Evangelical Christians around a "theopolitical" project, one that would consider Israel… "the key to the harmony of civilizations", replacing the United Nations that's become a "a tribalized confederation hijacked by Third World dictatorships": "Jerusalem's spiritual and historical importance endows it with a special authority to become a center of world's unity. [...] We believe that one of the objectives of Israel's divinely-inspired rebirth is to make it the center of the new unity of the nations, which will lead to an era of peace and prosperity, foretold by the Prophets". Three acting Israeli ministers spoke at the summit, including Benjamin Netanyahu, and Richard Perle.

          Jerusalem's dream empire is expected to come through the nightmare of world war. The prophet Zechariah, often cited on Zionist forums, predicted that the Lord will fight "all nations" allied against Israel. In a single day, the whole earth will become a desert, with the exception of Jerusalem, who "shall remain aloft upon its site" (14:10).

          With more than 50 millions members, Christians United for Israel is a major political force in the U.S.. Its Chairman, pastor John Haggee, declared: "The United States must join Israel in a pre-emptive military strike against Iran to fulfill God's plan for both Israel and the West, [...] a biblically prophesied end-time confrontation with Iran, which will lead to the Rapture, Tribulation, and Second Coming of Christ".

          And Guyenot concludes:

          Is it possible that this biblical dream, mixed with the neo-Machiavellianism of Leo Strauss and the militarism of Likud, is what is quietly animating an exceptionally determined and organized ultra-Zionist clan? General Wesley Clark testified on numerous occasions before the cameras, that one month after September 11th, 2001 a general from the Pentagon showed him a memo from neoconservative strategists "that describes how we're gonna take out seven countries in five years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia and Sudan and finishing off with Iran".

          Is it just a coincidence that the "seven nations" doomed to be destroyed by Israel form part of the biblical myths? …[W]hen Yahweh will deliver Israel "seven nations greater and mightier than yourself […] you must utterly destroy them; you shall make no covenant with them, and show no mercy to them."

          My summary:

          • We have a group that wishes greatly expanded power (to rule the world??)
          • Among them are brilliant strategists
          • They operate unrestrained by the most basic moral principles upon which civilization is founded. They are undisturbed by compassion for the suffering of others.
          • They use consciously and skillfully use deception and "myth-making" to shape policy
          • This is not a spiritual movement in any sense
          • They are utilizing religious myths and language to influence public thinking
          • They envision "winning" in the aftermath world war.
          • They have infiltrated the highest levels of banking, US military, NATO and US government.

          [Dec 11, 2015] Why Its Tricky for Fed Officials to Talk Politically

          "There is no reason for central banks to have the kind of independence that judicial institutions have. Justice may be blind and above politics, but money and banking are not." Economic and politics are like Siamese twins (which actually . If somebody trying to separate them it is a clear sign that the guy is either neoliberal propagandists or outright crook.
          Notable quotes:
          "... I think FED chairman is the second most powerful political position in the USA after the POTUS. Or may be in some respects it is even the first ;-) So it is quintessentially high-power political position masked with the smokescreen of purely economic (like many other things are camouflaged under neoliberalism.) ..."
          "... I think that is a hidden principle behind attacks on FED chair. A neoliberal principle that the state should not intrude into economics and limit itself to the police, security, defense, law enforcement and few other related to this functions. So their point that she overextended her mandate is an objection based on principle. Which can be violated only if it is used to uphold neoliberalism, as Greenspan did during his career many times. ..."
          "... This kind of debate seems to be a by-product of the contemporary obsession with having an independent central bank, run according to the fantasy that there is such a thing as a neutral or apolitical way to conduct monetary policy. ..."
          "... A number of commenters and authors have recently pointed out that inequality may not just be an unrelated phenomenon to monetary policy, but actually, in part at least, a byproduct of it. ..."
          "... The theory is that the Fed in the Great Moderation age has been so keen to stave off even the possibility of inflation that it chokes down the vigor of recoveries before they get to the part where median wages start rising quickly. The result is that wages get ratcheted down with the economic cycle, falling during recessions and never fully recovering during the recoveries. ..."
          "... Two Things: (i) The Fed should be open and honest about monetary policy. No one wants to return to the Greenspan days. (ii) Brad Delong is a neoliberal hack. ..."
          "... As to why risk a political backlash in the piece, the short answer is: to invoke the debate on whether politics or fact (science) is going to dominate. Because they can't both. See: Romer. Let's have this out once and for all. ..."
          Dec 11, 2015 | Economist's View
          anne said...
          Fine column, with which I agree. Federal Reserve policy as such is difficult and contentious enough to avoid wandering to social-economic analysis or philosophy from aspects of the Fed mandate.

          As for the use of the word "hack" in referring to Janet Yellen, that needlessly insulting use was by a Washington Post editor and not by columnist Michael Strain.

          anne -> RW (the other)...

          As Brad notes, many Fed Chairs before Yellen have opined on matters outside monetary policy so why is Yellen subject to a different standard?

          [ Fine, I have reconsidered and agree. No matter how the headline was written, the headline was meant to be intimidating and was willfully mean and that could and should have been made clear immediately by the writer of the column. ]

          likbez -> anne...

          "Federal Reserve policy as such is difficult and contentious enough to avoid wandering to social-economic analysis or philosophy from aspects of the Fed mandate."

          Anne,

          I think FED chairman is the second most powerful political position in the USA after the POTUS. Or may be in some respects it is even the first ;-) So it is quintessentially high-power political position masked with the smokescreen of "purely economic" (like many other things are camouflaged under neoliberalism.)

          That's why Greenspan got it, while being despised by his Wall-Street colleagues...

          He got it because he was perfect for promoting deregulation political agenda from the position of FED chair.

          pgl -> likbez...

          Greenspan was despised on Wall Street? Wow as he tried so hard to serve their interests. I guess the Wall Street crowd is never happy no matter how much income we feed these blow hards.

          anne -> likbez...

          So it is quintessentially high-power political position masked with the smokescreen of "purely economic" (like many other things are camouflaged under neoliberalism.)

          [ I understand, and am convinced. ]

          Peter K. said...

          I respectfully disagree. Republicans are always working the refs and despite what the writer from AEI said, they're okay with conservative Fed chairs talking politics. They have double standards.

          Greenspan testified to Congress on behalf of Bush's tax cuts for the rich. Something about how since Clinton balanced the budget, the financial markets had too little safe debt to work with. (maybe that's why they dove into mortgaged-backed securities). But tax cuts versus more government spending? He and Rubin advised Clinton to drop his middle class spending bill and trade deficit reduction for lower interest rates. That's economics which have political outcomes.

          So if the rightwing is going to work the the refs, so should the left. We shouldn't unilaterally disarm over fears Congress will gun for the Fed. There should be more groups like Fed Up protesting.

          The good thing about Yellen's speech is that it's a signal to progressives that inequality is problem for her even as she is raising rates in a political dance with hawks and Congress.

          The Fed is constantly accused of increasing inequality so it's good Yellen is saying she thinks it's a bad thing and not American.

          Bernie Sanders is right that for change to happen we'll need more political involvement from regular citizens. We'll need a popular movement with many leaders.

          The Fed should be square in the sights of a progressive movement. A high-pressured economy with full employment should be a top priority.

          Instead I saw Nancy Pelosi being interviewed by Al Hunt on Charlie Rose the other night. Hunt asked her about Yellen raising rates.

          Pelosi said no comment as she wasn't looking at the data Yellen was and didn't want to interfere. The Fed should be independent, etc. Perhaps like Thoma she has the best of motives and doesn't want to motivate the Republicans to go after the Fed and oppose what she wants.

          Still I felt the Democratic leadership should be committed to a high-pressure economy. Her staff should know what Krugman, Summers etc are saying. What the IMF and World Bank are sayings.

          She should have said "they shouldn't raise rates until they see the whites of inflation's eyes" as Krugman memorably put it. She should have said that emphatically.

          We need a Democratic Party like that.

          Instead Peter Diamond is blocked from becoming a Fed governor by Republicans and Pelosi is afraid to comment on monetary policy.

          Peter K. -> Peter K....

          A longer reply from DeLong:

          http://www.bradford-delong.com/2015/12/must-read-i-would-beg-the-highly-esteemed-mark-thoma-to-draw-a-distinction-here-between-inappropriate-and-unwise-in-m.html

          Must-Read: I would beg the highly-esteemed Mark Thoma to draw a distinction here between "inappropriate" and unwise. In my view, it is not at all inappropriate for Fed Chair Janet Yellen to express her concern about excessive inequality. Previous Fed Chairs, after all, have expressed their liking for inequality as an essential engine of economic growth over and over again over the past half century--with exactly zero critical snarking from the American Enterprise Institute for trespassing beyond the boundaries of their role.

          But that it is not inappropriate for Janet Yellen to do so does not mean that it is wise. Mark's argument is, I think, that given the current political situation it is unwise for Janet to further incite the ire of the nutboys in the way that even the mildest expression of concern about rising inequality will do.

          That may or may not be true. I think it is not.

          But I do not think that bears on my point that Michael R. Strain's arguments that Janet Yellen's speech on inequality was inappropriate are void, wrong, erroneous, inattentive to precedent, shoddy, expired, expired, gone to meet their maker, bereft of life, resting in peace, pushing up the daisies, kicked the bucket, shuffled off their mortal coil, run down the curtain, and joined the bleeding choir invisible:

          Mark Thoma: Why It's Tricky for Fed Officials to Talk Politically: "I think I disagree with Brad DeLong...

          pgl -> Peter K....

          "my point that Michael R. Strain's arguments that Janet Yellen's speech on inequality was inappropriate are void, wrong, erroneous..."

          DeLong is exactly right here. Strain's argument has its own share of partisan lies whereas Yellen is telling the truth. Brad will not be intimidated by this AEI weasel.

          sanjait said...

          Why would Yellen not talk about inequality? It's an important macroeconomic topic and one that is relevant for her job. It's both an input and an output variable that is related to monetary policy.

          And, arguably I think, median wage growth should be regarded as a policy goal for the Fed, related to its explicit mandate of "maximum employment."

          But even if you think inequality is unrelated to the Fed's policy goals, that doesn't stop them from talking about other topics. Do people accuse the Fed of playing politics when they talk about desiring reduced financial market volatility? That has little to do with growth, employment and general price stability.

          likbez -> sanjait...

          I think that is a hidden principle behind attacks on FED chair. A neoliberal principle that the state should not intrude into economics and limit itself to the police, security, defense, law enforcement and few other related to this functions. So their point that she overextended her mandate is an objection based on principle. Which can be violated only if it is used to uphold neoliberalism, as Greenspan did during his career many times.

          Sandwichman said...

          I think I disagree with Mark Thoma's disagreement with Brad DeLong. Actually, ALL economic discourse is political and efforts to restrain the politics are inevitably efforts to keep the politics one-sided

          Dan Kervick said...

          This kind of debate seems to be a by-product of the contemporary obsession with having an "independent" central bank, run according to the fantasy that there is such a thing as a neutral or apolitical way to conduct monetary policy.

          But there really isn't. Different kinds of social, economic and political values and policy agendas are going to call for different kinds monetary and credit policies. It might be better for our political health if the Fed were administratively re-located as an executive branch agency that is in turn part of a broader Department of Money and Banking - no different from the Departments of Agriculture, Labor, Education, etc. In that case everybody would then view Fed governors as ordinary executive branch appointees who report to the President, and whose policies are naturally an extension of the administration's broader agenda. Then if people don't like the monetary policies that are carried out, that would be one factor in their decision about whom to vote for.

          There is no reason for central banks to have the kind of independence that judicial institutions have. Justice may be blind and above politics, but money and banking are not. Decisions in that latter area should be no more politics-free than decisions about taxing and spending. If we fold the central bank more completely into the regular processes of representative government, then if a candidate wants to run on a platform of keeping interest rates low, small business credit easy, bank profits small, etc., they could do so without all of the doubletalk about the protecting the independence of the sacrosanct bankers' temple.

          We could also then avoid unproductive wheel-spinning about that impossibly vague and hedged Fed mandate that can be stretched to mean almost anything people want it to mean. The Fed's mandate under the political solution would just be whatever monetary policy the President ran on.

          likbez -> Dan Kervick...

          "The Fed's mandate under the political solution would just be whatever monetary policy the President ran on"

          Perfect !

          Actually sanjait in his post made a good point why this illusive goal is desirable (providing "electoral advantage") although Greenspan probably violated this rule. A couple of hikes of interest rates from now till election probably will doom Democrats.

          Also the idea of FEB independence went into overdrive since 80th not accidentally. It has its value in enhancing the level of deregulation.

          Among other things it helps to protect large financial institutions from outright nationalization in cases like 2008.

          Does somebody in this forum really think that Bernanke has an option of putting a couple of Wall-Street most violent and destructive behemoths into receivership (in other words nationalize them) in 2008 without Congress approval ?

          Dan Kervick -> Sanjait ...

          Sanjait, with due respect, you are not really responding to the reform proposal, but only affirming the differences between that proposal and the current system.

          Yes, of course fiscal policy is "constrained" by Congress. Indeed, it is not just constrained by Congress but actually made by Congress, subject only to an overridable executive branch veto. The executive branch is responsible primarily for carrying out the legislature's fiscal directives. That's the point. In a democratic system decisions about all forms of taxation and government spending are supposed to be made by the elected legislative branch, and then executed by agencies of the executive branch. My proposal is that monetary policy should be handled in the same way: by the elected political branches of the government.

          You point out that under current arrangements, central banks can, if they choose, effect large monetary offsets to fiscal policy (or at least to some of the aggregate macroeconomic effects of those policies). I don't understand why any non-elected and politically unaccountable branch of our government should have the power to offset the policies of the elected branches in this way. Fiscal and monetary policy need to be yoked together to achieve policy ends effectively. Those policy ends should be the ones people vote for, not the ones a handful of men and women happen to think are appropriate.

          JF -> Dan Kervick...

          "In a democratic system" is what you wrote.

          It is more proper to refer to it as republicanism. The separation of powers doctrine, underlying the US constitution, is a reflection of James Madison's characterization in the 51st The Federalist Paper, and it is a US-defined republicanism that is almost unique:

          "the republican form, wherein the legislative authority necessarily predominates."

          - or something like that is the quote.

          In the US framers' view, at least those who constructed the re-write in 1787 and were the leaders - I'd say the most important word in Madison's explanation is the word "necessarily" - this philosophy has all law and policy stemming from the public, it presumes that you can't have stability and dynamic change of benefit to society without this.

          Arguably, aristocracies, fascists, totalitarians, and all the other isms, just don't see it that way, they see things as top-down ordering of society.

          The mythology of the monetary theorizing and the notions about a central bank being independently delphic has some of this top-down ordering view to it (austerianism, comes to mind). Well, I don't believe in a religious sense that this is how it should be, nor do you it seems.

          It will be an interesting Congress in 2017 when new legislative authorities are enacted to establish clearer framing of the ministerial duties now held by the FRB.

          Are FED officials scared that this will happen, and as a result they circle the wagons with their associates in the financial community now to fend off the public????

          I hope this is not true. They can allay their own fears by leading not back toward 1907, in my opinion.

          Of course, I could say where I'd like economic policies to go, and do here often, but this thread is about Yellin and other FED officials.

          I recognize that FRB officials can say things too, and should, as leaders of this nation (with a whole lot of research power and evidence available to them their commentary on political economics should have merit and be influential).

          Thanks for continuing to remind people that we govern ourselves in the US in a US-defined republican-form. But I think the people still respect and listen to leadership - so speak out FED officials.

          JF -> Dan Kervick...

          But Dan K, then you'd de-mythologize an entire wing of macroeconomics in a wing referred to as monetary theory based on a separate Central Bank, or some non-political theory of money.

          Don't mind the theory as it is an analytic framework that questions and sometimes informs - but it is good to step back and realize some of the religious-like framing.

          It is political-economy.

          Peter K. -> pgl...

          Yellen really lays it out in her speech.

          "The extent of and continuing increase in inequality in the United States greatly concern me. The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression. By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then.2 It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity."

          And even links to Piketty in footnote 42.

          "Along with other economic advantages, it is likely that large inheritances play a role in the fairly limited intergenerational mobility that I described earlier.42"

          42. This topic is discussed extensively in Thomas Piketty (2014), Capital in the 21st Century, trans. Arthur Goldhammer (Cambridge, Mass.: Belknap Press). Return to text

          Sanjait said...

          A number of commenters and authors have recently pointed out that inequality may not just be an unrelated phenomenon to monetary policy, but actually, in part at least, a byproduct of it.

          The theory is that the Fed in the Great Moderation age has been so keen to stave off even the possibility of inflation that it chokes down the vigor of recoveries before they get to the part where median wages start rising quickly. The result is that wages get ratcheted down with the economic cycle, falling during recessions and never fully recovering during the recoveries.

          Do I believe this theory? Increasingly, yes I do. And seeing the Fed right now decide to raise rates, citing accelerating wage growth as one of the main reasons, has reinforced my belief.

          A Boy Named Sue said...

          Two Things: (i) The Fed should be open and honest about monetary policy. No one wants to return to the Greenspan days. (ii) Brad Delong is a neoliberal hack.

          A Boy Named Sue -> A Boy Named Sue...

          I do admit, Delong is my favorite conservative economist. He is witty and educational, unlike most RW hacks.

          Jeff said...

          As to "why risk a political backlash" in the piece, the short answer is: to invoke the debate on whether politics or fact (science) is going to dominate. Because they can't both. See: Romer. Let's have this out once and for all.

          [Dec 10, 2015] Special Report Buybacks enrich the bosses even when business sags

          Notable quotes:
          "... Most publicly traded U.S. companies reward top managers for hitting performance targets, meant to tie the interests of managers and shareholders together. At many big companies, those interests are deemed to be best aligned by linking executive performance to earnings per share, along with measures derived from the company's stock price. ..."
          "... But these metrics may not be solely a reflection of a company's operating performance. They can be, and often are, influenced through stock repurchases. In addition to cutting the number of a company's shares outstanding, and thus lifting EPS, buybacks also increase demand for the shares, usually providing a lift to the share price, which affects other performance markers. ..."
          "... Pay for performance as it is often structured creates "very troublesome, problematic incentives that can potentially drive very short-term thinking." ..."
          "... As reported in the first article in this series, share buybacks by U.S. non-financial companies reached a record $520 billion in the most recent reporting year. A Reuters analysis of 3,300 non-financial companies found that together, buybacks and dividends have surpassed total capital expenditures and are more than double research and development spending. ..."
          "... "There's been an over-focus on buybacks and raising EPS to hit share option targets, and we know that those are concentrated in the hands of the few, and that the few is in the top 1 percent," said James Montier, a member of the asset allocation team at global investment firm GMO in London, which manages more than $100 billion in assets. ..."
          "... The introduction of performance targets has been a driver of surging executive pay, helping to widen the gap between the richest in America and the rest of the country. Median CEO pay among companies in the S P 500 increased to a record $10.3 million last year, up from $8.6 million in 2010, according to data firm Equilar. ..."
          "... At those levels, CEOs last year were paid 303 times what workers in their industries earned, compared with a ratio of 59 times in 1989, according to the Economic Policy Institute, a Washington-based nonprofit. ..."
          finance.yahoo.com

          NEW YORK(Reuters) - When health insurer Humana Inc reported worse-than-expected quarterly earnings in late 2014 – including a 21 percent drop in net income – it softened the blow by immediately telling investors it would make a $500 million share repurchase.

          In addition to soothing shareholders, the surprise buyback benefited the company's senior executives. It added around two cents to the company's annual earnings per share, allowing Humana to surpass its $7.50 EPS target by a single cent and unlocking higher pay for top managers under terms of the company's compensation agreement.

          Thanks to Humana hitting that target, Chief Executive Officer Bruce Broussard earned a $1.68 million bonus for 2014.

          Most publicly traded U.S. companies reward top managers for hitting performance targets, meant to tie the interests of managers and shareholders together. At many big companies, those interests are deemed to be best aligned by linking executive performance to earnings per share, along with measures derived from the company's stock price.

          But these metrics may not be solely a reflection of a company's operating performance. They can be, and often are, influenced through stock repurchases. In addition to cutting the number of a company's shares outstanding, and thus lifting EPS, buybacks also increase demand for the shares, usually providing a lift to the share price, which affects other performance markers.

          As corporate America engages in an unprecedented buyback binge, soaring CEO pay tied to short-term performance measures like EPS is prompting criticism that executives are using stock repurchases to enrich themselves at the expense of long-term corporate health, capital investment and employment.

          "We've accepted a definition of performance that is narrow and quite possibly inappropriate," said Rosanna Landis Weaver, program manager of the executive compensation initiative at As You Sow, a Washington, D.C., nonprofit that promotes corporate responsibility. Pay for performance as it is often structured creates "very troublesome, problematic incentives that can potentially drive very short-term thinking."

          A Reuters analysis of the companies in the Standard & Poor's 500 Index found that 255 of those companies reward executives in part by using EPS, while another 28 use other per-share metrics that can be influenced by share buybacks.

          In addition, 303 also use total shareholder return, essentially a company's share price appreciation plus dividends, and 169 companies use both EPS and total shareholder return to help determine pay.

          STANDARD PRACTICE

          EPS and share-price metrics underpin much of the compensation of some of the highest-paid CEOs, including those at Walt Disney Co, Viacom Inc, 21st Century Fox Inc, Target Corp and Cisco Systems Inc.

          ... ... ...

          As reported in the first article in this series, share buybacks by U.S. non-financial companies reached a record $520 billion in the most recent reporting year. A Reuters analysis of 3,300 non-financial companies found that together, buybacks and dividends have surpassed total capital expenditures and are more than double research and development spending.

          Companies buy back their shares for various reasons. They do it when they believe their shares are undervalued, or to make use of cash or cheap debt financing when business conditions don't justify capital or R&D spending. They also do it to meet the expectations of increasingly demanding investors.

          Lately, the sheer volume of buybacks has prompted complaints among academics, politicians and investors that massive stock repurchases are stifling innovation and hurting U.S. competitiveness - and contributing to widening income inequality by rewarding executives with ever higher pay, often divorced from a company's underlying performance.

          "There's been an over-focus on buybacks and raising EPS to hit share option targets, and we know that those are concentrated in the hands of the few, and that the few is in the top 1 percent," said James Montier, a member of the asset allocation team at global investment firm GMO in London, which manages more than $100 billion in assets.

          The introduction of performance targets has been a driver of surging executive pay, helping to widen the gap between the richest in America and the rest of the country. Median CEO pay among companies in the S&P 500 increased to a record $10.3 million last year, up from $8.6 million in 2010, according to data firm Equilar.

          At those levels, CEOs last year were paid 303 times what workers in their industries earned, compared with a ratio of 59 times in 1989, according to the Economic Policy Institute, a Washington-based nonprofit.

          SALARY AND A LOT MORE

          Today, the bulk of CEO compensation comes from cash and stock awards, much of it tied to performance metrics. Last year, base salary accounted for just 8 percent of CEO pay for S&P 500 companies, while cash and stock incentives made up more than 45 percent, according to proxy advisory firm Institutional Shareholder Services.

          ...In 1992, Congress changed the tax code to curb rising executive pay and encourage performance-based compensation. It didn't work. Instead, the shift is widely blamed for soaring executive pay and a heavier emphasis on short-term results.

          Companies started tying performance pay to "short-term metrics, and suddenly all the things we don't want to happen start happening," said Lynn Stout, a professor of corporate and business law at Cornell Law School in Ithaca, New York. "Despite 20 years of trying, we have still failed to come up with an objective performance metric that can't be gamed."

          Shareholder expectations have changed, too. The individuals and other smaller, mostly passive investors who dominated equity markets during the postwar decades have given way to large institutional investors. These institutions tend to want higher returns, sooner, than their predecessors. Consider that the average time investors held a particular share has fallen from around eight years in 1960 to a year and a half now, according to New York Stock Exchange data.

          "TOO EASY TO MANIPULATE"

          Companies like to use EPS as a performance metric because it is the primary focus of financial analysts when assessing the value of a stock and of investors when evaluating their return on investment.

          But "it is not an appropriate target, it's too easy to manipulate," said Almeida, the University of Illinois finance professor.

          ...By providing a lift to a stock's price, buybacks can increase total shareholder return to target levels, resulting in more stock awards for executives. And of course, the higher stock price lifts the value of company stock they already own.

          "It can goose the price at time when the high price means they earn performance shares … even if the stock price later goes back down, they got their shares," said Michael Dorff, a law professor at the Southwestern Law School in Los Angeles.

          Exxon Corp, the largest repurchaser of shares over the past decade, has rejected shareholder proposals that it add three-year targets based on shareholder return to its compensation program. In its most recent proxy, the energy company said doing so could increase risk-taking and encourage underinvestment to achieve short-term results.

          The energy giant makes half of its annual executive bonus payments contingent on meeting longer-term EPS thresholds. Since 2005, the company has spent more than $200 billion on buybacks.

          ADDITIONAL TWEAKS

          While performance targets are specific, they aren't necessarily fixed. Corporate boards often adjust them or how they are calculated in ways that lift executive pay.

          [Dec 08, 2015] France's cowardly elite is to blame for the rise of Marine Le Pen

          That looks like a French backlash against neoliberal globalization, Against the society that cares only about top 1%.
          Notable quotes:
          "... Contrary to what we are told by the transnational business-political-media elite, there is nothing inevitable about ever-increasing 'globalisation'. It is simply a race to the bottom for ever-cheaper labour and erasure of sovereign national obstructions to corporate profit. ..."
          "... the impact of the third globalisation wave on any given country is the result of very deliberate political choices (many of which were taken by French governments rather later than their neighbours), not of some sort of inevitable natural fact. You do not, for instance, have to espouse unmitigated cross-border capital transfers. ..."
          "... the sooner the European Left admits that it was right in the 70s, when it correctly identified the EEC as an anti-worker construct, the better. Unless you fancy having a smattering of far right governments all over the EZ, that is. ..."
          "... France has terrible foreign policy. They completely destroyed Libya. France is responsible for the rise of far-right. ..."
          "... The elites disregard for anyones opinion apart from their own is largely the cause of the rise of the Front National. It is difficult to see how allowing millions of immigrants to settle in Europe can end well in the short to long term. ..."
          "... Not a bad article, this. Still, I wish this newspapers writers would stop defining democracy as that with which I agree . The FN is a Democratic Party. Deal with it. ..."
          "... If mainstream liberal and conservative parties will not listen to the citizenrys very real and very legitimate concerns about immigration and Islam, that citizenry will hold their collective nose and vote for right wing populists who will. ..."
          "... What we saw in France is being repeated in Sweden, the Netherlands and much of Eastern Europe. It is fueling Donald Trumps presidential run and Nigel Faranges parliamentary ambitions. ..."
          "... For the older generation in particular, Britain has changed out of all recognition in hte last 50 years. Although change can be a good thing, it can also be extremely unsettling. ..."
          "... Democracy in action. Unlike the UK whereby the politicians execute policy that they either lied about during the election, or they simply changed their mind in contempt of the electorate safe in the knowledge that the electorate will have to wait years to kick them out again. ..."
          "... Agreed, any grand coalition of the French ruling elite created as a blocker will only prove to many of the French people that there is very little real difference between the established parties; possibly driving those who do want real change towards the FN. ..."
          "... Globalisation depends on no borders - Factories and production have moved to avail of cheaper production. Shareholders and investment funds have benefited. Many, many citizens of sovereign nations have not. Now some European politicians and institutions have determined that immigration and multiculturalism is the new agenda anyway. There is to be no consultation by the political elite or the media with the people of the sovereign nations of Europe - It is to be forced on people whether they like it or not. ..."
          "... The rise of Front National is happening for the same reason the rise of the far right (or just plain right wing) parties is happening all over Europe: Moderate parties on both sides of the political spectrum refuse to have anything even resembling a discussion on the negative side of immigration or multiculturalism. It's really as simple as that. The far right has been handed a complete monopoly on an issue which is becoming an increasingly hot topic. They have an open goal. ..."
          www.theguardian.com
          umbofreddy smarty78, 7 Dec 2015 22:01

          Nougarayde was a journalist at the" Monde"; you know, this "french elite newspaper", who hate the front national and despise its supporters!

          viscount_jellicoe, 7 Dec 2015 21:39

          Contrary to what we are told by the transnational business-political-media elite, there is nothing inevitable about ever-increasing 'globalisation'. It is simply a race to the bottom for ever-cheaper labour and erasure of sovereign national obstructions to corporate profit.

          Daniele Gatti, 7 Dec 2015 21:46

          Your economic history is missing a few very important details, namely:

          1) the impact of the third globalisation wave on any given country is the result of very deliberate political choices (many of which were taken by French governments rather later than their neighbours), not of some sort of inevitable natural fact. You do not, for instance, have to espouse unmitigated cross-border capital transfers.

          2) there is no mention at all of the failed European monetary experiments, namely the ERM and the euro. The first was de facto dismantled in 1993 (by setting ridiculous oscillation bands) to avoid a French Black Wednesday after it had destroyed competitiveness pretty much everywhere apart from Germany and the Deutschemark area, the second is doing pretty much the same, only it was slower to compromise France than other countries because its economy is stronger than others.

          The fact remains that while relatively high public spending, in violation of the Maastricht parameters, directly translates into higher inflation than Germany, which leads to loss of competitiveness, which leads to a CA deficit.

          Sorry, but the French school system has absolutely nothing to do with all of the above, and the sooner the European Left admits that it was right in the 70s, when it correctly identified the EEC as an anti-worker construct, the better. Unless you fancy having a smattering of far right governments all over the EZ, that is.

          Andu68, 7 Dec 2015 21:49

          Why exactly is the FN far right? The only controversial position they have is their belief there is an urgent need to restrict immigration, yet this is a position held by the majority of European's public opinion, though not by mainstream politicians and certainly not by members of the left intellectual elite like Miss Nougareyde.

          LouSmorels, 7 Dec 2015 21:49

          If I were French, I would vote FN! Why should the French give up their country to become something else. Not everyone wants to end up like Sweden...

          finnrkn -> LouSmorels, 7 Dec 2015 22:22

          Not even Sweden wants to end up like Sweden nowadays.

          ClaudeNAORobot,

          Perhaps the rise of the FN reflects its offering to the electorate something that they want. It's something you don't want, so, rather in the spirit of the EU's rejection of result of a referendum that gives the 'wrong' result, you seek some excuse for that that you perceive to be the ill judgement of a portion of the electorate. Democracy can be irritating, can't it?

          euphoniumbrioche, 7 Dec 2015 20:46

          France's cowardly elite is to blame for the rise of Marine Le Pen

          France has terrible foreign policy. They completely destroyed Libya. France is responsible for the rise of far-right.

          allom8 -> euphoniumbrioche, 7 Dec 2015 20:55

          An inadequate explanation given the far right's continued rise all over Europe. The elephant in the room gets bigger with every passing day.

          GodzillaJones, 7 Dec 2015 20:48

          It's a reflection of politics in the West at the moment. When voters are not represented by their politicians, they look for something else, even if it's a bit unsavoury.

          ID9969553, 7 Dec 2015 20:48

          The elite's disregard for anyone's opinion apart from their own is largely the cause of the rise of the Front National. It is difficult to see how allowing millions of immigrants to settle in Europe can end well in the short to long term.

          WagerObe -> gunforhire, 7 Dec 2015 22:01

          Interestingly though, LR did not get the voting shares lost by the PS. They went to the FN. This is not a vote. against socialism, indeed on economic questions the FN is closer to the communists than classic right-wing parties.

          This is a vote against the main stream parties, and frankly it is not surprising. A succession of UMP - PS governments have changed nothing. Remains to be seen if FN can confirm the try next Sunday. If they win PACA

          finnrkn, 7 Dec 2015 20:49

          Not a bad article, this. Still, I wish this newspaper's writers would stop defining democracy as "that with which I agree". The FN is a Democratic Party. Deal with it.

          ID7475021 -> finnrkn, 7 Dec 2015 20:57

          The Nazi party in Germany used democracy to help itself climb to power... one of the problems democracy has not managed to address is how to deal with parties who use that democracy with the ultimate aim of destroying it.

          finnrkn -> ID7475021, 7 Dec 2015 21:04

          True enough; communist parties also subverted democracy in Eastern Europe. Beyond nationalism, though, I can't see there's much of a comparison to be made between the FN and the Nazis.

          elliot2511, 7 Dec 2015 20:49

          If mainstream liberal and conservative parties will not listen to the citizenry's very real and very legitimate concerns about immigration and Islam, that citizenry will hold their collective nose and vote for right wing populists who will.

          What we saw in France is being repeated in Sweden, the Netherlands and much of Eastern Europe. It is fueling Donald Trumps presidential run and Nigel Faranges parliamentary ambitions.

          ltm123 elliot2511, 7 Dec 2015 21:09

          Unfortunate those very real concerns about immigration are not very legitimate. You only have to do a small amount of research to realise that immigration isn't to blame for most of the things the main stream media would have you believe.

          huzar30 ltm123, 7 Dec 2015 21:14

          That really isn't the point. For the older generation in particular, Britain has changed out of all recognition in hte last 50 years. Although change can be a good thing, it can also be extremely unsettling.

          elliot2511 -> ltm123, 7 Dec 2015 21:23

          "You only have to do a small amount of research to realise that immigration isn't to blame for most of the things "
          You may be right...but people do not want mass immigration, and more particularly, do not want mass immigration from Islamic countries. That might be fair or unfair, justified or unjustified, but surely the greater population should have some say in what their country looks like.

          Laurence Johnson, 7 Dec 2015 20:50

          Democracy in action. Unlike the UK whereby the politicians execute policy that they either lied about during the election, or they simply changed their mind in contempt of the electorate safe in the knowledge that the electorate will have to wait years to kick them out again.

          Dave Beardsly -> Laurence Johnson, 7 Dec 2015 21:13

          Democracy in action. Unlike the UK

          Is it a better democracy? Or is it something to do with a more impartial, fairer, press? Because however bad our democracy is or isn't, we know for sure our press can make and break anyone it chooses.

          Sachaflashman, 7 Dec 2015 20:51

          "But the fact that such a question can now legitimately be raised is in itself a trauma for all those who care about democracy."

          In plain English: a democratic party that has managed to purge its past, re-defined itself and convinced 6 million citizens to vote for it....is nothing more than a trauma. If anything, the democratic trauma is a system whereby party A. can win the most votes only to be knocked out in round two by party B. dropping out and lending its votes to party C.

          This is a recipe for allowing bland, elitist politicians to stay in power forever.

          Mark Steven -> Conway Sachaflashman, 7 Dec 2015 22:22

          Agreed, any grand coalition of the French ruling elite created as a blocker will only prove to many of the French people that there is very little real difference between the established parties; possibly driving those who do want real change towards the FN.

          Magicmoonbeam2, 7 Dec 2015 20:53

          The so called elite have become accustomed to ruling independently of their electorates because for years their electorates had nowhere else to go. Now that their electorates have somewhere else to go, the brown squishy stuff is hitting the fan.


          Quiller -> Dave Beardsly, 7 Dec 2015 21:29

          Globalisation depends on no borders - Factories and production have moved to avail of cheaper production. Shareholders and investment funds have benefited. Many, many citizens of sovereign nations have not. Now some European politicians and institutions have determined that immigration and multiculturalism is the new agenda anyway. There is to be no consultation by the political elite or the media with the people of the sovereign nations of Europe - It is to be forced on people whether they like it or not.

          Any nation, people or politician who questions the new ideology is categorised as backward and reactionary. Secret meeting are held to push the issues forward. People of the sovereign nations of Europe have not signed up to the Federal Europe - France and other nations rejected the European Constitution. Nonetheless the ideologues press the issues forward onto the people.

          The latest revolt has been over the issue is immigration by Germany and Sweden - their initial action was - "we can do it !". When it dawned on them that they could not, they have tried to bully their way through the other sovereign nations via government structures, the European Union and the UN.

          Following the atrocities in France, Beirut, Ankara, Nigeria, Syria - the people are deciding they do not want to be a part of the change to the multicultural environment. Why would they when they perceive the change to be a retrograde step. If the current political party that one has voted for does not serve one's interests or they appear to be a political party with no clothes, then it is time to move on to a different political representative party. Of course - the smear continues against political parties that do not have the ideologues view.

          allom8, 7 Dec 2015 20:57

          The rise of Front National is happening for the same reason the rise of the far right (or just plain right wing) parties is happening all over Europe: Moderate parties on both sides of the political spectrum refuse to have anything even resembling a discussion on the negative side of immigration or multiculturalism. It's really as simple as that.

          The far right has been handed a complete monopoly on an issue which is becoming an increasingly hot topic. They have an open goal.

          Koolio, 7 Dec 2015 21:03

          "none of the mainstream parties have been able to address the many social and economic ailments"

          They've never tried. French politicians promise bold visions of the past as they keep trying to reheat and perpetuate policies that generate the record unemployment and entrenched structural inequalities while hoping if they say "républicain" ten times a day nobody will question their consistent failure.

          Even the politicians are stale, for example the Républicains are fighting over whether to back proven failure Sarkozy or convicted criminal Juppé (albeit gifted a crony-style presidential pardon by his ex-boss Chirac). Given choices like this no wonder millions of voters dissatisfied by Hollande and Valls skip to the FN.

          bally38, 7 Dec 2015 21:08

          Marine Le Pen has no solution for France's problems, her economic programme is all about retreating from the outside world and Europe.

          My understanding of the FN economic policy. Withdraw from the Euro. Close the borders. Put up a high tariff wall around france. (Which would mean de facto withdrawal from the Single Market).

          Quite how they think jobs are created in a global economy I really don't know. In some ways it would be great if they did win. Currently the eurosceptics can act all cosy with each other. Whereas in fact, their policies would amount to a mutual trade war.

          MrBojangles007, 7 Dec 2015 21:08

          Political dogma from the EU federalists and the invite from Merkel to all the worlds refugees is naive in the extreme. The people still love their country and most do not want a country called Europe.

          Too much too soon, we do not even speak the same language around 28 countries, until we do - a country called Europe is for the birds. The Euro has not worked, open borders have not worked, the EU is in an utter mess.

          FN - will always make progress when chaos reigns.

          PrinceEdward, 7 Dec 2015 21:29

          "The Prime Directive is not just a set of rules; it is a philosophy ... and a very correct one. History has proven again and again that whenever mankind interferes with a less developed civilization, no matter how well intentioned that interference may be, the results are invariably disastrous." -- Captain Jean-Luc Picard, USS Enterprise

          flowerssoft, 7 Dec 2015 21:32

          France's cowardly elite are responsible because they have refused to tackle issues which negatively affect the white working class in France.

          PrinceEdward, 7 Dec 2015 21:35

          People across the West are still scratching their heads as to why, given the large numbers of un and under employed young people, we need mass immigration, even in the face of austerity.

          The only answer I ever here is: If you're not for it, you're a xenophobe. Regardless of the sharp cuts to social programmes and the lack of housing throughout Europe. And if a European Country genuinely needs unskilled workers, there are plenty of Eastern and Southern Europeans who would be happy to bridge the gap.

          haunsk PrinceEdward, 7 Dec 2015 21:54

          There you have it in a nutshell. We are being spun,we are being played.

          smarty78, 7 Dec 2015 21:37

          'France's cowardly elite...'

          Natalie, it's rare I agree with you, so I'll focus on our consensus with the headline.

          That the other parties are now looking to form a block against FN demonstrates quite perfectly the arrogance of the French political elite and their utter contempt for democracy.
          I dearly wish FN the very best of luck - at least they attend to the legitimate grievances of a significant proportion of people.
          Fascist, Nazi, extremist blahblah... Bring it on and watch this space.

          André Pampel, 7 Dec 2015 21:51

          Ironic being that as far as economics goes extreme left and right speak almost from the same page....Mainly protectionism. What Nougayréde conviently does not say is how many people from the extreme left have gone over to the fn and that their vote is extremely high in the 18-34 age group, and the well educated in that group too. And herself was and is still part of the "establishment" so ironic criticising her chums like that....

          Anneke Ruben, 7 Dec 2015 21:52

          If people feel threatened, they tend to be more conservative. And frankly, I don't see a reason why France or the rest of Europe shouldn't feel threatened.. Mass unemployment, the Euro zone mess, thousands of migrants that pose as "refugees", migrants that mostly follow an unreformed religion, the mass shootings in Paris... So... Why is the left blaming the "elite" and not the ones responsible for creating this mess?

          [Dec 07, 2015] The key prerequisite of casino capitalism is corruption of regulators

          Economist's View

          likbez said...

          When capital became unable of reaping large and fairly secure profits from manufacturing it like water tries to find other ways. It starts with semi-criminalizing finance -- that's the origin of the term "casino capitalism" (aka neoliberalism). I see casino capitalism as a set of semi-criminal ways of maintaining the rate of profits.

          The key prerequisite here is corruption of regulators. So laws on the book does not matter much if regulators do not enforce them.

          As Joseph Schumpeter noted, capitalism is not a steady-state system. It is unstable system in which population constantly experience and then try to overcome one crisis after another. Joseph Schumpeter naively assumed that the net result is reimaging itself via so called "creative destruction". But what we observe now it "uncreative destruction". In other words casino capitalism is devouring the host, the US society.

          So all those Hillary statements are for plebs consumption only (another attempt to play "change we can believe in" trick). Just a hot air designed to get elected. Both Clintons are in the pocket of financial oligarchy and will never be able to get out of it alive.

          GeorgeK said...

          I believe I'm the only one on this blog that has actually traded bonds, done swaps and hedged bank portfolios with futures contracts. Sooo I kinda know something about this topic.

          Hilary is a fraud; her daughter worked at a Hedge fund where she met her husband Marc Mezvinsky, who is now a money manager at the Eaglevale fund. Oddly many of the Eaglevale investors are investors in the Clinton Foundation and have also given money to Hilary's campaign. The Clinton Foundation gets boat loads of money from Hedge funds and will not raise taxes on such a rich source of funding.

          The grooms mother is Marjory Margolies (ex)Mezvinsky, she cast the final vote giving Clinton the winning vote to raise taxes. She subsequently lost her run for reelection to congress, then her husband was convicted of fraud and they divorced.

          This speech is an attempt to pry people away from Bernie, it won't work with primary voters but might with what's left of rational Republicans in the general election.

          [Dec 07, 2015] Hillary Clinton How I'd Rein In Wall Street

          Economist's View

          likbez said...

          When capital became unable of reaping large and fairly secure profits from manufacturing it like water tries to find other ways. It starts with semi-criminalizing finance -- that's the origin of the term "casino capitalism" (aka neoliberalism). I see casino capitalism as a set of semi-criminal ways of maintaining the rate of profits.

          The key prerequisite here is corruption of regulators. So laws on the book does not matter much if regulators do not enforce them.

          As Joseph Schumpeter noted, capitalism is not a steady-state system. It is unstable system in which population constantly experience and then try to overcome one crisis after another. Joseph Schumpeter naively assumed that the net result is reimaging itself via so called "creative destruction". But what we observe now it "uncreative destruction". In other words casino capitalism is devouring the host, the US society.

          So all those Hillary statements are for plebs consumption only (another attempt to play "change we can believe in" trick). Just a hot air designed to get elected. Both Clintons are in the pocket of financial oligarchy and will never be able to get out of it alive.

          GeorgeK said...

          I believe I'm the only one on this blog that has actually traded bonds, done swaps and hedged bank portfolios with futures contracts. Sooo I kinda know something about this topic.

          Hilary is a fraud; her daughter worked at a Hedge fund where she met her husband Marc Mezvinsky, who is now a money manager at the Eaglevale fund. Oddly many of the Eaglevale investors are investors in the Clinton Foundation and have also given money to Hilary's campaign. The Clinton Foundation gets boat loads of money from Hedge funds and will not raise taxes on such a rich source of funding.

          The grooms mother is Marjory Margolies (ex)Mezvinsky, she cast the final vote giving Clinton the winning vote to raise taxes. She subsequently lost her run for reelection to congress, then her husband was convicted of fraud and they divorced.

          This speech is an attempt to pry people away from Bernie, it won't work with primary voters but might with what's left of rational Republicans in the general election.

          [Dec 07, 2015] Academic Nightmares Where Everybody Majors in Money

          The key idea of neoliberal university if to view students as customers and the degree as a product to sell.
          Notable quotes:
          "... The university of North Carolina at Chapel Hill now faces one year of probation from the Southern Association of Colleges and Schools Commission on Colleges as a result of a report that documents " widespread and long-lasting academic fraud at the university ." ..."
          "... Students are increasingly perceived as customers ..."
          "... the "product" the university is selling as a degree rather than an education, so it does seem counter productive to risk losing a customer for something so insignificant as failing to go to class. ..."
          "... Today's college students may be ignorant, but they aren't stupid. They take the measure of an institution pretty quickly. They can smell hypocrisy, and if they have to pay tens of thousands of dollars a year for the dubious privilege of uninterrupted olfactory assault, they'll very likely develop the moral equivalent of olfactory fatigue. ..."
          www.counterpunch.org
          ... ... ...

          The university of North Carolina at Chapel Hill now faces one year of probation from the Southern Association of Colleges and Schools Commission on Colleges as a result of a report that documents "widespread and long-lasting academic fraud at the university." For years, employees of the university "knowingly steered about 1,5000 athletes toward no-show courses that never met and were not taught by any faculty members, and in which the only work required was a single research paper that received a high grade no matter what the content."

          It isn't only athletes who get the benefit of such "no-show" courses. Small academic programs and departments struggling to survive occasionally come up with such courses as a way of boosting their numbers of majors. Even Harvard is now having to grapple with the question of whether their "General Education" program has had the effect of encouraging students to take easy courses.

          Universities will bend over backwards not to fail a student–so long as he or she is actually paying tuition. I know of a case of a professor who was told by the director of the program in which the professor teaches to "take some responsibility" for the fact that some of this professor's students were failing a course. Apparently, the professor was expected to find a way to ensure that all the students passed the course. Fortunately, the professor is tenured, and hence had to freedom to refuse to do more than to try to help the students actually LEARN the material. Would an adjunct have felt free to do the same thing?

          Students are increasingly perceived as customers and some administrators, and even some faculty, appear to conceive the "product" the university is selling as a degree rather than an education, so it does seem counter productive to risk losing a customer for something so insignificant as failing to go to class.

          Failing to pay tuition, however, is a different matter. Faculty are sometimes instructed not to allow students to attend courses if they have not paid their tuition by the beginning of the term (which, because of the glacial slowness of some financial aid programs, is frequently a problem).

          There's been a lot of discussion recently about how all students need to be taught ethics in college. Of course you can't require everyone to take the standard ethics class that is taught in the philosophy department. That would be too much work. If you suddenly are going to require that everyone at your university take ethics, well, you'd better dumb it down, so students won't object.

          Keep it rigorous, or dumb it down, requiring students to take an ethics course is unlikely to make them more ethical. The thing is, you rarely make people ethical by teaching them ethics. You can help them to better understand the complexities of some ethical dilemmas and you can arm them with theoretical language they can use to defend choices they probably would have made anyway, but that doesn't make them better people so much as it makes them happier people.

          Moral character is largely formed by the time students enter college. It isn't entirely formed, of course, so what happens to students in college can affect their moral development. People are so profoundly social that they continue to develop their conceptions of what is acceptable behavior throughout their entire lives. Aristotle recognized that. That's why he asserted that ethics was a subset of politics. If you want people to behave well, you have to organize your society in such a way that it sends a clear message concerning the behavior it approves of and the behavior it condemns. If the leaders of a given society want people to be honest and responsible, then they have to exemplify these character traits themselves, and then reward citizens who emulate their example.

          Universities would do a much better job of shaping students' characters in positive ways if instead of requiring students to take dumbed-down ethics classes, they gave a damn about ethics themselves, if they cared more about actually delivering the product they purport to be selling, rather than giving mere lip service to it. Many universities are now delivering degrees that are effectively equivalent to the indulgences sold by the Catholic church in the middle ages: expensive, but otherwise meaningless, pieces of paper.

          Today's college students may be ignorant, but they aren't stupid. They take the measure of an institution pretty quickly. They can smell hypocrisy, and if they have to pay tens of thousands of dollars a year for the dubious privilege of uninterrupted olfactory assault, they'll very likely develop the moral equivalent of olfactory fatigue. The message that, sadly, is all too often driven home to students today is that none of the traditional human values that educational institutions purport to preserve and foster, including learning in the broadest sense, really matter. The message they all to often receive now is that nothing really matters but money.

          Now THAT is a nightmare!

          M.G. Piety teaches philosophy at Drexel University. She is the editor and translator of Soren Kierkegaard's Repetition and Philosophical Crumbs. Her latest book is: Ways of Knowing: Kierkegaard's Pluralist Epistemology. She can be reached at: mgpiety@drexel.edu

          [Dec 06, 2015] CIA personnel and assets had the strongest motives to murder Kennedy

          www.nakedcapitalism.com
          Vatch

          JKF? I didn't know that the historian John King Fairbank was assassinated.

          roadrider

          Then I guess you have solid evidence to account for the actions of Allen Dulles, David Atlee Phillips, William Harvey, David Morales, E. Howard Hunt, Richard Helms, James Angleton and other CIA personnel and assets who had

          1) perhaps the strongest motives to murder Kennedy

          2) the means to carry out the crime, namely, their executive action (assassination) capability and blackmail the government into aiding their cover up and

          3) the opportunity to carry out such a plan given their complete lack of accountability to the rest of the government and their unmatched expertise in lying, deceit, secrecy, fraud.

          Because if you actually took the time to research or at least read about their actions in this matter instead of just spouting bald assertions that you decline to back up with any facts you would find their behavior nearly impossible to explain other than having at, the very least, guilty knowledge of the crime.

          skk

          Ruby claimed he was injected with cancer in jail, which ultimately rendered his second trial (after winning appeal overturning his death sentence) moot. It sounded crazy, but so did the motive proffered at his first trial-- that he wanted to save Mrs. Kennedy the anguish...

          that is such an amazing story.. i've yet to watch the video of Lyndon Johnson's swearing in - where Marr states he's seen to be winking and smiling etc -

          Jim Marrs - Kennedy Assassination Lecture

          those who wish - Pick it up at around 12 minutes. actually in that lecture he may well be showing videos of it - I wdn't know cos just listen to the audio.

          skk

          JFK is the one 'safe' conspiracy to talk about without getting the extreme whacko label.

          fascinating "lectures" - British Humanist Society and all - still you gotta listen to everything especially the other side:

          https://www.youtube.com/embed/V6s_Jw3RU9g?feature=oembed&wmode=opaque&list=PL44BEE83ED9D841A8

          Make a note of the names - rising stars in the I'm "left" but I'm not a conspiracist gaggle - ist a standard gaggle - Chomsky, Monbiot are in it ( to win it of course - their fabled "socialist" kingdom" ) - yeah yeah its BritLand so yeah why I care I suppose.

          [Dec 06, 2015] Beware Economics 101 -- this is a neoclassical junk

          Notable quotes:
          "... "The problem for early would ­- be neoclassical macroeconomists was that, strictly speaking, there was no microeconomic model of macroeconomics when they began their campaign. So they developed a neoclassical macro model from the foundation of the neoclassical growth model developed by Nobel laureate Robert Solow (Solow 1956) and Trevor Swan (Swan 2002). They interpreted the equilibrium growth path of the economy as being determined by the consumption and leisure preferences of a representative consumer, and explained deviations from equilibrium – which the rest of us know as the business cycle – by unpredictable 'shocks' to technology and consumer preferences. ..."
          "... This resulted in a model of the macroeconomy as consisting of a single consumer, who lives for ever, consuming the output of the economy. Which is a single good produced in a single firm, which he owns and in which he is the only employee, which pays him both profits equivalent to the marginal product of capital and a wage equivalent to the marginal product of labor. To which he decides how much labor to supply by solving a utility function that maximizes his utility over an infinite time horizon, which he rationally expects and therefore correctly predicts. ..."
          "... Paul Krugman is a quintessential neoclassical economist. Neoclassical economists threw the notion that economics should deal with empirical or factual reality overboard quite some time ago. ..."
          "... Economists often invoke a strange argument by Milton Friedman that states that models do not have to have realistic assumptions to be acceptable - giving them license to produce severely defective mathematical representations of reality. ..."
          "... Economists as a rule do not deny that their assumptions about human nature are highly unrealistic, but instead claim, following Friedman (1962, 1982), that the absence of realism does not diminish the value of their theory because it "works," in the sense that it generates valid predictions…. ..."
          "... Most important, philosophers of science have almost universally rejected Friedman's position (Boland, 1979). It is very widely agreed that the purpose of a theory is to explain. Otherwise, [predictions] are unable to foretell under what conditions they will continue to hold or fail. ..."
          "... With the advent of the Great Financial Crisis, which began in 2007 and continues to this day, the neoclassical models did fail. And they failed in the most spectacular way. ..."
          "... Nevertheless, for those like Krugman who are in love with orthodox economic theory, when facts don't conform to theory, so much worse for the facts. ..."
          "... It should be added that not everyone who rejects the orthodox, neoclassical theory of exogenous money creation and its "available funds" theory of banking, as Keen calls it, believes that debt matters. ..."
          "... A very good example of this is the MMT school, which even though it rejects the orthodox theory of money creation, nevertheless discounts the importance of debt, or at least public debt. ..."
          "... The distinction between private debt and public debt, however, is not a clear one. We all saw, for instance, the ease with which private debt was converted into public debt in the cases of Ireland and Spain in the wake of the GFC. ..."
          "... The piece that VK posted by Keen was essentially a rejection of the macroeconomic theory that was formulated to replace Keynesian theory. ..."
          "... The debate between these two economists on the role of banking and specifically the creation of credit is of fundamental importance in understanding the shortcomings of orthodox economic thinking – and why it was so ill-equipped to handle, let alone predict, the crash of 2008. ..."
          "... However, because he has such an important platform, it matters more to many monetary economists (including the editor of this series) that he appears to lack a proper understanding of the nature of credit, and the role of banks in the economy. ..."
          "... So yes debt is a big problem with a poorly regulated banking industry (financial industry really because of shadow banking). ..."
          peakoilbarrel.com
          VK, 12/04/2015 at 2:57 pm
          Beware Economics 101. The peer review mechanism has horribly failed.

          When you read Krugman, this is what he and our central bankers believe.

          "The problem for early would ­- be neoclassical macroeconomists was that, strictly speaking, there was no microeconomic model of macroeconomics when they began their campaign. So they developed a neoclassical macro model from the foundation of the neoclassical growth model developed by Nobel laureate Robert Solow (Solow 1956) and Trevor Swan (Swan 2002). They interpreted the equilibrium growth path of the economy as being determined by the consumption and leisure preferences of a representative consumer, and explained deviations from equilibrium – which the rest of us know as the business cycle – by unpredictable 'shocks' to technology and consumer preferences.

          This resulted in a model of the macroeconomy as consisting of a single consumer, who lives for ever, consuming the output of the economy. Which is a single good produced in a single firm, which he owns and in which he is the only employee, which pays him both profits equivalent to the marginal product of capital and a wage equivalent to the marginal product of labor. To which he decides how much labor to supply by solving a utility function that maximizes his utility over an infinite time horizon, which he rationally expects and therefore correctly predicts.

          The economy would always be in equilibrium except for the impact of unexpected 'technology shocks' that change the firm's productive capabilities (or his consumption preferences) and thus temporarily cause the single capitalist/worker/consumer to alter his working hours.

          Any reduction in working hours is a voluntary act, so the representative agent is never involuntarily unemployed, he's just taking more leisure. And there are no banks, no debt, and indeed no money in this model."

          Prof. Steve Keen, Debunking Economics.

          Dennis Coyne, 12/04/2015 at 6:11 pm
          Hi VK,

          No this is not what Krugman believes at all. There are some economists that think in these terms, in the US it is primarily in the interior of the country, the economists on the east and west coast, (this includes Krugman and many others) would not think in these terms at all.

          Have you ever read anything by Krugman?

          VK, 12/05/2015 at 1:41 am
          Read Krugman for years. The basic neoclassical models are founded on the representative agent model with the above assumptions as core. Look up the PhD text book on economics – http://www.amazon.com/Microeconomic-Theory-Andreu-Mas-Colell/dp/0195073401

          Krugman gives assessments based on the representative agent models, with its no money, no debt, no banks assumptions. Very linear models, no dynamic modeling.

          Economic theory and modeling is stuck in the 19th century. Rest of the hard sciences, physics, chemistry, atmospherics moved on with Poincare and later Lorenz to dynamic simulations.

          VK, 12/04/2015 at 3:04 pm
          To Dennis Coyne, debt levels matter because "loans create deposits" and not vice versa. Bank of England published a paper last year on modern money creation http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

          The fractional reserve banking model taught in economics is absolutely empirically wrong. Because banks have the power to create credit money, they can issue in excess.

          Under the empirically correct credit money creation model, there can be an excessive build up of debt. Hence the more than 250 sovereign and domestic govt debt crises since 1850.

          Dennis Coyne, 12/04/2015 at 6:24 pm
          Hi VK,

          Rune Likvern posted the link and I read the paper. US textbooks through 1990 covered this exactly as in that paper, so it was a good refresher, but not different from what I had learned in the past.

          There can be excessive debt and banks can fail due to poor lending practices combined with a severe recession. Nations can also default. The question is how much debt is too much debt. In economics there are different opinions on this question. When I was studying economics the focus was on public debt crowding out private debt when an economy was close to full employment.

          Now there seems to be more focus on private debt, which nobody in economics used to worry about.

          It may be that the lack of banking regulation and the rise of shadow banking has made this more of a problem, I am out of date on the latest research.

          http://www.economist.com/blogs/freeexchange/2015/06/public-debt

          The article at the link above suggests up to about a 150% debt to GDP ratio is a safe level for public debt.

          VK, 12/05/2015 at 1:56 am
          U.S. Textbooks don't cover this at all. The assumption that Paul Samuelson used in his seminal undergraduate textbook that millions have studied was the fractional reserve lending model which is empirically false.

          The whole of economics is empirically false, it would be a laughing stock if people looked under the hood with its assumptions that are meant to preserve straight line thinking rather than dealing with reality, which is highly non-linear and dynamic.

          Private debt wasn't a concern in economics because they assumed away the role of banks to preserve the equilibrium models. Once you incorporate reality into the models, which is what a true science would do, you find that private debt levels matter.

          What economists think: Saver lends to borrower. Saver loses purchasing power, borrower gains purchasing power. Purchasing power hasn't changed in the economy. Just a shift

          What really happens: Saver puts money in a bank, has access to his money anytime. Borrower wants money, bank issues a credit and writes loan amount as asset. Purchasing power as a whole increases across the economy as both saver and borrower now have money to buy goods and services with.
          That's how the economy grows – bank issuance of credit. And it can easily be in excess.

          https://unlearningeconomics.wordpress.com/2012/04/03/the-keenkrugman-debate-a-summary/

          Jef, 12/05/2015 at 9:12 am
          Thanks for hanging in there VK.

          I tried to explain this to my father in law who is an attorney specializing in finance and accounting. He simply could not accept it or even wrap his head around it even after reading the Bank of England piece.

          It is fraud plain and simple and the cost to humanity in both financial terms and lives lost is huge.

          Glenn Stehle, 12/05/2015 at 9:34 am
          Paul Krugman is a quintessential neoclassical economist. Neoclassical economists threw the notion that economics should deal with empirical or factual reality overboard quite some time ago.

          Perhaps no one was more explicit in articulating this notion that science should discard factual reality than Milton Friedman.

          Any number of critics have pointed this out. For instance,

          Economists often invoke a strange argument by Milton Friedman that states that models do not have to have realistic assumptions to be acceptable - giving them license to produce severely defective mathematical representations of reality.

          –NASSIM NICHOLAS TALEB, The Black Swan

          and

          Economists as a rule do not deny that their assumptions about human nature are highly unrealistic, but instead claim, following Friedman (1962, 1982), that the absence of realism does not diminish the value of their theory because it "works," in the sense that it generates valid predictions….

          Most important, philosophers of science have almost universally rejected Friedman's position (Boland, 1979). It is very widely agreed that the purpose of a theory is to explain. Otherwise, [predictions] are unable to foretell under what conditions they will continue to hold or fail.

          AMITAI ETZIONI, The Moral Dimension

          With the advent of the Great Financial Crisis, which began in 2007 and continues to this day, the neoclassical models did fail. And they failed in the most spectacular way.

          Nevertheless, for those like Krugman who are in love with orthodox economic theory, when facts don't conform to theory, so much worse for the facts.

          Glenn Stehle, 12/05/2015 at 9:55 am
          It should be added that not everyone who rejects the orthodox, neoclassical theory of exogenous money creation and its "available funds" theory of banking, as Keen calls it, believes that debt matters.

          A very good example of this is the MMT school, which even though it rejects the orthodox theory of money creation, nevertheless discounts the importance of debt, or at least public debt.

          The distinction between private debt and public debt, however, is not a clear one. We all saw, for instance, the ease with which private debt was converted into public debt in the cases of Ireland and Spain in the wake of the GFC.

          Dennis Coyne, 12/05/2015 at 12:38 pm
          Hi Glenn,

          Krugman does hold relatively mainstream views, but there are significant differences of opinion within economics. Many economists reject Keynesian theory, Krugman does not. The piece that VK posted by Keen was essentially a rejection of the macroeconomic theory that was formulated to replace Keynesian theory. Krugman would make many of the exact same criticisms.

          The "debt doesn't matter" theme is carried a little too far, nobody really argues this. The argument is that when the economy is doing poorly due to low aggregate demand (during a severe recession) and monetary policy is not effective because interest rates are near zero (so that the federal funds rate cannot be lowered any further), cutting fiscal deficits is poor public policy.

          Perhaps you disagree?

          Glenn Stehle, 12/05/2015 at 1:57 pm
          Dennis,

          Are you unaware of the famous debate between Krugman and Keen, and what it is all about?

          Perhaps this article by Ann Pettifor will help:

          The debate between these two economists on the role of banking and specifically the creation of credit is of fundamental importance in understanding the shortcomings of orthodox economic thinking – and why it was so ill-equipped to handle, let alone predict, the crash of 2008.

          Many rightly applaud Paul Krugman for using his platform at the New York Times to defend further fiscal stimulus in the US–against a hostile political crowd, not to mention the downright opposition of neo-liberal economists –- and we commend him for that.

          However, because he has such an important platform, it matters more to many monetary economists (including the editor of this series) that he appears to lack a proper understanding of the nature of credit, and the role of banks in the economy.

          https://www.opendemocracy.net/ourkingdom/steve-keen/keen-krugman-debate

          I very much recommend reading the entire article, and much more can be found by Googling "Keen vs Krugman debate."

          Dennis Coyne, 12/05/2015 at 12:15 pm
          Hi Vk,

          There are many of us who have studied beyond the introductory level. In my introductory courses, I believe we were taught this correctly, but that was long ago, I know when I instructed the introductory students as a grad student what I was teaching was essentially what I read in the paper you cited. Perhaps the "textbooks" have improved over time, I haven't read an economics textbook for many years.

          Have you read any economics papers lately, perhaps there has been more progress than you think. A fundamental problem with economics is that how we understand the workings of the economy can affect the way people behave. People will always try to game the system and this then effects the system. It is a difficult modelling problem not faced by chemists and physicists.

          If you solve it you should publish a paper.

          Dennis Coyne, 12/05/2015 at 1:41 pm
          Hi VK,

          You said:

          What economists think: Saver lends to borrower. Saver loses purchasing power, borrower gains purchasing power. Purchasing power hasn't changed in the economy. Just a shift

          Economists don't think this way at all. These kinds of lessons are often presented in introductory economics courses to show how economists once thought things worked in 1803 when Say introduced "Say's Law".

          Then the economics professor goes on to explain how a modern economy actually works (which we don't understand all that well.)

          Generally speaking economic growth is considered a good thing, and banks lending to borrowers that are likely to be able to repay the loan (not true leading up to the financial crisis due to poor regulation and lending practices), is not a problem in a well regulated banking sector (in the US this went away in the 1980s).

          So yes debt is a big problem with a poorly regulated banking industry (financial industry really because of shadow banking).

          Debt is like a lot of things in life, too much or too little can be a bad thing.

          The central bank can certainly influence the amount of lending by raising interest rates, as long as inflation is moderate, there is not much reason to do so.

          Rune Likvern, 12/05/2015 at 1:43 pm
          "US textbooks through 1990 covered this exactly as in that paper, so it was a good refresher, but not different from what I had learned in the past."

          And what is the title of those textbooks?

          "Now there seems to be more focus on private debt, which nobody in economics used to worry about."

          Was it US public or private debt that started the GFC in 2007/2008?

          [Dec 05, 2015] Income inequality happens by design. We cant fix it by tweaking capitalism

          Notable quotes:
          "... Stocks have always been a legal form of gambling . What is happening now however, is that a pair of treys can beat out your straight flush. Companies that have never turned a profit fetch huge prices on the stock market. ..."
          "... The stock market suckered millions in before 2008 and then prices plummeted. Where did the money from grandpas pension fund go? ..."
          "... Abraham Lincoln said that the purpose of government is to do for people what they cannot do for themselves. Government also should serve to keep people from hurting themselves and to restrain man's greed, which otherwise cannot be self-controlled. Anyone who seeks to own productive power that they cannot or won't use for consumption are beggaring their neighbor––the equivalency of mass murder––the impact of concentrated capital ownership. ..."
          "... family wealth" predicts outcomes for 10 to 15 generations. Those with extreme wealth owe it to events going back "300 to 450" years ago, according to research published by the New Republic – an era when it wasn't unusual for white Americans to benefit from an economy dependent upon widespread, unpaid black labor in the form of slavery. ..."
          "... Correction: The average person in poverty in the U.S. does not live in the same abject, third world poverty as you might find in Honduras, Central African Republic, Cambodia, or the barrios of Sao Paulo. ..."
          "... Since our poor don't live in abject poverty, I invite you to live as a family of four on less than $11,000 a year anywhere in the United States. If you qualify and can obtain subsidized housing you may have some of the accoutrements in your home that you seem to equate with living the high life. You know, running water, a fridge, a toilet, a stove. You would also likely have a phone (subsidized at that) so you might be able to participate (or attempt to participate) in the job market in an honest attempt to better your family's economic prospects and as is required to qualify for most assistance programs. ..."
          "... So many dutiful neoliberals on here rushing to the defense of poor Capitalism. Clearly, these commentators are among those who are in the privileged position of reaping the true benefits of Capitalism - And, of course, there are many benefits to reap if you are lucky enough to be born into the right racial-socioeconomic context. ..."
          "... Please walk us through how non-capitalist systems create wealth and allow their lowest class people propel themselves to the top in one generation. You will note that most socialist systems derive their technology and advancements from the more capitalistic systems. Pharmaceuticals, software, and robotics are a great example of this. I shutter to think of what the welfare of the average citizen of the world would be like without the advancements made via the capitalist countries. ..."
          Dec 05, 2015 | The Guardian

          The poorest Americans have no realistic hope of achieving anything that approaches income equality. They still struggle for access to the basics

          ... ... ...

          The disparities in wealth that we term "income inequality" are no accident, and they can't be fixed by fiddling at the edges of our current economic system. These disparities happened by design, and the system structurally disadvantages those at the bottom. The poorest Americans have no realistic hope of achieving anything that approaches income equality; even their very chances for access to the most basic tools of life are almost nil.

          ... ... ...

          Too often, the answer by those who have hoarded everything is they will choose to "give back" in a manner of their choosing – just look at Mark Zuckerberg and his much-derided plan to "give away" 99% of his Facebook stock. He is unlikely to help change inequality or poverty any more than "giving away" of $100m helped children in Newark schools.

          Allowing any of the 100 richest Americans to choose how they fix "income inequality" will not make the country more equal or even guarantee more access to life. You can't take down the master's house with the master's tools, even when you're the master; but more to the point, who would tear down his own house to distribute the bricks among so very many others?

          mkenney63 5 Dec 2015 20:37

          Excellent article. The problems we face are structural and can only be solved by making fundamental changes. We must bring an end to "Citizens United", modern day "Jim Crow" and the military industrial complex in order to restore our democracy. Then maybe, just maybe, we can have an economic system that will treat all with fairness and respect. Crony capitalism has had its day, it has mutated into criminality.

          Kencathedrus -> Marcedward 5 Dec 2015 20:23

          In the pre-capitalist system people learnt crafts to keep themselves afloat. The Industrial Revolution changed all that. Now we have the church of Education promising a better life if we get into debt to buy (sorry, earn) degrees.

          The whole system is messed up and now we have millions of people on this planet who can't function even those with degrees. Barbarians are howling at the gates of Europe. The USA is rotting from within. As Marx predicted the Capitalists are merely paying their own grave diggers.

          mkenney63 -> Bobishere 5 Dec 2015 20:17

          I would suggest you read the economic and political history of the past 30 years. To help you in your study let me recommend a couple of recent books: "Winner Take all Politics" by Jacob Hacker and Paul Pierson and "The Age of Acquiescence" by Steve Fraser. It always amazes me that one can be so blind the facts of recent American history; it's not just "a statistical inequality", it's been a well thought-out strategy over time to rig the system, a strategy engaged in by politicians and capitalists. Shine some light on this issue by acquainting yourself with the facts.


          Maharaja Brovinda -> Singh Jill Harrison 5 Dec 2015 19:42

          We play out the prisoner's dilemma in life, in general, over and over in different circumstances, every day. And we always choose the dominant - rational - solution. But the best solution is not based on rationality, but rather on trust and faith in each other - rather ironically for our current, evidence based society!


          Steven Palmer 5 Dec 2015 19:19

          Like crack addicts the philanthropricks only seek to extend their individual glory, social image their primary goal, and yet given the context they will burn in history. Philanthroptits should at least offset the immeasurable damage they have done through their medieval wealth accumulation. Collaborative philanthropy for basic income is a good idea, but ye, masters tools.


          BlairM -> Iconoclastick 5 Dec 2015 19:10

          Well, to paraphrase Winston Churchill, capitalism is the worst possible economic system, except for all those other economic systems that have been tried from time to time.

          I'd rather just have the freedom to earn money as I please, and if that means inequality, it's a small price to pay for not having some feudal lord or some party bureaucrat stomping on my humanity.

          brusuz 5 Dec 2015 18:52

          As long as wealth can be created by shuffling money from one place to another in the giant crap shoot we call our economy, nothing will change. Until something takes place to make it advantageous for the investor capitalists to put that money to work doing something that actually produces some benefit to the society as a whole, they will continue their extractive machinations. I see nothing on the horizon that is going to change any of that, and to cast this as some sort of a racial issue is quite superficial. We have all gotten the shaft, since there is no upward mobility available to anyone. Since the Bush crowd of neocons took power, we have all been shackled with "individual solutions to societal created problems."

          Jimi Del Duca 5 Dec 2015 18:31

          Friends, Capitalism is structural exploitation of ALL WORKERS. Thinking about it as solely a race issue is divisive. What we need is CLASS SOLIDARITY and ORGANIZATION. See iww.org We are the fighting union with no use for capitalists!

          slightlynumb -> AmyInNH 5 Dec 2015 18:04

          You'd be better off reading Marx if you want to understand capitalism. I think you are ascribing the word to what you think it should be rather than what it is.

          It is essentially a class structure rather than any defined economic system. Neoliberal is essentially laissez faire capitalism. It is designed to suborn nation states to corporate benefit.

          AmyInNH -> tommydog

          They make $40 a month. Working 7 days a week. At least 12 hour days. Who's fed you that "we're doing them a favor" BS?

          And I've news for you regarding "Those whose skills are less adaptable to doing so are seeing their earnings decline." We have many people who have 3 masters degrees making less than minimum wage. We have top notch STEM students shunned so corporations can hire captive/cheaper foreign labor, called H1-Bs, who then wait 10 years working for them waiting for their employment based green card. Or "visiting" students here on J1 visas, so the employers can get out of paying: social security, federal unemployment insurance, etc.

          Wake up and smell the coffee tommydog. They've more than a thumb on the scale.

          seamanbodine,
          I am a socialist. I decided to read this piece to see if Mr. Thrasher could write about market savagery without propounding the fiction that whites are somehow exempt from the effects of it.

          No, he could not. I clicked on the link accompanying his assertion that whites who are high school dropouts earn more than blacks with college degrees, and I read the linked piece in full. The linked piece does not in fact compare income (i.e., yearly earnings) of white high school dropouts with those of black college graduates, but it does compare family wealth across racial cohorts (though not educational ones), and the gap there is indeed stark, with average white family wealth in the six figures (full disclosure, I am white, and my personal wealth is below zero, as I owe more in student loans than I own, so perhaps I am not really white, or I do not fully partake of "whiteness," or whatever), and average black family wealth in the four figures.

          The reason for this likely has a lot to do with home ownership disparities, which in turn are linked in significant part to racist redlining practices. So white dropouts often live in homes their parents or grandparents bought, while many black college graduates whose parents were locked out of home ownership by institutional racism and, possibly, the withering of manufacturing jobs just as the northward migration was beginning to bear some economic fruit for black families, are still struggling to become homeowners. Thus, the higher average wealth for the dropout who lives in a family owned home.

          But this is not what Mr. Thrasher wrote. He specifically used the words "earn more," creating the impression that some white ignoramus is simply going to stumble his way into a higher salary than a cultivated, college educated black person. That is simply not the case, and the difference does matter.

          Why does it matter? Because I regularly see middle aged whites who are broken and homeless on the streets of the town where I live, and I know they are simply the tip of a growing mountain of privation. Yeah, go ahead, call it white tears if you want, but if you cannot see that millions (including, of course, not simply folks who are out and out homeless, but folks who are struggling to get enough to eat and routinely go without needed medication and medical care) of people who have "white privilege" are indeed oppressed by global capitalism then I would say that you are, at the end of the day, NO BETTER THAN THE WHITES YOU DISDAIN.

          If you have read this far, then you realize that I am in no way denying the reality of structural racism. But an account of economic savagery that entirely subsumes it into non-economic categories (race, gender, age), that refuses to acknowledge that blacks can be exploiters and whites can be exploited, is simply conservatism by other means. One gets the sense that if we have enough black millionaires and enough whites dying of things like a lack of medical care, then this might bring just a little bit of warmth to the hearts of people like Mr. Thrasher.

          Call it what you want, but don't call it progressive. Maybe it is historical karma. Which is understandable, as there is no reason why globally privileged blacks in places like the U.S. or Great Britain should bear the burden of being any more selfless or humane than globally privileged whites are or have been. The Steven Thrashers of humanity are certainly no worse than many of the whites they cannot seem to recognize as fully human are.

          But nor are they any better.
          JohnLG 5 Dec 2015 17:23

          I agree that the term "income inequality" is so vague that falls between useless and diversionary, but so too is most use of the word "capitalism", or so it seems to me. Typically missing is a penetrating analysis of where the problem lies, a comprehensibly supported remedy, or large-scale examples of anything except what's not working. "Income inequality" is pretty abstract until we look specifically at the consequences for individuals and society, and take a comprehensive look at all that is unequal. What does "capitalism" mean? Is capitalism the root of all this? Is capitalism any activity undertaken for profit, or substantial monopolization of markets and power?

          Power tends to corrupt. Money is a form of power, but there are others. The use of power to essentially cheat, oppress or kill others is corrupt, whether that power is in the form of a weapon, wealth, the powers of the state, or all of the above. Power is seductive and addictive. Even those with good intensions can be corrupted by an excess of power and insufficient accountability, while predators are drawn to power like sharks to blood. Democracy involves dispersion of power, ideally throughout a whole society. A constitutional democracy may offer protection even to minorities against a "tyranny of the majority" so long as a love of justice prevails. Selective "liberty and justice" is not liberty and justice at all, but rather a tyranny of the many against the few, as in racism, or of the few against the many, as by despots. Both forms reinforce each other in the same society, both are corrupt, and any "ism" can be corrupted by narcissism. To what degree is any society a shining example of government of, for, and by the people, and to what degree can one discover empirical evidence of corruption? What do we do about it?

          AmyInNH -> CaptainGrey 5 Dec 2015 17:15

          You're too funny. It's not "lifting billions out of poverty". It's moving malicious manufacturing practices to the other side of the planet. To the lands of no labor laws. To hide it from consumers. To hide profits.

          And it is dying. Legislatively they choke off their natural competition, which is an essential element of capitalism. Monopoly isn't capitalism. And when they bribe legislators, we don't have democracy any more either.

          Jeremiah2000 -> Teresa Trujillo 5 Dec 2015 16:53

          Stocks have always been "a legal form of gambling". What is happening now however, is that a pair of treys can beat out your straight flush. Companies that have never turned a profit fetch huge prices on the stock market.

          The stock market suckered millions in before 2008 and then prices plummeted. Where did the money from grandpa's pension fund go?

          Gary Reber 5 Dec 2015 16:45

          Abraham Lincoln said that the purpose of government is to do for people what they cannot do for themselves. Government also should serve to keep people from hurting themselves and to restrain man's greed, which otherwise cannot be self-controlled. Anyone who seeks to own productive power that they cannot or won't use for consumption are beggaring their neighbor––the equivalency of mass murder––the impact of concentrated capital ownership.

          The words "OWN" and "ASSETS" are the key descriptors of the definition of wealth. But these words are not well understood by the vast majority of Americans or for that matter, global citizens. They are limited to the vocabulary used by the wealthy ownership class and financial publications, which are not widely read, and not even taught in our colleges and universities.

          The wealthy ownership class did not become wealthy because they are "three times as smart." Still there is a valid argument that the vast majority of Americans do not pay particular attention to the financial world and educate themselves on wealth building within the current system's limited past-savings paradigm. Significantly, the wealthy OWNERSHIP class use their political power (power always follows property OWNERSHIP) to write the system rules to benefit and enhance their wealth. As such they have benefited from forging trade policy agreements which further concentrate OWNERSHIP on a global scale, military-industrial complex subsidies and government contracts, tax code provisions and loopholes and collective-bargaining rules – policy changes they've used their wealth to champion.

          Gary Reber 5 Dec 2015 16:44

          Unfortunately, when it comes to recommendations for solutions to economic inequality, virtually every commentator, politician and economist is stuck in viewing the world in one factor terms – human labor, in spite of their implied understanding that the rich are rich because they OWN the non-human means of production – physical capital. The proposed variety of wealth-building programs, like "universal savings accounts that might be subsidized for low-income savers," are not practical solutions because they rely on savings (a denial of consumption which lessens demand in the economy), which the vast majority of Americans do not have, and for those who can save their savings are modest and insignificant. Though, millions of Americans own diluted stock value through the "stock market exchanges," purchased with their earnings as labor workers (savings), their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Pew Research found that 53 percent of Americans own no stock at all, and out of the 47 percent who do, the richest 5 percent own two-thirds of that stock. And only 10 percent of Americans have pensions, so stock market gains or losses don't affect the incomes of most retirees.

          As for taxpayer-supported saving subsidies or other wage-boosting measures, those who have only their labor power and its precarious value held up by coercive rigging and who desperately need capital ownership to enable them to be capital workers (their productive assets applied in the economy) as well as labor workers to have a way to earn more income, cannot satisfy their unsatisfied needs and wants and sufficiently provide for themselves and their families. With only access to labor wages, the 99 percenters will continue, in desperation, to demand more and more pay for the same or less work, as their input is exponentially replaced by productive capital.

          As such, the vast majority of American consumers will continue to be strapped to mounting consumer debt bills, stagnant wages and inflationary price pressures. As their ONLY source of income is through wage employment, economic insecurity for the 99 percent majority of people means they cannot survive more than a week or two without a paycheck. Thus, the production side of the economy is under-nourished and hobbled as a result, because there are fewer and fewer "customers with money." We thus need to free economic growth from the slavery of past savings.

          I mentioned that political power follows property OWNERSHIP because with concentrated capital asset OWNERSHIP our elected representatives are far too often bought with the expectation that they protect and enhance the interests of the wealthiest Americans, the OWNERSHIP class they too overwhelmingly belong to.

          Many, including the author of this article, have concluded that with such a concentrated OWNERSHIP stronghold the wealthy have on our politics, "it's hard to see where this cycle ends." The ONLY way to reverse this cycle and broaden capital asset OWNERSHIP universally is a political revolution. (Bernie Sanders, are you listening?)

          The political revolution must address the problem of lack of demand. To create demand, the FUTURE economy must be financed in ways that create new capital OWNERS, who will benefit from the full earnings of the FUTURE productive capability of the American economy, and without taking from those who already OWN. This means significantly slowing the further concentration of capital asset wealth among those who are already wealthy and ensuring that the system is reformed to promote inclusive prosperity, inclusive opportunity, and inclusive economic justice.

          yamialwaysright 5 Dec 2015 16:13

          I was interested and in agreement until I read about structured racism. Many black kidsin the US grow up without a father in the house. They turn to anti-social behaviour and crime. Once you are poor it is hard to get out of being poor but Journalists are not doing justice to a critique of US Society if they ignore the fact that some people behave in a self-destructive way. I would imagine that if some black men in the US and the UK stuck with one woman and played a positive role in the life of their kids, those kids would have a better chance at life. People of different racial and ethnic origin do this also but there does seem to be a disproportionate problem with some black US men and some black UK men. Poverty is one problem but growing up in poverty and without a father figure adds to the problem.

          What the author writes applies to other countries not just the US in relation to the super wealthy being a small proportion of the population yet having the same wealth as a high percentage of the population. This in not a black or latino issue but a wealth distribution issue that affects everyone irrespective of race or ethnic origin. The top 1%, 5% or 10% having most of the wealth is well-known in many countries.

          nuthermerican4u 5 Dec 2015 15:59

          Capitalism, especially the current vulture capitalism, is dog eat dog. Always was, always will be. My advice is that if you are a capitalist that values your heirs, invest in getting off this soon-to-be slag heap and find other planets to pillage and rape. Either go all out for capitalism or reign in this beast before it kills all of us.

          soundofthesuburbs 5 Dec 2015 15:32

          Our antiquated class structure demonstrates the trickle up of Capitalism and the need to counterbalance it with progressive taxation.

          In the 1960s/1970s we used high taxes on the wealthy to counter balance the trickle up of Capitalism and achieved much greater equality.

          Today we have low taxes on the wealthy and Capitalism's trickle up is widening the inequality gap.

          We are cutting benefits for the disabled, poor and elderly so inequality can get wider and the idle rich can remain idle.

          They have issued enough propaganda to make people think it's those at the bottom that don't work.

          Every society since the dawn of civilization has had a Leisure Class at the top, in the UK we call them the Aristocracy and they have been doing nothing for centuries.

          The UK's aristocracy has seen social systems come and go, but they all provide a life of luxury and leisure and with someone else doing all the work.

          Feudalism - exploit the masses through land ownership
          Capitalism - exploit the masses through wealth (Capital)

          Today this is done through the parasitic, rentier trickle up of Capitalism:

          a) Those with excess capital invest it and collect interest, dividends and rent.
          b) Those with insufficient capital borrow money and pay interest and rent.

          The system itself provides for the idle rich and always has done from the first civilisations right up to the 21st Century.

          The rich taking from the poor is always built into the system, taxes and benefits are the counterbalance that needs to be applied externally.

          Iconoclastick 5 Dec 2015 15:31

          I often chuckle when I read some of the right wing comments on articles such as this. Firstly, I question if readers actually read the article references I've highlighted, before rushing to comment.

          Secondly, the comments are generated by cifers who probably haven't set the world alight, haven't made a difference in their local community, they'll have never created thousands of jobs in order to reward themselves with huge dividends having and as a consequence enjoy spectacular asset/investment growth, at best they'll be chugging along, just about keeping their shit together and yet they support a system that's broken, other than for the one percent, of the one percent.

          A new report from the Institute for Policy Studies issued this week analyzed the Forbes list of the 400 richest Americans and found that "the wealthiest 100 households now own about as much wealth as the entire African American population in the United States". That means that 100 families – most of whom are white – have as much wealth as the 41,000,000 black folks walking around the country (and the million or so locked up) combined.

          Similarly, the report also stated that "the wealthiest 186 members of the Forbes 400 own as much wealth as the entire Latino population" of the nation. Here again, the breakdown in actual humans is broke down: 186 overwhelmingly white folks have more money than that an astounding 55,000,000 Latino people.

          family wealth" predicts outcomes for 10 to 15 generations. Those with extreme wealth owe it to events going back "300 to 450" years ago, according to research published by the New Republic – an era when it wasn't unusual for white Americans to benefit from an economy dependent upon widespread, unpaid black labor in the form of slavery.

          soundofthesuburbs -> soundofthesuburbs 5 Dec 2015 15:26

          It is the 21st Century and most of the land in the UK is still owned by the descendants of feudal warlords that killed people and stole their land and wealth.

          When there is no land to build houses for generation rent, land ownership becomes an issue.

          David Cameron is married into the aristocracy and George Osborne is a member of the aristocracy, they must both be well acquainted with the Leisure Class.

          I can't find any hard work going on looking at the Wikipedia page for David Cameron's father-in-law. His family have been on their estate since the sixteenth century and judging by today's thinking, expect to be on it until the end of time.

          George Osborne's aristocratic pedigree goes back to the Tudor era:

          "he is an aristocrat with a pedigree stretching back to early in the Tudor era. His father, Sir Peter Osborne, is the 17th holder of a hereditary baronetcy that has been passed from father to son for 10 generations, and of which George is next in line."

          http://www.independent.co.uk/news/people/profiles/george-osborne-a-silver-spoon-for-the-golden-boy-2004814.html

          soundofthesuburbs 5 Dec 2015 15:24

          The working and middle classes toil to keep the upper class in luxury and leisure.

          In the UK nothing has changed.

          We call our Leisure Class the Aristocracy.

          For the first time in five millennia of human civilisation some people at the bottom of society aren't working.

          We can't have that; idleness is only for the rich.

          It's the way it's always been and the way it must be again.

          Did you think the upper; leisure class, social calendar disappeared in the 19th Century?
          No it's alive and kicking in the 21st Century ....

          Peer into the lives of today's Leisure Class with Tatler. http://www.tatler.com/the-season

          If we have people at the bottom who are not working the whole of civilisation will be turned on its head.

          "The modern industrial society developed from the barbarian tribal society, which featured a leisure class supported by subordinated working classes employed in economically productive occupations. The leisure class is composed of people exempted from manual work and from practicing economically productive occupations, because they belong to the leisure class."

          The Theory of the Leisure Class: An Economic Study of Institutions, by Thorstein Veblen. It was written a long time ago but much of it is as true today as it was then. The Wikipedia entry gives a good insight.

          DBChas 5 Dec 2015 15:13
          "income inequality" is best viewed as structural capitalism. It's not as if, did black and brown people and female people somehow (miraculously) attain the economic status of the lower-paid, white, male person, the problem would be solved--simply by adjusting pay scales. The problem is inherent to capitalism, which doesn't mean certain "types" of people aren't more disadvantaged for their "type." No one is saying that. For capitalists, it's easier to rationalize the obscene unfairness (only rich people say, "life's not fair") when their "type" is regarded as superior to a different "type," whether that be with respect to color or gender or both.

          Over time--a long time--the dominant party (white males since the Dark Ages, also the life-span of capitalism coincidentally enough) came to dominance by various means, too many to try to list, or even know of. Why white males? BTW, just because most in power and in money are white males does not mean ALL white males are in positions of power and wealth. Most are not, and these facts help to fog the issue.

          Indeed, "income inequality," is not an accident, nor can it be fixed, as the author notes, by tweaking (presumably he means capitalism). And he's quite right too in saying, "You can't take down the master's house with the master's tools..." I take that ALSO to mean, the problem can't be fixed by way of what Hedges has called a collapsing liberal establishment with its various institutions, officially speaking. That is, it's not institutional racism that's collapsing, but that institution is not officially recognized as such.

          HOWEVER, it IS possible, even when burdened with an economics that is capitalism, to redistribute wealth, and I don't just mean Mark Zuckerberg's. I mean all wealth in whatever form can be redistributed if/when government decides it can. And THIS TIME, unlike the 1950s-60s, not only would taxes on the wealthy be the same as then but the wealth redistributed would be redistributed to ALL, not just to white families, and perhaps in particular to red families, the oft forgotten ones.

          This is a matter of political will. But, of course, if that means whites as the largest voting block insist on electing to office those without the political will, nothing will change. In that case, other means have to be considered, and just a reminder: If the government fails to serve the people, the Constitution gives to the people the right to depose that government. But again, if whites as the largest voting block AND as the largest sub-group in the nation (and women are the largest part of that block, often voting as their men vote--just the facts, please, however unpleasant) have little interest in seeing to making necessary changes at least in voting booths, then...what? Bolshevism or what? No one seems to know and it's practically taboo even to talk about possibilities. Americans did it once, but not inclusively and not even paid in many instances. When it happens again, it has to happen with and for the participation of ALL. And it's worth noting that it will have to happen again, because capitalism by its very nature cannot survive itself. That is, as Marx rightly noted, capitalism will eventually collapse by dint of its internal contradictions.


          mbidding Jeremiah2000 5 Dec 2015 15:08

          Correction: The average person in poverty in the U.S. does not live in the same abject, third world poverty as you might find in Honduras, Central African Republic, Cambodia, or the barrios of Sao Paulo.

          Since our poor don't live in abject poverty, I invite you to live as a family of four on less than $11,000 a year anywhere in the United States. If you qualify and can obtain subsidized housing you may have some of the accoutrements in your home that you seem to equate with living the high life. You know, running water, a fridge, a toilet, a stove. You would also likely have a phone (subsidized at that) so you might be able to participate (or attempt to participate) in the job market in an honest attempt to better your family's economic prospects and as is required to qualify for most assistance programs.

          Consider as well that you don't have transportation to get a job that would improve your circumstances. You earn too much to qualify for meaningful levels of food support programs and fall into the insurance gap for subsidies because you live in a state that for ideological reasons refuses to expand Medicaid coverage. Your local schools are a disgrace but you can't take advantage of so-called school choice programs (vouchers, charters, and the like) as you don't have transportation or the time (given your employer's refusal to set fixed working hours for minimum wage part time work) to get your kids to that fine choice school.

          You may have a fridge and a stove, but you have no food to cook. You may have access to running water and electricity, but you can't afford to pay the bills for such on account of having to choose between putting food in that fridge or flushing that toilet. You can't be there reliably for your kids to help with school, etc, because you work constantly shifting hours for crap pay.

          Get back to me after six months to a year after living in such circumstances and then tell me again how Americans don't really live in poverty simply because they have access to appliances.


          Earl Shelton 5 Dec 2015 15:08

          The Earned Income Tax Credit seems to me a good starting point for reform. It has been around since the 70s -- conceived by Nixon/Moynihan -- and signed by socialist (kidding) Gerald Ford -- it already *redistributes* income (don't choke on the term, O'Reilly) directly from tax revenue (which is still largely progressive) to the working poor, with kids.

          That program should be massively expanded to tax the 1% -- and especially the top 1/10 of 1% (including a wealth tax) -- and distribute the money to the bottom half of society, mostly in the form of work training, child care and other things that help put them in and keep them in the middle class. It is a mechanism already in existence to correct the worst ravages of Capitalism. Use it to build shared prosperity.


          oKWJNRo 5 Dec 2015 14:40

          So many dutiful neoliberals on here rushing to the defense of poor Capitalism. Clearly, these commentators are among those who are in the privileged position of reaping the true benefits of Capitalism - And, of course, there are many benefits to reap if you are lucky enough to be born into the right racial-socioeconomic context.

          We can probably all agree that Capitalism has brought about widespread improvements in healthcare, education, living conditions, for example, compared to the feudal system that preceded it... But it also disproportionately benefits the upper echelons of Capitalist societies and is wholly unequal by design.

          Capitalism depends upon the existence of a large underclass that can be exploited. This is part of the process of how surplus value is created and wealth is extracted from labour. This much is indisputable. It is therefore obvious that capitalism isn't an ideal system for most of us living on this planet.

          As for the improvements in healthcare, education, living conditions etc that Capitalism has fostered... Most of these were won through long struggles against the Capitalist hegemony by the masses. We would have certainly chosen to make these improvements to our landscape sooner if Capitalism hadn't made every effort to stop us. The problem today is that Capitalism and its powerful beneficiaries have successfully convinced us that there is no possible alternative. It won't give us the chance to try or even permit us to believe there could be another, better way.

          Martin Joseph -> realdoge 5 Dec 2015 14:33

          Please walk us through how non-capitalist systems create wealth and allow their lowest class people propel themselves to the top in one generation. You will note that most socialist systems derive their technology and advancements from the more capitalistic systems. Pharmaceuticals, software, and robotics are a great example of this.

          I shutter to think of what the welfare of the average citizen of the world would be like without the advancements made via the capitalist countries.

          VWFeature 5 Dec 2015 14:29

          Markets, economies and tax systems are created by people, and based on rules they agree on. Those rules can favor general prosperity or concentration of wealth. Destruction and predation are easier than creation and cooperation, so our rules have to favor cooperation if we want to avoid predation and destructive conflicts.

          In the 1930's the US changed many of those rules to favor general prosperity. Since then they've been gradually changed to favor wealth concentration and predation. They can be changed back.

          The trick is creating a system that encourages innovation while putting a safety net under the population so failure doesn't end in starvation.

          A large part of our current problems is the natural tendency for large companies to get larger and larger until their failure would adversely affect too many others, so they're not allowed to fail. Tax law, not antitrust law, has to work against this. If a company can reduce its tax rate by breaking into 20 smaller (still huge) companies, then competition is preserved and no one company can dominate and control markets.

          Robert Goldschmidt -> Jake321 5 Dec 2015 14:27

          Bernie Sanders has it right on -- we can only heal our system by first having millions rise up and demand an end to the corruption of the corporations controlling our elected representatives. Corporations are not people and money is not speech.

          moonwrap02 5 Dec 2015 14:26

          The effects of wealth distribution has far reaching consequences. It is not just about money, but creating a fair society - one that is co-operative and cohesive. The present system has allowed an ever divide between the rich and poor, creating a two tier society where neither the twain shall meet. The rich and poor are almost different species on the planet and no longer belong to the same community. Commonality of interest is lost and so it's difficult to form community and to have good, friendly relationships across class differences that are that large.

          "If capitalism is to be seen to be fair, the same rules are to apply to the big guy as to the little guy,"

          http://www.independent.co.uk/news/business/news/2-charts-that-show-what-the-world-really-thinks-about-capitalism-a6719851.html


          Jeremiah2000 -> bifess 5 Dec 2015 14:17

          Sorry. I get it now. You actually think that because the Washington elite has repealed Glass-Steagel that we live in a unregulated capitalistic system.

          This is so far from the truth that I wasn't comprehending that anyone could think that. You can see the graph of pages published in the Federal Register here. Unregulated capitalism? Wow.

          Dodd Frank was passed in 2010 (without a single Republican vote). Originally it was 2,300 pages. It is STILL being written by nameless bureaucrats and is over 20,000 pages. Unregulated capitalism? Really?

          But the reality is that Goliath is conspiring with the government to regulate what size sling David can use and how many stones and how many ounces.

          So we need more government regulations? They will disallow David from anything but spitwads and only two of those.


          neuronmaker -> AmyInNH 5 Dec 2015 14:16

          Do you understand the concept of corporations which are products of capitalism?

          The legal institutions within each capitalist corporations and nations are just that, they are capitalist and all about making profits.

          The law is made by the rich capitalists and for the rich capitalists. Each Legislation is a link in the chain of economic slavery by capitalists.

          Capitalism and the concept of money is a construction of the human mind, as it does not exist in the natural world. This construction is all about using other human beings like blood suckers to sustain a cruel and evil life style - with blood and brutality as the core ideology.


          Marcedward -> MarjaE 5 Dec 2015 14:12

          I would agree that our system of help for the less-well-off could be more accessible and more generous, but that doesn't negate that point that there is a lot of help out there - the most important help being that totally free educational system. Think about it, a free education, and to get the most out of it a student merely has to show up, obey the rules, do the homework and study for tests. It's all laid out there for the kids like a helicopter mom laying out her kids clothes. How much easier can we make it? If people can't be bothered to show up and put in effort, how is their failure based on racism


          tommydog -> martinusher 5 Dec 2015 14:12

          As you are referring to Carlos Slim, interestingly while he is Mexican by birth his parents were both Lebanese.

          slightlynumb -> AmyInNH 5 Dec 2015 14:12

          Why isn't that capitalism? It's raw capitalism on steroids.

          Zara Von Fritz -> Toughspike 5 Dec 2015 14:12

          It's an equal opportunity plantation now.

          Robert Goldschmidt 5 Dec 2015 14:11

          The key to repairing the system is to identify the causes of our problems.

          Here is my list:

          The information technology revolution which continues to destroy wages by enabling automation and outsourcing.

          The reformation of monopolies which price gouge and block innovation.

          Hitting ecological limits such as climate change, water shortages, unsustainable farming.

          Then we can make meaningful changes such as regulation of the portion of corporate profit that are pay, enforcement of national and regional antitrust laws and an escalating carbon tax.

          Zara Von Fritz -> PostCorbyn 5 Dec 2015 14:11

          If you can believe these quality of life or happiness indexes they put out so often, the winners tend to be places that have nice environments and a higher socialist mix in their economy. Of course there are examples of poor countries that practice the same but its not clear that their choice is causal rather than reactive.

          We created this mess and we can fix it.

          Zara Von Fritz -> dig4victory 5 Dec 2015 14:03

          Yes Basic Income is possibly the mythical third way. It socialises wealth to a point but at the same time frees markets from their obligation to perpetually grow and create jobs for the sake of jobs and also hereford reduces the subsequent need for governments to attempt to control them beyond maintaining their health.

          Zara Von Fritz 5 Dec 2015 13:48

          As I understand it, you don't just fiddle with capitalism, you counteract it, or counterweight it. A level of capitalism, or credit accumulation, and a level of socialism has always existed, including democracy which is a manifestation of socialism (1 vote each). So the project of capital accumulation seems to be out of control because larger accumulations become more powerful and meanwhile the power of labour in the marketplace has become less so due to forces driving unemployment. The danger is that capital's power to control the democratic system reaches a point of no return.


          Jeremiah2000 -> bifess 5 Dec 2015 13:42

          "I do not have the economic freedom to grow my own food because i do not have access to enough land to grow it and i do not have the economic clout to buy a piece of land."

          Economic freedom does NOT mean you get money for free. It means that means that if you grow food for personal use, the federal government doesn't trash the Constitution by using the insterstate commerce clause to say that it can regulate how much you grow on your own personal land.

          Economic freedom means that if you have a widget, you can choose to set the price for $10 or $100 and that a buyer is free to buy it from you or not buy it from you. It does NOT mean that you are entitled to "free" widgets.

          "If capitalism has not managed to eradicate poverty in rich first world countries then just what chance if there of capitalism eradicating poverty on a global scale?"

          The average person in poverty in the U.S. doesn't live in poverty:

          In fact, 80.9 percent of households below the poverty level have cell phones, and a healthy majority-58.2 percent-have computers.

          Fully 96.1 percent of American households in "poverty" have a television to watch, and 83.2 percent of them have a video-recording device in case they cannot get home in time to watch the football game or their favorite television show and they want to record it for watching later.

          Refrigerators (97.8 percent), gas or electric stoves (96.6 percent) and microwaves (93.2 percent) are standard equipment in the homes of Americans in "poverty."

          More than 83 percent have air-conditioning.

          Interestingly, the appliances surveyed by the Census Bureau that households in poverty are least likely to own are dish washers (44.9 percent) and food freezers (26.2 percent).

          However, most Americans in "poverty" do not need to go to a laundromat. According to the Census Bureau, 68.7 percent of households in poverty have a clothes washer and 65.3 percent have a clothes dryer.

          (Data from the U.S. census.)

          [Dec 04, 2015] German Financialization and the Eurozone Crisis

          Notable quotes:
          "... Bundenstalt für Finanzdienstleistungsaufsicht ..."
          naked capitalism
          Many studies of the Eurozone crisis focus on peripheral European states' current account deficits, or German neo-mercantilist policies that promoted export surpluses. However, German financialization and input on the eurozone's financial architecture promoted deficits, increased systemic risk, and facilitated the onset of Europe's subsequent crises.

          Increasing German financial sector competition encouraged German banks' increasing securitization and participation in global capital markets. Regional liberalization created new marketplaces for German finance and increased crisis risk as current accounts diverged between Europe's core and periphery. After the global financial crisis of 2008, German losses on international securitized assets prompted retrenchment of lending, paving the way for the eurozone's sovereign debt crisis. Rethinking how financial liberalization facilitated German and European financial crises may prevent the eurozone from repeating these performances in the future.

          After the 1970s, German banks' trading activity came to surpass lending as the largest share of assets, while German firms increasingly borrowed in international capital markets rather than from domestic banks. Private banks alleged that political subsidies and higher credit ratings for Landesbanks, public banks that insured household, small enterprise, and local banks' access to capital, were unfair, and, in response, German lawmakers eliminated state guarantees for public banks. Landesbanks, despite their historic role as stable, non-profit, providers of credit, consequently had to compete with Germany's largest private banks for business. Changes in competition restructured the German financial system. Mergers and takeovers occurred, especially in commercial banks and Landesbanks. German financial intermediation ratios-total financial assets of financial corporations divided by the total financial assets of the economy-increased. Greater securitization and shadow banking relative to long-term lending increased German propensity for financial crisis, as securities, shares, and securitized debt constituted increasing percentages of German banks' assets and liabilities.

          Throughout this period, Germany lacked a centralized financial regulatory apparatus. Only in 2002 did the country's central bank, the Bundesbank, establish the Bundenstalt für Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority, known as BaFin), which consolidated the responsibilities of three agencies to oversee the whole financial sector. However, neither institution could keep pace with new sources of financial and economic instability. German banking changes continued apace and destabilizing trends in banking grew.

          German desire for financial liberalization at the European level, meanwhile, helped increase potential systemic risk of European finance. Despite some European opposition to removing barriers to capital and trade flows, Germany prevailed in setting these preconditions for membership in the European economic union. Germany's negotiating power stemmed from its strong currency, as well as French, Italian, and smaller European economies' desire for currency stability. Germany demanded an independent central bank for the union, removal of capital controls, and an expansion of the tasks banks could perform within the Economic and Monetary Union (EMU). The Second Banking Coordination Directive (SBCD) mandated that banks perform commercial and investment intermediation to be certified within the EMU; the Single Market Passport (SMP) required free trade and capital flows throughout the EMU. The SMP and SBCD increased the scope of activity that financial institutions throughout the union were expected to provide, and opened banks up to markets, instruments, and activities they could neither monitor nor regulate, and hence to destabilizing shocks.

          Intra-EMU lending and borrowing subsequently increased, and total lending and borrowing grew relative to European countries' GDP from the early 1990s onward. Asymmetries emerged in capital flows between Europe's core, particularly the UK, Germany, and the Netherlands, to Europe's newly liberalized periphery. German banks lent increasing volumes to EMU member states, especially peripheral states. Though this lending on a country-by-country basis was a small percentage of Germany's GDP, it constituted larger percentages of borrowers' GDPs. In 2007, Germany lent 1.23% of its GDP to Portugal; this represented 17.68% of Portugal's GDP; in 2008, Germany lent 6% of its GDP to Ireland; this was 84% of Irish GDP. Germany, the largest European economy, lent larger percentages of its GDP to peripheral EMU nations relative to its lending to richer European economies. These flows, more potentially disruptive for borrowers than for the lender, reflected lack of oversight in asset management. German lending helped destabilize European financial systems more vulnerable to rapid capital inflows, and created conditions for large-scale capital flight in a crisis.

          Financial competition increased in Europe over this period. Financial merger activity first accelerated within national borders, and later grew at supra-national levels. These movements increased eurozone access to capital, but increased pressure for banks to widen the scope of the services and lending that they provided. Rising European securitization in this period increased systemic risk for the EMU financial system. European holdings of U.S.-originated asset-backed securities increased by billions of dollars from the early 2000s until shortly before 2008. German banks were among the EMU's top issuers and acquirers of such assets. As banks' holdings of these assets increased, European systemic risk increased as well.

          European total debt as a percentage of GDP rose in this period. Financial debt relative to GDP grew particularly sharply in core economies; Ireland was the only peripheral EMU economy with comparable levels of financial debt. Though government debt relative to GDP fell or held constant for most EMU nations, cross-border acquisition of sovereign debt increased until 2007. German banks acquired substantially larger portfolios of sovereign debt issued by other European states, which would not decrease until 2010. Only in 2009 did government debt relative to GDP increase throughout the eurozone, as governments guaranteed their financial systems to minimize the costs of the ensuing financial crisis.

          The newly liberalized financial architecture of the eurozone increased both the market for German financial services and overall systemic risk of the European financial system; these dynamics helped destabilize the German financial system and economy at large. Rising German exports of goods, services, and capital to the rest of Europe grew the German economy, but divergence of current account balances within the EMU exposed it to sovereign debt risk in peripheral states. Potential systemic risk changed into systemic risk after the subprime mortgage crisis began. EMU economies would not have subsequently experienced such pressure to backstop national financial systems or to repay sovereign loans had German banks not lent so much or purchased so many sovereign bonds within the union. Narratives that fail to acknowledge Germany's role in promoting the circumstances that underlay the eurozone crisis ignore the destabilizing power of financial liberalization, even for a global financial center like Germany.

          susan the other, December 3, 2015 at 1:06 pm

          This is very interesting. It describes just how the EU mess unfolded beginning in 1970 with deregulation of the financial industry in the core. Big fish eat little fish. It is as if for 4 decades the banks in Germany compensated their losses to the bigger international lenders by taking on the riskier borrowers and were able to do so because of German mercantilism and financial deregulation. Like the German domestic banks loaned the periphery money with abandon, and effectively borrowed their own profits by speculating on bad customers. As German corporations did business with big international banksters, who lent at lower rates, other German banks resorted to buying the sovereign bonds of the periphery and selling CDOs, etc. The German banks were as over-extended looking for profit as consumers living on their credit cards. Deregulation enriched only the biggest international banks. We could call this behavior a form of digging your own grave. In 2009 the periphery saw their borrowing costs threatened and guaranteed their own financial institutions creating the "sovereign debt" that the core then refused to touch. Hypocrisy ruled. Generosity was in short supply. The whole thing fell apart. Deregulation was just another form of looting.

          washunate, December 3, 2015 at 1:28 pm

          German losses on international securitized assets prompted retrenchment of lending, paving the way for the eurozone's sovereign debt crisis.

          I agree with the general conclusion at the end that German financialization is part of the overall narrative of EMU, but I don't follow this specific link in the chain of events as described. The eurozone has a sovereign debt crisis because those sovereign governments privatized the profits and socialized the losses of a global system of fraud. And if we're assigning national blame, it's a system run out of DC, NY, and London a lot more than Berlin, Frankfurt, and Brussels.

          Current and capital account imbalances cancel each other out in the overall balance of payments. As bank lending decreases (capital account surplus shrinks) then the current account deficit shrinks as well (the 'trade deficit'). The problem is when governments step in and haphazardly backstop some of the losses – at least, when they do so without imposing taxes on the wealthy to a sufficient degree to pay for these bailouts.

          [Dec 04, 2015] Congressional Aid to Multinationals Avoiding Taxes

          EconoSpeak

          The OECD's Base Erosion and Profit Shifting (BEPS) initiative is an effort by the G20 to curb the abuse of transfer pricing by multinationals. Senator Hatch is not a fan:

          Throughout this process we have heard concerns from large sectors of the business community that the BEPS project could be used to further undermine our nation's competitiveness and to unfairly subject U.S. companies to greater tax liabilities abroad. Companies have also been concerned about various reporting requirements that could impose significant compliance costs on American businesses and force them to share highly sensitive proprietary information with foreign governments. I expect that we'll hear about these concerns from the business community and others during today's hearing.
          Indeed we heard from some lawyer representing The Software Coalition who was there to mansplain to us how BEPS is evil. I learned two startling things. First – Bermuda must be part of the US tax base. Secondly, if Google is expected to pay taxes in the UK, it will take all those 53,600 jobs which are mainly in California and move them to Bermuda:
          in particular how the changes to the international tax rules as developed under BEPS will significantly reduce the U.S. tax base and create disincentives for U.S. multinational corporations (MNCs) to create R&D jobs in the United States
          Yes – I find his testimony absurd at so many levels. Let's take Google as an example. When they say foreign subsidiaries – think Bermuda. Over the past three year, Google's income has average $15.876 billion per year but its income taxes have only average $2.933 billion for an effective tax rate of only 18.5%. How did that happen? Well – 55% of its income is sourced to these foreign subsidiaries and the average tax rate on this income is only 6.5%. Nice deal! Google's tax model is not only easy to explain but is also a very common one for those in the Software Coalition. While all of the R&D is done in the U.S. and 45% of its sales are in the U.S. – U.S. source income is only 45% of worldwide income. Very little of the foreign sourced income ends up in places like the UK even 11% of Google's sales are to UK customers. Only problem is that income ends up on Ireland's books with the UK getting a very modest amount of the profits. Now you might be wondering how Google got to the foreign taxes to be only 6.5% of foreign sourced income since Ireland's tax rate is 12.5%. But think Double Irish Dutch Sandwich and you'll get how the profits ended up in Bermuda as well as perhaps a good lunch! But what about that repatriation tax you ask. Google's most recent 10-K proudly notes:
          "We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries".
          In other words, they are not paying that repatriation tax. Besides the Republicans want to eliminate. Let's be honest – Congress has hamstringed the IRS efforts to enforce transfer pricing. The BEPS initiative arose out of this failure. And now the Republicans in Congress are objecting to even these efforts. And if Europe has the temerity of expecting its fair share of taxes, U.S. multinationals will leave California and relocate in Bermuda? Who is this lawyer kidding? Myrtle Blackwood
          The development model in nation after nation is dependent upon global corporations. What is happening is simply a byproduct of this.
          Jack
          Would the problem of transfer mythical corporate location and the resulting lost taxes be resolved if taxes were based on point of revenue? Tax gross income where it is earned instead of taxing profits where they are not earned.

          [Dec 04, 2015] The Neoconservative Movement is Trotskyism

          "... Kristol argues in his book The Neoconservative Persuasion that those Jewish intellectuals did not forsake their heritage (revolutionary ideology) when they gave up Communism and other revolutionary movements, but had to make some changes in their thinking. America is filled with such former Trotskyists who unleashed an unprecedented foreign policy that led to the collapse of the American economy. ..."
          "... Noted Australian economist John Quiggin declares in his recent work Zombie Economics that "Ideas are long lived, often outliving their originators and taking new and different forms. Some ideas live on because they are useful. Others die and are forgotten. But even when they have proved themselves wrong and dangerous, ideas are very hard to kill. Even after the evidence seems to have killed them, they keep on coming back. ..."
          "... These ideas are neither alive nor dead; rather…they are undead, or zombie, ideas." Bolshevism or Trotskyism is one of those zombie ideas that keeps coming back in different forms. It has ideologically reincarnated in the political disputations of the neoconservative movement. ..."
          "... As soon as the Israel Lobby came along, as soon as the neoconservative movement began to shape U.S. foreign policy, as soon as Israel began to dictate to the U.S. what ought to be done in the Middle East, America was universally hated by the Muslim world. ..."
          "... In that sense, the neoconservative movement as a political and intellectual movement represents a fifth column in the United States in that it subtly and deceptively seeks to undermine what the Founding Fathers have stood for and replace it with what the Founding Fathers would have considered horrible foreign policies-policies which have contributed to the demise of the respect America once had. ..."
          "... For example, when two top AIPAC officials-Steven Rosen and Keith Weissman-were caught passing classified documents from the Pentagon to Israel, Gabriel Schoenfeld defended them. ..."
          "... Israel has been spying on the United States for years using various Israeli or Jewish individuals, including key Jewish neoconservative figures such as Paul Wolfowitz and Douglas Feith, who were under investigation for passing classified documents to Israel. ..."
          January 22, 2013 | Veterans Today

          Kristol argues in his book The Neoconservative Persuasion that those Jewish intellectuals did not forsake their heritage (revolutionary ideology) when they gave up Communism and other revolutionary movements, but had to make some changes in their thinking. America is filled with such former Trotskyists who unleashed an unprecedented foreign policy that led to the collapse of the American economy.

          We have to keep in mind that America and much of the Western world were scared to death of Bolshevism and Trotskyism in the 1920s and early 30s because of its subversive activity.

          Noted Australian economist John Quiggin declares in his recent work Zombie Economics that "Ideas are long lived, often outliving their originators and taking new and different forms. Some ideas live on because they are useful. Others die and are forgotten. But even when they have proved themselves wrong and dangerous, ideas are very hard to kill. Even after the evidence seems to have killed them, they keep on coming back.

          These ideas are neither alive nor dead; rather…they are undead, or zombie, ideas." Bolshevism or Trotskyism is one of those zombie ideas that keeps coming back in different forms. It has ideologically reincarnated in the political disputations of the neoconservative movement.

          ... ... ...

          As it turns out, neoconservative think tanks such as the American Enterprise Institute are largely extensions of Trotskyism with respect to foreign policy. Other think tanks such as the Bradley Foundation were overtaken by the neoconservative machine back in 1984.

          Some of those double agents have been known to have worked with Likud-supporting Jewish groups such as the Jewish Institute for National Security Affairs, an organization which has been known to have "co-opted" several "non-Jewish defense experts by sending them on trips to Israel. It flew out the retired general Jay Garner, now slated by Bush to be proconsul of occupied Iraq."

          Philo-Semitic scholars Stephen Halper of Cambridge University and Jonathan Clarke of the CATO Institute agree that the neoconservative agendas "have taken American international relations on an unfortunate detour," which is another way of saying that this revolutionary movement is not what the Founding Fathers signed up for, who all maintained that the United States would serve the American people best by not entangling herself in alliances with foreign entities.

          As soon as the Israel Lobby came along, as soon as the neoconservative movement began to shape U.S. foreign policy, as soon as Israel began to dictate to the U.S. what ought to be done in the Middle East, America was universally hated by the Muslim world.

          Moreover, former secretary of defense Robert Gates made it clear to the United States that the Israelis do not and should not have a monopoly on the American interests in the Middle East. For that, he was chastised by neoconservative Elliott Abrams.

          In that sense, the neoconservative movement as a political and intellectual movement represents a fifth column in the United States in that it subtly and deceptively seeks to undermine what the Founding Fathers have stood for and replace it with what the Founding Fathers would have considered horrible foreign policies-policies which have contributed to the demise of the respect America once had.

          ... ... ...

          Israel has been spying on the United States for years using various Israeli or Jewish individuals, including key Jewish neoconservative figures such as Paul Wolfowitz and Douglas Feith, who were under investigation for passing classified documents to Israel.

          The FBI has numerous documents tracing Israel's espionage in the U.S., but no one has come forward and declared it explicitly in the media because most political pundits value mammon over truth.

          For example, when two top AIPAC officials-Steven Rosen and Keith Weissman-were caught passing classified documents from the Pentagon to Israel, Gabriel Schoenfeld defended them.

          In the annual FBI report called "Foreign Economic Collection and Industrial Espionage," Israel is a major country that pops up quite often. This is widely known among CIA and FBI agents and U.S. officials for years.

          One former U.S. intelligence official declared, "There is a huge, aggressive, ongoing set of Israeli activities directed against the United States. Anybody who worked in counterintelligence in a professional capacity will tell you the Israelis are among the most aggressive and active countries targeting the United States.

          They undertake a wide range of technical operations and human operations. People here as liaisons… aggressively pursue classified intelligence from people. The denials are laughable."

          [Dec 03, 2015] MOOCs and similar approaches to online learning can exacerbate rather than reduce disparities in educational outcomes related to socioeconomic status

          www.nakedcapitalism.com
          allan

          Another disruptive innovation turns out not to work out as advertised.

          Democratizing education? Examining access and usage patterns in massive open online courses [Science]

          Massive open online courses (MOOCs) are often characterized as remedies to educational disparities related to social class. Using data from 68 MOOCs offered by Harvard and MIT between 2012 and 2014, we found that course participants from the United States tended to live in more-affluent and better-educated neighborhoods than the average U.S. resident. Among those who did register for courses, students with greater socioeconomic resources were more likely to earn a certificate. Furthermore, these differences in MOOC access and completion were larger for adolescents and young adults, the traditional ages where people find on-ramps into science, technology, engineering, and mathematics (STEM) coursework and careers. Our findings raise concerns that MOOCs and similar approaches to online learning can exacerbate rather than reduce disparities in educational outcomes related to socioeconomic status.

          Lambert Strether, December 3, 2015 at 3:17 pm

          That's not a bug. It's a feature.

          jrs, December 3, 2015 at 5:40 pm

          Well that's pretty much the same charge that could be leveled against most higher education. It makes disparities worse, maybe less so community colleges, I don't know.

          cwaltz, December 3, 2015 at 6:16 pm

          I wonder how much of that is due to inability to access the web in neighborhoods that are less affluent?

          An online course isn't going to help me if mom or dad can't afford to pay for internet.

          Bob Haugen, December 3, 2015 at 8:06 pm

          Most education in the world now, whether in classrooms or MOOCs, is oriented toward improving the personal capital of the upwardly striving. There is no "make yourself a better citizen" or "improve your community" curriculum.

          likbez, December 3, 2015 at 10:47 pm

          "Most education in the world now, whether in classrooms or MOOCs, is oriented toward improving the personal capital of the upwardly striving."

          Very true. Thank you !

          This is the essence of neoliberal transformation of the university education.

          [Dec 03, 2015] On That Video Where Some Egyptians Allegedly Say Obama Is Insane And On Drugs And Should Be Removed From Office

          EconoSpeak

          An old and close, but very conservative and increasingly out of touch with reality friend of mine posted a video some days ago on Facebook. He indicated that he thought it was both funny and also insightful. It seemed highly suspicious to me, so I googled it and found that the person who uploaded it onto you tube stated in the comments on it that it is a spoof. Here is a link that discusses why it is known it is a spoof as well as linking to the video itself and its comments. It has reportedly been widely distributed on the internet by many conservatives who think it is for real, and when I pointed out it is a spoof, my friend defriended me from Facebook. I am frustrated.

          So, for those who do not view it, it purports to show a talk show in Egypt where a brief clip of Obama speaking last May to graduating military officers about how climate change is and will be a serious national security issue, something the Pentagon has claimed. He did not say it was the most serious such issue, and at least in the clip he said nothing about Daesh/ISIS/ISIL, although of course he has said a lot about it and not only has US drones attacking it but reportedly we have "boots on the ground" now against them in the form of some Special Ops.

          So, the video then goes back to the supposed talk show where they are speaking in Arabic with English subtitles. According to these subtitels, which are partly accurate translations but also wildly inaccurate in many places (my Arabic is good enough that I have parsed out what is what there) the host asks, "Is he insane?" A guest suggests he is on drugs. Another claims he just does what Michelle says and that his biceps are small. Finally a supposed retired general pounds the table and denounces him over Libya policy (that part is for real, although his name is never mentioned) and suggests that Americans should act to remove him from office. Again, conservative commentators have found hilarious and very insightful, with this even holding among commenters to the video aware that it is a mistranslated spoof. Bring these guys on more. Obviously they would be big hits on Fox News.

          So, I would like to simply comment further on why Egyptians would be especially upset about Libya, but that them being so against the US is somewhat hypocritical (I also note that there is reason to believe that the supposed general is not a general). Of course Libya is just to the west of Egypt with its eastern portion (Cyrenaica under Rome) often ruled by whomever was ruling Egypt at various times in the past. So there is a strong cultural-historical connection. It is understandable that they would take Libyan matters seriously, and indeed things in Libya have turned into a big mess.

          However, the move to bring in outside powers to intervene against Qaddafi in 2011 was instigated by an Egyptian, Abu Moussa. This was right after Mubarak had fallen in the face of massive demonstrations in Egypt. Moussa was both leader of the Arab League and wanting to run for President of Egypt. He got nowhere with the latter, but he did get somewhere with getting
          the rest of the world to intervene in Libya. He got the Arab League to support such an intervention, with that move going to the UN Security Council and convincing Russia and China to abstain on the anti-Qaddafi measure. Putin has since complained that those who intervened, UK and France most vigorously with US "leading from behind" on the effort.went beyond the UN mandate. But in any case, Qaddafi was overthrown, not to be replaced by any stable or central power, with Libya an ongoing mess that has remained fragmented since, especially between its historically separate eastern and western parts, something I have posted on here previously.

          So, that went badly, but Egyptians blaming the US for this seems to me to be a bit much, pretty hypocritical. It happens to be a fact that the US and Obama are now very unpopular in Egypt. I looked at a poll from a few months ago, and the only nations where the US and Obama were viewed less favorably (although a few not polled such as North Korea) were in order: Russia, Palestinian Territories, Belarus, Lebanon, Iran, and Pakistan, with me suspecting there is now a more favorable view in Iran since the culmination of the nuclear deal. I can appreciate that many Egyptians are frustrated that the US supported an election process that did not give them Moussa or El-Baradei, but the Muslim Brotherhood, who proceeded to behave badly, leading to them being overthrown by an new military dictatorship with a democratic veneer, basically a new improved version of the Mubarak regime, with the US supporting it, if somewhat reluctantly.

          Yes, this is all pretty depressing, but I must say that ultimately the Egyptians are responsible for what has gone down in their own nation. And even if those Egyptian commentators, whoever they actually are, are as angry about Obama as they are depicted as being, the fact is that Obama is still more popular there than was George W. Bush at the same time in his presidency, something all these US conservatives so enamored of this bizarre video seem to conveniently forget.

          Addenda, 5:10 PM:

          1) The people on that video come across almost like The Three Stooges, which highlights the comedic aspect that even fans of Obama are supposed to appreciate, although it does not add to the credibility of the remarks of those so carrying on like a bunch of clowns.

          2) Another reason Egyptians may be especially upset about the situation in Libya is that indeed Daesh has a foothold in a port city not too far from the Egyptian border in Surt, as reported as the top story today in the NY Times.

          3) Arguably once the rest of the world got in, the big problem was a failure to follow through with aiding establishing a central unified government, although that was always going to be a problem, something not recognized by all too many involved, including Abu Moussa. As it was once his proposal got going, it was then Sec. of State Hillary Clinton who was the main person leading the charge for the US to get in over the reluctance of Obama. This was probably her biggest mistake in all this, even though most Republicans think the irrelevant sideshow of the unfortunate incident in Benghazi is the big deal.

          4) Needless to say, Republican views at the time of the intervention were just completely incoherent, as symbolized at one point by Senator Lindsey Graham, who within the space of a single sentence simultaneously argued for the US to do nothing and also to go in full force with the proverbial "boots on the ground."

          Further Addendum, 7:10 PM:

          One of the pieces of evidence given that supposedly shows that the video is a spoof is that the supposed retired Brigadier General Mahmoud Mansour cannot be found if one googles his name, except in connection with this video. There are some other Egyptians named Mansour who show up, but this guy does not. However, it occurs to me that he might be for real, but simply obscure. After all, Brigadier is the lowest rank of General, one star, with Majors being two star, Lieutenants being three star (even though Majors are above Lieutenants), and with four and five star not having any other rank assigned to them. Furthermore, Egypt has a large military that has run the country for decades, so there may well be a lot of these Brigadier Generals, with many of them amounting to nothing. So, if he is for real, his claim to fame will be from jumping up and down, pounding on a table and calling for the overthrow of the POTUS.

          Barkley Rosser

          [Dec 03, 2015] Russia won't forget downed jet, Putin warns Turkey in annual address

          The Guardian

          Russian president says Ankara will not 'get away with a tomato ban' in response to 'cynical war crime'

          ... ... ...

          The Russian president said he was still bemused by the Turkish decision to shoot down the Su-24. He said: "Perhaps only Allah knows why they did this. And it seems Allah decided to punish the ruling clique in Turkey by relieving them of their sense and judgment."

          Russia has implemented a series of economic sanctions against Turkey, including banning fruit and vegetable imports and ordering Russian tour operators not to send tourists to the country. Putin emphasised that this limited response was not an attempt to move on and start afresh, however.


          "There will not be a nervous, hysterical reaction, that would be dangerous for us and for the whole world," he said. "We will not engage in sabre rattling. But if people think that after carrying out a cynical war crime, killing our people, they'll get away with a tomato ban or some limits in the construction sector, they're very wrong. We will keep remembering what they did. And they will keep regretting it."

          The day before, Russia's defence ministry had called journalists to a briefing at its command centre, showing slides and satellite imagery claiming to show proof that Turkey was profiting from the trade in Isis oil.

          "A unified team of bandits and Turkish elites operates in the region to steal oil from their neighbours," deputy defence minister Anatoly Antonov said on Wednesday. Erdoğan later dismissed the accusations as "slander".

          ... ... ...

          Putin again called for a unified coalition to fight terrorism, and said it was unacceptable to delineate between different terrorist groups. The Russian airstrikes have hit many groups that western countries do not consider terrorists. Putin also made it clear once again who he blames for the current terrorist threat.

          "Iraq, Libya and Syria have turned into zones of chaos and anarchy which threaten the whole world," he said. "And of course we know why this happened. We know who wanted to change inconvenient regimes, and crudely impose their rules. And what was the result? They made a mess, ruined the states, turned different peoples against each other and then, as we say in Russia, washed their hands of the places, opening the road for radicals, extremists and terrorists."

          [Dec 02, 2015] An introduction to the geography of student debt

          Equitable Growth

          The geography of student debt is very different than the geography of delinquency. Take the Washington, D.C. metro region. In zip codes with high average loan balances (western and central Washington, D.C.), delinquency rates are lower. Within the District of Columbia, median income is highest in these parts of the city. Similar results–low delinquency rates in high-debt areas–can be seen for Chicago, as well. (See Figure 1.)

          ...What explains this relationship? There appear to be two possible, and mutually consistent, theories. First, although graduate students take out the largest student loans, they are able to carry large debt burdens thanks to their higher salaries post-graduation. Second, the rise in the number of students borrowing relatively small amounts for for-profit colleges has augmented the cumulative debt load, but because these borrowers face poor labor market outcomes and lower earnings upon graduation (if they do in fact graduate), their delinquency rates are much higher. This is further complicated by the fact that these for-profit college attendees generally come from lower-income families who may not be able to help with loan repayments.

          The inverse relationship between delinquency and income is not surprising, especially when considering that problems of credit access have disproportionately affected poor and minority populations in the past.

          ...It might seem counterintuitive that lack of access to credit results in delinquency-seemingly a problem of "too much debt." But in fact, lack of access to credit and delinquency are two sides of the same coin. Nearly everyone needs access to credit markets to meet basic economic needs, and if they can't get loans through competitive, transparent financial networks, poor people are more likely to be subjected to exploitative credit arrangements in the form of very high rates and other onerous terms and penalties, including on student loans. That disadvantage interacts with and is magnified by their lack of labor market opportunities. The result is exactly what we see across time and space: high delinquency rates for those with the least access to credit markets.

          ...For user-friendliness, we assign each of these student debt scale variables a qualitative category. If average loan balance on the map is "somewhat high," for example, then it means that a zip code's average loan balance is between 25 and 35 percent higher than the national average of $24,271. Similarly, if the delinquency reads "very low," it corresponds to a scale level between 0.067 and 0.091. Figure 6 summarizes the relationship between each of the scale variables' levels and their qualitative description.

          [Dec 02, 2015] The False Promise of Meritocracy

          Dec 02, 2015 | The Atlantic
          Americans are, compared with populations of other countries, particularly enthusiastic about the idea of meritocracy, a system that rewards merit (ability + effort) with success. Americans are more likely to believe that people are rewarded for their intelligence and skills and are less likely to believe that family wealth plays a key role in getting ahead. And Americans' support for meritocratic principles has remained stable over the last two decades despite growing economic inequality, recessions, and the fact that there is less mobility in the United States than in most other industrialized countries.

          This strong commitment to meritocratic ideals can lead to suspicion of efforts that aim to support particular demographic groups. For example, initiatives designed to recruit or provide development opportunities to under-represented groups often come under attack as "reverse discrimination." Some companies even justify not having diversity policies by highlighting their commitment to meritocracy. If a company evaluates people on their skills, abilities, and merit, without consideration of their gender, race, sexuality etc., and managers are objective in their assessments then there is no need for diversity policies, the thinking goes.

          But is this true? Do commitments to meritocracy and objectivity lead to more fair workplaces?

          Emilio J. Castilla, a professor at MIT's Sloan School of Management, has explored how meritocratic ideals and HR practices like pay-for-performance play out in organizations, and he's come to some unexpected conclusions.

          In one company study, Castilla examined almost 9,000 employees who worked as support-staff at a large service-sector company. The company was committed to diversity and had implemented a merit-driven compensation system intended to reward high-level performance and to reward all employees equitably.

          But Castilla's analysis revealed some very non-meritocratic outcomes. Women, ethnic minorities, and non-U.S.-born employees received a smaller increase in compensation compared with white men, despite holding the same jobs, working in the same units, having the same supervisors, the same human capital, and importantly, receiving the same performance score. Despite stating that "performance is the primary bases for all salary increases," the reality was that women, minorities, and those born outside the U.S. needed "to work harder and obtain higher performance scores in order to receive similar salary increases to white men."

          [Dec 02, 2015] Wolf Richter: Financially Engineered Stocks Drag Down S P 500

          All this neoliberal talk about "maximizing shareholder value" is designed to hide a redistribution mechanism of wealth up. Which is the essence of neoliberalism. It's all about executive pay. "Shareholder value" is nothing then a ruse for getting outsize bonuses but top execs. Stock buybacks is a form of asset-stripping, similar to one practiced by buyout sharks, but practiced by internal management team. Who cares if the company will be destroyed if you have a golden parachute ?
          Notable quotes:
          "... By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street . ..."
          "... IBM has blown $125 billion on buybacks since 2005, more than the $111 billion it invested in capital expenditures and R D. It's staggering under its debt, while revenues have been declining for 14 quarters in a row. It cut its workforce by 55,000 people since 2012. ..."
          "... Big-pharma icon Pfizer plowed $139 billion into buybacks and dividends in the past decade, compared to $82 billion in R D and $18 billion in capital spending. 3M spent $48 billion on buybacks and dividends, and $30 billion on R D and capital expenditures. They're all doing it. ..."
          "... Nearly 60% of the 3,297 publicly traded non-financial US companies Reuters analyzed have engaged in share buybacks since 2010. Last year, the money spent on buybacks and dividends exceeded net income for the first time in a non-recession period. ..."
          "... This year, for the 613 companies that have reported earnings for fiscal 2015, share buybacks hit a record $520 billion. They also paid $365 billion in dividends, for a total of $885 billion, against their combined net income of $847 billion. ..."
          "... Buybacks and dividends amount to 113% of capital spending among companies that have repurchased shares since 2010, up from 60% in 2000 and from 38% in 1990. Corporate investment is normally a big driver in a recovery. Not this time! Hence the lousy recovery. ..."
          "... Financial engineering takes precedence over actual engineering in the minds of CEOs and CFOs. A company buying its own shares creates additional demand for those shares. It's supposed to drive up the share price. The hoopla surrounding buyback announcements drives up prices too. Buybacks also reduce the number of outstanding shares, thus increase the earnings per share, even when net income is declining. ..."
          "... But when companies load up on debt to fund buybacks while slashing investment in productive activities and innovation, it has consequences for revenues down the road. And now that magic trick to increase shareholder value has become a toxic mix. Shares of buyback queens are getting hammered. ..."
          "... Me thinks Wolf is slightly barking up the wrong tree here. What needs to be looked at is how buy backs affect executive pay. "Shareholder value" is more often than not a ruse? ..."
          "... Interesting that you mention ruse, relating to "buy-backs"…from my POV, it seems like they've legalized insider trading or engineered (a) loophole(s). ..."
          "... On a somewhat related perspective on subterfuge. The language of "affordability" has proven to be insidiously clever. Not only does it reinforce and perpetuate the myth of "deserts", but camouflages the means of embezzling the means of distribution. Isn't distribution, really, the only rational purpose of finance, i.e., as a means of distribution as opposed to a means of embezzlement? ..."
          "... buybacks *can* be asset-stripping and often are, but unless you tie capital allocation decisions closer to investment in the business such that they're mutually exclusive, this is specious and a reach. No one invests if they can't see the return. It would be just as easy to say that they're buying back stock because revenue is slipping and they have no other investment opportunities. ..."
          "... Perhaps an analysis of the monopolistic positions of so many American businesses that allow them the wherewithal to underinvest and still buy back huge amounts of stock? If we had a more competitive economy, companies would have less ability to underinvest. Ultimately, I think buybacks are more a result than a cause of dysfunction, but certainly not always bad. ..."
          "... One aspect that Reuters piece mentions, but glosses over with a single paragraph buried in the middle, is the fact that for many companies there are no ( or few) reasons to spend money in other ways. If capex/r d doesn't give you much return, why not buy out the shareholders who are least interested in holding your stock? ..."
          "... Dumping money into R D is always risky, although different industries have different levels, and the "do it in-house" risk must be weighed against the costs of buying up companies with "proven" technologies. Thus, R D cash is hidden inside M A. M A is up 2-3 years in a row. ..."
          November 21, 2015 | naked capitalism

          By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

          Magic trick turns into toxic mix.

          Stocks have been on a tear to nowhere this year. Now investors are praying for a Santa rally to pull them out of the mire. They're counting on desperate amounts of share buybacks that companies fund by loading up on debt. But the magic trick that had performed miracles over the past few years is backfiring.

          And there's a reason.

          IBM has blown $125 billion on buybacks since 2005, more than the $111 billion it invested in capital expenditures and R&D. It's staggering under its debt, while revenues have been declining for 14 quarters in a row. It cut its workforce by 55,000 people since 2012. And its stock is down 38% since March 2013.

          Big-pharma icon Pfizer plowed $139 billion into buybacks and dividends in the past decade, compared to $82 billion in R&D and $18 billion in capital spending. 3M spent $48 billion on buybacks and dividends, and $30 billion on R&D and capital expenditures. They're all doing it.

          "Activist investors" – hedge funds – have been clamoring for it. An investigative report by Reuters, titled The Cannibalized Company, lined some of them up:

          In March, General Motors Co acceded to a $5 billion share buyback to satisfy investor Harry Wilson. He had threatened a proxy fight if the auto maker didn't distribute some of the $25 billion cash hoard it had built up after emerging from bankruptcy just a few years earlier.

          DuPont early this year announced a $4 billion buyback program – on top of a $5 billion program announced a year earlier – to beat back activist investor Nelson Peltz's Trian Fund Management, which was seeking four board seats to get its way.

          In March, Qualcomm Inc., under pressure from hedge fund Jana Partners, agreed to boost its program to purchase $10 billion of its shares over the next 12 months; the company already had an existing $7.8 billion buyback program and a commitment to return three quarters of its free cash flow to shareholders.

          And in July, Qualcomm announced 5,000 layoffs. It's hard to innovate when you're trying to please a hedge fund.

          CEOs with a long-term outlook and a focus on innovation and investment, rather than financial engineering, come under intense pressure.

          "None of it is optional; if you ignore them, you go away," Russ Daniels, a tech executive with 15 years at Apple and 13 years at HP, told Reuters. "It's all just resource allocation," he said. "The situation right now is there are a lot of investors who believe that they can make a better decision about how to apply that resource than the management of the business can."

          Nearly 60% of the 3,297 publicly traded non-financial US companies Reuters analyzed have engaged in share buybacks since 2010. Last year, the money spent on buybacks and dividends exceeded net income for the first time in a non-recession period.

          This year, for the 613 companies that have reported earnings for fiscal 2015, share buybacks hit a record $520 billion. They also paid $365 billion in dividends, for a total of $885 billion, against their combined net income of $847 billion.

          Buybacks and dividends amount to 113% of capital spending among companies that have repurchased shares since 2010, up from 60% in 2000 and from 38% in 1990. Corporate investment is normally a big driver in a recovery. Not this time! Hence the lousy recovery.

          Financial engineering takes precedence over actual engineering in the minds of CEOs and CFOs. A company buying its own shares creates additional demand for those shares. It's supposed to drive up the share price. The hoopla surrounding buyback announcements drives up prices too. Buybacks also reduce the number of outstanding shares, thus increase the earnings per share, even when net income is declining.

          "Serving customers, creating innovative new products, employing workers, taking care of the environment … are NOT the objectives of firms," sais Itzhak Ben-David, a finance professor of Ohio State University, a buyback proponent, according to Reuters. "These are components in the process that have the goal of maximizing shareholders' value."

          But when companies load up on debt to fund buybacks while slashing investment in productive activities and innovation, it has consequences for revenues down the road. And now that magic trick to increase shareholder value has become a toxic mix. Shares of buyback queens are getting hammered.

          Citigroup credit analysts looked into the extent to which this is happening – and why. Christine Hughes, Chief Investment Strategist at OtterWood Capital, summarized the Citi report this way: "This dynamic of borrowing from bondholders to pay shareholders may be coming to an end…."

          Their chart (via OtterWood Capital) shows that about half of the cumulative outperformance of these buyback queens from 2012 through 2014 has been frittered away this year, as their shares, IBM-like, have swooned:

          Mbuna, November 21, 2015 at 7:31 am

          Me thinks Wolf is slightly barking up the wrong tree here. What needs to be looked at is how buy backs affect executive pay. "Shareholder value" is more often than not a ruse?

          ng, November 21, 2015 at 8:58 am

          probably, in some or most cases, but the effect on the stock is the same.

          Alejandro, November 21, 2015 at 9:19 am

          Interesting that you mention ruse, relating to "buy-backs"…from my POV, it seems like they've legalized insider trading or engineered (a) loophole(s).

          On a somewhat related perspective on subterfuge. The language of "affordability" has proven to be insidiously clever. Not only does it reinforce and perpetuate the myth of "deserts", but camouflages the means of embezzling the means of distribution. Isn't distribution, really, the only rational purpose of finance, i.e., as a means of distribution as opposed to a means of embezzlement?

          Jim, November 21, 2015 at 10:42 am

          More nuance and less dogma please. The dogmatic tone really hurts what could otherwise be a fine but more-qualified position.

          "Results of all this financial engineering? Revenues of the S&P 500 companies are falling for the fourth quarter in a row – the worst such spell since the Financial Crisis."

          Eh, no. No question that buybacks *can* be asset-stripping and often are, but unless you tie capital allocation decisions closer to investment in the business such that they're mutually exclusive, this is specious and a reach. No one invests if they can't see the return. It would be just as easy to say that they're buying back stock because revenue is slipping and they have no other investment opportunities.

          Revenues are falling in large part because these largest companies derive an ABSOLUTELY HUGE portion of their business overseas and the dollar has been ridiculously strong in the last 12-15 months. Rates are poised to rise, and the easy Fed-inspired rate arbitrage vis a vis stocks and "risk on" trade are closing. How about a little more context instead of just dogma?

          John Malone made a career out of financial engineering, something like 30% annual returns for the 25 years of his CEO tenure at TCI. Buybacks were a huge part of that.

          Perhaps an analysis of the monopolistic positions of so many American businesses that allow them the wherewithal to underinvest and still buy back huge amounts of stock? If we had a more competitive economy, companies would have less ability to underinvest. Ultimately, I think buybacks are more a result than a cause of dysfunction, but certainly not always bad.

          NeqNeq, November 21, 2015 at 11:44 am

          One aspect that Reuters piece mentions, but glosses over with a single paragraph buried in the middle, is the fact that for many companies there are no ( or few) reasons to spend money in other ways. If capex/r&d doesn't give you much return, why not buy out the shareholders who are least interested in holding your stock?

          Dumping cash into plants only makes sense in the places where the market is growing. For many years that has meant Asia (China). For example, Apple gets 66% (iirc) of revenue from Asia, and that is where they have continued investing in growth. If demand is slowing and costs are rising, and it looks like both are true, why would you put even more money in?

          Dumping money into R&D is always risky, although different industries have different levels, and the "do it in-house" risk must be weighed against the costs of buying up companies with "proven" technologies. Thus, R&D cash is hidden inside M&A. M&A is up 2-3 years in a row.

          [Dec 02, 2015] Larry Summers and the Subversion of Economics

          Notable quotes:
          "... As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws. ..."
          "... Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.) ..."
          "... In 2005, at the annual Jackson Hole, Wyo., conference of the worlds leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other peoples money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a full-blown financial crisis and a catastrophic meltdown. When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a Luddite, dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.) ..."
          "... Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And its due not just to ideology; its also about straightforward, old-fashioned money. ..."
          "... Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Departments Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates. ..."
          "... I think it is interesting that Summers led the financial deregulation efforts of the Clinton administration and then made a bundle on Wall Street. I think that should be taken into account when evaluating his discussions of economics. ..."
          "... It is difficult to get a man to understand something when his salary depends upon his not understanding it. ..."
          economistsview.typepad.com

          RGC, December 02, 2015 at 06:09 AM

          Larry Summers and the Subversion of Economics

          By Charles Ferguson October 03, 2010

          The Obama administration recently announced that Larry Summers is resigning as director of the National Economic Council and will return to Harvard early next year. His imminent departure raises several questions: Who will replace him? What will he do next? But more important, it's a chance to consider the hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking.

          Summers is unquestionably brilliant, as all who have dealt with him, including myself, quickly realize. And yet rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy. For the past two years, I have immersed myself in those worlds in order to make a film, Inside Job, that takes a sweeping look at the financial crisis. And I found Summers everywhere I turned.

          Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

          After Summers left the Clinton administration, his candidacy for president of Harvard was championed by his mentor Robert Rubin, a former CEO of Goldman Sachs, who was his boss and predecessor as treasury secretary. Rubin, after leaving the Treasury Department-where he championed the law that made Citigroup's creation legal-became both vice chairman of Citigroup and a powerful member of Harvard's governing board.

          Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)

          Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown."

          When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.)

          Soon after that, Summers lost his job as president of Harvard after suggesting that women might be innately inferior to men at scientific work. In another part of the same speech, he had used laissez-faire economic theory to argue that discrimination was unlikely to be a major cause of women's underrepresentation in either science or business. After all, he argued, if discrimination existed, then others, seeking a competitive advantage, would have access to a superior work force, causing those who discriminate to fail in the marketplace. It appeared that Summers had denied even the possibility of decades, indeed centuries, of racial, gender, and other discrimination in America and other societies. After the resulting outcry forced him to resign, Summers remained at Harvard as a faculty member, and he accelerated his financial-sector activities, receiving $135,000 for one speech at Goldman Sachs.

          Then, after the 2008 financial crisis and its consequent recession, Summers was placed in charge of coordinating U.S. economic policy, deftly marginalizing others who challenged him. Under the stewardship of Summers, Geithner, and Bernanke, the Obama administration adopted policies as favorable toward the financial sector as those of the Clinton and Bush administrations-quite a feat. Never once has Summers publicly apologized or admitted any responsibility for causing the crisis. And now Harvard is welcoming him back.

          Summers is unique but not alone. By now we are all familiar with the role of lobbying and campaign contributions, and with the revolving door between industry and government. What few Americans realize is that the revolving door is now a three-way intersection. Summers's career is the result of an extraordinary and underappreciated scandal in American society: the convergence of academic economics, Wall Street, and political power.

          Starting in the 1980s, and heavily influenced by laissez-faire economics, the United States began deregulating financial services. Shortly thereafter, America began to experience financial crises for the first time since the Great Depression. The first one arose from the savings-and-loan and junk-bond scandals of the 1980s; then came the dot-com bubble of the late 1990s, the Asian financial crisis; the collapse of Long Term Capital Management, in 1998; Enron; and then the housing bubble, which led to the global financial crisis. Yet through the entire period, the U.S. financial sector grew larger, more powerful, and enormously more profitable. By 2006, financial services accounted for 40 percent of total American corporate profits. In large part, this was because the financial sector was corrupting the political system. But it was also subverting economics.

          Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money.

          Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Department's Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates.

          In my film you will see many famous economists looking very uncomfortable when confronted with their financial-sector activities; others appear only on archival video, because they declined to be interviewed. You'll hear from:

          • Martin Feldstein, a Harvard professor, a major architect of deregulation in the Reagan administration, president for 30 years of the National Bureau of Economic Research, and for 20 years on the boards of directors of both AIG, which paid him more than $6-million, and AIG Financial Products, whose derivatives deals destroyed the company. Feldstein has written several hundred papers, on many subjects; none of them address the dangers of unregulated financial derivatives or financial-industry compensation.
          • Glenn Hubbard, chairman of the Council of Economic Advisers in the first George W. Bush administration, dean of Columbia Business School, adviser to many financial firms, on the board of Metropolitan Life ($250,000 per year), and formerly on the board of Capmark, a major commercial mortgage lender, from which he resigned shortly before its bankruptcy, in 2009. In 2004, Hubbard wrote a paper with William C. Dudley, then chief economist of Goldman Sachs, praising securitization and derivatives as improving the stability of both financial markets and the wider economy.
          • Frederic Mishkin, a professor at the Columbia Business School, and a member of the Federal Reserve Board from 2006 to 2008. He was paid $124,000 by the Icelandic Chamber of Commerce to write a paper praising its regulatory and banking systems, two years before the Icelandic banks' Ponzi scheme collapsed, causing $100-billion in losses. His 2006 federal financial-disclosure form listed his net worth as $6-million to $17-million.
          • Laura Tyson, a professor at Berkeley, director of the National Economic Council in the Clinton administration, and also on the Board of Directors of Morgan Stanley, which pays her $350,000 per year.
          • Richard Portes, a professor at London Business School and founding director of the British Centre for Economic Policy Research, paid by the Icelandic Chamber of Commerce to write a report praising Iceland's financial system in 2007, only one year before it collapsed.
          • And John Campbell, chairman of Harvard's economics department, who finds it very difficult to explain why conflicts of interest in economics should not concern us.

          But could he be right? Are these professors simply being paid to say what they would otherwise say anyway? Unlikely. Mishkin and Portes showed no interest whatever in Iceland until they were paid to do so, and they got it totally wrong. Nor do all these professors seem to make policy statements contrary to the financial interests of their clients. Even more telling, they uniformly oppose disclosure of their financial relationships.

          The universities avert their eyes and deliberately don't require faculty members either to disclose their conflicts of interest or to report their outside income. As you can imagine, when Larry Summers was president of Harvard, he didn't work too hard to change this.

          Now, however, as the national recovery is faltering, Summers is being eased out while Harvard is welcoming him back. How will the academic world receive him? The simple answer: Better than he deserves.

          While making my film, we wrote to the presidents and provosts of Harvard, Columbia, and other universities with detailed questions about their conflict-of-interest policies, requesting interviews about the subject. None of them replied, except to refer us to their Web sites.

          Academe, heal thyself.

          http://chronicle.com/article/Larry-Summersthe/124790/

          EMichael said in reply to RGC...
          Yeah, after an economist has had one job in the government; one job in the banking system; and one teaching job he should be required to stop working as an economist.
          RGC said in reply to EMichael...
          I think it is interesting that Summers led the financial deregulation efforts of the Clinton administration and then made a bundle on Wall Street. I think that should be taken into account when evaluating his discussions of economics.
          EMichael said in reply to RGC...
          Of course it should.

          At the same time this is not taking anything into account, this is about "subverting" economics.

          Can you make a case that the only reason Summers made a "bundle" working on Wall Street is because of the financial deregulation efforts he made? Last time I looked he did not have a vote on the legislation.

          RGC said in reply to EMichael...
          I think this is especially troubling for the economics profession:

          "Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money."

          EMichael said in reply to RGC...
          Cause no economists actually believed in any of the policies that caused all of those things nor did any economist fail to vote for the policies adopted.
          RGC said in reply to EMichael...
          Upton Sinclair:

          "It is difficult to get a man to understand something when his salary depends upon his not understanding it."

          Tom aka Rusty said in reply to RGC...

          As Hemingway and F. SCott Fitzgerald exchanged in their writings (the reputed face-to-face conversation may not have happened):

          The rich are different.

          Yes, they have more money.

          Combine elite and rich and you get a toxic combination.

          [Dec 01, 2015] US Intervention Before And After

          Zero Hedge
          WhackoWarner

          Before death in Libya....Ghadaffi's crime was in "not playing along and selling out". Kinda like Iraq and all. They all should just hand over everything and say thanks...but they did not . There is disinfo on both sides, But the "madman" and people who actually live there never seem to make the NYTimes.

          "For 40 years, or was it longer, I can't remember, I did all I could to give people houses, hospitals, schools, and when they were hungry, I gave them food. I even made Benghazi into farmland from the desert, I stood up to attacks from that cowboy Reagan, when he killed my adopted orphaned daughter, he was trying to kill me, instead he killed that poor innocent child. Then I helped my brothers and sisters from Africa with money for the African Union.

          I did all I could to help people understand the concept of real democracy, where people's committees ran our country. But that was never enough, as some told me, even people who had 10 room homes, new suits and furniture, were never satisfied, as selfish as they were they wanted more. They told Americans and other visitors, that they needed "democracy" and "freedom" never realizing it was a cut throat system, where the biggest dog eats the rest, but they were enchanted with those words, never realizing that in America, there was no free medicine, no free hospitals, no free housing, no free education and no free food, except when people had to beg or go to long lines to get soup.

          No, no matter what I did, it was never enough for some, but for others, they knew I was the son of Gamal Abdel Nasser, the only true Arab and Muslim leader we've had since Salah-al-Deen, when he claimed the Suez Canal for his people, as I claimed Libya, for my people, it was his footsteps I tried to follow, to keep my people free from colonial domination - from thieves who would steal from us.

          Now, I am under attack by the biggest force in military history, my little African son, Obama wants to kill me, to take away the freedom of our country, to take away our free housing, our free medicine, our free education, our free food, and replace it with American style thievery, called "capitalism," but all of us in the Third World know what that means, it means corporations run the countries, run the world, and the people suffer. So, there is no alternative for me, I must make my stand, and if Allah wishes, I shall die by following His path, the path that has made our country rich with farmland, with food and health, and even allowed us to help our African and Arab brothers and sisters to work here with us, in the Libyan Jamahiriya.

          I do not wish to die, but if it comes to that, to save this land, my people, all the thousands who are all my children, then so be it.

          Let this testament be my voice to the world, that I stood up to crusader attacks of NATO, stood up to cruelty, stood up to betrayal, stood up to the West and its colonialist ambitions, and that I stood with my African brothers, my true Arab and Muslim brothers, as a beacon of light. When others were building castles, I lived in a modest house, and in a tent. I never forgot my youth in Sirte, I did not spend our national treasury foolishly, and like Salah-al-Deen, our great Muslim leader, who rescued Jerusalem for Islam, I took little for myself...

          In the West, some have called me "mad", "crazy", but they know the truth yet continue to lie, they know that our land is independent and free, not in the colonial grip, that my vision, my path, is, and has been clear and for my people and that I will fight to my last breath to keep us free, may Allah almighty help us to remain faithful and free.

          Kirk2NCC1701
          "they hate us for our freedoms"

          No, "They hate us for our freebombs" that we keep delivering.

          Suppose you lived in a town that was run by a ruthless Mafioso boss. Sure he was ruthless to troublemakers and dissenters, but if you went about your business (and paid your taxes/respects to him), life was simple but livable, and crime was negligible.

          Now imagine that a crime Overlord came from another country and decided to wreck the town, just to remove your Mafioso Don. In the process, your neighborhood and house were destroyed, and you lost friends and family.

          Now tell me that YOU would not make it YOUR life's mission to bring these War Criminals to justice -- by any and all means necessary. And tell me that these same Criminals could not have foreseen all this. Now say it again - but with a straight face. I dare you. I fucking double-dare you!

          Max Cynical
          US exceptionalism!
          GhostOfDiogenes
          The worst one, besides Iraq, is Libya.

          The infrastructure we destroyed there is unimaginable.

          Sure Iraq was hit the worst, and much has been lost there....but Libya was a modern arab oasis of a country in the middle of nothing.

          We destroyed in a few days what took decades to build.

          This is why I am not proud of my country, nor my military.

          In fact, I would like to see Nuremberg type trials for 'merican military leaders and concentration gulags for the rest of enlisted. Just like they did to Germany.

          Its only proper.

          GhostOfDiogenes
          The USA did this murder of Libya and giving ownership to the people who did '911'? What a joke. http://youtu.be/aJURNC0e6Ek
          Bastiat
          Libya under Ghadaffi: universal free college education, free healthcare, free electricity. interest free loans. A very bad example of how a nation's wealth is to be distributed!
          CHoward
          The average American has NO idea how much damage is being done in this world - all in the name of Democracy. Unbelivable and truly pathetic. Yet - most sheeple still believe ISIS and others hate us because of our "freedoms" and i-pods. What bullshit.
          Bioscale
          Czech public tv published a long interview in English with Asad, it was filmed in Damascus some days ago.Very unusual thing, actually. Terrorism being transported by US, Turkey and France to Syria is being openly debated. http://www.ceskatelevize.cz/ct24/svet/1628712-asad-pro-ct-rebelove-jsou-...

          Overfed

          Compare and contrast Assad, giving an interview very well in a second language, with O'bomb-a, who can't even speak to school children without a teleprompter. Sad.

          Razor_Edge

          Along with President Putin, Dr al Assad is consistently the most sane, rational and clearly honest speaker on the tragedy of Syria. By contrast, our satanic western leaders simply lie outrageously at all times. How do we know? Their lips are moving. They also say the most absurd things.

          We in the west may think that at the end of the day, it's not going to harm us, so why discomfort ourselves by taking on our own elites and bringing them down. But I believe that an horrific future awaits us, one we richly deserve, because we did not shout stop at this ocean of evil bloodshed being spilt in our names. We pay the taxes that pay for it, or at least in my countrys case, (traditional policy of military neutrality), we facilitate the slaughter (troop transports through Shannon airport), or fail to speak out for fear it may impact FDI into Ireland, (largest recipient of US FDI in the world).

          We are our brothers keepers, and we are all one. It is those who seek to separate us to facilitate their evil and psychopathic lust for power and money, who would have us beieve that "the other" is evil. Are we really so simple minded or riven by fear that we cannot see through the curtain of the real Axis of Evil?

          Demdere

          Israeli-neocon strategy is to have the world's economy collapse at the point of maximum war and political chaos.

          Then they can escape to Paraguay. Sure as hell, if they stay here, we are going to hang them all. Treasonous criminals for the 9/11 false flag operation.

          By 2015, every military and intelligence service and all the think tanks have looked at 9/11 carefully. Anyone who looks at the evidence sees that it was a false flag operation, the buildings were destroyed via explosives, the planes and evil Arab Muslims were show. Those agencies reported to their civilian leaders, and their civilian leaders spread the information through their societies.

          So all of the politically aware people in the world, including here at home, KNOW that 9/11 was a false flag operation, or know that they must not look at the evidence. Currently, anyone who disagrees in MSM is treated as invisible, and I know of no prominent bloggers who have even done the bits of extention of 'what it must mean' that I have done.

          But it certainly means high levels of distrust for the US and for Israel. It seems to me that World Domination is not possible, because the world won't let you, and the means of opposition are only limited by the imaginations of the most creative, intelligent and knowledgable people. We don't have any of those on our side any more.

          L Bean

          In their farcical quest to emulate the Roman empire...

          Auferre, trucidare, rapere, falsis nominibus imperium; atque, ubi solitudinem faciunt, pacem appellant - Tacitus

          They plunder, they slaughter, and they steal: this they falsely name Empire, and where they make a wasteland, they call it peace.

          [Dec 01, 2015] The New Supply-Side Economics

          Economist's View
          reason: December 01, 2015 at 07:27 AM

          Sanjait

          I think it is perfectly clear that a secular policy of increasing private indebtedness is not indefinitely extendable. Sure, if we had printed money in the past and kept monetary policy relatively tight (or otherwise managed the international financial system so that large persistent balance of payments deficits were not tolerated) we wouldn't have got in the mess we are in. But once we are there just trying to get over-indebted people to take on more debt doesn't seem like a winning strategy.

          http://crookedtimber.org/2015/11/29/secular-stagnation-and-the-financial-sector/comment-page-3/#comment-650710

          EMichael said in reply to reason... December 01, 2015 at 07:34 AM

          I see no real increase in private indebtedness.

          The problem with the financial system is what lies behind lending.

          reason: December 01, 2015 at 07:36 AM

          Avraam Jack Dectis
          Not bad.
          But

          1. asset taxes are tricky things to run (many assets aren't traded and the prices of other assets are very volatile). And there is the problem of offshore ownership and offshore assets, so it requires international co-operation.

          2. This takes a very closed economy view of things - the trade deficit might end up affecting the trade balance and hence the flow of assets into and out of the country, and eventually also the terms of trade. You should think through how such a policy would work in say - Luxembourg.

          reason:

          EMichael

          You see no increase in private indebtedness - when do you mean? If you mean now - then yes - that is exactly why the economy is so sluggish. Where is the increase in demand going to come from if the country is running a trade deficit, is not increasing its borrowing and is committed to reducing its government deficit?

          [Nov 30, 2015] Is Balanced Growth Really the Answer

          Notable quotes:
          "... I can only add, that our economic system already redistributes income upward to capital and management, whose contribution to productivity is far below what they are paid. ..."
          "... That's the idea of neoliberal transformation of society that happened since 80th or even earlier. Like John Kenneth Galbraith noted "Trickle-down theory is the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows" ..."
          "... "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 ..."
          "... Just as was the case with his work on financial instability, Hyman Minsky's analysis of the problems of poverty and inequality in a capitalist economy, as well as his understanding of the political dysfunctions that would result from treating these problems in the wrong way, were prophetic. See this piece by Minksy's student L. Randall Wray, especially Section 2: http://www.levyinstitute.org/pubs/wp_515.pdf ..."
          "... it is unjust to tell the poor that they must change before they will be entitled to work-whether it is their skills set or their character that is the barrier to work... Minsky always argued that it is preferable to "take workers as they are," providing jobs tailored to the characteristics of workers, rather than trying to tailor workers to the jobs available before they are allowed to work ..."
          "... Further, NIT (and other welfare programs) would create a dependent class, which is not conducive to social cohesion (Minsky 1968). Most importantly, Minsky argued that any antipoverty program must be consistent with the underlying behavioral rules of a capitalist economy (Minsky no date, 1968, 1975a). One of those rules is that earned income is in some sense deserved. ..."
          "... This misreads the politics. People who are disconnected from the job market very easily get disconnected from the political process. They don't vote. ..."
          "... The problem in thinking here is the equilibrium paradigm. Equilibrium NEVER exists. If there is a glut the price falls below the marginal cost/revenue point, if the seller is desperate enough it falls to zero! Ignoring disequilibrium dynamics means this obvious (it should be obvious) point is simply ignored. The assumption of general equilibrium leads to the assumption of marginal productivity driving wages. You are not worth what you produce, you are worth precisely what somewhat else would accept to do your job. ..."
          "... Never say never. There some stationary points at which equilibrium probably exists for a short period of time. But as the whole system has positive feedback loop built-in and is unstable by definition. So you are right in a sense that disequilibrium is the "normal" state of such a system and equilibrium is an exception. ..."
          "... And the problem is more growth, is more growth is a trick we cannot always do in a finite resource technologically sophisticated world. (At least not growth as it is currently seen.) We need to start thinking in much longer term time scales. Saying that we have enough oil for 30 years, is not optimistic - it is an imminent crisis - or do we want our grandchildren to see the end of the world? ..."
          Nov 30, 2015 | Economist's View

          DrDick said...

          "then more growth will simply lead to even more inequality."

          Which is exactly what we have seen for the past 40 years, Great analysis here. I can only add, that our economic system already redistributes income upward to capital and management, whose contribution to productivity is far below what they are paid.

          ikbez -> DrDick...

          "then more growth will simply lead to even more inequality."

          That's the idea of neoliberal transformation of society that happened since 80th or even earlier. Like John Kenneth Galbraith noted "Trickle-down theory is the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows"

          And another relevant quote:

          "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

          anne -> likbez...

          "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

          [ Perfect. ]

          Dan Kervick, November 30, 2015 at 11:12 AM

          Just as was the case with his work on financial instability, Hyman Minsky's analysis of the problems of poverty and inequality in a capitalist economy, as well as his understanding of the political dysfunctions that would result from treating these problems in the wrong way, were prophetic. See this piece by Minksy's student L. Randall Wray, especially Section 2: http://www.levyinstitute.org/pubs/wp_515.pdf

          The centerpiece of Minsky's preferred approach was based on a government commitment to "tight full employment". He believed that neither human capital investment, economic growth, nor redistribution would be sufficient on their own to address the problem.

          As part of the critique of the human capital approach, Minsky argued that:

          "it is unjust to tell the poor that they must change before they will be entitled to work-whether it is their skills set or their character that is the barrier to work... Minsky always argued that it is preferable to "take workers as they are," providing jobs tailored to the characteristics of workers, rather than trying to tailor workers to the jobs available before they are allowed to work (Minsky 1965, 1968, 1973)."

          Minsky accurately foresaw the way in which a welfare approach to poverty, as opposed to a full employment approach, would politically divide working people among themselves:

          "Further, NIT (and other welfare programs) would create a dependent class, which is not conducive to social cohesion (Minsky 1968). Most importantly, Minsky argued that any antipoverty program must be consistent with the underlying behavioral rules of a capitalist economy (Minsky no date, 1968, 1975a). One of those rules is that earned income is in some sense deserved."

          "With the perspective of the 1980s and 1990s now behind us, it is hard to deny Minsky's arguments-President Reagan successfully turned most Americans against welfare programs and President Clinton finally "eliminated welfare as we know it." According to Minsky, a successful antipoverty program will need to provide visible benefits to the average taxpayer."

          We can note that this political problem has only gotten worse, as can be seen from the deepening ugliness of our domestic politics, and the poll results that MacGillis cites.

          Minsky also understood the unhealthy political and economic dynamics of an undirected aggregate demand approach to poverty, and promoted, following ideas of Keynes, a measure of socialized investment and direct job creation:

          "Minsky feared that using demand stimulus to reduce poverty would necessarily lead to "stop-go" policy. Expansion would fuel inflation, causing policy makers to reverse course to slow growth in order to fight inflation (Minsky 1965, 1968). Because wages (and prices) in leading sectors would rise in expansion, but could resist deflationary pressures in recession, there would be an upward bias to rising wages in those sectors. However, in the lagging sectors, wage increases would come slowly-only with adequate tightening of labor markets -- and could be reversed in recession. Hence, Minsky argued that a directed demand policy would be required-to raise demand in the lagging sectors and for low wage and unemployed workers. For this reason, he concluded that a direct job creation program would be required."

          All this adds up to a more activist role for the government sector.

          likbez -> Dan Kervick...

          My impression is that "human capital" is one of the most fundamental neoliberal myths. See, for example What Exactly Is Neoliberalism by Wendy Brown https://www.dissentmagazine.org/blog/booked-3-what-exactly-is-neoliberalism-wendy-brown-undoing-the-demos

          As for people betraying their own economic interests, this phenomenon was aptly described in "What's the matter with Kansas" which can actually be reformulated as "What's the matter with the USA?". And the answer he gave is that neoliberalism converted the USA into a bizarre high demand cult. There are several characteristics of a high demand cult that are applicable. Among them:

          • "The group is preoccupied with making money."
          • "Questioning, doubt, and dissent are discouraged or even punished."
          • "Mind-numbing techniques (for example: meditation, chanting, speaking in tongues, debilitating work routines) are used to suppress doubts about the group or its leader(s)." Entertainment and, especially sport events in the US society serves the same role.
          • "The group's leadership dictates – sometimes in great detail – how members should think, act, and feel." Looks like this part of brainwashing is outsourced to economy departments ;-)
          • "The group is elitist, claiming a special, exalted status for itself, its leader(s), and members (for example the group and/or the leader has a special mission to save humanity)."
          • "The group has a polarized, "we-they" mentality that causes conflict with the wider society."
          • "The group's leader is not accountable to any authorities (as are, for example, clergy with mainstream denominations)."
          • "The group teaches or implies that its supposedly exalted ends justify means (for example: collecting money for bogus charities) that members would have considered unethical before joining."
          • "The group's leadership induces guilt feelings in lower members for the lack of achievement in order to control them."
          • "Members are expected to devote inordinate amounts of time to the group."
          • "Members are encouraged or required to live and/or socialize only with other group members."

          It is very difficult to get rid of this neoliberal sect mentality like is the case with other high demand cults.

          cm -> likbez...

          What has any of this to do with human capital? "Capital" is basically a synonym for productive capacity, with regard to what "productive" means in the socioeconomic system or otherwise the context that is being discussed.

          E.g. social or political capital designates the ability (i.e. capacity) to exert influence in social networks or societal decision making at the respective scales (organization, city, regional, national etc.), where "productive" means "achieving desired or favored outcomes for the person(s) possessing the capital or for those on whose behalf it is used".

          Human capital, in the economic domain, is then the combined capacity of the human population in the domain under consideration that is available for productive endeavors of any kind. This includes BTW e.g. housewives and other household workers whose work is generally not paid, but you better believe it is socially productive.

          likbez -> cm...

          "Human capital, in the economic domain, is then the combined capacity of the human population in the domain under consideration that is available for productive endeavors of any kind. This includes BTW e.g. housewives and other household workers whose work is generally not paid, but you better believe it is socially productive."

          This is not true. The term "human capital" under neoliberalism has different semantic meaning: it presuppose viewing a person as a market actor.

          See the discussion of the term in http://www.jceps.com/wp-content/uploads/PDFs/10-1-07.pdf

          kthomas

          "...it's driven be resentment..."

          No, its driven by racism. White trash will take with one hand, then walk right into a voting both and screw themselves because they think they sticking it to blacks, mexicans, gays, etc.

          Syaloch -> kthomas...

          Racism is certainly part of it, but it's really more fundamental than that.

          "This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages."

          Adam Smith, The Theory of Moral Sentiments

          http://knarf.english.upenn.edu/Smith/tms133.html

          cm -> kthomas...

          What is racism if not an expression of resentment?

          bakho said...

          This misreads the politics. People who are disconnected from the job market very easily get disconnected from the political process. They don't vote. The people who do have jobs and are worried about keeping them and being paid too little are voting against the "losers" who they see as parasites. Never mind that the Malefactors of Great Wealth are the true parasites. Elections in the US are won or lost on voter turnout.

          The Rage said...

          I guess it depends on what kind of economy you want.

          Growth of all kinds is not good. The 2001-2007 "growth" was badly constructed. I think America itself is in a bad rut....and has been since 1974. That itself will not be popular. The consensus belief was everything was rosy up until 2001. That is lie. They used to have a saying "nothing really happens on the X-files anymore". It really applies to America since 1974. It goes beyond "inequality".

          I mean, we could have 3% wage growth in 2016 and 4% wage growth in 2017. That doesn't mean a damn thing for a economy's health. The infrastructure is bad. It shows up in pop culture apathy.

          pgl -> The Rage...

          "The 2001-2007 "growth" was badly constructed."

          Glenn Hubbard might quarrel with this. He was well constructed for George W. Bush's base - rich people.

          On the whole - great comment!!!

          cm -> The Rage...

          The Y2K/dotcom boom unraveled in 2000, but not all at once. It is difficult to impossible to disentagle the boundary between dotcom bust, 9/11 and the prolonged reaction to it, and the start of the Bush presidency (and the top policymaking figures that came with that, I don't want to necessarily tie it to Bush himself).

          At the same time, the global rollout of the internet, telecommunication, (start of) commodity videoconferencing, broadband and realtime data exchange, etc. enabled the outsourcing and offshoring of large and growing segments of blue and white collar jobs, and much increased fungibility of variously skilled labor altogether.

          On that foundation, a lot of things will appear as badly constructed. Or from a different angle, given that foundation, how would you arrange for things to be well constructed?

          likbez -> cm...

          I would view 9/11 as a perfect cure for dot-com bust. Soon after invasion of Iraq stock market returned to almost precrash levels. War is the health of stock market. And since probably 1998 nobody cared about real economy anyway.

          Also housing boom started around this period as conscious, deliberate effort of Fed to blow the bubble to cure the consequences of the crash at all costs and face the day of reckoning later (without Mr. Greenspan at the helm)

          reason said...

          The problem in thinking here is the equilibrium paradigm. Equilibrium NEVER exists. If there is a glut the price falls below the marginal cost/revenue point, if the seller is desperate enough it falls to zero! Ignoring disequilibrium dynamics means this obvious (it should be obvious) point is simply ignored. The assumption of general equilibrium leads to the assumption of marginal productivity driving wages. You are not worth what you produce, you are worth precisely what somewhat else would accept to do your job.

          Lafayette -> reason...

          I could not agree more. A Market-Economy is a dynamic in constant disequilibrium, changing positively and negatively around a mean. The mean is very rarely an "equilibrium".

          likbez -> reason...

          Never say never. There some stationary points at which equilibrium probably exists for a short period of time. But as the whole system has positive feedback loop built-in and is unstable by definition. So you are right in a sense that disequilibrium is the "normal" state of such a system and equilibrium is an exception.

          reason said...

          And the problem is more growth, is more growth is a trick we cannot always do in a finite resource technologically sophisticated world. (At least not growth as it is currently seen.) We need to start thinking in much longer term time scales. Saying that we have enough oil for 30 years, is not optimistic - it is an imminent crisis - or do we want our grandchildren to see the end of the world?

          [Nov 30, 2015] Secular stagnation and the financial sector

          Notable quotes:
          "... Surely the answer is "risk transfer" ..."
          "... Is what you're saying here is that, by extending a lot of credit, the financial sector allowed households to maintain consumption in the face of a permanent decline in income (at least relative to expectation)? That's an important part of the story, I agree. ..."
          "... the FIRE sector in particular, are parasitic on the economy. ..."
          "... Perhaps financialization isn't so much a thing-in-itself as the mechanism through which wealth concentrates in periods of slow growth? ..."
          "... As in the official theory of efficient markets, the financial sector is actually earning its keep by allocating capital to the most productive investments, and by spreading and managing risk. I don't see how anyone can argue this with a straight face in the light of the last 20 years of bubbles and busts." ..."
          "... Did Cuba, Venezuela, Argentina and North Korea do better than the financialized economies of the world? Did the hand of the State in Russia, China and other countries secure better outcomes than the global financial sector in countries that allowed it to operate (albeit with heavy regulation)? ..."
          "... The financial system can engage in usury, lending money with no connection to productive investment, by simply creating a parasitic claim on income. There are straightforward ways of doing this: credit cards with high rates of interest or payday lending. There are slightly more complicated approaches: insurance that by design doesn't pay off for the nominal beneficiary. ..."
          "... "The biggest economic policy decision of the last thirty years has been the decision to de-socialise a lot of previously socially insured risks and transfer them back to the household sector (in their various capacities as workers, homeowners and consumers of healthcare). The financial sector was obviously the conduit for this policy decision." ..."
          "... My feeling (based on nothing but intuition) is that the answer is (d). The government is a tool of moneyed interests. I know, it sounds awfully libertarian, but it is what it is. And I can't foresee any non-catastrophic end to it. ..."
          November 29, 2015 | Crooked Timber

          In my last post on private infrastructure finance and secular stagnation, I suggested a bigger argument that

          The financialization of the global economy has produced a hugely costly financial sector, extracting returns that must, in the end, be taken out of the returns to investment of all kinds. The costs were hidden during the pre-crisis bubble era, but are now evident to everyone, including potential investors. So, even massively expansionary monetary policy doesn't produce much in the way of new private investment.
          This isn't an original idea. The Bank of International Settlements put out a paper earlier this year arguing that financial sector growth crowds out real growth. But how does this work and what can be done about it? I'm still organizing my thoughts on this, so what I have are some ideas rather than a fully formed argument.

          First, if the financial sector is unproductive, how can it be so large and profitable in a market economy?

          There are a few possible explanations

          (a) As in the official theory of efficient markets, the financial sector is actually earning its keep by allocating capital to the most productive investments, and by spreading and managing risk. I don't see how anyone can argue this with a straight face in the light of the last 20 years of bubbles and busts.

          (b) Tax evasion: the global financial sector allows corporations to greatly reduce their tax liabilities. Most of the savings in tax is captured in the financial sector itself, but the amount flowing to corporations is sufficient to offset the high costs of the modern financial sector, relative to (for example) old-style bank finance and simple corporate structures financed by debt and equity

          (c) Volatility: the financialization of the economy has produced greatly increased volatility (in exchange rates, asset prices and so on). The financial sector amplifies and profits from this volatility, partly through regulatory arbitrage, and partly through entrenched and systematic fraud as in the LIBOR and Forex scandals.

          (d) Political capture: The financial sector controls political outcomes in both traditional ways (political donations, highly revolving door jobs for future and former politicians) and through the ideology of market liberalism, which is perfectly designed to support policies supporting the financial sector, while discrediting policies traditionally sought by other parts of the corporate sector, such as protection for manufacturing industry. The shift to private finance for infrastructure, discussed in the previous post is part of this. The construction part of the infrastructure sector (which was always private) has suffered from the reduced flow of projects, but the finance part (previously managed through government bonds) has benefited massively.

          The result of all this is that the financial sector benefits from an evolutionary strategy similar to that of an Australian eucalypt forest. Eucalypts are both highly flammable (they generate lots of combustible oil) and highly fire resistant. So eucalypt forests are subject to frequent fires which kill competing species, and allow the eucalypts to extend their range.

          dsquared 11.29.15 at 1:24 pm

          Surely the answer is "risk transfer". The biggest economic policy decision of the last thirty years has been the decision to de-socialise a lot of previously socially insured risks and transfer them back to the household sector (in their various capacities as workers, homeowners and consumers of healthcare). The financial sector was obviously the conduit for this policy decision. Their role is to provide insurance to the rest of society and this is what they did – in fact, they provided too much of it, with too little capital which is why they went bust, and why their bankruptcy was so disastrous (there's nothing worse than an insurer bankruptcy, because it hits you with a big loss at exactly the worst time). I think c) above is particularly unconvincing, as the biggest stylised feature of the period of financialisation was the Great Moderation – in fact, the financial sector stored up volatility that would otherwise have been experienced by other people, including the intermediation of some genuinely historically massive imbalances associated with the industrialisation of China, and stored it up until it couldn't hold any more and exploded.

          I also don't think LIBOR and FX fit into that pattern at all very well either. Financial systems have two kinds of problem, which is why they often have two kinds of regulators. They have prudential problems and conduct problems. Both LIBOR and FX were old-fashioned profiteering and cartel arrangements, which could happen in any industry (hey let's talk about drug pricing and indeed university tuition some time). In actual fact, as I wrote a while ago, it's only LIBOR that can really be considered a scandal – FX was very much more a case of customers who wanted the benefits of tight regulation but didn't want to pay for them, and were lucky enough to find a political moment in which the time was right for an otherwise very unpromising case.

          In other words, the answer to all your questions is "leverage". That's why financial systems grew so fast, that's why they're associated with poor economic performance, and that's why they tend to show up in periods of secular stagnation – a secular stagnation is almost defined as a period during which people try to maintain their standard of living by borrowing. Of course, if the financial sector had been required to hold enough equity capital in the first place, it would never have grown so big in the first place, and we could all be enjoying the thirteenth year of the post-dot-com bust[1] in relative contentment.

          [1] I am never going to shut up about this. The real estate bubble was a policy-created bubble. It was blown up in real time and intentionally, by a Federal Reserve which wanted to cushion the blow of the tech bust. If the financial sector had refused to finance it, the financial sector would have been trying to run a monetary policy directly opposed to that of the central bank.

          John Quiggin 11.29.15 at 1:55 pm 2

          I agree that risk transfer is a big deal. On the other hand, it's not obvious that the financial sector did a lot to insure households against most of the additional risk, or that the Great Moderation corresponded to a reduction in the volatility faced by households. On the first point, despite massive financial innovation since 1980, the set of financial instruments easily available to households hasn't changed all that much. Most obviously, there's no insurance against bad employment and wage outcomes and home equity insurance hasn't really happened either.

          Is what you're saying here is that, by extending a lot of credit, the financial sector allowed households to maintain consumption in the face of a permanent decline in income (at lea