Category Archives: Wall Street

Is the Run on the Dollar Due to Panic or Greed?

What’s going on in the repo market? Rates on repurchase agreements (“repo”) should be around 2%, in line with the fed funds rate. But they shot up to over 5% on September 16 and got as high as 10% on September 17. Yet banks were refusing to lend to each other, evidently passing up big profits to hold onto their cash – just as they did in the housing market crash and Great Recession of 2008-09.

Since banks weren’t lending, the Federal Reserve Bank of New York jumped in, increasing its overnight repo operations to $75 billion; and on October 23 it upped the ante to $120 billion in overnight operations and $45 billion in longer-term operations.

Why are banks no longer lending to each other? Are they afraid that collapse is imminent somewhere in the system, as with the Lehman collapse in 2008?

Perhaps, and if so the likely suspect is Deutsche Bank. But it looks to be just another case of Wall Street fattening itself at the public trough, using the funds of mom and pop depositors to maximize bank profits and line the pockets of bank executives while depriving small businesses of affordable loans.

Why the Repo Market Is a Big Deal

The repo market allows banks and other financial institutions to borrow and lend to each another, usually overnight. More than $1 trillion in overnight repo transactions collateralized with U.S. government debt occur every day. Banks lacking available deposits frequently go to these markets to fund their loans and finance their trades.

Legally, repos are sales and repurchases; but they function like secured overnight or short-term loans. They work like a pawn shop: the lender takes an asset (usually a federal security) in exchange for cash, with an agreement to return the asset for the cash plus interest the next day unless the loan is rolled over.  The New York Fed currently engages in two types of repo operations: overnight repurchase agreements that unwind the next business day, and 14 day repurchase agreements that unwind after 14 days.

The Fed re-started its large-scale repo operations in September, when borrowing rates shot up due to an unexpectedly high demand for dollars. The Fed said the unusual demand was due largely to quarterly tax payments and Treasury debt settlements. Other factors proposed as contributing to the cash strains include regulatory change and a decline in bank reserves due to “quantitative tightening” (in which the Fed shrunk its balance sheet by selling some of its QE acquisitions back into the market), as well as unusually high government debt issuance over the last four years and a flight into U.S. currency and securities to avoid the negative interest rate policies of central banks abroad.

Panic or Calculated Self-interest?

The Fed’s stated objective in boosting the liquidity available to financial markets was simply to maintain its “target rate” for the interest charged by banks to each other in the fed funds market. But critics were not convinced. Why were private capital markets once again in need of public support if there was no financial crisis in sight? Was the Fed engaged in a stealth “QE4,” restarting its quantitative easing program?

The Fed insisted that it wasn’t, and financial analyst Wolf Richter agreed. Writing on Wolfstreet.com on October 10, he said the banks and particularly the primary dealers were hoarding their long-term securities in anticipation of higher profits. The primary dealers are the 24 U.S. and foreign broker-dealers and banks authorized to deal directly with the U.S. Treasury and the New York Fed. They were funding their horde of long-term securities in the repo market, putting pressure on that market, as the Fed said in the minutes for its July meeting even before repo rates blew out in mid-September. Richter contended:

They’d expected a massive bout of QE, and perhaps some of the players had gleefully contributed to, or even instigated the turmoil in the repo market to make sure they would get that massive bout of QE as the Fed would be forced to calm the waters with QE, the theory went. This QE would include big purchases of long-term securities to push down long-term yields, and drive up the prices of those bonds ….

Prices were high and yields were low, a sign that there was heavy demand. But the dealers were holding out for even higher prices and even lower yields. … Massive QE, where the Fed buys these types of Treasury securities, would accomplish that.

But that’s exactly what the Fed said it wouldn’t do.

What the Fed was doing instead, it said, was to revive its “standing repo facility” – the facility it had used before September 2008, when it abandoned that device in favor of QE and zero interest rate policy. But it insisted that this was not QE, expanding the money supply. Overnight repos are just an advance of credit, which must be repaid the next day. While $165 billion per month sounds like a lot, repo loans don’t accumulate; the Fed is just making short-term advances, available as needed up to a limit of $165 billion.

In Wall Street on Parade on October 28, Pam and Russ Martens pointed to another greed-driven trigger to the recent run on repo. The perpetrator was JPMorgan Chase, the largest bank in the U.S., with $1.6 trillion in deposits. Quoting David Henry on Reuters:

Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline. … [T]he data shows its switch accounted for about a third of the drop in all banking reserves at the Fed during the period.

This $158 billion drawdown in JPMorgan’s reserve account is evidently what necessitated the Fed’s $165 billion in new repo offerings. But why the large drawdown?

Henry attributed it to regulatory changes that increased the bank’s required reserves, but according to the Martens, something more was involved. “The shocking news,” they write, is that “according to its SEC filings, JPMorgan Chase is partly using Federally insured deposits made by moms and pops across the country in its more than 5,000 branches to prop up its share price with buybacks.” Small businesses are being deprived of affordable loans because the liquidity necessary to back the loans is being used to prop up bank stock prices. Bank shares constitute a substantial portion of the pay of bank executives.

According to Thomas Hoenig, then Vice Chair of the Federal Deposit Insurance Corporation (FDIC), in a July 2017 letter to the U.S. Senate Banking Committee:

[If] the 10 largest U.S. Bank Holding Companies [BHCs] were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5 percent of annual U.S. GDP.

Four of the 10 BHCs will distribute more than 100 percent of their current year’s earnings, which alone could support approximately $537 billion in new loans to Main Street.

If share buybacks of $83 billion, representing 72 percent of total payouts for these 10 BHCs in 2017, were instead retained, they could, under current capital rules, increase small business loans by three quarters of a trillion dollars or mortgage loans by almost one and a half trillion dollars.

Hoenig was referring to the banks’ own capital rather than to their deposits, but the damage to local credit markets is even worse if deposits are also being diverted to fund share buybacks. Banks are not serving the real economy. They are using public credit backed by public funds to feed their own private bottom lines.

The whole repo rigmarole underscores the sleight of hand on which our money and banking systems are built, and why it is time to change them. Banks do not really have the money they lend. To back their loans, they rely on their ability to borrow from the reserves of other banks, generated from their customers’ deposits; and if those banks withhold their deposits in the insatiable pursuit of higher profits, the borrowing banks must turn to the public purse for liquidity. The banks could not function without public support. They should be turned into public utilities, mandated to serve the interests of the people and the productive economy on which the public depends.

This article was first posted on Truthdig.com

No Country for Old Protest Marchers

And all our yesterdays have lighted fools the way to dusty death.
— from Shakespeare’s Macbeth

The first time I got involved in demonstrations was back in 1967, and concerned what I considered to be a crime against mankind, over in a little country in Southeast Asia called Vietnam.  Along about the same time, providence led me to drop out of Arizona State University, and enroll at the Phoenix campus extension of The Kesey College of Psychedelics.  There, I devoured the curriculum, and graduated summa cum laude with a solid “A” on the final acid test within a single semester.

Unfortunately the local draft board didn’t recognize my chosen educational institution, so there I was, a mere lad of 19 and about to lose the coveted student deferment.  Now old acidheads like me, who’ve managed to survive this far into the next century, well understand that the massive protests against The Vietnam War would likely not have happened at all, or at least not have been as widespread and successful in helping end that abominable slaughter, had it not been for two factors:  one was the only non-toxic gift given to mankind by the C.I.A….that being the empathetic power of L.S.D., and two being the instinct of self-preservation within millions of young U.S. male citizens, who were prime cannon fodder for the C.I.A./U.S. Military.  Make love not war, Dude.

The counterculture anti-war protests of that time were arguably the last successful, legitimate demonstrations to take place on U.S. soil, and likely worldwide.  But I didn’t understand that until recently.

So over the years I picked up my protest signs with vigor and enthusiasm, marching several times against Arizona’s blatantly racist legislation, known as S.B. 1070.  Thousands flooded into the streets of downtown Phoenix.  Speeches were made.  Mass chants were shouted to the heavens.  A small band of heavily-armed skinheads showed up in counter-protest.  Police presence was everywhere.  “The people united will never be defeated!” we cried.  But in the end Arizona, not surprisingly, passed the bill which mandates racial profiling from all law enforcement agencies in the state.  The people united didn’t have a chance.

Then, of course, there was the Occupy Wall Street fiasco, and maybe it’s just me but I haven’t seen any apparent change as a result.  The 99% of us remain the feudal serfs of the 1%, fighting their wars, paying their taxes to fund those wars (now fought in so many ingenious and creative new ways), guarding their national borders, overflowing prisons, banks, and gated communities, mowing their lawns, mopping their floors, swallowing their incessant media swill, and wiping their asses.

On Maui, where Monsanto Biotechnology Corporation routinely poisoned both The Valley Isle and its population with impunity, we carried out several tepid, police-directed demonstrations.  “Stay on the sidewalk!  Cross intersections only on green lights!  Keep moving because if you stop, you’re loitering and subject to arrest!”  All with Monsanto goons watching and recording from their signature nondescript beige Chevy trucks.  They were festive, fun, weekend events, complete with dogs and children, and guess how much good they did!  At any given moment in the U.S. of A., we are all being exposed to untold millions of gallons of Monsanto’s Roundup Weed and Sentient Being Killer.  Glyphosate:  The gift that keeps on giving.  You can’t walk into a Lowe’s or Home Depot without stumbling over a few thousand plastic jugs of the malignant carcinogenic fluid labeled “Roundup”.

It occurs to me now that all those protests were just good physical exercise, and little more.  Even less successful if you were among those who got arrested, gassed, or had their heads busted in the process.  The thing is…fixing one small piece of a system that’s already hopelessly broken is an act of futility.  Women’s rights?  Forget it.  Gay rights, minority rights, immigrant rights, gun control, equal internet access…all just lounge chairs on the deck of the Titanic, and no matter how you arrange them…you know the rest.

Somehow, the C.I.A. must have been too involved with moving drugs and weapons in Southeast Asia, back in my youth, to pay attention to how well Wall Street’s media circus was covering the protests on U.S. soil.  Thanks to nonstop, uncut film footage, the anti-war movement grew from the overt actions of a small minority into something popular with a majority of citizens.  The scale was tipped after Kent State, and the Vietnam War ended with a whimper.  The 1% learned the lesson well, and subsequent civil disobedience in the streets has been marginalized or ignored, as per official government directives to all mainstream “news” sources.  During the Vietnam days we’d chant “The whole world is watching.”  Today most U.S. citizens don’t have a clue what their government does in their names, and their reality consists of so-called reality television shows.

Above all else, the media’s job is to keep the 99% from suspecting that there are some basic flaws in the so-called democracy we’re instructed to worship like a god and love more than life.  Voting?  A completely ineffectual act.  There is only one party to vote into office, and whether red or blue, the result will always be the same.  Trump is Obama.  The media trick is to keep the circus running seamlessly in all three rings.  Keep the military lions and tigers leaping through fiery hoops, squeeze two dozen republican clowns into a tiny car, and leave the audience breathless with death defying feats of D.N.C. trapeze artists.  Punctuate all this with a few beers and hotdogs, a heartfelt, teary-eyed rendition of The Star Spangled Banner, a few disabled veterans (preferably with missing limbs), and an earth-shaking flyover by The Blue Angels, and you’ve got the perfect combination for keeping the masses forever clueless with an overdose of bread and circuses.

Those of us who refuse to attend the circus have a thankless task ahead of us if we attempt to spoil the illusions for the vast majority.  We Americans have been assured that we are God’s (the Christian god’s) chosen ones.  We live in the land of the free and home of the brave.  We are Obama’s exceptional people, and superior to any and all of the lesser folks in inferior countries.  Our government reserves the right of Wall Street to worldwide resources, regardless of where they might be located.  Our warfare now includes mass-starvation and death through sanctions and embargos, bought and staged foreign government crushing demonstrations, assassinations, and whatever it takes to maintain power and control over our underlings and their valuables.

Protesting for causes is a completely worthless act, unless you just need to blow off some steam and shout in the streets without being locked up for insanity or for disturbing the peace.  The only possible way to end racial profiling is to open the borders of all nations to every earthling.  Ending S.B. 1070 would be the equivalent of pissing on a forest fire.  Occupying Wall Street might have seemed like a good idea at the time, but the only way to end hunger, homelessness, poverty, obscene wealth, and voracious greed would be to take control of government out of Wall Street’s hands, placing it firmly into the embrace of all citizens.  Even poor ones.  Monsanto’s crimes against humanity are only one tiny facet of the injustice perpetuated by thousands of predatory corporations which claim both personhood and immunity from responsibility for their crimes.  And if you still believe that marching in the streets for social issues will do any good, perhaps you should be locked up for insanity.  Your voice goes unheard, and makes no noise at all, falling upon absent ears like a tree in a remote, unoccupied forest.

And all our yesterdays have lighted fools the way to dusty death, claimed the Bard of Avon.  People who agree with my assessments of the foolishness of mankind have been warning about nuclear holocaust and the end of the world for my entire life.  Now it appears that the arms race with a reluctant but goaded Russia is kicking back into high gear, and that the end time may indeed be at hand.  I don’t usually like being wrong, but in this case I don’t want to be right.  And buying a portfolio of stock in corporations specializing in the manufacture of W.M.D.’s would be no silver lining in that dark cloud.  I hear that rich folks bleed just like you and me.  Let’s do everything we can to avoid finding out.  Hasta la victoria siempre!

A Wall Street Boost for Social Security

The aging of America is putting the squeeze on Social Security. About 10,000 baby boomers turn 65 every day and the number is heading even higher. Ready or not, our retirement system faces its first major overhaul in decades.

Lawmakers should listen to Warren Buffett before they settle on any new payroll tax or benefit schedules. “I’m a card-carrying capitalist,” Buffett says, “I believe we wouldn’t be sitting here except for the market system.”

Social Security should become a card-carrying capitalist too. It should invest part of its $2.8 trillion trust fund in the stock market, specifically in broad-based, low-cost index funds.

Call it a Wall Street boost for Social Security. It could make the coming overhaul less costly for workers and employers alike. It would effectively give tens of millions of low- to middle-income workers their first share ever in the market. Lastly, it’s the smart thing to do: research has shown the reward easily justifies the risk.

Trust fund dollars have always been invested in ultra-safe government securities. The idea of seeking higher returns by putting some of the money into stocks has been proposed before, but it’s never gone anywhere.

The coming reform (the first since 1983 and only the second ever) gives Congress a chance to begin making up for lost time.

And for lost opportunities too. By mid-March of 2019, the S&P 500 had risen by more than 300 percent from its financial-crisis low in March 2009. According to Goldman Sachs, the index’s annualized gain of over 15 percent represents one of its best decades ever.

The huge bull run didn’t add a penny to the Social Security trust fund. In fact, the fund’s return over the same decade was lower than usual: many of its holdings were paying (and still are) abnormally low interest rates.

All the more reason to make sure a stock market boost becomes part of the overhaul. Let’s give the trust fund its first chance for substantial gains. Let’s keep pushing back the year the fund runs dry. The program’s trustees now estimate it’ll happen in 2035. If Congress doesn’t act before then, benefits will have to be cut by roughly 25 percent.

Both parties are well aware of the crunch. As usual these days, they’re gridlocked on what to do.

Republicans think the problem can be solved with just two words: stingier and shorter. Their proposals would hit future recipients with the double whammy of lower benefits and a later retirement age (an idea Buffett has also floated).

Democrats have lined up solidly behind a bill that goes in the opposite direction. It increases payouts by two percent and sweetens the formula for cost-of-living adjustments (COLAs). The money to pay for it would come from higher payroll taxes, especially on the biggest earners.

Payroll taxes are currently not collected on wages greater than $132,900. The Democratic bill would tax all earnings over $400,000. The rate itself (levied on both workers and employers) would rise 0.1 percent per year from 2020 to 2043, going from the current 6.2 percent to 7.4 percent. The system’s actuaries say these changes would keep the fund solvent into the 2090s.

All well and good, but adding a Wall Street boost could make the reform even better. The tax increase could be smaller. The trust fund’s solvency could be extended into the 22nd century. Millions of workers without workplace retirement plans could reap some of the same stock market gains as workers who have them.

Alicia H. Munnell lives and breathes retirement policy. It was her calling card for a top job in the Clinton Administration. Since then she’s been a professor at Boston College, where she founded and directs its Center for Retirement Research. In 2006 she co-authored the definitive book Social Security and the Stock Market.

It’s a probing, scholarly work. It doesn’t minimize the risks, including the political risks of putting the government in charge of investment decisions. It cites hundreds of facts, including these:

After all, stocks yield 7 percent after inflation and bonds only 3 percent.

Two types of government pensions in the United States already invest in equities with no apparent ill effects,” the Thrift Savings Program for federal employees and state and local pension funds.

Adding the Social Security trust fund to the list would make that three. As Warren Buffett knows, it’s really no more than a bet on the future of America. If that’s not a good bet, what is?

• This article first appeared at www.nydailynews.com

The Bankers’ “Power Revolution”: How the Government Got Shackled by Debt

This article is excerpted from my new book Banking on the People: Democratizing Money in the Digital Age, available in paperback June 1.

*****

The U.S. federal debt has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $22 trillion in April 2019. The debt is never paid off. The government just keeps paying the interest on it, and interest rates are rising.

In 2018, the Fed announced plans to raise rates by 2020 to “normal” levels — a fed funds target of 3.375 percent — and to sell about $1.5 trillion in federal securities at the rate of $50 billion monthly, further growing the mountain of federal debt on the market. When the Fed holds government securities, it returns the interest to the government after deducting its costs; but the private buyers of these securities will be pocketing the interest, adding to the taxpayers’ bill.

In fact, it is the interest, not the debt itself, that is the problem with a burgeoning federal debt. The principal just gets rolled over from year to year. But the interest must be paid to private bondholders annually by the taxpayers and constitutes one of the biggest items in the federal budget. Currently the Fed’s plans for “quantitative tightening” are on hold; but assuming it follows through with them, projections are that by 2027 U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Donald Trump’s trillion-dollar infrastructure plan every year, and it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds.

Where will this money come from? Crippling taxes, wholesale privatization of public assets, and elimination of social services will not be sufficient to cover the bill.

Bondholder Debt Is Unnecessary

The irony is that the United States does not need to carry a debt to bondholders at all. It has been financially sovereign ever since President Franklin D. Roosevelt took the dollar off the gold standard domestically in 1933. This was recognized by Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, in a 1945 presentation before the American Bar Association titled “Taxes for Revenue Are Obsolete.”

“The necessity for government to tax in order to maintain both its independence and its solvency is true for state and local governments,” he said, “but it is not true for a national government.” The government was now at liberty to spend as needed to meet its budget, drawing on credit issued by its own central bank. It could do this until price inflation indicated a weakened purchasing power of the currency.

Then, and only then, would the government need to levy taxes — not to fund the budget but to counteract inflation by contracting the money supply. The principal purpose of taxes, said Ruml, was “the maintenance of a dollar which has stable purchasing power over the years. Sometimes this purpose is stated as ‘the avoidance of inflation.’

The government could be funded without taxes by drawing on credit from its own central bank; and since there was no longer a need for gold to cover the loan, the central bank would not have to borrow. It could just create the money on its books. This insight is a basic tenet of Modern Monetary Theory: the government does not need to borrow or tax, at least until prices are driven up. It can just create the money it needs. The government could create money by issuing it directly; or by borrowing it directly from the central bank, which would create the money on its books; or by taking a perpetual overdraft on the Treasury’s account at the central bank, which would have the same effect.

The “Power Revolution” — Transferring the “Money Power” to the Banks

The Treasury could do that in theory, but some laws would need to be changed. Currently the federal government is not allowed to borrow directly from the Fed and is required to have the money in its account before spending it. After the dollar went off the gold standard in 1933, Congress could have had the Fed just print money and lend it to the government, cutting the banks out. But Wall Street lobbied for an amendment to the Federal Reserve Act, forbidding the Fed to buy bonds directly from the Treasury as it had done in the past.

The Treasury can borrow from itself by transferring money from “intragovernmental accounts” — Social Security and other trust funds that are under the auspices of the Treasury and have a surplus – but these funds do not include the Federal Reserve, which can lend to the government only by buying federal securities from bond dealers. The Fed is considered independent of the government. Its website states, “The Federal Reserve’s holdings of Treasury securities are categorized as ‘held by the public,’ because they are not in government accounts.”

According to Marriner Eccles, chairman of the Federal Reserve from 1934 to 1948, the prohibition against allowing the government to borrow directly from its own central bank was written into the Banking Act of 1935 at the behest of those bond dealers that have an exclusive right to purchase directly from the Fed. A historical review on the website of the New York Federal Reserve quotes Eccles as stating, “I think the real reasons for writing the prohibition into the [Banking Act] … can be traced to certain Government bond dealers who quite naturally had their eyes on business that might be lost to them if direct purchasing were permitted.”

The government was required to sell bonds through Wall Street middlemen, which the Fed could buy only through “open market operations” – purchases on the private bond market. Open market operations are conducted by the Federal Open Market Committee (FOMC), which meets behind closed doors and is dominated by private banker interests. The FOMC has no obligation to buy the government’s debt and generally does so only when it serves the purposes of the Fed and the banks.

Rep. Wright Patman, Chairman of the House Committee on Banking and Currency from 1963 to 1975, called the official sanctioning of the Federal Open Market Committee in the banking laws of 1933 and 1935 “the power revolution” — the transfer of the “money power” to the banks. Patman said, “The ‘open market’ is in reality a tightly closed market.” Only a selected few bond dealers were entitled to bid on the bonds the Treasury made available for auction each week. The practical effect, he said, was to take money from the taxpayer and give it to these dealers.

Feeding Off the Real Economy

That massive Wall Street subsidy was the subject of testimony by Eccles to the House Committee on Banking and Currency on March 3-5, 1947. Patman asked Eccles, “Now, since 1935, in order for the Federal Reserve banks to buy Government bonds, they had to go through a middleman, is that correct?” Eccles replied in the affirmative. Patman then launched into a prophetic warning, stating, “I am opposed to the United States Government, which possesses the sovereign and exclusive privilege of creating money, paying private bankers for the use of its own money. … I insist it is absolutely wrong for this committee to permit this condition to continue and saddle the taxpayers of this Nation with a burden of debt that they will not be able to liquidate in a hundred years or two hundred years.”

The truth of that statement is painfully evident today, when we have a $22 trillion debt that cannot possibly be repaid. The government just keeps rolling it over and paying the interest to banks and bondholders, feeding the “financialized” economy in which money makes money without producing new goods and services. The financialized economy has become a parasite feeding off the real economy, driving producers and workers further and further into debt.

In the 1960s, Patman attempted to have the Fed nationalized. The effort failed, but his committee did succeed in forcing the central bank to return its profits to the Treasury after deducting its costs. The prohibition against direct lending by the central bank to the government, however, remains in force. The money power is still with the FOMC and the banks.

A Model We Can No Longer Afford

Today, the debt-growth model has reached its limits, as even the Bank for International Settlements, the “central bankers’ bank” in Switzerland, acknowledges. In its June 2016 annual report, the BIS said that debt levels were too high, productivity growth was too low, and the room for policy maneuver was too narrow. “The global economy cannot afford to rely any longer on the debt-fueled growth model that has brought it to the current juncture,” the BIS warned.

But the solutions it proposed would continue the austerity policies long imposed on countries that cannot pay their debts. It prescribed “prudential, fiscal and, above all, structural policies” — “structural readjustment.” That means privatizing public assets, slashing services, and raising taxes, choking off the very productivity needed to pay the nations’ debts. That approach has repeatedly been tried and has failed, as witnessed, for example, in the devastated economy of Greece.

Meanwhile, according to Minneapolis Fed president Neel Kashkari, financial regulation since 2008 has reduced the chances of another government bailout only modestly, from 84 percent to 67 percent. That means there is still a 67 percent chance of another major systemwide crisis, and this one could be worse than the last. The biggest banks are bigger, local banks are fewer, and global debt levels are higher. The economy has farther to fall. The regulators’ models are obsolete, aimed at a form of “old-fashioned banking” that has long since been abandoned.

We need a new model, one designed to serve the needs of the public and the economy rather than to maximize shareholder profits at public expense.

An earlier version of this article was published in Truthout.org.

Forgive them their debts as they forgive those…

It is “budget time” again!

That is the season when the persons displayed on television screens as representatives of those who have no representation engage in the theatrical display of subordination to those who actually own things, like the countries we happen to inhabit. Although there have been a few publicised investigations and even some occasional criminal charges against (usually septuagenarians) some conspicuous miscreants, there has been no action which could restore some health or sanity to what most of us consider the daily economy. In some countries, like where I live, people go on strike. There is little indication that the fundamental message of the strikers gets heard. Perhaps that is also why the television seems obsessed with the marketing of hearing aids. There is a hearing aid for every occasion, except sessions of the national assembly, where such technology might really help.

One way of dealing with the hearing impaired is repetition. In scientific terms this means increasing the rate of signal in proportion to noise in the hope that the essential message is received. Although I wrote a version of this paper in 2014, four years later I cannot help feeling some repetition would do no harm. If every budget season one has to listen to the same set of distortions, then it is only fair to reproduce the corrections.

Like the absurd climate debate, which never includes the “carbon footprint” of the largest military machines, the budget debates (essentially interchangeable) never discuss the cost of subsidising international banks and corporations to facilitate their extraction of wealth from the national economy. There is no intelligent, let alone honest, discussion of what is meant by “public debt”—or why the taxpayers must bear losses to guarantee tax-exempt profits for investors.

I always ask myself when someone says or writes “loss”, where did the money go? Even when a ship is lost at sea there is generally wreckage. Of course, the ocean is bigger than the economy and it is possible that a ship’s remains disappear beyond recovery. The price of abandoning the very modest social gains of the New Deal in the US and social democracy in Europe with the ascendancy of Margaret Thatcher and Ronald Reagan has been enormous, not only for US and European working people but, for the rest of the world. In fact, the meter is still running with no indication of when it will stop.

The crisis no one cares to talk about any more comprises trillions in losses. If these losses are real, then that means the value has been forfeited in favour of someone else. E.g. after the Great War France and Britain were essentially bankrupt: they owed nearly everything to US banks. Without economic manipulation, war and terror, India would probably have occupied the same status vis a vis Great Britain in 1945 that Brazil gained vis a vis Portugal after the Napoleonic Wars. The claims against the productive capacity and assets of Old Europe were held by identifiable third parties, representing, then as now, a tiny band of bankers. Of course, those claims were so great that no normal income streams from taxation could satisfy them. Control of Britain was effectively ceded to the US, while India was wracked by civil war rather than collecting the wartime debt Britain owed to her.

The other meaning of loss is the inability to sustain a certain valuation of an asset or income stream. The nature of the initial valuation is then the problem. The continuous attempts in the IFRS (international accounting standards) to skirt around the issue of essentially fraudulent valuation illustrates that even the private sector’s notion of “value”, whether book value or fair value, is the product of casuistry.

Since European “banking” was reorganised on the US Federal Reserve model by creation of the European Central Bank, it is instructive to consider how grand theft in the state-banking sector of the US functions. In other words, the “losses” hidden on the books of the USG banks, “Fannie” and “Freddie”, are either notional or they reflect claims that were satisfied in favour of third parties beyond the capacity of those institutions to generate income. Again we know who those third parties are. The “losses” are essentially sacrificed sovereignty.

Government institutions pledge to private persons (corporations and foreign exchange pirates) the State’s capacity to pay, derived from the ability to tax the working population, beyond any realistic possibility to extract that income. This was called “tax farming” in the bad old days of “colonialism”. Frequently punitive military force was sent into any country that was not delivering enough booty (aka interest on foreign debt). In fact, as retired general of US Marines infamously confessed that was his main job in the Corps—protecting corporate plunder.

This is essentially the same principle imposed through the ECB—except that some nominal account has to be taken of national political systems. Since in Europe the State was far more frequently the owner of capital infrastructure, absorbing the cost of its operation and regulating labour as civil servants, considerable ideological work had to be performed to cultivate the generation, which privatised most of the national capital assets held by European states. The fact that since 1945 the US has controlled the international payments system has reduced the need for military intervention. Decisions taken in New York, London, Frankfurt or Brussels can deprive a country of any affordable means to engage in the most basic financial transactions. The entities involved are privately owned and therefore cannot be coerced except by measures that would “threaten private property”.

Just as the railroads and banks obtained control over most of the continental US by defrauding the US government in the 19th century, the surviving banks have defrauded most of the American population of its home equity today. Although it was established that a conspiracy of UK-based clearing banks illegally fixed the LIBOR/ EURIBOR rates, this had no serious consequences. If one considers very carefully that nearly all mortgage and commercial financing agreements base their interest computations on one of these benchmarks, the true scope of the fraud becomes apparent. Everyone who made an interest rate agreement assuming the “free market” condition of the underlying rate was cheated. It could be argued that the interest rate clauses of innumerable contracts were void due to fraud. A perusal of public debt instruments would no doubt reveal even more catastrophic deception.

The endless wars, funded by plundering the public treasury and the wealth of other countries, are part of that income extraction, too. Now the US government and those of its vassals are little more than one large mercenary enterprise, together as NATO, the most heavily armed collection agency on behalf of third party creditors on the planet. It does not matter who occupies the mansion at 1600 Pennsylvania Avenue.

Of course, there is plausible denial for any of the beneficiaries of this plunder since populations weaned on soap operas and “crime drama” are incapable of examining, let alone comprehending, the most obvious operations of US corporations and their agents– who almost never appear as criminals on television. The “crime drama” narrative dominates almost every bandwidth on the critical spectrum and as a much younger US director, Michael Moore demonstrated in Bowling for Columbine, corporate crime does not make acceptable television. The most elemental sociological truths, plain to anyone who has ever belonged to a club or worked in middle management of a company, namely that “democratic” and “meritocratic” decisions are regularly subverted by scheming among the ambitious at the expense of the docile– become discredited when the insight is applied to the polity as a whole. People who do not think twice about making a phone call to a “friend” to influence a decision in their social club or place of employment, become incredulous at the suggestion that the chairman of a major investment bank would dictate policy to the head of state whose election he had financed.

In short, the debate about the current global economic “crisis” is obscenely counterintuitive and illogical to the point of incoherence. Who is willing to “follow the money”? This dictum, popularised in the Woodward and Bernstein fairy tale of US President Richard Nixon’s demise– All the President’s Men— appears utterly forgotten, despite recurring astronomic fraud perpetrated by US corporations since the so-called “S&L scandal”– crimes for which no more than a handful of people were indicted, let alone tried or sentenced. Only one corporation was deprived of its right to do business, Arthur Andersen, and this was patently done to spare all the politicians from the reigning US president, most of the US Congress, and untold state and local officials who had been bribed or otherwise influenced by Enron.

If the stories reported by Pete Brewton in 1992, the documented history of the OSS “China insurer” AIG, and the implications of the 2002 Powers Report on the Enron collapse are taken seriously, then Houston lies on a financial fault line more devastating than the San Andreas. That fault line runs from Texas through Virginia to the bedrock of Manhattan. The economic earthquakes that have persisted since 1980 are both literally and figuratively the result of deployment of the US atomic arsenal and the policies that gave rise to it. The US dollar’s continued, if fluctuating, strength as a reserve currency is based on drugs, weapons, and oil– all traded in US dollars. However, this material reality is also based on an ideological or dogmatic constitution. The seismic activity induced by US corporations created gaping holes in the global economy– holes which could only be breached by the financial instruments developed in the weapons laboratories of Wall Street based on the same conceptual models as the neutron bomb and today’s nano-munitions developed at Lawrence Livermore. Indeed, the theory has been almost universally accepted that people are always to blame for the problems of government and Business is the sole and universal solution to all problems. Hence tax monies will only be spent on weapons, war, and subsidies for corporations—the things Business needs.

A considerable obstacle to any change in the US, short of its destruction, is the fact that as Michael Hudson and former assistant Treasury secretary under Reagan, Paul Craig Roberts, write repeatedly, the US government has absolutely lost whatever legitimate function it may ever have had as an instrument of popular will. In other words, the efforts of working people, whether immigrant or ex-slave to remake the plutocratic regime of the 19th century into a State responsive to their needs were frustrated by the massive assaults on labour, combined with the ideological warfare of the “Progressive” movement. The latter, funded heavily by the newly created super-philanthropies, including those of Rockefeller, Sage, Peabody, and Carnegie, predated CIA-style front organizations and infiltration. They helped turn popular sovereignty movements into the kind of technocratic organisations which prevail today– dependent on corporate donations and led by the graduates of cadre schools like the Ivy League colleges, Oxford and the LSE. With few exceptions the only remnants of the “popular will” in the US are those that drive lynch mobs, reincarnated in “talk radio” today.

The main work of the USG and the corporations for which it stands has been to undermine any notion that the State is rightfully an expression of the popular will for the realisation of popular welfare. The State has been reduced to a protection racket. By the time Ronald Reagan, imitating Margaret Thatcher, pledged to “get government off the back of the people”, the only “people” who counted were corporations and those in thrall to them.

It is easy to forget that the US was actually founded on the basis of a kind of white (in that sense “enlightened”), oligarchic absolutism– the British parliamentary dictatorship minus hereditary monarch. Its moral vision predated the Thirty Years War and, until John Kennedy was elected president, its hypocrisy was that of Cromwellian fanatics. In revolutionary France and countries that were inspired by France, as opposed to the American independence war, struggle continued on the premises that the State is not the King (in whatever incarnation) but created by the citizens (not the possessive individual) for the maintenance of the common weal– including the nutrition, health, housing, education of its people. The opposition to destruction of the public sector or public services and the debate that continues in Greece, France, Italy, and to a lesser extent Germany, defies comprehension in North America and Great Britain because of some unfortunate residues of that revolutionary vision of the State so violently opposed by Britain and the US ever since 1789– except when the resulting instability provided business opportunities. (Thatcher did not restore the spirit of Churchill to power—but that of Wellington.)

Moreover as Coolidge once said, “the business of America is business”. If a policy or action of government cannot be expressed in terms of someone’s maximum private profit then it is indefensible in the US. The conditions of the Maastricht Treaty establishing the euro and the ECB are an attempt to impose those same ideological and political constraints on the European Union enforced by adoption of the Federal Reserve Act in the US. The Federal Reserve is essentially a technology for naturalising usury and endowing it with supernatural legitimacy. But just as it has been argued in some quarters that the US Federal Reserve triggered the Great Depression– for the benefit of the tiny bank of banking trusts– the European Central Bank, urged by the right-wing government in Berlin, is being pressured to follow the same rapine policies as the FED is pursuing today. Of course, there are other countries ruled by financial terrorism or where banking gangs have turned their entire arsenal against sovereign peoples.

The “Crisis” is not really about the “debt” or the heinous losses. It is a crisis of sovereignty. The failure of popular sovereignty means that a microscopic bacterial colony of the immeasurably rich can make war on the rest of the world, destroying the common weal and commerce at home and everything else abroad. Germany’s citizens have been bludgeoned since 1945 by Anglo-American propaganda and the occupation forces to persuade them that they– not the great banking and industrial cartels on both sides of the Atlantic– were responsible for Adolph Hitler’s rise to power. When in 1968, student leaders like Rudi Dutschke tried to remind Germans that their democracy was destroyed before Hitler’s putsch and that they had the right and opportunity to demand a democratic Germany after the war, those young people were harassed and even killed. (Dutschke was shot in the head by an unemployed labourer. That “lone” killer later died in prison with a plastic bag over his head.) Attempts to create a truly popular democratic government in Germany have been frustrated by foreign intervention since the French Revolution. Nevertheless people in Germany still believe that the State is there to provide services to the people– and not to fight wars to further foreign trade as suggested by Horst Köhler before he was relieved of his duties (ostensibly resigning) as German federal president.

There is no doubt in Germany that former Chancellor Schroeder’s refusal to follow the US into Iraq—whatever motivated it—enjoyed the widest support, even among those who tend to believe anything the US government says. The resignation of former IMF director and Federal President Köhler expressed the sensitivity of the situation then. On one occasion he referred to the great banking interests as “monsters” and then broke the silence on the German war efforts in Central Asia by explicitly articulating what had been Chancellor Merkel’s, silent but deadly policy of supporting US counter-terror in Afghanistan. Köhler was not opposed to the future escalation of German belligerence, but by his calling a spade a spade on national radio, the right-wing government in Berlin almost had to defend its unconstitutional deployment of German soldiers in public. Already that April Angela Merkel had been forced to sacrifice an army general and a cabinet minister when it became known that German combat aircraft were also bombing civilians like their US counterparts—and trying to keep the fact a secret.

In the midst of the financial crisis, that is the plunder and pillage of the accumulated reserves of Europe’s working population after those of the US are exhausted, it is impossible to ignore the restoration of Asian political and economic prominence. This process started in the 1960s when Britain and the US launched their wars to secure footholds and control of the vast resources of Indonesia and Indochina. Although only partly successful, the destruction of national independence movements throughout South Asia created the conditions for de-industrialising Europe and North America. Mistakenly much of the North American and European Left judged the losses in Korea and Vietnam as defeats for US power. Such judgments have been based on assessments of the official war aims and not on any analysis of the underlying corporate and financial policy objectives. The long-term results of those wars included creation of the massive debt system that is at the root of financial collapse for the majority of US Americans. Of course, China remains the great unconquerable threat to continuation of US hegemony. The balance of power in Asia may be very delicate indeed.

Continental Europe remained somewhat insulated from those seismic forces until 1989. The “velvet” invasion of Eastern Europe and the former Soviet Union led by US capital, aided as usual by the combined secret services and economic “consultants” of Shock Therapy, began the destruction of the economic base for European social democracy and “real socialism”. The debt machine created to exploit Eastern Europe was applied in Germany first– destroying the GDR and financing that destruction with EU-generated debt, culminating in the euro. Introduction of the euro effectively destroyed half of the purchasing power of working people in the Euro Zone overnight, creating the conditions for consumer borrowing which had prevailed in the US since the late 60s and eroding wages and benefits drastically.

The final loss of control over archaic legislative instruments (whether in the US or Europe) is not only assured by the system of bribery that turns those in office into indentured servants of corporations. Full investigation of the Enron scandal would have proven once and for all that there is almost no one in the US Congress not owned by some corporation. Similar conditions have come to prevail in European legislatures where for decades US academic and policy exchange programmes have trained the political class to work first and foremost for Business.

The loss is also assured by the now entrenched belief that the only legitimate human goal is individual personal profit. As Hudson has suggested, this is the “theology of the Chicago School”. Since Margaret Thatcher was appointed to convert Britain to that dogma, nearly the entire political, academic and “civil” culture has been saturated with people who cannot think in any other terms– even when they assert that they are still social democrats or democratic socialists. The latter insist that “social policy” is merely a palliative to prevent the poor and destitute from becoming unsightly spectres in urban entertainment centres. They all have become positivists– reifying the prevailing economic relations and worshipping quantitative methods– subordinating human agency to pseudo-science and thinly disguised opportunism. The only kindness this ethical standpoint can express is “charity”. Charity, however, has nothing to do with the common weal or the State as an embodiment of the popular will. In fact, it is just as parasitic as the belief from which it springs. If those whom John Pilger called “the new rulers of the world” consent to relieve us– that is to allow us anything resembling our dignity and subsistence wages– then it will scarcely exceed the infamous “dimes” with which John D. Rockefeller cloaked his cynicism in piety and charity. Nowhere is the cynicism more profound than in the expression “giving back”. Of course, the pennies “given back” are microscopic compared with the billions “taken” in the first place. But those shiny pennies and dimes are enough to keep embedded intellectuals loyal to Bill Gates or George Soros. For a few dollars more they will even protect the likes of Blankfein or Buffett.

“Charity” is the gratification a person finds when scratching a mosquito bite. One feels better while scratching– although this provides no relief. The cause of the itch is the substance injected by the mosquito while sucking the blood from its victim. Of course, some mosquitoes offer only token charity and the itch disappears. But there are mosquitoes that carry other parasites– the effects of their charity can last forever, or at least until the victim dies.

The Banality of Evil Creeps into those Who Believe They Are Good

I was at a city hall meeting in Beaverton, Oregon, the other day when a few questions I had for the presenters dropped jaws. We’ll get to that later, the jaw-dropping effect I and those of my ilk have when we end up in the controlled boardrooms and chambers of the controllers – bureaucrats, public-private clubs like Chamber of Commerce, Rotary, and both political operatives and those who liken themselves as the great planners of the world moving communities and housing and public commons around a giant chessboard to make things better for and more efficient in spite of us.

Look, I am now a social worker who once was a print journalist who once was a part-time college instructor (freeway flyer adjunct teaching double the load of a tenured faculty) facilitating literature, writing, rhetoric classes, and others. The power of those “planners” and “institutional leadership wonks” and those Deanlets and Admin Class and HR pros and VPs and Provosts to swat down a radical but effective teacher/faculty/instructor/lecturer isn’t (or wasn’t then) so surprising. I was one of hundreds of thousands of faculty, adjunct,  hit with 11th Hour appointments, Just-in-Time gigs and called one-week-into-the-semester with offers to teach temporarily. Then, the next logical step of precarity was when a dean or department head or someone higher got wind of a disgruntled student, or helicopter (now drone) parent who didn’t like me teaching Sapphire or Chalmers Johnson or Earth Liberation Front or Ward Churchill in critical thinking classes, it was common to get only one or many times no classes the following semester. De facto fired. They fought and fought against unemployment benefits.

Here’s one paragraph that got me sanctioned while teaching in Spokane, at both Gonzaga and the community college:

As for those in the World Trade Center… Well, really, let’s get a grip here, shall we? True enough, they were civilians of a sort. But innocent? Gimme a break. They formed a technocratic corps at the very heart of America’s global financial empire—the “mighty engine of profit” to which the military dimension of U.S. policy has always been enslaved—and they did so both willingly and knowingly. Recourse to “ignorance”—a derivative, after all, of the word “ignore”—counts as less than an excuse among this relatively well-educated elite. To the extent that any of them were unaware of the costs and consequences to others of what they were involved in—and in many cases excelling at—it was because of their absolute refusal to see. More likely, it was because they were too busy braying, incessantly and self-importantly, into their cell phones, arranging power lunches and stock transactions, each of which translated, conveniently out of sight, mind and smelling distance, into the starved and rotting flesh of infants. If there was a better, more effective, or in fact any other way of visiting some penalty befitting their participation upon the little Eichmanns inhabiting the sterile sanctuary of the twin towers, I’d really be interested in hearing about it.

We are talking 17 years ago, Ward Churchill. The Little Eichmann reference goes back to the 1960s, and the root of it goes to Hannah Ardent looking at the trial of Adolf Eichmann, more or a less a middle man who helped get Jews into trains and eventually onto concentration camps and then marched into gas chambers. The banality of evil was her term from a 1963 book. So this Eichmann relied on propaganda against Jews and radicals and other undesirables rather than thinking for himself. Careerism at its ugliest, doing the bureaucratic work to advance a career and then at the Trial, displayed this “Common” personality that did not belie a psychopathic tendency. Of course, Ardent got raked over the coals for this observation and for her book, Eichmann in Jerusalem.

When I use the term, Little Eichmann, I broadly hinge it to the persons that live that more or less sacred American Mad Men lifestyle, with 401k’s, trips to Hawaii, cabins at the lake, who sometimes are the poverty pimps in the social services, but who indeed make daily decisions that negatively and drastically affect the lives of millions of people. In the case of tanned Vail skiers who work for Raytheon developing guidance systems and sophisticated satellite tethers and surveillance systems, who vote democrat and do triathlons, that Little Eichmann archetype also comes to mind. Evil, well, that is a tougher analysis  – mal, well, that succinctly means bad. I see evil or bad or maladaptive and malicious on a spectrum, like autism spectrum disorders.

Back to Beaverton City Hall: As I said, last week I was at this meeting about a “safe parking” policy, a pilot program for this city hooked to the Portland Metro area, where Intel is sited, and in one of the fastest growing counties in Oregon. Safe parking is all a jumbo in its implications: but for the city of Beaverton the program’s intent is to get three spaces, parking slots from each entity participating, for homeless people to set up their vehicles from which to live and dine and recreate. Old Taurus sedans, beat-up Dodge vans, maybe a 20-foot 1985 RV covered in black mold or Pacific Northwest moss. The City will put in $30,000 for a non-profit to manage these 15 or 20 spaces, and the city will put in a porta-potty and a small storage pod (in the fourth space) for belongings on each property.

This is how Portland’s tri-city locale plans to “solve” the homeless problem: live in your vehicles, with all manner of physical ailments (number one for Americans, bad backs) and all manner of mental health issues and all manner of work schedules. Cars, the new normal for housing in the world’s number one super power.

This is the band-aid on the sucking chest wound. This is a bizarre thing in a state with Nike as its brand, that Phil Knight throwing millions into a Republican gubernatorial candidate for governor’s coffers. Of course, the necessity of getting churches and large non-profits with a few empty parking spaces for houseless persons is based on more of the Little Eichmann syndrome – the city fathers and mothers, the business community, the cops, and all those elites and NIMBYs (not in my backyard) voted to make it illegal to sleep in your vehicle along the public right away, or, along streets and alleys. That’s the rub, the law was passed, and now it’s $300 fine, more upon second offense, and then, 30 days in jail for repeat offense: for sleeping off a 12-hour shift at Amazon warehouse or 14-hour shift as forklift operator for Safeway distribution center.

So these overpaid uniformed bureaucrats with SWAT armament and armored vehicles and $50 an hour overtime gigs and retirement accounts will be knocking on the fogged-over windows of our sisters/ brothers, aunties/uncles, cousins, moms/dads, grandparents, daughters/sons living the Life of Riley in their two-door Honda Accords.

Hmm, more than 12 million empty homes in the richest country in the world. Millions of other buildings empty. Plots of land by the gazillion. And, we have several million homeless, and tens of millions one layoff, one heart-attack, one arrest away from homelessness.

The first question was why we aren’t working on shutting down the illegal and inhumane law that even allows the police to harass people living in their cars? The next question was why parking spaces for cars? Certainly, all that overstock inventory in all those Pacific Northwest travel trailer and camper lots would be a source of a better living space moved to those vaunted few (20) parking spaces: or what about all those used trailers up for sale on Craig’s List? You think Nike Boy could help get his brethren to pony up a few million for trailers? What worse way to treat diabetic houseless people with cramped quarters? What fine way to treat a PTSD survivor with six windows in a Chevy with eight by four living space for two humans, a dog, and all their belongings and food.

The people at this meeting, well, I know most are empathetic, but even those have minds colonized by the cotton-ball-on-the-head wound solution thinking. All this energy, all the Power Points, all the meeting after meeting, all the solicitation and begging for 20 parking spaces and they hope for a shower source, too, as well as an internet link (for job hunting, etc.)  and maybe a place to cook a meal.

While housing vacancy has long been a problem in America, especially in economically distressed places, vacancies surged in the wake of the economic crisis of 2008. The number of unoccupied homes jumped by 26 percent—from 9.5 to 12 million between 2005 and 2010. Many people (and many urbanists) see vacancy and abandoned housing as problems of distressed cities, but small towns and rural communities have vacancy rates that are roughly double that of metropolitan areas, according to the study.

This is the insanity of these Little Eichmanns: The number of cities that have made homelessness a crime! Then, getting a few churches to open up parking slots for a few people to “try and get resources and wrap around services to end their homelessness.” Here are the facts — the National Law Center on Homelessness and Poverty states there are over 200 cities that have created these Little Eichmann (my terminology) municipal bans on camping or sleeping outside, increasing by more than 50 percent since 2011. Theses bans include various human survival and daily activities of living processes, from camping and sitting in particular outdoor places, to loitering and begging in public to sleeping in vehicles.

I am living hand to mouth, so to speak. I make $17 an hour with two master’s degrees and a shit load of experience and depth of both character and solutions-driven energy. This is the way of the world, brother, age 61, and living the dream in Hops-Blazers-Nike City, in the state of no return Nike/Oregon Ducks. Man oh man, those gridlock days commuting to and from work. Man, all those people outside my apartment building living in their vehicles (I live in Vancouver) and all those people who have to rotate where they live, while calling Ford minivan home, moving their stuff every week, so the Clark County Sheriff Department doesn’t ticket, bust and worse, impound.

I have gotten a few teeth – dentures — for some of these people. Finding funding to have a pretty rancid and nasty old guy in Portland measure, model and mold for a fitting. That’s, of course, if the people have their teeth already pulled out.

Abscesses and limps and back braces and walkers and nephritic livers and dying flesh and scabies and, hell, just plain old BO. Yet, these folk are working the FedEx conveyor belts, packaging those Harry and David apples, folding and stacking all those Black Friday flyers.

Living the high life. And, yet, these Little Eichmanns would attempt to say, or ask, “Why do they all have smart phones . . . they smoke and vape and some of them drink? Wasteful, no wonder they are homeless.”

So that line of thinking comes and goes, from the deplorables of the Trump species to the so-self vaunted elite. They drink after a hard day’s work, these houseless people. Yet, all those put-together Portlanders with two-income heads of household, double Prius driveways, all that REI gear ready for ski season, well, I bicycle those ‘hoods and see the recycle bins on trash day, filled to the brim with IPA bottles, affordable local wine bottles, and bottles from those enticing brews in the spirit world.

So self-medicating with $250K dual incomes, fancy home, hipster lifestyles, but they’d begrudge houseless amputees who have to work the cash register at a Plaid Pantry on 12 hour shifts?

I have been recriminated for not having tenure, for not being an editor, for not retired with a pension, for not having that Oprah Pick in bookstores, for not having a steady career, for working long-ass hours as a social worker. The recrimination is magnificent and goes around all corners of this flagging empire. Pre-Trump, Pre-Obama, Pre-Clinton, Pre-Bush. Oh, man, that Ray-gun:

He had a villain, who was not a real welfare cheat or emblamtic of people needing welfare assistance to live back then in a troubling world of Gilded Age haves and haves not. That was January 1976, when Reagan announced that this Welfare Queen was using ”80 names, 30 addresses, 15 telephone numbers to collect food stamps, Social Security, veterans benefits for four nonexistent, deceased veteran husbands, as well as welfare. Her tax-free cash income alone has been running $150,000 a year.”

Four decades later, we have the same dude in office, the aberration of neoliberalism and collective amnesia and incessant ignorance in what I deem now as Homo Consumopithecus and Homo Retailapithecus. Reagan had that crowd eating out of his hands as he used his B-Grade Thespian licks to stress the numbers – “one hundred and fifty thousand dollars.”

Poverty rose to the top of the public agenda in the 1960s, in part spurred by the publication of Michael Harrington’s The Other America: Poverty in the United States. Harrington’s 1962 book made a claim that shocked the nation at a time when it was experiencing a period of unprecedented affluence: based on the best available evidence, between 40 million and 50 million Americans—20 to 25 percent of the nation’s population—still lived in poverty, suffering from “inadequate housing, medicine, food, and opportunity.”

Shedding light on the lives of the poor from New York to Appalachia to the Deep South, Harrington’s book asked how it was possible that so much poverty existed in a land of such prosperity. It challenged the country to ask what it was prepared to do about it.

So, somehow, all those people reminding me that my job history has been all based on my passions, my avocations, my dreams, that I should be proud being able to work at poverty level incomes as a small town newspaper reporter, or that I was able to teach so many people in gang reduction programs, at universities and colleges, in alternative schools, in prisons and elsewhere, at poverty wages; or that I was able to get poems published here and stories published there and that I have a short story collection coming out in 2019 at zero profit, or that I am doing God’s work as a homeless veterans counselor, again, at those Trump-loving, Bezos-embracing poverty wages.

Oh, man, oh man, all those countries I visited and worked in, all those people whose lives I changed, and here I am, one motorcycle accident away from the poor house, except there is no poor house.

Daily, I see the results of military sexual trauma, of incessant physical abuse as active duty military, infinite anxiety and cognitive disorders, a truck load of amputated feet and legs, and unending COPD, congestive heart failure, and overall bodies of a 70-year-old hampering 30-year-old men and women veterans.

They get this old radical environmentalist, vegan, in-your-face teacher, and a huge case of heart and passion, and I challenge them to think hard about how they have been duped, but for the most part, none of the ex-soldiers have even heard of the (two-star) Major General who wrote the small tome, War is a Racket:

WAR is a racket. It always has been.

It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.

A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small “inside” group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.

In the World War I a mere handful garnered the profits of the conflict. At least 21,000 new millionaires and billionaires were made in the United States during the World War. That many admitted their huge blood gains in their income tax returns. How many other war millionaires falsified their tax returns no one knows.

How many of these war millionaires shouldered a rifle? How many of them dug a trench? How many of them knew what it meant to go hungry in a rat-infested dug-out? How many of them spent sleepless, frightened nights, ducking shells and shrapnel and machine gun bullets? How many of them parried a bayonet thrust of an enemy?

How many of them were wounded or killed in battle?

Out of war nations acquire additional territory, if they are victorious.

They just take it. This newly acquired territory promptly is exploited by the few — the selfsame few who wrung dollars out of blood in the war. The general public shoulders the bill.

And what is this bill?

This bill renders a horrible accounting. Newly placed gravestones. Mangled bodies. Shattered minds. Broken hearts and homes. Economic instability. Depression and all its attendant miseries. Back-breaking taxation for generations and generations.

For a great many years, as a soldier, I had a suspicion that war was a racket; not until I retired to civil life did I fully realize it. Now that I see the international war clouds gathering, as they are today, I must face it and speak out.

More fitting now than ever, General Butler’s words. Structural violence is also the war of the billionaires and millionaires against the rest of us, marks and suckers born every nanosecond in their eyes. Disaster Capitalism is violence. Parasitic investing is war. Hostile takeovers are was. Hedge funds poisoning retirement funds and billions wasted/stolen to manage (sic) this dirty money are war. Forced arbitration is war. PayDay loans are war. Wells Fargo stealing homes is war. Lead in New Jersey cities’ pipes is war. Hog  excrement/toxins/blood/aborted fetuses pound scum sprayed onto land near poor communities is war. Fence lining polluting industries against poor and minority populations is war.

So is making it illegal to sit on a curb, hold a sign asking for a handout;  so is the fact there are millions of empty buildings collecting black mold and tax deferments. War is offshore accounts, and war is a society plugged into forced, perceived and planned obsolescence.

Some of us are battle weary, and others trudge on, soldiers against the machine, against the fascism of the market place, the fascism of the tools of the propagandists.

Some of us ask the tricky questions at meetings and conferences and confabs: When are you big wigs, honchos, going to give up a few hours a week pay for others to get in on the pay? When are you going to open up that old truck depot for homeless to build tiny homes?

When are you going to have the balls to get the heads of Boeing, Nike, Adidas, Intel, the lot of them, to come to our fogged-up station wagon windows in your safe parking zones to show them how some of their mainline workers and tangential workers who support their billions in profits really live?

How many millionaires are chain migrating from California or Texas, coming into the Portland arena who might have the heart to help fund 15 or 30 acres out there in Beavercreek (Clackamas, Oregon) to set up intentional communities for both veterans and non veterans, inter-generational population, with permaculture, therapy dog training, you name it, around a prayer circle, a sweat lodge, and community garden and commercial kitchen to sell those herbs and veggies to those two-income wonders who scoff at my bottle of cheap Vodka while they fly around and bike around on their wine tours and whiskey bar rounds? Micro homes and tiny homes.

My old man was in the Air Force for 12 years, which got the family to the Azores, Albuquerque, Maryland, and then he got an officer commission in the Army, for 20 years, which got the family to Germany, UK, Paris, Spain and other locales, and I know hands down he’d be spinning and turning in his grave if he was alive and here to witness not only the mistreatment of schmucks out of the military with horrendous ailments, but also the mistreatment of college students with $80K loans to be nurses or social workers. He’d be his own energy source spinning in his grave at Fort Huachuca if he was around, after being shot in Korea and twice in Vietnam, to witness social security on the chopping block, real wages at 1970 levels, old people begging on the streets, library hours waning, public education being privatized and dumb downed, and millions of acres of public sold to the “I don’t need no stinkin’ badge” big energy thugs.

I might be embarrassed if he was around, me at age 61, wasted three college degrees, living the dream of apartment life, no 401k or state retirement balloon payment on the horizon, no real estate or stocks and bonds stashed away, nothing, after all of this toil to actually have given to society, in all my communist, atheistic glory.

But there is no shame in that, in my bones, working my ass off until the last breath, and on my t-shirt, I’d have a stick figure, with a stack of free bus tickets, journalism awards, and housing vouchers all piled around me with the (thanks National Rifle Association) meme stenciled on my back:

You can have my social worker and teaching credentials and press passes when you pry them from my cold dead hands!

Brazil: Bolsonaro Towards a Military Dictatorship

   Jair Bolsonaro                   Fernando Haddad

One week before the second round of voting in Brazil, Jair Bolsonaro, the extreme right-wing candidate from the Social Liberal Party (PSL), against Fernando Haddad from the Worker’s Party (PT), Lula’s Party, for Brazil’s Presidential run-off elections, Bolsonaro leads to polls by double digits, about 58 against 42. And the gap is growing, despite the fact that as recent as end of September 2018, Brazilian women campaigned massively against Bolsonaro with the hashtag #EleNao (Not Him). His misogynist record left him with only 27% of women supporters only a couple of weeks ago. Massive cheat-and lie-propaganda increased that ratio by now to 42%. Does anybody seriously believe that Bolsonaro has changed his racist character and his women-degrading attitude?  It is mind-boggling how people fall for propaganda lies and manipulations.

The usual propaganda of deceit from the right has infiltrated every election in the last 5-10 years, starting with the sophisticated internet and propaganda fraud invented by Oxford Analytica (OA), which is largely believed having brought Trump to the White House, Macri to the Casa Rosada in Buenos Aires, Macron to the Elysée in Paris and Mme. Merkel for the fourth time to the German Federal Chanceller’s office in Berlin – among others. OA is also said having helped the BREXIT supporters. In the meantime, OA’s dirty election manipulation methods have been mainstreamed to the mainstream media – with lots and lots of corporate and banking money.

In fact, the frontrunner Bolsonaro is currently being accused by his opponent Fernando Haddad, of a ‘fraud and fake news’ campaign, and that just a few days before the run-off. The charge is that Bolsonaro is running a multi-million-dollar defamation campaign against Haddad, via Whatsapp and other social media. This means sending out literally millions of tailor-made messages to potential groups of voters. That’s the way of the of OA’s algorithms.

According to RT, Haddad told a media conference in Rio:

We have identified a campaign of slander and defamation via WhatsApp and, given the mass of messages, we know that there was dirty money behind it, because it wasn’t registered with the Supreme Electoral Tribunal.

This, after the Folha de S.Paulo newspaper uncovered a suspected election fraud. The publication alleges that a group of entrepreneurs are backing a multi-million-dollar slander campaign that would use several popular social media apps to reach out to Haddad supporters and smear his name with ‘fake news’.

We can only hope that the discovery of this slander and fraud may not be too late to stop Bolsonaro’s end run and to inform voters. Leading to an indictment of Bolsonaro is hardly a realistic chance, as he is supported by the current corrupt and fascist-type Temer Government and all the high judges who have impeded Lula’s legitimate request for running for Presidency. Only voters’ consciousness may make a difference.

Imagine what happens if Bolsonaro is elected? It is hardly fathomable. Bolsonaro has already declared that if elected he will render full power to the military. “When I’m elected, those who will command are the (military) captains”. His word  in Portuguese.

He is a fascist no doubt. There were other fascist military governments in Brazil, like Getúlio Vargas, who reigned from 1930-1945 as a military dictator mostly by decree. He abrogated the 1891 Constitution and introduced a new one in 1934 which was overturned, when finally, in 1945 Vargas was deposed and a new democratization process began with a new Constitution being introduced in 1946. But that was not all for fascism and military dictatorship in Brazil. There was more to come in the decades preceding Lula.

Another brutal military government came to power in 1964 by a coup d’état by the Armed Forces. It ruled Brazil from 1 April 1964 to 15 March 1985 by President Joao Goulart. It came to an end when José Sarney took office on 15 March 1985. What’s important to know is that both the Vargas coup of 1930, as well as the 1964 military coup were supported by the US Embassy in Brazil and the State Department in Washington. Mr. Bolsonaro has already today – after the first election round – the full support of Washington. He was immediately congratulated by the Trump government after the October 7 election results were known.

If no miracle happens within the coming week, Brazil may be slanted to go back some 90 years, into a fierce military dictatorship. Worse, today with the neoliberal doctrine being the overarching last word on economic policies, also for the military. We are looking at full privatization of everything, of social services, water and health privatization has already begun; basic and profitable infrastructure, natural resources, and the IMF, World Bank, FED-Wall Street indebtment is already well under way and its future programmed, including a devastating austerity program which under unelected Mr. Corrupt Temer has already started.

In fact, economic disaster in terms of dependence on IMF, WB and the FED, may also loom under Haddad, who has already said he would work with the financial fiefdom of Washington. As Luiz Inacio Lula did, when he was elected in 2002. He was the “golden example boy” for the IMF, following strictly the rules he was taught would bring progress to his country.  Later he realized what was actually going on within the financial sector of Brazil. He corrected some of the aberrations, but many stayed in place throughout Dilma Rousseff’s Presidency.

Brazil could become South America’s Greece – just multiplied by a factor of 100.

Just imagine the political and economic impact this would have on the Latin American region. Brazil is by far the largest economy of Latin America with a GDP of about 2.1 trillion US-dollars in 2017, a population of 210 million and a landmass 8.516 million km2 – and with the world’s largest known fresh water reserves. Trade without Brazil is unthinkable for Latin America and the world. Plus, a Bolsonaro regime would have full ideological and military support from Washington. In fact, Brazil may soon become the second South American NATO country after Colombia.

How would Venezuela feel, surrounded by two fierce militarized NATO countries? Washington could just smile and watch, while Colombia and Brazil – and their NATO command – would do the rest. Or would they?  Venezuela is on the best way to detach herself from the dollar hegemony and ally with the East. And that is not only in trade, but also in huge investments from China and Russia. Invading Venezuela would not be easy, despite NATO from the east and from the west and with the empire just across the Caribbean.

Back to Bolsonaro. It will not be as easy to thrash this fascist military doctrine, of a President, hitherto hardly known to the outside world, down the average Brazilians’ throats. Their vote and mind may be manipulated, but once they wake up – the election may be past, and the Temer policies implemented by factors of ten – social suffering will increase, à la Greece – people may simply not take it.

They will realize that this entire propaganda farce serves only a few Brazilian oligarchs, but mostly the transnational corporations and banks. Will they take to the streets? Demand another government, fight for their rights? Brazilians are not (yet) the kind to double up and shut up, as the Greeks had to do, weakened by a Government of treason, by an absence of medical and other social services and by a low-low morale that is reflected in an exponentially rising suicide rate, according to the British Lancet. Brazilians may have learned a lesson.

Brazil and the BRICS. Already under Temer, Brazil’s role in the BRICS was merely anecdotal. It was clear that politically Brazil would and could no longer adhere to the principles that was behind the BRICS association, namely, economic independence from the debt masters IMF, World Bank and FED. What with Bolsonaro? It would behoove the BRICS expulsing Brazil; sending Brazilians a warning now, before the run-off elections, that no fascist government could be admitted within the ranks of the BRICS. Fascism is the absolute antidote to the new alliances of SCO, BRICS, EEU, and newly the Caspian Sea Alliance (Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan).

But – and this is highly important – let’s not let it get out of hand. Let not Bolsonaro be elected this coming Sunday. Make the right choice now. Regardless what you are being manipulated to believe. Stand up Brazilians, Women and men – say #NAO Bolsonaro!

A Global People’s Bailout for the Coming Crash

When the global financial crisis resurfaces, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

*****

A full decade since the great crash of 2008, many progressive thinkers have recently reflected on the consequences of that fateful day when the investment bank Lehman Brothers collapsed, foreshadowing the worst international financial crisis of the post-war period. What seems obvious to everyone is that lessons have not been learnt, the financial sector is now larger and more dominant than ever, and an even greater crisis is set to happen anytime soon. But the real question is when it strikes, what are the chances of achieving a bailout for ordinary people and the planet this time?

In the aftermath of the last global financial meltdown, there was a constant stream of analysis about its proximate causes. This centred on the bursting of the US housing bubble, fuelled in large part by reckless sub-prime lending and an under-regulated shadow banking system. Media commentaries fixated on the implosion of collateralised debt obligations, credit default swaps and other financial innovations—all evidence of the speculative greed and lax government oversight which led to the housing and credit booms.

The term ‘financialisation’ has become a buzzword to explain the factors which precipitated these events, referring to the vastly expanded role of financial markets in the operation of domestic and global economies. It is not only about the growth of big banks and hedge funds, but the radical transformation of our entire society that has taken place as a result of the increasing dominance of the financial sector with its short-termist, profitmaking logic.

The origins of the problem are rooted in the early 1970s, when the US government decided to end the fixed convertibility of dollars into gold, formally ending the Bretton Woods monetary system. It marked the beginning of a new regime of floating exchange rates, free trade in goods and the free movement of capital across borders. The sweeping reforms brought in under the Thatcher and Reagan governments accelerated a wave of deregulation and privatisation, with minimum protective barriers against the ‘self-regulating market’.

The agenda was pushed aggressively by most national governments in the Global North, while being imposed on many Southern countries through the International Monetary Fund and World Bank’s infamous ‘structural adjustment programmes’. A legion of books have examined the disastrous consequences of this market-led approach to monetary and fiscal policy, derisorily labelled the neoliberal Washington Consensus. As governments increasingly focused on maintaining low inflation and removing regulations on capital and corporations, the world of finance boomed—and the foundations were laid for a dramatic dénouement in 2008.

Missed opportunities

What’s extraordinary to recall about the immediate aftermath of the great crash is the temporary reversal of those policies that had dominated the previous two decades. At the G20 summit in April 2009 hosted by British Prime Minister Gordon Brown, heads of state envisaged a return to Keynesian macroeconomic prescriptions, including a large-scale fiscal stimulus in both developed and developing countries. It appeared that the Washington Consensus had suddenly lost all legitimacy. The liberalised global financial system had clearly failed to provide for a net transfer of resources to the developing world, or prevent instability and recurrent crisis without effective state regulation and democratic public oversight.

Many civil society organisations saw the moment to call for fundamental reform of the Bretton Woods institutions, as well as a complete rethink of the role of the state in the economy. There was even talk of negotiating a new Bretton Woods agreement that re-regulates international capital flows, and supports policy diversity and multilateralism as a core principle (in direct contrast to the IMF’s discredited approach).

The United Nations played a staunch role in upholding such demands, particularly through a commission set up by the then-President of the UN General Assembly, Miguel d’Escoto Brockmann. Led by Nobel laureate Joseph Stiglitz, the ‘UN Conference on the World Financial and Economic Crisis and its Impact on Development’ proposed a number of sensible measures to protect the least privileged citizens from the effects of the crisis, while giving developing countries greater influence in reforming the global economy.

Around the same time, the UN Secretary-General endorsed a Global Green New Deal that could stimulate an economic recovery, combat poverty and avert dangerous climate change simultaneously. It envisioned a massive programme of direct public investments and other internationally-coordinated interventions, arguing that the time had come to transform the global economy for the greater benefit of people everywhere, including the millions living in poverty in developing and emerging industrial economies.

This wasn’t the first time that nations were called upon to enact a full-scale reordering of global priorities in response to financial turmoil. At the onset of the ‘third world’ debt crisis in 1980, an Independent Commission on International Development Issues convened by the former West German Chancellor, Willy Brandt, also proposed far-reaching emergency measures to reform the global economic system and effectively bail out the world’s poor.

Yet the Brandt Commission proposals were widely ignored by Western governments at the time, which marked the rise of the neoliberal counterrevolution in macroeconomic policy—and all the conditions that led to financial breakdown three decades later. Then once again, governments responded in precisely the opposite direction for bringing about a sustainable economic recovery based on principles of equity, justice, sharing and human rights.

A world falling apart

We are all familiar with the course of action taken from 2008-9: colossal bank bailouts enacted (without public consultation) that favoured creditors, not debtors, despite using taxpayer money. Quantitative easing (QE) programmes that have pumped trillions of dollars into the global financial system, unleashing a fresh wave of speculative investment and further widening income and wealth gaps. And the perceived blame for the crisis deflected towards excessive public spending, leading to fiscal austerity measures being rolled out across most countries—a ‘decade of adjustment’ that is projected to affect nearly 80 percent of the global population by 2020.

To be sure, the ensuing policy responses across Europe were often compared to structural adjustment programmes imposed on developing countries in the 1980s and 1990s, when repayments to creditors of commercial banks similarly took precedence over measures to ensure social and economic recovery. The same pattern has repeated in every crisis-hit region, where the poorest in society pay the price through extreme austerity and the privatisation of public assets and services, despite being the least to blame for causing the crisis in the first place.

After ten years of these policies a new billionaire is created every second day, banks are still paying out billions of dollars in bonuses each year, and the top 1% of the world population are far wealthier than before the crisis happened. At the same time, global income inequality has returned to 1820 levels, and indicators suggest progress is now reversing on the prevention of extreme poverty and multiple forms of malnutrition.

Indeed the United Nations continues to face the worst humanitarian situation since the second world war, in large part due to conflict-driven crises that are rooted in the economic fallout of the 2008 crash—most dramatically in Syria, Libya, and Yemen. Countries of both the Global North and South remain in the grip of a record upsurge of forced human displacement, to which governments are predictably failing to respond to in the direction of cooperative burden sharing through agreements and institutions at the international level.

Not to mention the rise of fascism and divisive populism that is escalating in almost every society, often as a misguided response to pervasive inequality and a widespread sense of unfairness among ordinary workers. It is surely reasonable to suggest that all these trends would not be deteriorating if the community of nations had seized the opportunity a decade ago, and acted in accordance with calls for a just transition to a more equitable world order.

The worst is yet to come

We now live in a strange era of political limbo. Neoclassical economics may have failed to predict the great crash or provide answers for a sustained recovery, yet it still retains its hold on conventional academic thought. Neoliberalism may also be discredited as the dominant political and economic paradigm, yet mainstream institutions like the IMF and OECD still embrace the fundamentals of free market orthodoxy and countenance no meaningful alternative. Consequently, the new regulatory initiatives agreed at the global level are largely voluntary and inadequate, and governments have done little to counter the power of oligopolistic banks or prevent reckless speculative behaviour.

Banks may be relatively safer and possess a bigger crisis toolkit, but the risk has moved to the largely unregulated shadow banking system which has massively increased in size, growing from $28 trillion in 2010 to $45 trillion in 2018. Even major banks like JP Morgan are forewarning an imminent crisis, which may be caused by a digital ‘flash crash’ in which high frequency investments (measuring trades in millionths of a second) lead to a sudden downfall of global stock markets.

Another probable cause is the precipitous rise in global debt, which has soared from $142 to $250 trillion since 2008, three times the combined income of every nation. Global markets are running on easy money and credit, leading to a debt build-up which economists from across the political spectrum agree cannot last indefinitely without catastrophic results. The problem is most acute in emerging and developing economies, where short-term capital flowed in response to low interest rates and QE policies in the West. As the US and other rich countries begin to steadily raise interest rates again, there is a risk of a mass exodus of capital from emerging markets that could trigger a renewed debt crisis in the world’s poorest countries.

Of most concern is China, however, whose credit-fuelled expansion in the post-crash years has led to massive over-investment and national debt. With an overheating real-estate sector, volatile stock market and uncontrolled shadow banking system, it is a prime candidate to be the site for the next financial implosion.

However it originates, all the evidence suggests that an economic collapse could be far worse this time around. The ‘too-big-to-fail’ problem remains critical, with the biggest US banks owning more deposits, assets and cash than ever before. And with interest rates at historic lows for many G-10 central banks while the QE taps are still turned on, both developed and developing countries have less policy and fiscal space to respond to another shock.

Above all, China and the US are not in a position to take the same decisive central bank action that helped avert a world depression in 2008. And then there are all the contemporary political factors that mitigate against a coordinated international response—the retreat from multilateralism, the disintegration of established geopolitical structures and relationships, the fragmentation and polarisation of political systems throughout the world.

After two years of a US presidency that recklessly scraps global agreements and instigates trade wars, it is hard to imagine a repeat of the G20 gathering in 2009 when assembled leaders pledged never to go down the road of protectionist tariff policies again, fearing a return to the dire economic conditions that led to a world war in the 1930s. The domestic policies of the Trump administration are also especially perturbing, considering its current push for greater deregulation of the financial sector—rolling back the Dodd-Frank and consumer protection acts, increasing the speed of the revolving door between Wall Street and Washington, D.C., and more.

Mobilising from below

None of this is a reason to despair or lose hope. The great crash has opened up a new awareness and energy for a better society that brings finance under popular control, as a servant to the public and no longer its master. Many different movements and campaigns have sprung up in the post-crash years that focus on addressing the problems wrought by financialisation, which more and more people realise is the underlying source of most of the world’s interlinking crises. All of these developments are hugely important, although the true test of this rising political consciousness will come when the next crash happens.

After the worldwide bank bailouts of 2008-9—estimated in excess of $29 trillion by the US Federal Reserve alone—it is no longer possible to argue that governments cannot afford to provide for the basic necessities of everyone. Just a fraction of that sum would be enough to end income poverty for the 10% of the global population who live on less than $1.90 a day. Not to mention the trillions of dollars, euros, pounds and yen that have been directly pumped into financial markets by central banks of the major developed economies, constituting a regressive form of distribution in favour of the already wealthy that could have been converted into some form of ‘quantitative easing for the people’.

A reversal of government priorities on this scale is clearly not going to be led by the political class. They have already missed the opportunity, and are largely beholden to vested interests that are unduly concerned with short-term profit maximisation, not the rebuilding of the public realm or the universal provision of essential goods and services. The great crash and its aftermath was a global phenomenon that called for a cooperative global response, yet the necessary vision from within the ranks of our governments was woefully lacking. If the financial crisis resurfaces in a different and severer manifestation, we the people will have to fill the vacuum in political leadership. It will call for a monumental mobilisation of citizens from below, focused on a single and unifying demand for a people’s bailout across the world.

Much inspiration can be drawn from the popular uprisings throughout 2011 and 2012, although the Arab Spring and Occupy movements were unable to sustain the momentum for change without a clear agenda that is truly international in scope, and attentive to the needs of the world’s majority poor. That is why we should coalesce our voices around Article 25 of the Universal Declaration of Human Rights, which proclaims the right of everyone to the minimal requirements for a dignified life—adequate food, housing, medical care, access to social services and financial security.

Through ceaseless demonstrations in all countries that continue day and night, a united call for implementing Article 25 worldwide may finally impel governments to cooperate at the highest level, and rewrite the rules of the international economic system on the basis of shared mutual interests. In the wake of a breakdown of the entire international financial and economic order, such a grassroots mobilisation of numberless people may be the last chance we have of resurrecting long-forgotten proposals in the UN archives, as notably embodied in the aforementioned Brandt Report or Stiglitz Commission.

The case of Iceland is widely remembered as an example of how a people’s bailout can be achieved, following the ‘Pots and Pans Revolution’ that swept the country in 2009—the largest protests in the country’s history to date. As a result of the public’s demands, a new coalition government was able to buck all trends by avoiding austerity measures, actively intervening in capital markets and strengthening social programs for the less privileged. The results were remarkable for Iceland’s economic recovery, which was achieved without forcing society as a whole to pay for the blunders of corrupt banks. But it still wasn’t enough to prevent the old establishment political parties from eventually returning to power, and resuming their support for the same neoliberal policies that generated the crisis.

So what must happen if another systemic banking collapse occurs of even greater magnitude, not only in Iceland but in every country of the world? That is the moment when we’ll need a global Pots and Pans Revolution that is replicated by citizens of all nationalities and political persuasions, on and on until the entire planet is engulfed in a wave of peaceful demonstrations with a common cause. It will require a huge resurgence of the goodwill and staying power that once animated Occupy encampments, although this time focused on a more inclusive and universal demand for implementing Article 25 and sharing the world’s resources.

It may seem far-fetched to presume such an unprecedented awakening of a disillusioned populace, as if we can expect a visionary leader of Christ-like stature to point out the path towards resurrecting the UN’s founding ideals of “better standards of life for everyone in the world”. Unfortunately, nothing less may suffice in this age of economic chaos and confusion, so let us all be prepared for the climactic events about to take place.

How America can Free Itself from Wall Street

Wall Street owns the country.  That was the opening line of a fiery speech that populist leader Mary Ellen Lease delivered around 1890. Franklin Roosevelt said it again in a letter to Colonel House in 1933, and Sen. Dick Durbin was still saying it in 2009. “The banks—hard to believe in a time when we’re facing a banking crisis that many of the banks created—are still the most powerful lobby on Capitol Hill,” Durbin said in an interview. “And they frankly own the place.”

Wall Street banks triggered a credit crisis in 2008-09 that wiped out over $19 trillion in household wealth, turned some 10 million families out of their homes and cost almost 9 million jobs in the U.S. alone. Yet the banks were bailed out without penalty, while defrauded home buyers were left without recourse or compensation. The banks made a killing on interest rate swaps with cities and states across the country, after a compliant and accommodating Federal Reserve dropped interest rates nearly to zero. Attempts to renegotiate these deals have failed.

In Los Angeles, the City Council was forced to reduce the city’s budget by 19 percent following the banking crisis, slashing essential services, while Wall Street has not budged on the $4.9 million it claims annually from the city on its swaps. Wall Street banks are now collecting more from Los Angeles just in fees than it has available to fix its ailing roads.

Local governments have been in bondage to Wall Street ever since the 19th century despite multiple efforts to rein them in. Regulation has not worked. To break free, we need to divest our public funds from these banks and move them into our own publicly owned banks.

L.A. Takes It to the Voters

Some cities and states have already moved forward with feasibility studies and business plans for forming their own banks. But the city of Los Angeles faces a barrier to entry that other cities don’t have. In 1913, the same year the Federal Reserve was formed to backstop the private banking industry, the city amended its charter to state that it had all the powers of a municipal corporation, “with the provision added that the city shall not engage in any purely commercial or industrial enterprise not now engaged in, except on the approval of the majority of electors voting thereon at an election.”

Under this provision, voter approval would apparently not be necessary for a city-owned bank that limited itself to taking the city’s deposits and refinancing municipal bonds as they came due, since that sort of bank would not be a “purely commercial or industrial enterprise” but would simply be a public utility that made more efficient use of public funds. But voter approval would evidently be required to allow the city to explore how public banks can benefit local economic development, rather than just finance public projects.

The L.A. City Council could have relied on this 1913 charter amendment to say no to the dynamic local movement led by millennial activists to divest from Wall Street and create a city-owned bank. But the City Council chose instead to jump that hurdle by putting the matter to the voters. In July 2018, it added Charter Amendment B to the November ballot. A “yes” vote will allow the creation of a city-owned bank that can partner with local banks to provide low-cost credit for the community, following the stellar precedent of the century-old Bank of North Dakota, currently the nation’s only state-owned bank. By cutting out Wall Street middlemen, the Bank of North Dakota has been able to make below-market credit available to local businesses, farmers and students while still being more profitable than some of Wall Street’s largest banks. Following that model would have a substantial upside for both the small business and the local banking communities in Los Angeles.

Rebutting the Opposition

On September 20, the Los Angeles Times editorial board threw cold water on this effort, calling the amendment “half-baked” and “ill-conceived,” and recommending a “no” vote.

Yet not only was the measure well-conceived, but L.A. City Council President Herb Wesson has shown visionary leadership in recognizing its revolutionary potential. He sees the need to declare our independence from Wall Street. He has said that the country looks to California to lead, and that Los Angeles needs to lead California. The people deserve it, and the millennials whose future is in the balance have demanded it.

The City Council recognizes that it’s going to be an uphill battle. Charter Amendment B just asks voters, “Do you want us to proceed?” It is merely an invitation to begin a dialogue on creating a new kind of bank—one geared to serving the people rather than Wall Street.

Amendment B does not give the City Council a blank check to create whatever bank it likes. It just jumps the first of many legal hurdles to obtaining a bank charter. The California Department of Business Oversight (DBO) will have the last word, and it grants bank charters only to applicants that are properly capitalized, collateralized and protected against risk. Public banking experts have talked to the DBO at length and understand these requirements, and a detailed summary of a model business plan has been prepared, to be posted shortly.

The L.A. Times editorial board erroneously compares the new effort with the failed Los Angeles Community Development Bank, which was founded in 1992 and was insolvent a decade later. That institution was not a true bank and did not have to meet the DBO’s stringent requirements for a bank charter. It was an unregulated, non-depository, nonprofit loan and equity fund, capitalized with funds that were basically a handout from the federal government to pacify the restless inner city after riots broke out in 1992—and its creation was actually supported by the L.A. Times.

The Times also erroneously cites a 2011 report by the Boston Federal Reserve contending that a Massachusetts state-owned bank would require $3.6 billion in capitalization. That prohibitive sum is regularly cited by critics bent on shutting down the debate without looking at the very questionable way in which it was derived. The Boston authors began with the $2 million used in 1919 to capitalize the Bank of North Dakota, multiplied that number up for inflation, multiplied it up again for the increase in GDP over a century and multiplied it up again for the larger population of Massachusetts. This dubious triple-counting is cited as serious research, although economic growth and population size have nothing to do with how capital requirements are determined.

Bank capital is simply the money that is invested in a bank to leverage loans. The capital needed is based on the size of the loan portfolio. At a 10 percent capital requirement, $100 million is sufficient to capitalize $1 billion in loans, which would be plenty for a startup bank designed to prove the model. That sum is already more than three times the loan portfolio of the California Infrastructure and Development Bank, which makes below-market loans on behalf of the state. As profits increase the bank’s capital, more loans can be added. Bank capitalization is not an expenditure but an investment, which can come from existing pools of unused funds or from a bond issue to be repaid from the bank’s own profits.

Deposits will be needed to balance a $1 billion loan portfolio, but Los Angeles easily has them—they are now sitting in Wall Street banks having no fiduciary obligation to reinvest them in Los Angeles. The city’s latest Comprehensive Annual Financial Report shows a government net position of over $8 billion in cash and investments (liquid assets), plus proprietary, fiduciary and other liquid funds. According to a 2014 study published by the Fix LA Coalition:

Together, the City of Los Angeles, its airport, seaport, utilities and pension funds control $106 billion that flows through financial institutions in the form of assets, payments and debt issuance. Wall Street profits from each of these flows of money not only through the multiple fees it charges, but also by lending or leveraging the city’s deposited funds and by structuring deals in unnecessarily complex ways that generate significant commissions.

Despite having slashed spending in the wake of revenue losses from the Wall Street-engineered financial crisis, Los Angeles is still being  crushed by Wall Street financial fees, to the tune of nearly $300 million—just in 2014. The savings in fees alone from cutting out Wall Street middlemen could thus be considerable, and substantially more could be saved in interest payments. These savings could then be applied to other city needs, including for affordable housing, transportation, schools and other infrastructure.

In 2017, Los Angeles paid $1.1 billion in interest to bondholders, constituting the wealthiest 5 percent of the population. Refinancing that debt at just 1 percent below its current rate could save up to 25 percent on the cost of infrastructure, half the cost of which is typically financing. Consider, for example, Proposition 68, a water bond passed by California voters last summer. Although it was billed as a $4 billion bond, the total outlay over 40 years at 4 percent will actually be $8 billion. Refinancing the bond at 3 percent (the below-market rate charged by the California Infrastructure and Development Bank) would save taxpayers nearly $2 billion on the overall cost of the bond.

Finding the Political Will 

The numbers are there to support the case for a city-owned bank, but a critical ingredient in effecting revolutionary change is finding the political will. Being first in any innovation is always the hardest. Reasons can easily be found for saying no. What is visionary and revolutionary is to say, “Yes, we can do this.”

As California goes, so goes the nation, and legislators around the country are watching to see how it goes in Los Angeles. Rather than criticism, council President Wesson deserves high praise for stepping forth in the face of predictable pushback and daunting legal hurdles to lead the country in breaking free from our centuries-old subjugation to Wall Street exploitation.

• First published in Truthdig

Tenth Anniversary Of Financial Collapse, Preparing For The Next Crash

Jail Bankers Not Protesters, Occupy Wall Street, 2011 (Photo by Stan Honda for AFP-Getty Images)

Ten years ago, there was panic in Washington, DC, New York City and financial centers around the world as the United States was in the midst of an economic collapse. The crash became the focus of the presidential campaign between Barack Obama and John McCain and was followed by protests that created a popular movement, which continues to this day.

Banks: Bailed Out; The People: Sold Out

On the campaign trail, in March 2008, Obama blamed mismanagement of the economy on both Democrats and Republicans for rewarding financial manipulation rather than economic productivity. He called for funds to protect homeowners from foreclosure and to stabilize local governments and urged a 21st Century regulation of the financial system. John McCain opposed federal intervention, saying the country should not bail out banks or homeowners who knowingly took financial risks.

By September 2008, McCain and Obama met with President George W. Bush and together they called for a $700 billion bailout of the banks, not the people. Obama and McCain issued a joint statement that called the bank bailout plan “flawed,” but said, “the effort to protect the American economy must not fail.” Obama expressed “outrage” at the “crisis,” which was “a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years.”

By October 2008, the Troubled Asset Relief Program (TARP), or bank bailout, had recapitalized the banks, the Treasury had stabilized money market mutual funds and the FDIC had guaranteed the bank debts. The Federal Reserve began flowing money to banks, which would ultimately total almost twice the $16 trillion claimed in a federal audit. Researchers at the University of Missouri found that the Federal Reserve gave over $29 trillion to the banks.

This did not stop the loss of nine million jobs, more than four million foreclosures and the deep reduction in wealth among the poor, working and middle classes. A complete banking collapse was averted, but a deep recession for most people was not.

The New Yorker described the 2008 crash as years in the making, writing:

…the crisis took years to emerge. It was caused by reckless lending practices, Wall Street greed, outright fraud, lax government oversight in the George W. Bush years, and deregulation of the financial sector in the Bill Clinton years. The deepest source, going back decades, was rising inequality. In good times and bad, no matter which party held power, the squeezed middle class sank ever further into debt.

Before his inauguration, Obama proposed an economic stimulus plan, but, as Paul Krugman wrote:

Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat.

In the end, the stimulus was even smaller than what Obama proposed. Economist Dean Baker explained that it may have created 2 million jobs, but we needed 12 million. It was $300 billion in 2009, about the same in 2010, and the remaining $100 billion followed over several years — too small to offset the $1.4 trillion in annual lost spending.

New York Magazine reports the stimulus was “a spending stimulus bigger, by some measures than the entire New Deal.” But unlike the New Deal, which benefited people at the bottom and built a foundation for a long-term economy, the bi-partisan post-2008 stimulus bailed out Wall Street and left Main Street behind.

Wall Street executives were not prosecuted even though the financial crisis was in large part caused by their fraud. Bankers were given fines costing dimes on the dollar without being required to admit guilt or having their cases referred for prosecution. The fines were paid by shareholders, not the perpetrators.

Protest near Union Square in New York, April, 2010. Popular Resistance.

Still at Risk

Many of the root causes of the crisis remain today, making another economic downturn or collapse possible. The New Yorker reports that little has changed since 2008, with Wall Street banks returning to risky behavior and the inadequate regulation of Dodd-Frank being weakened. Big finance is more concentrated and dominant than it was before the crash. Inequality and debt have expanded, and despite the capital class getting wealthier in a record stock market with corporate profits soaring, real wages are stuck at pre-crisis levels.

People are economically insecure in the US and live with growing despair, as measured by reports on well-being. The Federal Reserve reported in 2017 that “two in five Americans don’t have enough savings to cover a $400 emergency expense.” Further, “more than one in five said they weren’t able to pay the current month’s bills in full, and more than one in four said they skipped necessary medical care last year because they couldn’t afford it.”

Positive Money writes:

Ten years on, big banks are still behaving in reckless, unfair and neglectful ways. The structural problems with our money and banking system still haven’t been fixed. And many experts fear that if we don’t change things soon, we’re going to sleepwalk into another crash.

William Cohen, a former mergers and acquisitions banker on Wall Street, writes that the fundamentals of US economy are still flawed. The Economist describes the current situation: “The patient is in remission, not cured.”

From Occupy Washington DC at Freedom Plaza

The Response Of the Popular Movement

Larry Eliott wrote in the Guardian: “Capitalism’s near-death experience with the banking crisis was a golden opportunity for progressives.” But the movement in the United States was not yet in a position to take advantage of it.

There were immediate protests. Democratic Party-aligned groups such as USAction, True Majority and others organized nationwide actions. Over 1,000 people demonstrated on Wall Street and phones in Congress were ringing wildly. While there was opposition to the bailout, there was a lack of national consensus over what to do.

Protests continued to grow. In late 2009, a “Move Your Money” campaign was started that urged people to take their money out of the big banks and put it in community banks and credit unions. The most visible anti-establishment rage in response to the bailout arose later in the Tea Party and Occupy movements. Both groups shared a consensus that we live in a rigged economy created by a corrupt political establishment. It was evident that the US is an oligarchy, which serves the interests of the wealthy while ignoring the necessities of the people.

The anti-establishment consensus continues to grow and showed itself in the 2016 presidential campaigns of Senator Bernie Sanders and Donald Trump. They were two sides of the same coin of populist anger that defeated Jeb Bush and Hillary Clinton. Across the political spectrum, there is a political crisis with both mainstream, Wall Street-funded political parties being unpopular but staying in power due to a calcified political system that protects the duopoly of Democrats and Republicans.

Occupy Wall Street 2011

Preparing for the Next Collapse

When the next financial crisis arrives, the movement is in a much stronger position to take advantage of the opportunity for significant changes that benefit people over Wall Street. The Occupy movement and other efforts since then have changed the national dialogue so that more people are aware of wealth inequality, the corruption of big banks and the failure of the political elites to represent the people’s interests.

There is also greater awareness of alternatives to the current economy. The Public Banking movement has grown significantly since 2008. Banks that need to be bailed out could be transformed into public banks that serve the people and are democratically controlled. And there are multiple platforms, including our People’s Agenda, that outline alternative solutions.

We also know the government can afford almost $30 trillion to bail out the banks. One sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all US public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade. We can afford to provide for the necessities of the people.

We can look to Iceland for an example of how to handle the next crisis. In 2008, they jailed the bankers, let the banks fail without taking on their debt and put controls in place to protect the economy. They recovered more quickly than other countries and with less pain.

How did they do it? In part, through protest. They held sustained and noisy protests, banging pots and pans outside their parliament building for five months. The number of people participating in the protests grew over time. They created democratized platforms for gathering public input and sharing information widely. And they created new political parties, the Pirate Party and the Best Party, which offered agendas informed by that popular input.

So, when the next crash comes. Let’s put forward a People’s Agenda. Let’s be like Iceland and mobilize for policies that put people first. Collectively, we have the power to overcome the political elites and their donor class.