May 14, 2012

Palling around

The recent news that J.P. Morgan lost around 2 billion "dollars" in a risky trade deal is abuzz in the media, and within moments of the news breaking anti-capitalists were already sounding the horn for more regulation.  This is likely a Trojan Horse which will only serve the well connected and crush those who don't do things like blow $2 billion on a trade.

As Bob Wenzel points out:

"In the wake of the JPMorgan loss, government officials will babble on about new regulations that will be needed to be put in place to stop banks from doing such trading. But these new regulations will benefit the politically connected at the expense of conservative banks, who do traditional banking. The connected, like Jamie Dimon, will gain even further advantages and opportunities to blow up even more money."  

Indeed, J.P. Morgan will "get by with a little help from their friends."  Chairman Jamie Dimon describes his view of the relationship here:

"In the meantime, the rest of us should hold hands, get together, collaborate, business and government together, to fix the problem.  It's going to be very hard for government to do this on its own.  And business can't do it without collaborating with the government."

With all this palling around, there will be an incentive to take unnatural risks with the availability of cheap loans and implicit guarantees in the case of a failure, and regulations will likely favor (and be written by) the big players.  Bob Wenzel again:

On an even more important note, one has to ask why there aren't any lines outside JPMorgan Chase, since clearly the bank allows blithering econometric modelers to run naked through the bank, with the ability to put billions of depositor/bank money at risk.

The answer is moral hazard. JPMorgan depositors know that the FDIC will back them up, even if there are even greater toxic trading bombs that could go off at the bank .

The FDIC, by backing these firms, serves to prop-up institutions that have made mistakes, and permit them to escape failure unscathed.  The effect of this action on the economy is multiplicative.  The firm itself now knows it will not be punished, stimulating it toward risky behavior in the future (moral hazard).  Also, the firm continues to draw investment- and at a much higher level than if it were allowed to fail.  This diluted and skewed pool of resources mean fewer investors are available for competing firms.  These effects are worse for society in the grand scheme than the ludicrous bill the taxpayers are stuck with in the case of a failure, for the insolvent firms are allowed to continue- promising more, but greater pain (due to an inflated currency) as the financial "bridges to nowhere" carry on.  Thus, too big to fail is a systemic problem that lies at the feet of the FDIC.

Because regulations merely tweak the current system and ignore the moral hazard, the fundamental problems of our economy can never be resolved.  Unless we address the special relationship these firms have with regulators and the government itself, we will only see more regulation designed to crush competition.  Would you lose $2 billion to make $10 billion over a period of time, as your competitors are forced under water by special regulations that were put in place for your "mistake?"  Perhaps this is why depositors are not running away...

The lesson here is that the last century of government intervention and central economic planning has been a dismal failure and is doomed to more of the same.  But, disconnecting government (and, of course, quasi-government institutions) from the financial market is not part of the paradigm our desperate overlords have in mind.  Quoting Edwin Vierra:

"They (the Fed) cannot face the consequences of a depression- can you imagine what a 1930's style depression in this country would be like?  That's what they don't want to have happen, and the one tool that they have that they think can prevent that in the short term is what?  Quantitative easing- inflation, generating money, generating paper currency, bills of credit- well, bills of discredit because they are not going to be paid.  We keep generating this stuff and we hope something will happen.  We are playing for time- financially.  But I think it was Machiavelli that said that's a fallacy because time brings all things- bad as well as good."

Since the current power structure chooses to perpetuate the status quo at all costs, we should consider Vierra's idea of using alternative currencies on the State level.  This way at least the States could provide a bulwark against a corrupt and dangerous system.  Crucially, this action would eliminate the relevance of moral hazard, and, at least, provides a working alternative to a crumbling "dollar":

"...The only solution here, I think, is to come up with an alternative currency- and a lot of people have proposed exactly how to do this.  This isn't something that's difficult, on the shelf technology, we could set this thing up in 30-60 days after the statute is passed- an alternative sound currency based on silver and gold.  Start using that in the marketplace, start transitioning the governments into using it for purposes of taxation and spending, and let the banks figure out how to solve their own problems."  -- Edwin Vierra

May 8, 2012

Willard Worried

In this post on the blog, your author is included with some analysis...

May 4, 2012

The Narrative

Listening to NPR a few weeks ago, I made an important realization about the media, and it's (dis)function in providing "the narrative" we revolve our lives around.  The story was that Rick Santorum had dropped out of the presidential race, leaving the republican nomination to Mitt Romney.*  Some examples: hereherehere, and here.  Of course, since there were still two other candidates competing for that prize, one wonders how the news media can make such a statement.

Any significant event is corralled by the news media into an acceptable story for consumption of the American mind.  Or, if needed, an event (or significant portions of the event) can be ignored or under-reported.  In this way, the media is attempting to frame a certain worldview that is sympathetic or even perpetuous of the power of the State.  The official narrative for this presidential race is now that the candidates will be Romney and Obama.

Enjoy your "choice," America!

Neither Romney or Obama will fundamentally challenge the status quo, and are interchangeable.  Indeed, this is a choice between Worse and Worser.  For those of us who would rather avoid this Titanical game of musical chairs, and instead would like a candidate who offers significant change of course, it would be preposterous to consider either of them.  The role of the news media is to create a narrative that achieves a facade of legitimacy whilst ushering in the chosen winner of the contest, and to exclude any stories that may suggest another outcome.

Moving Beyond...

Despite many scholars who have written books, lectured, and even made (limited) media appearances on moving beyond the State, this possibility is never included as part of the narrative.  However-- just as major media networks have become almost fully intermarried into a propaganda mouthpiece of the ruling class-- documentary films, websites, podcasts, and various other conduits have emerged (mostly on the internet) to fill the void for those who crave more, and have provided a nice alternative source of information.  It seems that every action, indeed, causes and equal and opposite reaction.


One benefit of the primitive status of the internet is that this venue makes it much more difficult (though not impossible) for you to be intellectually swindled, as it is lacks highly trained teleprompter readers who are beautiful, exquisitely dressed, and professional- telling you how it is.  Contrarily, internet outlets are traditionally seen as unprofessional- with low sound and video quality.  Sometimes, you have to really want the information to sit through an exceedingly inadequate presentation.

However, this is changing as technology advances and becomes more affordable, and as the market for information continues to slide from TV to the internet.  Now, as people are tuning out cable and supporting emerging outlets for information, winners are being chosen- and with their success, they are able to invest in more capital (video and audio equipment) as well as labor (higher quality and/or quantity of staff).  This synergy of interest in the product and professionalism in packaging has led to the internet being the choice of the upcoming generation.

Another advantage the internet has over the traditional media is the ability to link to original sources.  This is an important check on those who would like to take a story out of context.  It is possible, in the comments section, to correct a fact or opinion and reach at least some folks (like myself) who like to see differing viewpoints on a particular subject.  Also, you are able to link to your blog there- perhaps a whole post can be devoted to providing a factual account of the issue at hand.

Clearly, the ability to bring up a document without having the entire room filled with books and magazines, let alone having to remember exactly which issue of which publication it was found in, etc. is an unappreciated example of progress.  The ability to instantly upload and download information spells disaster for those who would want to snuff out particular stories- we are now much less information "impaired."  Although "those who would want to" are not above it!

It is also nice to be able to read a story about something that piques your interest, and be able to find out more details by simply clicking a link.  The internet is an easy place for a person to find many different angles on a particular subject, perhaps even stumbling on opinions that are outside of Tom Wood's Joe Biden/Mitt Romney Box of Allowed Political Dogma.  As the dinosaur media loses it's traditional audience to old age, and the current crop to irrelevancy,  the narrative- which is the fancy wrapping paper on the box of permitted opinion- will be crushed and burned with it.  This process of intellectual liberation, already in progress, is a great benefit to humanity.

*Update 5/7:

I found a map of the delegates so far, and it would appear the media has, indeed, created a narrative that is not based in reality:

Link to map

May 3, 2012

The CIA as The State

In this interview, Peter Janney talks to Lew Rockwell about his book: Mary's Mosaic: The CIA Conspiracy to Murder John F. Kennedy, Mary Pinchot Meyer, and Their Vision of World Peace.  Peter's book details how Mary Pinochet Meyer, a pacifist, had a great influence on Kennedy as he gained the Presidency.  The book also details the cover-up of her assassination, as well as the characters involved in that plot.

Janney contends that Kennedy's philosophy of pacifism was antithetical to the CIA's vision of world dominance, and because of JFK's threat to "shatter the agency into a thousand pieces," the president had to be assassinated to protect the country from a threat they felt he didn't understand or take seriously enough.  This coup de tat represented a fundamental shift in governance.  Most interestingly, Janney paints a picture of a CIA with ever expanding influence, to the point where they have unilateral control on society:


"Of course, no one knew how about bad it was until Watergate.  It was really at the time of the Watergate era that people began to wake up and realize, 'My god, the CIA has been acting unilaterally, as if it was it's own country.  There aren't any checks and balances here.  They lie all the time to us in terms of any raining in on the part of congress.'  And so, all the sudden, after Watergate, it became very fashionable to, in a sense, disassociate oneself from the CIA."

Later, Rockwell asked, "Is the CIA much worse today?  Is the American government in a sense the U.S. of the CIA?..."


"This is a huge conflict, because every nation state has the right to collect intelligence as a way to protect itself.  And so, you have to step back and look clearly at what the limits of that can be.  If you are going to get into the arena where state sponsored murder is okay, then I think you've crossed the line where there is no more democracy.*  There's basically a plutocracy or an oligarchy that wants to stay in control by any means necessary."

As "National Security" gained increasing prominence in the role of foreign and domestic policy, we began to see the results in the form of CIA assassinations and coups worldwide,  This control quickly turned inward, begetting illegal wiretapping and spying on citizens at home, and assassinations of politicians and activist leaders domestically.  All of these despicable actions were performed on a unilateral basis, with no authority or oversight.  Any part of government is subject to corruption- and the National Security apparatus acted in the interests of a power oligarchy hell-bent on domination of the world at any cost.

Confronting this reality is both difficult and prescient- as we have watched the liberties we have cherished dissolve in the post-9/11 atmosphere.  The National Security State, where you are guilty until proven innocent and dissent is viewed as dangerous, is the ultimate end for those who would like total control over society.  Clearly, dismantling this apparatus is crucial to restoring liberty and rule of law in society.

*  I am not sure why he uses the word "democracy" here.  We were founded as a republic, but many progressives desire democracy- and use the word to describe our political order.  That said, I would agree that in the last century we have regressed to more of a democracy.  This is unfortunate, as the following video shows, and the results are the predicable outcome of oligarchy that Janney describes above: