While the Nation Fragments Socially, the Financial Aristocracy Rules Unimpeded

If there is one central irony in American history, it is this: the citizenry that broke free of the chains of British Monarchy, the citizenry that reckoned everyone was equal before the law, the citizenry that vowed never to be ruled by an aristocracy that controlled the government and finance as a means of self-enrichment, is now so distracted by social fragmentation that the citizenry is blind to their servitude to a new and formidably informal financial aristocracy.

From this juncture, ironies abound: the so-called Socialist demands for Medicare for All, “free” college for all and Universal Basic Income (UBI) are encouraged (or perhaps orchestrated) by the financial aristocracy, which rakes in tens of billions of dollars in profits from its banking, healthcare, national defense and higher education cartels: throwing more trillions down the ratholes of Medicare and higher education will only further enrich and empower the financial elites.

As for Universal Basic Income (UBI), the financial aristocracy is cheering loudly for UBI, which would enable debt-serfs to keep servicing their debts. (Is anyone so naive to think that UBI won’t have a clause which enables the deduction of debt payments from the monthly “free money”? Does anyone think the financial aristocracy is going to give $1,000 a month to debt-serfs and then let them default on their debt? Get real!)

The demands for social justice, i.e. that everyone be allowed to be treated the same before the law and enjoy the same rights as other citizens, is a core tenet of American culture. Long before the Constitution was even ratified, the calls to end slavery were becoming louder. Long before women won the the right to vote, the calls to treat women equally before the law were gaining ground.

In the long sweep of U.S. history, the rights of gays to marry and other contemporary social justice issues are of a piece with all previous drives to eliminate disparities between the way individuals are treated before the law. This is of course as it should be: this was a core value of the revolutionaries, as limited as it was in that era, and this drive is largely what makes America America.

Equally important was the cultural drive to never be ruled by a neofeudal aristocracy or let an aristocracy form in America. Yet this is precisely what has come to pass: we are ruled by an informal but oh-so neofeudal aristocracy.

As social justice controversies fragment the increasingly economically precarious populace, a financial aristocracy has arisen that rules the nation behind the screens of “meritocracy” and “equal rights.” No one is more in favor of equal rights and the abolition of social privilege that the members of the financial aristocracy, who have no need for social privilege since they control the real source of power in America: proximity to credit and newly issued money.

(Look at the liberal leanings of the Silicon Valley, L.A., Boston and NYC elites. They all love whatever distracts everyone from scrutinizing their power, and love recruiting fresh talent to slave away for their private empires.)

With this wealth, the financial aristocracy buys political influence for piddling sums and scoops up most of the low-risk productive assets of the private sector.

The core structure of the financial aristocracy is the state-cartel, the cartels that are funded and enforced by the central state: higher education, healthcare, national defense, banking, mortgages, student loans, etc.

For the financial aristocracy, the federal government is their personal enrichment machine, collecting trillions in taxes and borrowing additional trillions which are funneled through the state-cartels.

The number of seats in the American aristocracy is extremely limited, and so the top 5% are willing to go to extreme lengths to get in the first class lifeboat as the Titanic takes on water. This manifests in all sorts of ways, including the elite college admissions scandal.

While social justice proponents focus on divisive distractions, the financial aristocracy is tightening its control of the nation’s economy and political order.As everyday life, civil liberties and economic security all become increasingly precarious for the bottom 90%, the divisive focus on social privilege becomes a useful distraction for the financial aristocracy, which also controls the mainstream media.

America’s aristocracy is chuckling with great amusement as society is torn to pieces by media-circus sideshows. America’s aristocracy doesn’t need any titles or overt class distinctions as the aristocracy of old had; this would only call attention to their dominance. The ideal arrangement is a society shredded by social-media-driven fabricated divisions and a profound apathy to the actual structures of power, wealth and control.

America’s aristocracy is not formalized, and that’s the secret of its success.The power and control are exercised behind the formal machinery of governance and finance, and this structure protects the aristocracy from scrutiny.

So by all means demand Medicare for All and UBI: the aristocracy is heavily promoting these expansions of its wealth and power. Just as the Roman elites favored distributing free bread to the disenfranchised masses and the staging of Netflix binge TV watching–oops, I mean circuses– so too does America’s aristocracy favor UBI, Medicare for All and a fragmented society in thrall to disunity.

 

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.

My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

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The Coming Crisis the Fed Can’t Fix: Credit Exhaustion

Having fixed the liquidity crisis of 2008-09 and kept a perversely unequal “recovery” staggering forward for a decade, central banks now believe there is no crisis they can’t defeat: Liquidity crisis? Flood the global financial system with liquidity. Interest rates above zero? Create trillions out of thin air and use the “free money” to buy bonds. Mortgage and housing markets shaky? Create another trillion and use it buy up mortgages.

And so on. Every economic-financial crisis can be fixed by creating trillions of out thin air, except the one we’re entering–the exhaustion of credit. Central banks, like generals, always prepare to fight the last war and believe their preparation insures their victory.

China’s central bank created over $1 trillion in January alone to flood China’s faltering credit system with new credit-currency. Pouring new trillions into the financial system has always restarted the credit system, triggering renewed borrowing and lending that then powered yet another cycle of heedless consumption and mal-investment–oops, I meant development.

The elixir of new central bank money isn’t working as intended, and this failure is now eroding trust in the central bank’s fixes. Central banks can issue new credit to the private sector and it can can buy bonds, empty flats and mortgages, but no central bank can force over-indebted borrowers to borrow more or force wary lenders to lend to uncreditworthy borrowers.

Let’s be honest: the entire global “recovery” since 2009 has been fueled by soaring debt. The output of more debt is declining, that is, every additional dollar of debt is no longer generating much in the way of positive returns. As with any stimulant, increasing the stimulant leads to diminishing returns.

Then there’s the issue of debt saturation and debt exhaustion: those who are creditworthy no longer want to borrow more and those who are not creditworthy cannot borrow more, unless lenders want to eat the losses of default a few months after they issue the new loan.

The evidence is plain enough: defaults of student loans and auto loans are already at monumental levels, and the recession hasn’t even started. Zero-percent financing for vehicles is a thing of the past, and those borrowers with average credit ratings are paying 6% or more for a new vehicle loan.

Coupled with the ever-higher prices of vehicles, this is leading to auto loans of $600 and $700 a month and lenders extending the duration of the loans from 5 to 7 years. Just how badly do households need a new vehicle at these rates and prices?

As for housing–unless the buyer just sold a house in a bubblicious market and has hundreds of thousands of dollars in cash, housing is out of reach of the bottom 95% in many markets. This raises the other dynamic of credit exhaustion: the whole exercise of buying a home or dumping more money in stocks is ultimately based on greater fools arising who will pay substantially more that the buyer paid today.

Greater fools generally depend on credit to finance their purchase, and so the erosion of creditworthy borrowers means the pool of greater fools willing and able to pay $1.2 million for the old bungalow someone paid $1 million for today is drying up fast.

Only a fool buys an asset that is poised to lose value as the pool of future buyers dries up. No wonder insiders are selling stocks like no tomorrow, and housing markets have become decidedly sluggish: the pool of qualified borrowers who are willing to bet on another decade of central-bank goosed “growth at any cost” is shrinking rapidly.

The next crisis won’t be one of liquidity that central banks can fix by emitting additional trillions; it’s a crisis that’s impervious to central bank manipulation.The credibility of central banks is already evaporating like spilled water in July-baked Death Valley.

Central banks cannot magically make uncreditworthy borrowers creditworthy or magically force those who have forsworn adding more debt to borrow more at high rates of interest, and as a result they are powerless to stop the tide of credit from ebbing.

Thus will end the central banks’ bombastic hubris and the public’s faith in central banks’ godlike powers, the “global growth” story, the China story, and all the other fairy tales that have passed as policies for the past decade rather than what they really were: politically expedient cover for the greatest expansion of inequality in modern history.

 

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.

My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. 

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Why Calling U.S. a ‘Democracy’ Is Both False & Dangerous to Do

Eric Zuesse, originally posted at strategic-culture.org

It’s false because it is definitely untrue, and that’s not merely because America has a higher percentage of its residents in prison than does any other nation on this planet, but also because the only scientific studies that have been done of the matter show — they prove scientifically — that the U.S. is a dictatorship by its very wealthiest residents, against all the rest of the population. Traditionally, that’s called an “aristocracy,” not a democracy, but ever since Mussolini in the 1920s, it came to be called “fascism,” which is the successor to “feudalism” and thus is merely the modernized form of feudalism. What used to be called by such terms as “monarchy” or “aristocracy” is thus now called “fascism” but the leopard is the same regardless of what it is labeled, and what it really is is dictatorship. Mussolini sometimes instead called fascism “corporationism” and it certainly is today’s United States Government, even if some people choose to call it ‘democracy’. It’s what the U.S. Government has been scientifically proven to be: dictatorship, by the richest few (the controlling owners of the international corporations), against the entire public.

But even worse than being only false, calling the U.S. a ‘democracy’ is also itself extremely dangerous to the entire world, and here is why:

Every time that the U.S. perpetrates a coup (such as it’s trying now to do against Venezuela) or a military invasion (such as it did to Iraq 2003 and Libya 2011 and Syria 2012- and to Yemen 2015-, and many others) the U.S. regime and its propagandists call it an action ‘for humanitarian purposes’, and for regime-change ‘to bring democracy and human rights’ to that country, and it’s always lies, which wouldn’t even be believed by anyone who knows that the U.S. itself is actually a dictatorship, which it is. So, the lie of calling the U.S. a ‘democracy’ is actually okaying a lying dictatorship by using, for it, the term “democracy,” which this particular dictatorship chooses to refer to itself, for PR purposes.

Calling the U.S. a ‘democracy’ is to support this government that the entire world (in the only polls that have been done of the matter) recognizes to be the most aggressive and dangerous regime on Earth. To smear the good name of “democracy” that way, by calling the world’s most rapacious Government a ‘democracy’, is to assist in corroding that high term of praise, “democracy,” and turning it instead into an insult, which applies to what is actually the globally recognized most aggressive and dangerous nation on this planet.

The United States of America used to be a limited democracy, but now it’s no longer even that, and to call it a ‘democracy’ at all  is not only false, but it encourages the world’s most dangerous and harmful regime and sets it as a model for other nations. To encourage evil by lying to say it’s not that but is instead good, is itself evil, or else rabidly ignorant and deceived; but, in any case, it is a very wrong thing to do.

On March 7th the liberal U.S. billionaire who owns Bloomberg News was so much opposed to the over-the-top, far too overtly fascist, billionaires who now control the country, so that Bloomberg News headlined “Pence Asked Merkel to Provoke Russia by Sending Warships to Crimea”, and their reporters opened:

The U.S. leaned on German Chancellor Angela Merkel last month to conduct a naval maneuver in Russia’s backyard aimed at provoking President Vladimir Putin, according to three people familiar with the talks. At a Feb. 16 meeting at the Munich Security Conference, U.S. Vice President Mike Pence urged Merkel to send German warships through a narrow channel between the Crimean peninsula and mainland Russia to show Putin that Western powers won’t surrender their access to those waters, according to the officials, who spoke on condition of anonymity. The German leader refused, they said.

On March 8th, RT (a reliably truthful news-site that the U.S. regime calls ‘fake news’ because it reports truths the U.S. rulers don’t want the public to know) headlined “Caving in to the US? Brussels kills its own money laundering ‘blacklist’ after Washington criticism” and reported that the U.S. regime objected to the EU’s European Commission including in its proposed list of 11 additional money-laundering centers four U.S. territories, after which “the Council of the European Union, which consists of the ministers representing all 28 EU members, justified its decision to reject the document with the arguments that seemed strikingly similar to those employed by the US Treasury.” Page 11 of the European Commission’s 36-page detailed explanation of its proposed list said: “Based on the review of additional information sources, the Commission’s analysis has concluded that 11 additional jurisdictions present strategic deficiencies for the purposes of Article 9 of Directive (EU) 2015/849. Those jurisdictions are the following: Afghanistan, American Samoa, Guam, Iraq, Libya, Nigeria, Panama, Puerto Rico, Saudi Arabia, U.S. Virgin Islands, Samoa.” The objective of the additions was to make more difficult the laundering of proceeds from crime. A legal advisory from a law firm representing U.S. international corporations explained that “The US Treasury Department has objected to the inclusion of American Samoa, Guam, Puerto Rico and the US Virgin Islands on the grounds that the European Commission did not follow the methodology used by FATF in developing its own list of high-risk third countries, and that FATF standards apply to all US territories.” Supposedly, the methodology of FATF was more ‘transparent’ than that set forth in the European Commission’s 36-page detailed explanation of its proposed 11 additions. The European Council arrived at its rejection of the 11 additions to the list on the grounds that “The consultation ended on 28 February 2019, with the required majority of delegations having declared their intention to object to the delegated act in question, in particular on the basis that the act was not established in a sufficiently transparent way.” The European Council thus accepted without question the U.S. regime’s undocumented allegation that the U.S. regime’s chosen methodology is more ‘transparent’ than the European Commission’s is. In a press release, the European Council justified its decision on the grounds that it “cannot support the current proposal that was not established in a transparent and resilient process that actively incentivises affected countries to take decisive action while also respecting their right to be heard.” In short: BS. How can either the U.S. regime, or the one in the EU, reasonably claim to be ‘transparent’? It’s ridiculous. That’s merely a relationship between the imperial nation and its vassal-states. They’re all dictatorships, they’re a hierarchy of dictatorships. But only the U.S. dictatorship has been scientifically proven.

Anyone who opposes America’s dictatorship of the world will call the U.S. regime what it is: a dictatorship. This cat is now out of the bag and roaming wildly, almost everywhere, trying now even for Venezuela, the Kerch Strait and the South China Sea. (Calling the South China Sea and Kerch Strait ‘disputed waters’ is like calling the surrounding waters of the U.S. ‘disputed waters’; but only the international bully-regime is deliberately trying to “provoke” other nations in order to get them to buckle to its international dictatorship — which is the U.S. regime, which regime Obama had called “the one indispensable nation,” meaning that all others are ‘dispensable’. It’s clearly not only Trump that’s the problem. It’s the regime, which is the dictatorship, and it outlasts any particular ruler.)

The U.S. is no democracy. It clearly is a dictatorship, by its richest. To call that a ‘democracy’, is to insult democracy itself. Maybe America’s actual rulers would therefore like that.

—————

Investigative historian Eric Zuesse is the author, most recently, of  They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

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What Sort of “Democracy” Do We Have If Everyone’s Goal Is Maximizing Their Government Swag?

A democratic republic is a government in which power flows from citizens to their elected representatives. The American revolutionaries did not make a big distinction between republic and democracy, for in the context of the late 1700s, the dominant political structure was monarchy, and democracy meant the people have the final say via elections.

As Gordon Wood explains in his seminal book The Radicalism of the American Revolution, the upper-class revolutionaries had their doubts about the rabble’s ability to pursue the common good above their own narrow self interests. This ability to focus on the public good rather than on one’s own financial interests was widely understood to be the make-or-break dynamic of a durable democracy: without a class of citizens who could set the public good above their own interests, democracy would fail and be replaced by a neofeudal system of patronage in which loyalties followed a hierarchy of self-serving privilege.

In other words, precisely what we have today in the USA.

The revolutionary founders understood that only financially independent citizens had the wherewithal to put the public good above their own private interests. Those who were dependent on a powerful individual or organization would have no incentive to put the common good above their own share of the swag, and every incentive to support their patron (individual, corporation or government program) at the expense of the common good.

How many citizens are truly financial independent in America today? How many don’t depend on a wealthy individual, corporation or government program for their livelihood and financial well-being?

What incentives are present that would cause a dependent to vote against the narrow interests of their patronage? Very few if any.

The number of financially independent citizens is very low in a neofeudal economy dominated by centralized government, cartels, corporations and a super-wealthy financial nobility— the latter three (cartels, corporations and financial elites) being just as obsessed with maximizing their share of government swag (tax breaks, subsidies, sweetheart contracts, etc.) as any welfare dependent.

As a result, politics in America has decayed into an endless free-for-all of parasitic elites and dependent constituencies squabbling over their share of the federal swag.

The public good is given lip service but everyone knows patronage and dependence are the dominant dynamics of our society and economy. How can an elected official who must spend half their time raising millions of dollars from corporations and wealthy elites have any real conception of the public good? How can voters who approve every “free” benefit and financial “right” that will flow to their account have any real measure of the public good?

The “marketplace” of individuals and entities all seeking to maximize their share of the central-state swag doesn’t make a democracy. They are merely a rabble fighting over the bread and circuses issued by an empire that seeks to placate and distract a citizenry and commercial elite that has lost all sense of public good beyond “free” patronage.

Time will reveal that nothing is truly free, including democracy and the public good. Those dependent on central state patronage will discover that centralization has entered diminishing returns on its way to dissolution and ruin.

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How States/Empires Collapse in Four Easy Steps

There is a grand, majestic tragedy in the inevitable collapse of once-thriving states and empires: it all seemed so permanent at its peak, so godlike in its power, and then slowly but surely, too many grandiose, unrealistic promises were made to too many elites and constituencies, and then as growth decays to stagnation, the only way to maintain the status quo is to appear to meet all the promises by creating money out of thin air, i.e. debauching the currency.

This political expediency works most wonderfully for a time: people don’t realize the silver content of their coinage is being cut to near-zero, or there’s nothing holding up the value of their currency but trickery and vague allusions to past glory.

Trust in the state/empire’s currency suddenly collapses in a phase shift: all seems well until the moment the avalanche sweeps it all away.

It’s a simple progression: during the permanent-growth-is-our-birthright phase of self-reinforcing virtuous cycles, when everything is expanding rapidly–credit, resources, jobs, capital, profits, state tax revenues, etc.–promises are made to elites and constituencies that look easy to meet as the economy is projected to expand rapidly essentially forever.

But virtuous cycles decay to unvirtuous cycles of bureaucratic sclerosis and corruption, systemic friction, declining productivity and resource depletion, and the rise of parasitic elites who contribute nothing but skim plenty saps the surplus available for productive reinvestment.

Every elite under pressure to satisfy the demands of those who were over-promised in the good times reverts to the same two financial fixes: debt and currency debasement. First the state borrows and borrows and borrows, all under the belief that “the government can’t go broke because it issues its own money.”

Any rationalization will do in the phase of stagnation, but the reality is it’s all political expediency: lacking the resources to pay all the promises, the state borrows from the future to maintain the illusion of stability.

Alas, the future arrives, and the interest on the debt begins stripmining tax revenues needed to fund the essential responsibilities of the state/empire. At this point, the ruling elites pursue two equally fatal fixes: they raise taxes on the remaining productive class while the parastic elites pay little or nothing, and they devalue the currency so they can continue to pay the promised sums with less actual wealth.

The productive class either escapes to other climes, goes underground or opts out. As tax revenues fall, the ruling elites turn in desperation to debauching the state currency, in effect issuing 10 units of currency for every 1 unit of actual purchasing power.

This maintains the fiction that the promises are being met, but the purchasing power of the currency erodes so drastically that the parasitic elites and the constituencies eventually catch on and demand a full payment of what was promised back in good times.

This demand cannot be met, and so society decays into warring elites and competing constituencies. The only real solution–to make severe sacrifices in order to live within the modest means available and jettison the parasitic elites–is politically and culturally unpalatable to a citizenry steeped in a belief that good times should be forever and it’s the fault of the ruling party of the moment rather than a failure of the entire system.

Then the “free” distribution of bread and circuses ramps up and the silver shipped to phantom legions defending the borders ends up in the quartermasters’ pockets. The delusional state of the ruling elite infects the general populace, and magical thinking abounds, as do vague claims to future greatness based on the mythologies of previous eras that had earned prosperity with sacrifice and thrift.

The entire global status quo is in the stagnation phase, and the promises that cannot be met are looming large. And so the politically expedient ruling elites turn to debt and financial trickery to stave off the reckoning. This works for a few years but it guarantees the coming collapse.

Expansion, maturation, stagnation and collapse:

 

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.

My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. 

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