Sunday, September 21, 2008

Lenin's Chickens Roost in Paulson's Attic

Another reason why the omnipotence of “wealth” is more certain in a democratic republic is that it does not depend on defects in the political machinery or on the faulty political shell of capitalism. A democratic republic is the best possible political shell for capitalism, and, therefore, once capital has gained possession of this very best shell..., it establishes its power so securely, so firmly, that no change of persons, institutions or parties in the bourgeois-democratic republic can shake it. -- Lenin, State and Revolution
The cascade of financial failures on Wall Street -- the sure result of a decade or more of unregulated, unrestrained capitalist speculation -- has shaken the world capitalist system with a sudden, shuddering spasm of fear. But with fear comes opportunity, and the ruling elite now sees an opportunity to cast off the shackles of messy public oversight and control entirely.

If one were looking for the utmost in financial irresponsibility, allowing the system to implode/explode, paving the way for socialist revolution (or failing that, a fall into post-Roman-Empire-like darkness), then you'd put Bush and his cronies, like Treasury Secretary Henry Paulson, in charge of a supposed "bailout" plan for Wall Street. That's because the Bush-Paulson plan, by turning over unrestricted control of nearly a trillion dollars of a running tab, while handing the gargantuan bill over to an already deficit-weary taxpayer, will totally eviscerate the public sector of the economy, and pave the way for the complete impoverishment of the wide spectrum of the society. (Naomi Klein has described this process accurately in her widely-read book, The Shock Doctrine.)

As one commentator put it:
[T]he cost is still unknown, but there is no way that the taxpayers will profit. My initial estimate is that the direct costs of the Paulson plan will be $700 billion to taxpayers. That is about double the cost of the S&L crisis (compared to GDP).

....The plan only limits the Treasury to "$700,000,000,000 outstanding at any one time", so the total purchases can exceed $700 billion.
It's a running tab of almost a trillion dollars! Furthermore, this tab is run explicitly without any oversight or regulation. In the words of Paulson's own plan:
Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency. [Emphasis added]
There are plenty of others well versed in economics and financial arcana who can describe much better than I the inadequacies of this bill... nay, it's sheer inanity, representing, as it does, a total heist of an unknown hundreds of billions of dollars. Here's Mike Whitney's take (at Counterpunch):
Most people don't understand what happened on Thursday, but the build-up of bad news on the Lehman default and the $85 billion government takeover of AIG, triggered a run on the money markets and a freeze in interbank lending. The overnight LIBOR rate (London Interbank Offered Rate) more than doubled to 6.44 per cent. Bank of America reported overnight borrowing rates in excess of 6 per cent. Longer-term LIBOR rates also rose sharply. On Wednesday, jittery investors removed their money from money markets and flooded short-term US Treasuries for the assurance of a government guarantee on their savings even though interest rates had turned negative which means that their balance would actually shrink at the date of maturity. This is unprecedented, but it does help to illustrate how raw fear can drive the market.

The TED spread (the TED Spread measures market stress by revealing the reluctance of banks to lend to each other) widened and the credit markets froze in place. Borrowing three-month dollars on the interbank market and the U.S. Treasury's three-month borrowing costs widened five full percentage points. That's huge. The banking system shut down.

What does it mean? It means the Federal Reserve has lost control of the system. The market is driving interest rates now, and the market is terrified. End of story....

The problems cannot be resolved by shifting the debts of the banks onto the taxpayer. That's an illusion. By adding another $1 or $2 trillion dollars to the National Debt, Paulson is just ensuring that interest rates will go up, real estate will crash, unemployment will soar, and foreign central banks will abandon the dollar. In truth, there is no fix for a deleveraging market anymore than there is a fix for gravity. The belief that massive debts and insolvency can be erased by increasing liquidity just shows a fundamental misunderstanding of economics....

The malfunctioning of the markets and the freeze-over in the banking system are the outcome of a massive credit unwind instigated by trillions of dollars of low interest credit from the Federal Reserve which was magnified many times over via complex derivatives contracts and extreme leveraging by speculative investment bankers. This has generated the biggest equity bubble in history. That bubble is now set for a "hard-landing" which is the predictable result of an unsupervised marketplace where individual players are allowed to create as much credit as they choose.
Bush-Nero Resurrects Marx

It was Karl Marx who first recognized that the bust and boom cycles of capitalism was not an evil to be extirpated but an inherent feature of the system. It is beyond tragic that it is going to take the immiseration of millions to bring us back to Marxism, and the road to true socialism. It has already cost humanity many millions of deaths, but still the insanity of organizing the world according to proprietary nation states -- run by elites who own the bulk of their own nation's wealth, and continue to steal any newly created wealth, hiding their crimes behind clouds of fear and hideous war waged on either internal or external "enemies" -- remains unquestioned. I shudder to think whether that lesson can ever be learned.

The past seven years has been excessively gory and greedy, even by typical historical standards. Bush is like Nero. He's taken the excrescences of empire to heights that his predecessors could never have contemplated, stealing billions... even trillions of dollars, it seems, right out in the open. And the mainstream politicians, even the liberals like Obama and Pelosi, are, with some populist protest, conducted in a minor key, dancing with the rest of the rotten bunch the macabre dance around the death of their own system.

I'd say, if you were a revolutionary, you'd have to be grimly satisfied to see the capitalist chickens come home to roost. Except I don't think any critic of this system would want to see so many suffer. But suffering people are, and suffer they will, while the rich and super-rich have their government to keep them safe.

Class warfare means this: the 400 richest individuals in the United States divide among them $1.57 trillion dollars in net worth -- that's almost $4 billion per person! And how many of you reading this are wondering if you can keep your house, pay your rent, put your child through school or send them to college? It's class warfare all right, but it's war made by the rich on YOU!

Sometimes class warfare is fought with bullets and bombs, sometimes with legislation and foreclosures.

Here's a short program to "fix" the economy: expropriate the banks and energy industries and nationalize them; no money for the rich owners of these industries who have ripped off the public for trillions. End the wars in Afghanistan and Iraq, and begin the process of military withdrawal from the countries that have a U.S. presence.

I can think of no better way to close this piece than with the words of Harold Pinter, who used his Nobel acceptance speech to speak the unuttered truth about the United States and its actions in the world. He emphasized the use of bullets and bombs in spreading U.S. predominance over the globe, but I think the points are just as relevant to the economic bomb our lords and masters are dropping on our heads right now:
The United States supported and in many cases engendered every right wing military dictatorship in the world after the end of the Second World War. I refer to Indonesia, Greece, Uruguay, Brazil, Paraguay, Haiti, Turkey, the Philippines, Guatemala, El Salvador, and, of course, Chile. The horror the United States inflicted upon Chile in 1973 can never be purged and can never be forgiven.

Hundreds of thousands of deaths took place throughout these countries. Did they take place? And are they in all cases attributable to US foreign policy? The answer is yes they did take place and they are attributable to American foreign policy. But you wouldn't know it.

It never happened. Nothing ever happened. Even while it was happening it wasn't happening. It didn't matter. It was of no interest. The crimes of the United States have been systematic, constant, vicious, remorseless, but very few people have actually talked about them. You have to hand it to America. It has exercised a quite clinical manipulation of power worldwide while masquerading as a force for universal good. It's a brilliant, even witty, highly successful act of hypnosis....

When we look into a mirror we think the image that confronts us is accurate. But move a millimetre and the image changes. We are actually looking at a never-ending range of reflections. But sometimes a writer has to smash the mirror – for it is on the other side of that mirror that the truth stares at us.

I believe that despite the enormous odds which exist, unflinching, unswerving, fierce intellectual determination, as citizens, to define the real truth of our lives and our societies is a crucial obligation which devolves upon us all. It is in fact mandatory.

If such a determination is not embodied in our political vision we have no hope of restoring what is so nearly lost to us – the dignity of man.


ILÚVATAR said...

Maybe the biggest heist in history, played out right in front of us. The greed and addiction are so evident. The old joke is the drunk will borrow twenty bucks from you and forget to pay you back, the addict will steal twenty bucks from you then help you look for it when you find it missing.

Valtin said...

Agreed. These are the biggest thieves in history, although, when you account for inflation, etc., they may be similar to the railroad barons and industrial moguls of the late 19th century, I'm not sure.

In any case, criminals working to save their criminal system.

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