Psychopolitik 2.0

In the footnotes of a speech U.S. Federal Reserve Bank Chairman Ben Bernanke would have given to the House Financial Services Committee on Feb. 10, lies a unique and startling disclosure.Hosted on the Federal Reserve’s own servers, the written testimony of the bank’s chairman explains in plain text what expanding the Fed’s powers will do.

“The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system,” footnote number nine, at the bottom of the page, explains without additional qualification.

MTV believes in it, having acknowledged that the “M” now stands for Mediocre instead of Music.  Obama, on the other hand, does not…:

President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.

The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

WTF…really?  Comparing politically connected megabankers to pro athletes, that’s all you have?  Is this a joke?  Last time I checked, the gambling debts of athletes weren’t backstopped by the rest of the public at gunpoint, otherwise that incident Gilbert Arenas let his Desert Eagle soar over would’ve worked out much differently.

It’s not the money, Barry.  It’s how they get it.  If the banksters ran their companies in a reasonable manner & didn’t take silly system-crushing risks then their pay wouldn’t have even shown up in the news.  But they didn’t.  They took the government up on the implied cushion & took a one-way trip to Moral Hazardistan.  That these companies even still exist is an insult.

“That is part of the free-market system”…ridiculous.

Obama sought to combat perceptions that his administration is anti-business and trumpeted the influence corporate leaders have had on his economic policies. He plans to reiterate that message when he speaks to the Business Roundtable, which represents the heads of many of the biggest U.S. companies, on Feb. 24 in Washington.

Funny.  He puts someone in at Treasury that recommended AIG try to cover their tracks, retains Bernanke (a friggin’ Bush appointee) at the Fed, and to this day defends the bailouts, now going as far as to say big bonuses at the banks that were kept alive with our money are no big deal.  Yet despite all this, he is (& still will be no matter what) painted as the 2nd coming of Che Guevara.

Simple question: how much does someone have to vigorously defend state-capitalism at all costs before it is finally admitted that they’re a capitalist?

When you build up a monster & let it loose, the probability of a trail of destruction following it rapidly approaches one.

This one has been busy for awhile, even going as far as to cook the books for an entire friggin’ COUNTRY:

“Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future,” one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece’s debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.

Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks. (emphasis mine)

A nominally “private” company bailing out a government, and with funny money at that.  So THAT’s where they got the idea…

Props.

When there is a void, fill it.

For example, here’s one, complete with helpful illustration:

In general, much of the U.S. population does not trust the large institutions that currently hold power over the system they live within.  Naturally I’d argue they never should’ve trusted them in the first place, but the million dollar question is how to replace them with something that CAN be trusted.

BTW: whether the limitation of the top two responses to yourself & blood relatives was intentional or not makes a suggestion about a possible void-filler that would actually be worse than the status quo.  Try to guess what it is.

The first entry in the “that’s what we’ve been trying to tell you all along!” department of the year comes via WaPo:

The past decade was […], according to a wide range of data, a lost decade for American workers. A decade that began in a moment of triumphalism — there was a current of thought among economists in 1999 that recessions were a thing of the past — has included two of them — bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 — and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.[emphasis mine]

When the point of your position is to ignore these types of things, they end up shocks after the fact.  For the rest of us, the endless bouts of “WTF, my check is gone already?!?” kept us away from that luxury.

The miserable economic track record is, in part, a quirk of timing. The 1990s ended near the top of a stock market and investment bubble. Three months after champagne corks popped to celebrate the dawn of the year 2000, the market turned south, a recession soon following. The decade finished near the trough of a severe recession.

But beyond these dramatic ups and downs lies an even more sobering reality: long-term economic stagnation. The trillions of dollars that poured into housing investment and consumer spending in the first part of the decade distorted economic activity. […]

The housing bubble both caused, and was enabled by, a boom in indebtedness. Total household debt rose 117 percent from 1999 to its peak in early 2008, according to Federal Reserve data, as Americans borrowed to buy ever more expensive homes and to support consumption more generally.

Income went stagnant, prices kept going.  The politically endorsed response to this was treating debt as if it were savings, hence the resulting malinvestment.  Learning from our errors sounds like a simple resolution to make for the new year, but will we actually approach it?

While reading about the extensions of subsidies in the All-Encompassing Shit Sandwich in some random post elsewhere, the following recurring thought came back up:

If people above the “official” poverty line, according to the “mainstream” Left still need assistance, then doesn’t that mean the “official” definition of poverty is bullshit?

(cross-posted to FreedomDemocrats.org)

Tom Knapp, in reference to the desperate defenses of the “stimulus” by Obama:

Even taking President Obama’s lowball estimate of his “stimulus” program’s cost — about $800 billion — at face value, and giving his jobs figure undue credence, those 650,000 jobs were created (or, to include his fudge, “saved”) at a cost of about $1.2 million each!

Let’s make some very rough and broad assumptions about an average job here — assumptions which I’m pretty sure will make the “stimulus” figures look better, not worse, than warranted.

Let’s assume an annual salary of $50,000 (that’s higher than the actual per capita figure), plus another $50,000 in non-salary costs — the “employer’s share” of payroll taxes, employer-sponsored insurance and bennies, the pro rata cost of running the human resources operation that hires the individual employee, etc.

That brings the cost of a single job to a nice, round $100k.

Or to put it another way, it would’ve been cheaper to just take those 650,000 people and give them each $100,000.  Not to say that such a move would be particularly realistic, but hell it couldn’t be any less so — or less effective — than the policy actually taken up.

That’s the wonderful thing about mainstream political economics.  Because the intent is more to look like you’re doing something than to actually accomplish anything, you can claim victory regardless.  None of that messy acknowledging that corporatism has rendered the economy artificially zero-sum to worry about…

Get and maintain wealth by using your high-level business connections to game the system?  Possible criminal:

By all appearances, Raj Rajaratnam was a self-made billionaire, having built Galleon Group into a giant hedge fund with a specialty in technology companies.

But prosecutors said on Friday that he had profited not from his trading genius but from his Rolodex, and they arrested him on charges of conspiracy and securities fraud in what they called the biggest insider trading scheme ever involving a hedge fund.

In all, six people were arrested, accused by prosecutors and the Securities and Exchange Commission of earning more than $20 million from illegal trading in companies like Google, Akamai and Hilton Hotels over nearly three years.

Even now, after the discovery of Bernard L. Madoff, the scheme outlined by law enforcement officials is the stuff of Wall Street thrillers, not seen since the days of Ivan Boesky two decades ago. Mr. Rajaratnam is accused of tapping a vast network of informants across a swath of corporate America: a senior official at I.B.M. considered a contender for the top job at that firm; executives of Intel and the consulting firm McKinsey & Company; two former Bear Stearns employees who had moved to a hedge fund, New Castle Partners; and an analyst at Moody’s Investors Service.

Get & maintain wealth by using your high-level business connections including members of the government to game the system?  Sure thing, go ahead!

If the alleged regulatory standard in finance was applied evenly, there’d be a lot more CEOs wearing handcuffs, and government agents would basically have to frog-march themselves right behind people like Raj.  After all, if the issue is profiting from your connections, then whether hidden or overt makes no difference, as the entirety of Wall Street does this.  No, enforcement is a matter of convenience, throw the occasional bone & hope the rubes take it & shut up.

Yet still they wonder why people conclude the problem is the system itself rather than particular players…

What people need isn’t credit, but MONEY.  There’s a difference.

In case anyone was wondering about the banks:

Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune. (emphasis mine)

How odd.  So how is this fund usually filled?

The FDIC maintains the [Deposit Insurance Fund] by assessing depository institutions an insurance premium. The amount each institution is assessed is based both on the balance of insured deposits as well as on the degree of risk the institution poses to the insurance fund.

-Wiki entry on the FDIC.

Whoops…looks like a case of drastically optimistic low-balling on that premium.  Thus, the reason the banks & their lobbyists prefer loaning the government the money — ironic, what with the bailouts an’ all — becomes screamingly obvious.  Let’s go back to that first article…

A hallmark of the financial crisis has been the decision by successive administrations over the last year to lend hundreds of billions of taxpayer dollars to large and small banks.

“It’s a nice irony,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company. “Like so much of this crisis, this is an issue that involves the least worst options.”

Bankers and their lobbyists like the idea because it is more attractive than the alternatives: yet another across-the-board emergency assessment on them, or tapping an existing $100 billion credit line to the Treasury. […] Bankers worry that a special assessment of $5 billion to $10 billion over the next six months would crimp their profits and could push a handful of banks into deeper financial trouble or even receivership. And any new borrowing from the Treasury would be construed as a taxpayer bailout that could open the industry to a political reaction, resulting in a wave of restrictions like fresh limits on executive pay.

Translation: “We don’t just want you to save our asses, we want to make a profit off of you saving our asses, disguised as us helping you.”  A game of three-card monte looks like less of a screw-job in comparison to dealing with these people.