The Hazardous Morals of Bankers

Warning: You must forgive the writer for the exceptional length of this piece as a combination of rust that accumulated over months away from writing, a little too much time on his hands and what is feared to be the initial stages of ambiguphobia all contributed to the problem. 
- ed.

US federal debt will be more than $16 trillion by the time you read this. Student loan debt in the land of the free surpassed both credit card debt and the $trillion mark earlier this year. Greece teeters on the brink of bankruptcy while the other PIIGS wait their turn in the slaughterhouse. Three cities in California declared bankruptcy within a month this summer while nations have given up their sovereignty in order to avoid the same fate. Tens of millions have been thrown out of their homes in the past four years while even the Catholic Church battles to remain solvent. All of this was kicked off with the collapse of Lehmann Brothers four years ago triggering a crisis which forced governments and central banks around the world to pour trillions of dollars of bailouts into the financial system in order to stave off financial collapse and the threatened panic, chaos and disaster sure to follow. So, why are we here four years later staring over the US fiscal cliff, waiting for the eurozone to collapse and watching local sheriffs play the muscle for the mafioso banks repossessing all our neighbours possessions? The same reason the crisis seems perpetual. Debt and it's collector, moral hazard.

“You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.”
 - George Bernard Shaw

Like all good yarns, that of debt goes way back in time, before money, before barter, beginning with the Sumerians in Mesopotamia over 5000 years ago in fact, but we don't need to go back that far. No, forty-one years is enough for our purposes, when Richard Nixon ended the post war Bretton Woods International Monetary system by suspending the convertibility of the dollar into gold (then $35 to the ounce, today around $1600) on August 15th, 1971, effectively creating the current floating currency regimes: fiat money. No longer would the US dollar be convertible to gold; no longer would money creation and thus finance be constrained. Not only was the US fighting a war in Vietnam that had to be paid for but they were battling "international money speculators" as Tricky Dick dubbed them. Heck watch for yourself:



So it was that the casino known as the financialization of capital was built, in order to protect the average worker "because they [financial speculators] thrive on crisis, they help to create them". By no means was this the first time the world had used virtual money with nothing guaranteeing its value but our faith. According to David Graeber, there have been two such previous periods in the history of money and debt: The Age of the First Agrarian Empires (3500–800 BCE) and The Middle Ages (600 CE — 1500 CE). The key difference with today was that both those eras saw strong institutions and traditions which placed controls on the potentially catastrophic social consequences of debt from Mosaic jubilees (debt forgiveness every 50 years) to Christian and Muslim prohibitions on usury. Fast forward in time to go backward as the current era has seen protection turned on its head creating the first effective planetary debt enforcement system, operating through the IMF, World Bank, governments, corporations and other financial institutions. In the past we protected debtors; today we protect the interest(s) of creditors. Spot the doublethink involved here as the danger posed by financial speculators led to a policy which in turn empowered the threat leading to it's perpetuation becoming a necessity to maintain the status quo. The battle against the money speculators has been fought just like the war on terror.

Nixon's move had predictable results, a series of crises as wave after wave of speculation, manipulation and deregulation smashed against the economy. Predictably, with no physical limit to fiscal and monetary expansion, government debts ballooned leading to inflation which needed 22% interest rates to tame causing economic malaise that necessitated tax cuts (mostly for corporations and the rich) and deregulation to get the economy going again. The balance of power between rentiers and workers was shifted by slashing capital gains and opening investment loopholes so that in less than a generation the very group we had been warned about had been handed the keys to the Porsche and proceeded to drive us all over the edge. The process seemed almost planned, conspiratorial, but it was our own hubris that allowed it.

"There are compelling reasons for paying attention to this potential for catastrophe as, every debt crisis in history since Solon of Athens has ended in inflation, bankruptcy or war, and there is no cause to believe we’ve solved this one, even if it has been postponed." - Susan George; Fate Worse Than Debt, p. 196

The Cliff's Notes to the crisis reads like a tragedy. Steady erosion of the competitive advantage enjoyed by the US after WWII and the west as a whole to the east leads to policies which ensured wage stagnation for those working in industries losing employment and skyrocketing renumeration for the CEO's outsourcing those jobs and the financial industry which facilitates it. This creates a feedback loop in which those at the top enjoy more influence on legislation thanks to their enhanced financial position. Those at the bottom, seeing themselves falling further behind turn to debt in order to maintain the illusion of keeping up with the Joneses. Check out this interactive chart to see the machine in action. Meanwhile, the flood of money to the top leads to fewer and fewer available investment alternatives necessitating looser regulation on credit to lend to less and less credit worthy clients through the creation of creative, near magical, financial instruments. All the while, the growing inequality brought about by transferring wealth to the top slowly strangles the consumer driven economy (about 70%) as those who would spend have less while those who invest, at home or abroad, have more. A little more doublethink courtesy of trickle-down economics.

On the government side, though Reagan talked a fiscally conservative game, he walked a public spending splurge as debt tripled under his watch. Bush the elder didn't do much better and though Clinton managed to run a couple of surpluses late in his second term, Dubya and Congress managed to pass two successive $trillion plus tax cuts while fighting two separate $trillion plus wars along with passing a $trillion plus prescription drug plan. The Anglo-Saxon affinity saw the UK walking in near lockstep; just replace Reagan with Thatcher and Clinton with Blair at the head of the parade through the Corporation of the City of London instead of Wall Street. The financial sectors share of domestic US profits skyrocketed from below 16% to 41% making bankers more important than ever. The partial repeal of Glass Steagall, allowing banks to gamble grandma's pension with the Gramm-Leach-Bliley Act (also known as the Financial Services Modernization Act) and the Commodity Futures Modernization Act which ensured that the credit default swaps and collateralised debt obligations at the heart of the 2007/8 crisis wouldn't be regulated were the finishing touches as the banksters had merged with government and rigged the economy for explosion.

The story that unfolded in continental Europe was somewhat different but had the same result. Overnight, countries such as Ireland, Greece, Spain, Portugal and Italy were expected to transform into Germany. Shockingly, it didn't happen and without their own currencies to debase in order to regain competitiveness, the peripheral, low-capital investment economies were crippled while German producers were given a boost. Not only did prices go up - in Spain a loaf of bread doubled in four years - but salaries stayed about the same, rising 14% in the ten years from the introduction of the euro January 1st, 2002 to the end of 2011. Throw in the additional enticement of suddenly being deemed nearly as credit worthy as their northern partners and you've got yourself the perfect debt bomb recipe. The explosion of Benzes, Beemers and Audis on the streets of Madrid and Dublin created a surplus that found its way back to German banks who had to lend this money to someone and were happy to find eurozone approved customers from Porto to Thessaloniki to buy more German cars or real estate developers to build beach resorts to take vacations in. Each country took their own path to purgatory, in Spain and Ireland it was more private bank debt while in Greece and Portugal it was more public (and Italy, well, they've always had too much debt).

As we know, our story doesn't end well, in fact, there doesn't seem to be an end as it's starting to feel like the neverending story. The total cost is incalculable  in dollars, euros or pounds, but it's the human cost that should remind us that economies are meant to serve people and not the other way around. When the crisis hit, we were told we had to bailout the banks or the world would end, so we did. Ever since it became clear that Greece wasn't going to be able to maintain its debt, the troika always manages to get the money to Athens on time. When the Irish banks couldn't keep afloat, their government threw them a lifeline and guaranteed their debt. Spanish banks were going under so once again the troika (IMF/ECB/European Commission) saved the day. Trillions of paper dollars, pounds and euros all to ensure the debt obligations continue to be paid, trillions the people will have to pay back. For what? The sums will never be paid off, everything has been done to keep interest payments flowing to the banks and to give them enough time to get their capital out. The price of paying off failed bankster bets is not only the sweat of our brows but becomes ever more demanding, framed in the Orwellian language of fiscal austerity/consolidation, structural adjustment/reform, labour flexibility, competitiveness, and growth.

In the 70's and 80's the IMF/World Bank became despised figures in the developing world. As global capital sought higher returns than could be found in the developed west, their sites settled on the poorer resource-rich nations of the south and east where they found dictators, anti-commie generals and corrupt legislators willing to sign over their people's futures in exchange for ready cash to build vanity projects, fund coups, suppress insurrections or simply pad their Swiss bank accounts. When the people of their nations found they couldn't pay, the men in black would arrive, preaching the 'free market' mantra of globalization, structural adjustment programs, which always had the effect of worsening life for the people while benefiting the foreign corporations. Eventually, the anti-globalization movement and debt cancellation voices became loud enough and democracy returned to many places and debt was in some cases even forgiven. The first part of the story is now playing itself out in the 'developed' world except this time the countries aren't even getting a hydroelectric dam, bombs or a statue in return. Debt is granted only to maintain existing debt in exchange for lowering spending on those things that help the people, shredding the social safety net, firing workers, lowering tariffs and taxes and eliminating workers rights in a duplicitous attempt to make the economy more competitive in order to grow and pay off the increased debt load. Unfortunately it has never worked, isn't working and never will. The only winner, for awhile at least, are the banks to whom the interest keeps flowing.

Ironically, many accept this punishment as atonement, self-flagellation to purify the soul. Debts are contracts that must be paid off, more than an obligation, as the threat of moral hazard would not only destroy our financial system but lead to anarchy (gasp!). Yet bank bailouts are a perfect example of moral hazard as the banksters have now learned that they will not pay the costs of their losses; their gains remain privatized while their losses are socialized. Morality should be the last thing they want to talk about as their lascivious behaviour has been highlighted this summer with a series of scandals that illustrate they have no intention of ever doing the right thing whenever there's a whiff of profit to be had. If they don't get caught, great, if they do, well, there will be newspaper headlines, an investigation and finally, at worst, a fine to pay, usually a fraction of what the illegal behaviour gained. Somehow, even though both Mitt Romney and the US Supreme Court have defined corporations as people, not only are the big banks Too Big To Fail, they've become Too Big To Jail (TBTF/J).

"Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from these rules, in consequence of some flattering speculation of extraordinary gain, is almost always extremely dangerous, and frequently fatal to the banking company which attempts it." Adam Smith; The Wealth of Nations, Book V, Chapter I, Part III, p.820

This summer has put the lie to Adam's words once and for all. Most recently it was Britain's Standard Chartered, who NY state regulators accused of hiding $250 billion of transactions with Iran despite sanctions. A person would be charged with terrorism and sent to Guantanamo, a bank simply pays a $340 million fine; it's up to the families of those killed in terrorist attacks facilitated by StanChar to sue the bank. The reaction of the British government was particularly instructive; when a British bank is threatened with the loss of its New York banking license, officials, from the mayor of London to the Bank of England governor to the Chancellor of the Exchequer rush to its defense. This, from the same country that would and has done everything in its power to get Julian Assange extradited to the US for torture and possible execution and done nothing to prevent its own citizen, Gary MacKinnon, who suffers from Asperger's syndrome, from being extradited to the US for exposing weaknesses in the defense department's computer security systems.

Just a few week before that came the revelations of the LIBOR rigging scandal. A story that is 'too complicated' to understand by the public was therefore ignored by the media. Besides, there was that whole Batman shooting and then the Olympics to worry about. Denver theater body counts and jingoistic medal counts are far more interesting than a bunch of bankers sending each other emails, right? Well, no, not really when mass shootings seem to have become monthly occurrences in the US (surprise! another one today), the Olympic medal count can be predicted based on population, per capita GDP, past performance, and host status while the bankster collusion earned them hundreds of billions (trillions?) in profits while costing the public an impossible to figure, er, figure. Wait, sounds a bit like the Olympics. Anyway, as usual it's not all that complicated.

LIBOR stands for the London Inter Bank Offered Rates and it's used in the setting of most other kinds of interest in the world, from credit cards, student loans and mortgages to the cost of government bonds. Seeing as we live in a 'free market', up until the scandal we all assumed this rate was set by the 'laws' of supply and demand but, as usual, our naivety cost us and profited them. Instead, the most important rate in the world is determined every morning by representatives of the 18 largest western banks who report on what they expect to pay to borrow funds from each other (Inter Bank) in the future. Under LIBOR rules, the four highest and four lowest estimates are eliminated, and the average of the rest becomes the official rate. Well, shockingly, banksters used this opportunity to artificially set rates everyday a bit higher or lower in order to profit from the positions they held in their portfolios. Barclays had their boss Bob Diamond resign and was fined ￡290 million by British authorities, who were involved in the racket, while seven banks including Barclays have been subpoenaed in the States. A few Italian families get together and we call them the mafia and charge them with racketeering but when banks do it we call it cooperation. It will take years of litigation to sort it all out but you can be assured, a few banks will have to pay a fraction of the profits earned in the scam.

Speaking of the mafia, seeing as interest rates aren't spicy enough to make headlines, the other summer scandal involved just that, Mexican drug lords who line headless bodies on highways. Once again the contrast between the justice meted out to the flesh and blood people and the corporate people is illuminating. A real person gets caught selling dime bags on the street corner trying to raise money to go to college, we go to jail for life; they get caught laundering the money from the profits earned on those bags, they say they're sorry and get a slap on the wrist. Europe's largest bank, HSBC, not only transported billions of dollars of cash in armoured vehicles, cleared suspicious travellers' cheques worth billions, and allowed Mexican drug lords to buy planes with money laundered through Cayman Islands accounts, they also moved money from Iran, Syria and other countries on US sanctions lists, helped a Saudi bank linked to al-Qaida shift money to the US and even cleared $290 million in "obviously suspicious travelers cheques" that benefitted Russians "who claimed to be in the used car business." Lucky we only have to worry about Iranian-American used car salesmen hiring Mexican drug lords to assassinate the Saudi ambassador or this might sound like a conspiracy theory. Yep, all this was part of a report by a US senate committee which revealed HSBC failed to monitor $60 trillion in wire transfer and account activity, had a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity, and failed to conduct anti-money laundering due diligence before opening accounts for HSBC affiliates.

Each time new revelations come to light, bank executives line up to testify in front of an important sounding committee and explain how they are "horrified" by what has happened, that they couldn't have foreseen events, that measures have been put in place, that it was bad luck or a black swan or a rogue trader. Then it happens again. Just this spring, the last remaining 'good banker', Jamie Dimon had his bank JP Morgan victimized by one of those rogues as "the London whale" lost a bet on a position that could cost his bank $9 billion. Just the kind of gamble we were promised these banks would no longer make in exchange for bailing them out just four years ago. Just the kind that lost UBS $2 billion last September, Societe Generale $6 billion in January 2008, or Barings Bank $1.3 billion in 1995. Our always vigilant press is always sure to name them rogues, despite being the norm, performing unauthorized trades and justice is swiftly served on these lone scoundrels while pensioners and savers pay the price and the banks continue to promote the culture of short term profits in which psychopaths thrive, to inflate their quarterly earnings. Had enough yet? There's always the fattening of the PIIGS, the Magnetar trade, the Sentinel fraud, any of these, or ...

If these were people, as corporations such as banks have supposedly become, we'd execute, jail or banish them from our communities so how do you explain the social pressure to repay criminal enterprises that are slowly sucking the life from our economic system? In order to succeed in society, few would disagree that a university or college education is a prerequisite. Such a degree costs tens of thousands of dollars or pounds obliging many to take out student loans which become payable upon completion of their studies. In America, if you decide to head to Vegas and max out your credit card on hookers, blow and roulette only to find yourself unable to pay, one option is to declare bankruptcy, ruining your chances to obtain credit but clearing the debt off the books just as the hangover clears after a good, greasy breakfast. If you find yourself without a job (or only part-time or unpaid internship) once you finish school and unable to pay back a student loan, you don't have the bankruptcy option, it can't be cleared and will be with you until death or its paid. Heaven forbid if you're among the 25% of Americans without health coverage and you or a family member fall ill, the cost of which forces many into a debt spiral. This is nothing if not slavery. Even if you're a good client and you pay your debts, or the debts of your nation through your taxes, you are forced to work in order to earn the income. What else is forced labour but slavery?

Funny that we (or at least the Sumerians) had this all figured out 5000 years ago. Even then they recognized the need to protect those forced into debt from unforeseeable circumstances or the avaricious. Interest rates also seem to have first appeared in Sumer where most transactions were conducted on credit. Years with bad harvests resulted in peasants hopelessly indebted to the rich, forced to surrender their farms and, ultimately, family members, in debt bondage. Inevitably this would lead to a social crisis in which the masses were enslaved to the few. It soon became traditional for each new ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or 'freedom', so that all bonded labourers could return to their families. Significantly, the first word for 'freedom' known in any human language, the Sumerian amarga, literally means 'return to mother' while in Sanskrit, Hebrew and Aramaic, debt, guilt, and sin are actually the same word. Julius Caesar became the hero of the Plebs, and was ultimately killed by the nobles, for introducing debt forgiveness schemes after he took power from the corrupt patrician oligarchy. Solon laid the foundation for Athenian democracy by "shaking off the burdens" of enslaving debt. Biblical prophets instituted a similar custom, the Jubilee, whereby after seven years all debts were similarly cancelled, the direct ancestor of the New Testament notion of ‘redemption’. Through some historical error, we inherited the institutions of lending at interest without the original checks and balances.

Instead, we live in a world where banks are bailed out while people are sold out. In which lenders making up details on credit applications became such a common practice it became known as liar loans but debtors get sent to jail for 30 years for lying on the same forms. It was after all many of those liar loans that were slapped together, sliced, diced and bundled into the CDO's that helped cause the crisis, but no one needs to be jailed for that. It's only those uncivilized countries that obviously need a good bombing where bankers are actually punished for fraud. Tax evasion is only for the rich and corporation kind of people not the 99%. It's jail for you or me if you screw the IRS but if you're HSBC or Credit Suisse, you just cut a deal in which you hand over email and telephone records of your staff to the US Department of Justice. Stealing from your clients is frowned upon unless your MF Global, an investment company run by the former governor of New Jersey Jon Corzine, then of course it's okay. It's usually fraud if I sell you something that I know is going to blow up, but if you're Goldman Sachs, where your clients are referred to as muppets, well, it's fine to sell your clients investment products that your bank is offloading as fast as possible on the open market because you know they're about to explode, even when there's emails to prove it.

It doesn't seem like banks have morals and they definitely don't learn their lesson from the punishments they receive. Bank of America’s securities unit has agreed four times since 2005 not to violate a major antifraud statute, and another four times not to violate a separate law. Merrill Lynch, which Bank of America acquired in 2008, has separately agreed not to violate the same two statutes seven times since 1999. They're just doing cost-benefit analysis, where their benefits are our costs as when Morgan Stanley entered into a complex swap agreement with the New York electricity provider KeySpan in 2006 that gave it a stake in the profits of a competitor enabling the two companies to push up the price of electricity. Price fixing is illegal, so Morgan Stanley had to pay a fine of $4.8 million for enabling it, but they got to keep the $21.6 million they made for handling the swap and didn't have to admit any wrongdoing. The cost to New Yorkers in higher utility bills? $300 million. Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase came out smelling like roses converting human shit into billions of dollars in profits by financing a new sewer treatment plant for the people of Jefferson County. The people didn't come out smelling so pretty though as the financing cost forced them into the biggest municipality bankruptcy in US history. The same thinking probably went into Wells Fargo's alleged decision to fire an employee three days before his daughter was scheduled for surgery in order to avoid paying the bill. No cash, no cure for cancer as the hospital cancelled the surgery and the child was left to die.

What of finances role of market maker and facilitating transactions for investors and consumers, surely we owe them something for that? Well, thanks to the deregulation of the agricultural commodity market in 2000 Goldman Sachs earned £600m from food speculation in 2009 alone. While the bank's profits were boosted, the numbers dependent on food banks and aid were exacerbated thanks in part to the banksters. No one disagrees that their gambling pushes up prices, the only question is how much relative to other factors such as biofuels, changing consumption patterns and drought. The poor are disproportionately affected by a rise in food prices as they spend a higher percentage of their income for the basics, just as they do for debt. If you use anything made of plastic, drive a car or heat your home, you should know oil speculation adds $23.39 to the price of a barrel (around a quarter) which translates to about an 83-cent-per-gallon of gas premium and costing an average American family $82/month. And people we're angry when Bank of America introduced a $5/month debit card fee!?! Seems these financial behemoths need the cash though as they need to keep up with their competitors in the new world of flash trading. By spending billions on faster cables they can shave microseconds off the latency, or trading execution time, thus allowing themselves to peek at the orders of other traders before they're made. Not only does this destroy the idea of investing, especially by us flesh and blooders, but it opens up the markets to one of the newest perils, the flash crash. Hooray, more risk!

Perusing the comments under any number of stories of payday loan companies charging four to 5000% interest, distraught families being tossed on the street or students in the streets protesting their debt enslavement, one can always be sure to find defenders of the faith of finance. These moralizers are quick to point out that no one forces people to sign on the dotted line but never take into account the asymmetry of information and power between the parties or the corrupting influence of living in a society built on sating our short term desires no matter the cost. The tired refrain of taxation and representation is trotted out to rationalize paying the debts of our governments but loses all meaning when put in the context of the options faced by voters today: Bad or Worse, Red or Blue, vote wrong and it's a redo, either/or results in another IOU as the need for money to get elected forces politicians to prostate themselves before the FIRE (finance, insurance and real estate, one for all and all for one thanks to deregulation). Insisting people today make rational economic decisions seems ludicrous while our educational system is being sold off to the lowest bidder and converted into a propaganda factory where standardized test scores are more important than critical thinking. Arguing we have a choice when the information we receive is nothing but a toxic mix of cognition clogging updates in our Twitooglebook universe alongside stories from a media controlled by six corporations (down from 50 in 1983) offering 2,000 channels with the same message while selling an illusion of choice barraging us with a constant stream of crisis reports, crisis summits and near-crisis averted but never connecting the dots.

"When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretend payment." - Adam Smith; The Wealth of Nations, Book V, Chapter III, Part V, p. 481

To review. Forty years ago we entered a new era of fiat currency which untethered money and thus debt from any constraints in order to protect ourselves from "money speculators". The US in particular experienced a long economic boom for the wealthy with stagnation and even decline for the rest as taxes for the rich and corporations were cut, unions were gutted and jobs were outsourced. In the past 30 years, 96% of the growth of average incomes have gone to the richest 10% and in the past 10 years, the incomes of the other 90% have declined. In Europe, a new currency was introduced with supposed magical powers to turn the likes of Greece into Germany but only had the effect of causing them to diverge. On both sides of the Atlantic, the shortfall of the poor, the middle class and their governments was made up by increased borrowing. The "money speculators", whose ingenuity was unleashed by the deregulation that regulatory capture bought them, were more than happy to find more and more creative ways to eliminate risk and earn huge rewards. When the ponzi scheme faltered, we were told there was no alternative to saving the banks, transferring trillions from public hands to private with no consequences and next to no oversight. With nothing fixed and no lesson having been learned, the banks emerged bigger and more powerful than ever with the knowledge they can act with impunity while the public from Madrid to Manchester to Miami are forced to accept ever more stringent austerity measures in exchange for ever larger bailouts which continue right under our noses.

Oh, it continues. TARP was just the beginning of bank bailouts as the program has continued in stealth and shows no sign of being abandoned therefore changing the game is the new moral imperative and sustaining it a sin. Language is their most effective ruse, twisting meanings and changing expressions. Quantitative easing in the US and UK is nothing more than printing money electronically and using it to overpay banks for their financial assets or by lending to them on the cheap, minimizing their borrowing costs and lowering their reserve requirements in the hopes they will lend that money on to the real economy. Of course they don't, they just buy more bonds (gilts in the UK) to earn a risk free return (as long as the merry-go-round continues) and wait for the next round of easing (QE3 is rumored for a fall sailing). All this goes to pad the bottom line which they need to perpetually improve to keep increasing CEO salaries, keep the stock market happy and of course, give idiots like this something to babble about incoherently.



European sensibilities were a bit too sensitive for such blatant Zimbabwe/Weimar Republic-like behavior (at least until recently when they just up and gave Spanish banks €100 billion that the people will have to pay back), so the ECB basically did the same thing but called it LTRO, Long Term Refinancing Operation. Prohibited from giving money directly to countries, the ECB printing press is used to give money to banks ostensibly to buy bonds from countries having problems selling them (ie. Greece et al). More free money for the banks if the game continues as they can either put the cash into the riskier bonds at higher rates or play it safe and deposit it back at the ECB. Other Newspeak candidates include 'Growth friendly' policies, those which hand more power to foreign corporation and banks to continue their plunder while David Cameron's 'expansionary austerity' is more Orwellian than his Big Society and has driven the UK into a 'surprise' double-dip recession. Confused? Yep, you're meant to be, otherwise you'd wonder why they don't just give the money directly to the people instead of banks while artificially maintaining low interest rates in order to force the elderly to eat cat food or starve.

"And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the moneychangers, and the seats of them that sold doves" - Matthew 21:12

Just this past week US VP Joe Biden got in a little hot water for telling a half-truth:

People (well, right-wingnuts) went, well, nuts, as they tried to turn his words into an insensitive race play. The mistake he made though is that we're already in chains, slaves to greedy, immoral (amoral?), psychopathic bankers. It wouldn't be so bad if we at least we're being driven for a monumental purpose, I dunno, like building pyramids, the US capitol or White House instead of facilitating the worship of the Golden Calf. Up til now we've been complicit in their shakedown where debt is a sacred obligation only if it is owed by the poor and vulnerable to the rich and powerful who have used their gains to purchase political power or hidden them away in the Caymans. Yet debt is always negotiable or can even be written off when it's the other way around ensuring the wealth keeps flowing upwards. The growth in inequality seen before the crisis has been put on steroids since the bailout with more than 90% of the gains going exclusively to the richest 1% causing the middle class to slowly disappear and poverty to explode while Paul Ryan argues to cut their support. Regardless, much of the rabble will rally to the Romney/Ryan call to extend the Bush tax cuts and further cut taxes on the rich while making the rest pay for it. We used to ask "What's the Matter With Kansas?" but we need to ask "what's the matter with us?" today for doing nothing as the air raid sirens are sounding the next attack.



Alone, none of us can destroy the false idol of greed, there's no Moses amongst us, the only way is if enough people act together. Think and buy locally, plant a garden, ride your bike, vote for alternative parties and take your money out of the TBTF/J  banks (US, UK, Facebook) and put it in a credit union that puts profits back into communities are all simple ways to start. The more ambitious can talk to and teach others, join a protest, or even try to get out of the fiat economy altogether by investing in physical gold, silver or other metals. Of course if you're worried about all that extra weight in your pockets try using the alternative, electronic, secure Bitcoin currency. Finally, we have to shed the holier-than-thou shackles placed on us by those that would call people who walk away from underwater homes deadbeats, graduates unable to make their student loan payments slackers and governments tricked into a debt trap unable to meet their debt obligations lazy while bailed out banks behave beligerently, 'good' governments gut the promised social welfare state and corporations renege on obligations and commitments made to provide health care, pensions and other benefits to workers. The parasites may seem to have the power, they may have won the previous battles, but we, as flesh and blood people, have the real power, it's time to Strike Debt, stop paying what is no longer morally owed, a debt strike to stop the bankster shock doctrine takeover.

Let Them Eat iPads!

Whether or not Marie Antoinette ever uttered the phrase that modern myth-makers have attributed to the much maligned monarch to help spark the French Revolution, there is less doubt surrounding the harsh realities of a peasant's life in late18th century France. Rising bread prices, unemployment, rising war-related debt, an inefficient financial system leading to difficulties managing said debt exacerbated by the burden of an inadequate system of taxation and a ruling class disconnected and isolated from the realities of the day-to-day life of the population are all cited as causes leading up to the storming of the Bastilles. Fortunately, as North Americans finish their Labor Day holiday (Labour up north, eh), they can enjoy those picnic hotdogs all the more in the knowledge we've come a long way since 1789, as democracy and capitalism have spread and taken hold guaranteeing an equal voice and opportunity for all.

The struggle of man against power is the struggle of memory against forgetting
- Milan Kundera

The trick you see is to help/make a majority of the people ignore the relevant facts by distorting or drowning them out. Let's start with the holiday itself. The first Labor Day celebration in the US was nothing but a parade organized by unions in New York on September 5, 1882, as a celebration of "the strength and spirit of the American worker." Their goals were simple: decent wages, an eight-hour workday and the right to organize. The national holiday wasn't instated until twelve years later in 1894 when President Grover Cleveland needed good publicity cover for, get this, crushing a labour strike by sending in troops during the economic depression known as the Panic of 1893. Politicians and labour leaders were content to keep the holiday in September, far from the growing popularity of May Day. Both the workers and Cleveland turned out to be the losers as Grover lost the Democratic nomination in 1896 and the reforms labour sought did not come about for nearly half a century when the Depression-era fair labour laws that were passed under Franklin D. Roosevelt finally set standards like the eight-hour day and an end to child labour.

Those laws (and the US hegemony of the post-WWII world) set the stage for an era of unparallelled growth and prosperity. All this success inevitably bred the hunger for more, and more now. Satiating today's desires became more important than tomorrow's which were less pressing than next week's. In the business world this was reflected in a culture that rewarded results this quarter through increasing stock prices and executive pay and neglected the necessity for planning for a few years down the road. People worked longer hours, women entered the workforce then they took on two jobs or overtime. When this wasn't enough they simply financed it in an orgy of credit cards, payday loans and even turned their homes into cash machines. Of course all of this was cheered on by corporate America which adapted by shifting the entire economy away from manufacturing towards financing all that debt. General Electric doesn't make their money producing light bulbs, they are now first and foremost a finance company. This seemed great for everyone for awhile, those at the bottom needed money to keep buying more stuff, those at the top needed somewhere to invest all the cash they were making and the financial intermediaries gladly created ever more complex securities to shuffle the money from one to the other.

Well, we know all know how that wound up. Luckily the US today is nothing like France in 1789, you remember - "Rising bread prices, unemployment, rising war-related debt, an inefficient financial system leading to difficulties managing said debt exacerbated by the burden of an inadequate system of taxation and ruling royalty disconnected and isolated from the realities of the day-to-day life of the population". We're told by government statistics that inflation is under control so bread prices can't be a problem; somehow printing trillions to bail out the banks and to lend them at near zero interest rates hasn't affected prices. Oh, that's right, core inflation is what they talk about. Core, meaning the price of everything that we don't need to live, as it excludes the price of food and energy. Lucky those new iPads are tasty and keep us warm at night. Meanwhile, the financial industry has done a great job of using their free cash to bid up the price of food and oil.

"Wealth is like sea-water; the more we drink, the thirstier we become"
- Arthur Schopenhauer

Incomes have risen to meet the real increased cost of living - if you were already rich to start with at least. Today, he richest 1% of households earn as much each year as the bottom 60% put together taking in a quarter of the nation's income; they possess as much wealth as the bottom 90%; with each passing year, a greater share of the nation’s treasure flows through their hands and into their pockets giving them control of 40% of the nation's riches. In twenty-five years they have more than doubled their share of income while wealth rose from 33% of the total. "Meh", says Joe six-pack, "it's not so much how you divide the pie that matters, it's how big the pie is, besides, one day, I could be part of the 1%." Unbeknownst to him, median incomes declined outright from 1999 to 2009 for those lucky enough to still have a job. For 90 percent of American workers, incomes have stagnated or fallen for the past three decades, while they've ballooned at the top, and exploded at the very tippy-top: By 2008, the wealthiest 0.1% were making 6.4 times as much as they did in 1980 (adjusted for inflation).

Cruelly, the August jobs report released just last week showed that no jobs were created which really represents a net loss as at least 125,000 are needed to keep up with population growth. Since the end of 2007, America’s potential labour force – working-age people who want jobs – has grown by over 7 million but the number of Americans with jobs has shrunk by more than 300,000. We're told the unemployment rate has been over 9% for a couple of years which sounds horrible enough but is nothing when compared to reality. Again, statistics are manipulated to manufacture cold comfort as reported unemployment only measures active job seekers and takes no account of underemployment. Taking into account long-term discouraged workers who were defined out of official existence in 1994 and those forced to work part-time because they cannot find full-time work, the SGS Alternate Unemployment Rate is 22.8%.

Did someone say rising war related debt? Again, if you live in America, about half of you have been convinced that the debt was either created by greedy teachers or is part of President Obama's plan to sell you into indentured servitude to his Muslim Kenyan drunk uncle. Step back, get off the Tea Party, Koch crack. If the Bush-era tax cuts are renewed next year, that policy will by 2019 be the single largest contributor to the nation's public debt -- "the sum of annual budget deficits, minus annual surpluses" -- according to new (well, May) analysis from the non-partisan Center for Budget and Policy Priorities. Graph's on the right. These tax breaks, combined with the cost of fighting wars in Iraq and Afghanistan, will account for nearly half the public debt in 2019, measured as a percentage of economic output.

Oh, it only gets worse war worriers. These figures surely underestimated the costs associated with almost 50% of returning troops eligible to receive some level of disability payment and more than 600,000 treated so far in veterans’ medical facilities. But the social costs, reflected in veteran suicides (which have topped 18 per day in recent years) and family breakups, are incalculable. Am I the only one twisted enough to find it funny that so many people have been convinced to back the union busting way of governors from Wisconsin to Ohio, Michigan and Florida by snake-oil salesmen to cut deficits when in fact it was increased defense spending, together with the Bush tax cuts that were key reason why America went from a fiscal surplus of 2% of GDP when Bush was elected to its parlous deficit and debt position today. That is the real reason wieners like Rep. Eric Cantor say the country needs to find savings elsewhere before helping the people of Vermont after a catastrophe.

Efficient modern financial market have turned out to be nothing but a pipedream as they've turned out to be worse than those in the time of Jean Valjean. We've spent countless trillions propping up a system that is rotten to the core. Without Faux News or lunatics screaming CNBC about subsidizing deadbeat homeowners creating moral hazard we may have done just that, keeping a roof over people's head instead of, you know, creating moral hazard by giving cash to the bank. The muppets keep droning on spouting supposed financial forecasting knowing full well that economists are nothing but people who see something working in practice and try to figure out if it would work in theory. Voila, socialized losses and privatized gains for the banks. The financial system creates NO wealth on its own, its value lies in its ability to efficiently allocate capital, to smoothly transfer money from savers to spenders. The key word is efficiently, there shouldn't be much friction in the system. Yet the µ (Mu) has been rising - the financial industry has increase its share of US domestic corporate profits from 16% in 1985 to over 40% today.

One need look no further than the hostage taking of Dollarmageddon this summer for proof of a nation having difficulties managing its debt. Here we see the malevolent influence of money on the gears of power as the paid lackeys parading as congressmen in Washington do the bidding of their corporate masters, creating a crisis to allow them to implement their agenda. This Kibuki theatre play is worsened by the false-front democracy of a two-party system where one is dumb, greedy, evil and only exists to be re-elected in the next cycle and the other is well, a bit dumber, greedier and more evil hoping to be elected in the next cycle. In fact, faced with a near insurmountable mountain of debt and only two ways to narrow the deficit, lowering spending and raising taxes, not one of the presidential candidates for the dumber, greedier and eviler side would consider the latter. That'll get you a credit downgrade and qualify as a difficulty managing debt.

Bigger? Click.

The final ingredient in the French Revolution, a ruling class disconnected and isolated from the realities of the day-to-day life of the population, is in heavy supply in today's America. Wall Street controls Washington through K Street with no regard to Main Street. It turns out that at a time when austerity for everyone but the rich in order to pay back the banks leaving less money for the economy is the only accepted prescription offered by the ruling class, it's better to have no government like in Belgium. You'd expect some empathy when thanks to the recession, the number of American families no longer earning enough to pass the minimum threshold to pay income tax has risen from 30% to 47%. Never mind that the number of children now living in poverty has risen to 15 million, 21% of all children in the US, that 45 million people rely on food stamps to survive, or that these people pay a myriad of other more regressive taxes such as payroll, sales, state and local - no, the crazier party believes they should pay more. That's right, CEO's who are massively rewarded with higher pay for helping their corporations dodge taxes don't need to pay any taxes (a must read report, infographic on the left), but the poor, well, they need to pay more. Forget that it's those people spending that keeps the economy going - consumer spending accounts for 70% of economic activity - they need to be taxed more. About the only elite who doesn't seem blind to the chaos caused by the chasm between us and them is one of the three richest men in the world, Warren Buffet, who took the the NY Times op-ed page to call for an end to the coddling of the super-rich. What, and have them pay as much as under Clinton? Outrageous!

Our democracy is but a name. We vote. What does that mean? It means that we choose between two bodies of real -- though not avowed -- autocrats. We choose between 'Tweedledum' and 'Tweedledee'.
- Helen Keller

In fact, some elites have become so blinded with rage by the situation somehow caused by the rest, they've decided to pull up stakes and let the poor fend for themselves. Yep, John Galt himself would be proud. Those who in their benevolence choose to stay and help us poor plebs will be sure to fight to ensure that all of their tax advantages stay in place. Of course the politicians in Washington, most of whom are part of the 1% anyway, have every incentive to only listen to the richest voices, they'll need jobs after getting out of office, self-interest and all, you know? Strangely - or more correctly - predictably enough, turns out senators only listen to the rich (PDF of study here). No wonder that slightly more evil party even thinks poor people voting is un-American.



It's all about convincing enough of the people things are fine and lies, such as the one that businesses aren't hiring because of taxes and regulation. The corporate tax rate is supposedly the highest in the world at 35% yet over 100 companies on the S&P 500 paid less than 20%, GE earned billions at home while paying nothing as did at least 15 others. Media, from Hollywood to your iPad has served her corporate masters well as it seems as long as we can buy more stuff, never mind if it's made in China and sold at Wal-Mart, everything is better than before. Amazingly, with all of the propaganda their exposed to, when asked about income distribution, Americans tend to think they live in Sweden, wish they lived in a Socialist utopia but in fact live in Turkmenistan or the Uganda. No offense Turkmen and Ugandans.

American workers' have seen their number of hours worked per week rise along with their productivity which magically seems to grow corporate profits but not median salaries. They put in an average of 122 more hours per year than Brits, 137 hours more than Japanese workers and 378 hours (nearly 10 weeks!) more than Germans. It's the only country besides Papua New Guinea, Sierra Leone, Liberia, Samoa, and Swaziland that doesn't legislate paid time off for new moms and the only country in the OECD where a right to weekends off and paid vacation time isn't guaranteed. The only explanation of satisfaction for those living in a country where income mobility is falling and people get excited when McDonald's is hiring is some weird twisted ur-myth of Ben Franklin-Horatio Alger-Henry Ford where through hard work one can attain the American Dream and become rich and successful. To get ahead though, a 70-hour work week has become the new standard. I've got news for anyone who doesn't realize the economic catastophe of the past few years will make it easier for employers to demand more while giving less. Is there any wonder why illegal drug use is at a decade high and prescription drug abuse has surged 400% in a decade while mental illness has skyrocketed?

Reality doesn't hit most until they're one of the 50 million Americans without health insurance and they get sick in a country that spends the most for health care (about double) for less than average results. They don't care until joining the 25.3 million Americans out of work, forced to work part-time, unable to find a full-time job or have given up searching for a job in the past month. Giving up is easy when they realize there is one job for every 4.5 job seekers. If you're wondering where the jobs are check out the chart to the right. By avoiding the responsibilities of taxes that mere people are required to pay and squeezing ever higher productivity out of workers while firing domestically and hiring elsewhere, American corporations are sitting pretty while workers only defense in the past, unions, are losing more and more power. In fact, the ratio of corporate profits to wages is now higher than any time since before the Great Depression. Apple, Exxon and Goldman Sachs don't exist to make our lives better in the crony capitalism that we've allowed to develop, in fact they seem a lot better at making them worse - just like the economy is going to get on our present course, hello double dip, er, recession I mean! Will it take a Robespierre to rally the retards or will enough people simply pitching tents on Wall Street September 17th to let the banksters know the other 99% are suffering? Either way, I'd say let capitalism make you rich and invest in a good, solid guillotine maker.



More suggested reading and doing:
Can the Middle Class be Saved?
The Rise of the New Global Elite
Of the 1%, By the 1%, For the 1%
Occupy Wall Street September 17th
US Uncut
Great charts and graphs here and here