Or we could try democracy

I've been meaning to write some posts on the aftermath of the perfect storm that came and went, leaving too little changed. Benign Brodwicz, at Animal Spirits, summarized my pessimistic view of current trends.

The Animal Spirits Page: On the coming neo-feudalism:

"It does seem as if the vast majority of people in the United State of America are going to become like medieval serfs, living at what feels in the post-gilded-age new realities like subsistence, watching a small slice of society from a distance as they jet in and out of the country, monopolize the ski resorts, continue to live in big houses with two or three thousand square per person, and so on.

The Baby Boom doesn’t have enough money to retire (quaint notion) and will be working till they drop, which will actually extend their lives. The Gen X’ers will continue to live on scraps. The Millennials are idealistically waiting their turn to be heroes while trying to find a way to support themselves in a workforce that is top-heavy with whining Boomers and cagey Gen X’ers. Most of us will work for large or small corporations at a wage that is enough to support a modest lifestyle, but holidays will be spent close to home. We will worry that we may be next to join the ranks of the unemployed, many of whom and whose stories we know—stories of lost jobs, houses, children’s sense of security in forced moves to strange communities. The health consequences of the current crisis are no doubt predictable. In a PBS special on other countries’ health programs, a German was asked if unemployed people lose their health benefits there. Of course not, he said. They are under great stress and risk to their health. They need health benefits more than anyone.

For a developed nation, America is a barbaric place.

Demand will not recover. The Stimulus, piling upon preexisting terrifying trillions in deficits courtesy of Bush, will not work. Spending will be cut to satisfy our external creditors. The sheer weight of the debt will slow the economy. The narrow U3 unemployment rate will rise into the double digits and stay there through the president’s term. The “real” under- and unemployment rate U6 will hit twenty percent, and stay in the high teens.

The poor and disenfranchised may even take to the streets at some point. Americans are pretty timid now, worried that they’ll be called terrorists and disappear in the night or be put on the no-fly list. Habeas corpus is gone. Last September Hank Paulson said we may need martial law. The government has been preparing for it. There are empty prison camps standing ready, according to reliable reports. (Many were built by Halliburton, allegedly.) The Katrina experience showed us what to expect: mercenaries will disarm the public; impose martial law; tell you to stay in your house or get shot. FEMA’s National Level Exercise scheduled for late July is supposedly a counter-terrorism drill, but I would bet it involves practicing how to impose martial law. Some believe the true purpose of the exercise itself will be to disarm the public. Lots of luck with that. That might provoke the first shots of a revolution. But perhaps that is the intent, to show force and discourage any further dissent. Like Iran now. Like China twenty years ago.

Will President Obama be able to prevent this? I don’t think so. His government has thrown trillions at financial institutions, but we don’t even have workfare or income support for the long-term unemployed, and not everyone is even covered by unemployment insurance. There are 25 million people in the U6 category today. What happens when there are 50 million? Will the government help them, or try to lock them all up? We have a higher percentage of our population behind bars than any other developed country. Will the fortunate just sit in their houses and hope that the Xe guys (formerly Blackwater—great name for a mercenary outfit) will protect them and their property from roving gangs?

Americans have lost confidence in their government and themselves. Their elected representatives do not listen to them. The President is an agent of the status quo. He has enabled the largest wealth transfer to a privileged elite in American history during the financial crisis, at the expense of the American taxpayer for years to come. Does any American believe the new financial regulations will break the grip of the rich upon the resources of the nation? Will we all come together all can-do, gung-ho style and pitch in together and the income distribution suddenly become more equal as it did in World War II and pull ourselves out of this?

It ain’t happening.

These problems, of course, are replicated in many other countries, including our ostensible long-term rival and enemy, China. Which is why the next ten years are a breeding ground for fascism around the world, and for the seeds of war. We went into Iraq to build military bases to protect “our” oil, if push comes to shove. But our military policies are backward-looking to the last war, as John Robb and others point out. We will look pretty stupid when someone pulls off what Robb calls a systempunkt right here at home while we’re blowing billions in Afghanistan. We don’t require our kids to get educated well. Obama is backing off a single-payer health insurance plan, the one preferred by the American people and the one that makes the most sense from an insurance point of view. The American social contract is broken.

People say Europe will be a museum in a decade, a lot of pretty castles and tourist attractions and mamoni hanging around at cafes. America might be like a ski resort, with some beautiful neighborhoods in the cities and trailer parks outside where the workers and retired people live. The Chinese will buy up real estate and companies and immigrate in large numbers, as they did to Vancouver from Hong Kong, having bought enough members of Congress to get their way. They won the financial war, fair and square. They might even teach us how to make state capitalism work, as the Japanese taught us how to make quality automobiles.

Or we could try democracy, for a change."

Change we can believe in?

Yves Smith at naked capitalism asks the classic question, "Quis custōdiet ipsōs custōdēs?"

I love Obama, but his economic team are foxes, working for wolves, and we, the American Public, are the sheep and the chickens.

Yves Smith has a great example.

Quoting the foxes' PR: "The Financial Industry Regulatory Authority (FINRA), [formerly, National Association of Securities Dealers (NASD) -- clever name change, for one of "our SROs", don't you think?] is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,000 brokerage firms, about 173,000 branch offices and approximately 653,000 registered securities representatives. . . . FINRA is a trusted advocate for investors, dedicated to keeping the markets fair, ensuring investor choice and proactively addressing emerging regulatory issues before they harm investors or the markets."

It seems the FINRA, with a $3 billion balance sheet, at one point held roughly $800 billion in Auction-rate securities. Trouble was on the horizon in the Auction-rate securities market. FINRA sold all its holdings. Six months later, in February 2008, the auction-rate securities market froze-up, making these previously high-rate liquid securities into low-rate illiquid, long-term bad investments on a death march. Turns out the auctions, in which auction-rates were set, were rigged, by the market-makers, who were making big underwriting profits. The market-makers are the giant brokerages that own and run FINRA.

FINRA, by the way, runs the arbitration process through which an individual investor must appeal the fraud, under which he was sold these bad investments.

But, here's the kicker.

Obama made the FINRA Chair and CEO, the lovely lady, who, as a well-informed institutional investor, sold her organization's holdings, without disclosure, chair of the SEC.

Wolves: Merrill Lynch and friends.

Foxes: Mary Schapiro, SEC and formerly, FINRA.

Chickens and Sheep: Us.

Where's the Fat Lady?

The economy downshifted rather dramatically in September-October 2008 -- "fell off a cliff", in Calculated Risk's version of rosy-fingered dawn. An inventory adjustment followed, which gave everyone a big shock -- a sense of freefall, as trade seemed to just stop, as inventories were run down to the new level of economic activity. The inventory adjustment is over. The financial panic appears to be over.

Now, we're stuck at the new, lower level of economic activity.

Politically, the relief from panic feels like we're returning to "normal" whatever "normal" is. (Hint: it's a lower level of economic activity, characterized by persistent high unemployment. With an end to the panic, there's a sense that the Administration has muddled through.

Matthew Yglesias » Dinner With Prize-Winning Critics: "The administration has hit on what it thinks is a reasonable satisficing solution and they believe the economy is starting to turn around. Critics respond that having taken more forceful action in the past would have been better, but to a large extent the water is now under the bridge. What’s more, it’s very likely that a few months hence we’ll start seeing slightly positive GDP growth and continued weakness in the labor market and that both sides in the Great Democratic Party Banking Family Feud will view that data as vindication for their position."

I don't think so. Like Atrios at Eschaton: "I see round 2" I mean I think Yglesias is right on the general outlines -- slightly positive GDP growth, high unemployment. But, I think one side in the Great Democratic Party Banking Family Feud was fundamentally and importantly right, and one side -- unfortunately the Obama Administration side -- was fundamentally and critically wrong.

Policy has consequences. Obama is the best politician I've ever seen, and he has a fantastically good sense of the politically possible. What he doesn't have is economic advisers, who can teach him, realistically, about the necessary and sufficient -- the consequences of policy -- the non-negotiable tendency of reality to bite.

The Real Villains

Matthew Ygelsias reviews the current political dynamics of health care reform, and discovers the "real" villains: the centrists and moderates, who are for reform, BUT . . .

Matthew Yglesias » Killing Health Reform With Kindness:

"My great fear is that this is how health care reform is going to die. A handful of very conservative members of congress may position themselves as “against” reform. But many people on the center and the right are going to say that they’re all for reform. They’re just going to be against particular things such that reform is impossible. . . .

we should be clear on who the real villains are here—Senators in the center who killed the Obama administration’s revenue concept without either putting a new revenue concept on the table or admitting that their actions are imperiling health reform. Thus far, people have been very eager to build “momentum” for reform by trumpeting all the different people and groups who say they’re for reform. But you need to watch out for a scenario in which reform’s false friends kill it with kindness. If there’s a battle between white hats and black hats we can fight the battle and perhaps win. But if we let too many black hats inside the tent, then reform’s false friends can kill universal health care with kindness. In other words, as far as I’m concerned anyone who’s “for” health reform but “against” all the ways of paying for it is against reform. Someone who’s really for reform—like me—is for paying for reform through any reasonable measures."

This is the dynamic on a lot of vital issues, not just health care reform. The centrist middle has lots of power, but presents no critique and undertakes no advocacy and, therefore, assumes very little responsibility. But, they wield a heck of a lot of power -- or, at least the six or eight conservative/moderate/centrist Democrats in the Senate do: Ben Nelson of Nebraska, Evan Bayh of Indiana, newly converted Arlen Specter of Pennsylvania, being prime examples.

A System of Fealty to Oligarchs

dday at Hullabaloo: "The system of government in this country has become a system of fealty to oligarchs."

What provoked dday today, was the failure in the U.S. Senate of a bankruptcy reform "to allow bankruptcy judges to modify loan terms on primary residences the way they can on second homes, yachts, cars, and other pieces of property".

"Nays included all Republicans and Baucus, Bennet, Byrd, Carper, Dorgan, Johnson, Landrieu, Lincoln, Nelson (NE), Pryor, Specter (awesome!), Tester. The Senators against this bill have lined up with the banksters, and for good reasons - they fund the campaigns, they throw the best parties, they share the interests and perspective of those disproportionately wealthy politicians." Roll Call Vote

So, there you have it: the Oligarchs control the Senate, approximately, 52-47. (3 Senators were absent, and not voting, but I made a good guess where they stand.)

Bankruptcy bill is a relatively minor issue, of course, even if the Rollcall is a good indicator of the balance of power.

ampersand commenting at Economist's View said today what no one in the news Media will say, the truth:

"Summers, Rubin, Geithner, Bernanke et al.

None of these people will admit to a recovery plan - which they pretend to want - and stick it to the oligarchs. All kinds of excuses abound for that. Sticking it to the oligarchs is 'moral hazard fundamentalism', there is no Senate support for it, 'first let us fix the economy' and so on. Remember [Brad] DeLong covering Geithners ass on the PIPP by crying "Voinovich, Voinovich"?

All these people push the line -like gospel truth - that breaking the oligarchy makes recovery impossible. This pretension that without the oligarchy, recovery is impossible fails the simple laugh test. Without this govt propping it up via bank bailouts, the oligarchy wont exist.

In reality, none of them want a recovery plan that breaks the oligarchy. None of them will _allow_ such a recovery plan.The current impasse and mind-numbing morass of dealing with the crisis and recovery planning is precisely because of the opposite. It is really hard to come up with a plan to save the oligarchs and have an economic recovery.

These people pretend the problem is the opposite - that it's hard to get a recovery plan that breaks the oligarchs."

We are tying ourselves into knots, wringing our hands over the impotence of economic policy, because such an attitude protects key powers-that-be.

I can stand it, too

Following Brad DeLong and Patrick Neilsen Hayden and Eric Alterman, I take note of hwat Charles Pierce has to say:

Slacker Friday:

"I have now lived through three major episodes in my life where the political elite have told me quite plainly that neither I nor my fellow citizens are sufficiently mature to suffer the public prosecution of major crimes committed within my government.

The first was when Gerry Ford told me I wasn't strong enough to handle the sight of Richard Nixon in the dock. (Ed. note--I would have thrown a parade.) Dick Cheney looked at this episode and determined that the only thing Nixon did wrong was get caught. The second time was when the entire government went into spasm over the crimes of the Iran-Contra gang and I was told that I wasn't strong enough to see Ronald Reagan impeached or his men packed off to Danbury. Dick Cheney looked at this and determined that the only thing Reagan and his men did wrong was get caught and, by then, Cheney had decided that even that wasn't really so very wrong and everybody should shut up. Now, Barack Obama, who won election by telling the country and its people that they were great because of all they'd done for him, has told me that I am not strong enough to handle the prosecution of pale and vicious bureaucrats, many of them acting at the behest of Dick Cheney, who decided that the only thing he was doing wrong was nothing at all, who have broken the law, disgraced their oaths, and manifestly belong in a one-room suite at the Hague. Not to put too fine a point on it, but I'm sick and goddamn tired of being told that, as a citizen, I am too fragile to bear the horrible burden of watching public criminals pay for their crimes and that, as a political entity, my fellow citizens and I are delicate flowers encased in candy-glass who must be kept away from the sight of men in fine suits weeping as they are ripped from the arms of their families and sent off to penal institutions manifestly more kind than those in which they arranged to get their rocks off vicariously while driving other men mad.

Hey, Mr. President. Put these barbarians on trial and watch me. I'll be the guy out in front of the courtroom with a lawn chair, some sandwiches, and a cooler of fine beer. I'll be the guy who hires the brass band to serenade these criminal bastards on their way off to the big house. I'll be the one who shows up at every one of their probation hearings with a copy of the Constitution, the way crime victims show up at the parole board when their attacker comes up for release. I'll declare a national holiday -- Victory Over Torture Day -- and lead the parade right up whatever gated street it is that Cheney lives on these days. Trust me, Mr. President. I can take it."

Why Ants would be Democrats and (some) People are Republicans

How house-hunting ants choose the best home:

Dr Elva Robinson and colleagues in the University's School of Biological Sciences fitted rock ants with tiny radio-frequency identification tags [see image], each measuring 1 / 2,000 (one two-thousandth) the size of a postage stamp, then observed as they chose between a poor nest nearby and a good nest further away. The ant colonies showed sophisticated nest-site choice, selecting the superior site even though it was nine times further away than the alternative. The best nest was chosen, despite the fact that very few individual ants made direct comparisons between the nest-sites. . . .

Dr Robinson said: "Each ant appears to have its own 'threshold of acceptability' against which to judge a nest individually. Ants finding the poor nest were likely to switch and find the good nest, whereas ants finding the good nest were more likely to stay committed to that nest. When ants switched quickly between the two nests, colonies ended up in the good nest. Individual ants did not need to comparatively evaluate both nests in order for the entire colony to make the correct decision.

"On the other hand, animals – including humans – who use comparative evaluation frequently make 'irrational' decisions, due to the context in which options are compared or by inconsistently ranking pairs of options, (for example option A preferred to B, B preferred to C but C preferred to A).

"The ants' threshold rule makes an absolute assessment of nest quality that is not subject to these risks, and circumvents the necessity for memorization and comparison of every site visited. Thus, simple individual behaviour substitutes for direct comparison, facilitating effective choice between nest sites for the colony as a whole."

Who is in Charge?

Banks Show Clout on Legislation to Help Consumers - NYTimes.com:

"During the presidential campaign, Mr. Obama made an issue of what he considered excessive credit card fees, but he has been largely silent on the matter since his arrival in Washington. As a candidate, he also favored legislation to make it easier for troubled homeowners to use bankruptcy court to ease the terms of their mortgages, a proposal he again endorsed last month.

Despite the president’s support and strong Democratic majorities in Congress, both proposals are in jeopardy because of lobbying by banks and their trade groups, particularly in the Senate. . .

The banking industry has also succeeded in working closely with Republicans to water down and then block a measure that would give bankruptcy judges greater authority to modify mortgages, including reducing principal payments. Senate Republican leaders say they have the support of all 41 of their members — enough to kill the provision by making it impossible to get the 60 votes necessary to cut off debate. . . Republican supporters of the industry have been helped in part by the decision by some Democratic campaign committees, fearful of voter reaction, to reject contributions from banks that have received bailout money.

Some prominent Democrats, including Nancy Pelosi, the House speaker, also are refusing donations from bank political action committees. Mr. Frank will not take money from employees of banks that received bailout funds.

Republicans “are never going to beat the Democrats in the fund-raising game in D.C. as long as they are the minority,” said Sam Geduldig, a lobbyist for several banking trade associations at Clark Lytle & Geduldig. “To the extent the Republicans can show they can impact policy, it causes professional donors and lobbyists to look at them in a different light, as opposed to when they just got bludgeoned” in the last election."

Partisan politics is a competition. As long as the Republicans can win this game, by serving the plutocracy, the plutocracy will be in charge.

Talk of the importance of campaign contributions is really just a sideward glance at the importance of the Media in campaigns, and the fecklessness of the People.

This blog had a simple premise: policy has consequences -- and the Bush Administration was engaged, in 2004 and earlier, in the worst of bad policy, policy bound to have bad consequences. Yet, Bush was elected in 2004. And, so the consequences would come, and create a political storm, and the political storm would consist of those consequences, and the moral fables told about those consequences: the People would learn once again, however imperfectly, some political wisdom. In the face of economic collapse, worry about gay marriage and the importance of torturing Al Quaeda suspects would lose some of its purchase.

The stories mediate the consequences. The political storm consists not of the raw consequences of bad policy, but of the stories: who gets blamed. The Right has invested in a massive industry of storytellers -- in the Media, in Academe, in the so-called think-tanks. Against them, the Left has had the rising blogosphere, and the Sword of Truth (they've been right about everything).

But, still the main action in politics remains campaign contributions.

The Media is the ultimate recipient of those contributions -- they buy advertising; much of the political news media exist to make campaign advertising absolutely necessary, by making sure no one has any idea what politicians of either Party are up to, in relation to the substance of politics. As long as the Media, in its self-appointed role as Tribunes of the People, can be so easily distracted by such controversies as whether Obama smiled when he shook hands with Chavez, and people are disinterested in, or simply confused by, the kind of straightforward political reporting that's been done in this article in the New York Times, then our politics will be dictated by cleverness in 30-second teevee ads.

Poltics is about money and power. Politics is about how much people pay in credit card fees and whether bankruptcy law is going to be fair and rational -- or cruel and arbitrary.

Too many people simply refuse to face the reality. And, too many turn away in righteous disgust. Too many simply do not get it. Too many do not see that they have a choice, here.

The Democrats are not saints, or monks. They are doing their best to make a "business model" based on actually caring, somewhat, about fairness to the middle class pay off in democratic politics, in a country where most people have no idea what is going on, because of 24/7 Cable News. The other side is working on a "business model", where they cater to the needs and interests of the class of overpaid corporate executives, who are the most active campaign donors, and where a bunch of morons, clinging to their bibles and guns can be manipulated by one transparent "outrage" after another, fed to them by Lou Dobbs or Rush Limbaugh or some idiot Christian preacher. And, if anything political or economic news gets past the "outrage" of the week, there's a handy second team of libertarians, many of them academics, willing to say anything to provide political cover and short-circuit informative debate, from their well-paid perches at the Council on Foreign Relations, the Hoover Institution, George Mason and the University of Chicago, Heritage and AEI, etc. And, should I mention the third team of neo-liberal chumps, paid to be interlocutors to the second team?

There's a process of electoral selection at work in democratic politics, and in a game of survival of the fittest, politicians, who serve the plutocracy feel fit, very fit indeed.