New Elite at War with Everyone

This past month has seen the final shoving of Germany towards supporting a Greek bailout, the condition being an imposed austerity whose terms will lower Greek living standards for years to come.  Most of the Greek public is opposed, having never seen most of the money their financial and political sectors managed not to invest in rebuilding a modern Greek economy.  They are getting their wages and pensions cut anyway, and are regularly in the streets.

The media largely still tells the story as between past and future, meaning labor and finance, or unions, who seek self-protection that looks backward to a vanished era, and responsible, enlightened business opinion, which seeks austerity.  For example, a leading proponent of serious financial reregulation in the U.S., Simon Johnson, calls for austerity in Greece.  Economists who point out that this is a recipe for poverty and financial depression - which in turn endangers loan repayment - are in a minority.

The "capital vs. labor" paradigm suggests that there is a large, forward-looking majority -- wealthy business elites, of course, but also a large affluent middle-class with BAs, MBAs, JDs and MDs -- and that this combined majority sides with enlightened business interests who create new wealth and the future's new industries.  They oppose the dwindling, outmoded blue-collar folks represented by unions and the public sector in general, who fight a rear-guard action for privileges that the marketplace, reflecting the real economy, no longer supports.

There was a time during the post-war "golden age" when the very top of the financial pyramid cemented the loyalty of a large middle class with generous benefits, delivered largely through a well-funded public sector.  Great public universities were one major example, but so were cheap freeways and subsidized suburban developments, hospitals and schools, the whole panoply of the "American way of life" for what was actually a fairly ordinary bunch of people, judged by global standards.  This time has come and gone. I've written at length about the deliberate downsizing of the middle class through attacks on its central institution, the public university, and we now have abundant evidence of the result: a splitting of a tiny elite -- an upper 0.1% or so -- from the rest of the top, which it opposes.

We're actually seeing a return of the Three Estates of the profoundly pre-democratic French 18th century social system: well-educated brainworkers are falling into a huge Third Estate of unprotected, insecure workers of vastly different educational qualifications. One example of the tendency is the ongoing effort to eliminate public pensions in California, which provide compensation for the relatively lower wages of public service workers many of whom are as well educated as $800,000 / year attorneys (nurses, college professors, financial analysts, etc.)

A good example of our "post-democratic" class structure appears in a nice paper by Mike Konczal.
He finds a way to distinguish the views on financial reform of Certified Finanacial Analysts, whose median incomes of around $250,000 put them in the top 1.5%, in contrast to the people who hire them, in the top 0.1%.

Studies of the distribution of the financial gains of the past decade show much the same thing - the lion's share not to the top 10% or even the top 1% but to the top 0.1% and 0.01% of the population.  The result is an unsustainable economy - as the crisis has shown - and a fractured polity that even the apparently skillful Barack Obama is blatantly unable to glue together again in the absence of meaningful 'reform."

The only cure is moving ahead into a new egalitarian phase of whole-society development.  But this depends entirely on a push from the great majority that is currently losing ground.  And where is that push?  Konczal's paper went up on HuffPo on May 3rd.  Almost three weeks later, it has zero comments. Meanwhile, a clip of Rand Paul's dumb, obviously right-wing stuff about the Civil Rights Act has over 16 thousand. Great, we've figured out that Paul is Tea Partying right-winger, like he hadn't already said that everyday in his campaign.  Meanwhile, the middle-class seems completely unable to define the reforms on which depends for its survival.

Falling Ideology?

In addition to running good steady commentary on the banking reform legislation (e.g here), Simon Johnson remarks on the Baseline Scenario that "the ideology of unfettered finance is crumbling."  Clearly top Obama economics advisor Larry Summers hasn't heard. It's worth watching the clip to see the weird blasé attitude towards "things that happen on Wall Street" - the tone is more important than the words.  I'm not feeling the shift yet but he's there and I'm not so here's hoping.

Finance as Fraud Itself

This morning the Vulcan cloud of cinders is as good a commentary as we're going to get on the fragility of an economy that depends on unsustainble long range transport. 

Krugman is a bit late but still lucid defining the crisis as issuing from deliberate fraud. He mentions a good ProPublica piece on the same kind of toxic stuffing at a hedge fund with one of the stupid fake names bankers love - Magnetar, which immediately dissolves into several variants composed of amputated partwords stitched together by Dr. Frankenstein - Mangy-tar, eat-tar (from the French manger- to eat), eat nectar, magnet-star . . .)

A commentary on Goldman Sachs by Will Hutton gets at two other core issues in the rise of finance over the past 30 years in the Anglo-American version of capitalism (beyond the use of complexity to defraud one group of clients for the benefit of another).  The first is the abuse of independent professionals as fronts of legitimacy: clients couldn't see under the hood of the instruments they were buying, so they took the word of analysts on the basis of their professional stature and institutional affiliation.  "A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters."

And in the Goldman Sachs case,

Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission's case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman's vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were "among the most sophisticated mortgage investors" in the world. But this is a used car salesman flogging a broken car he's got from some wide-boy pal to some driver who can't get access to the log-book. Except it was lionised as financial innovation.

The investors who bought the collateralised debt obligation (CDO) were not complete innocents. They had asked for the bond to be validated by an independent expert into residential mortgage-backed securities – a company called ACA management. ACA gave the bond the thumbs-up on the understanding from Fabrice Tourre that the hedge fund Paulson were investing in it.

 Whether or not Goldman Sachs' Tourre lied to his investors and said that Paulson was investing in the CDO when in reality he seems to have made it as toxic as possible so he could bet it would collapse, as it did, the deeper point is that these transactions were confidence games, literally speaking.

The further issue is that the transactions had no value except in the confidence game that constructed them. Outside of that, they had no value, certainly not for society.  Hutton writes,

It is time to reframe the question. Banks and financial institutions should do what economy and society want them to do – support enterprise, direct credit to where it is needed and be part of the system that generates investment and innovation. Andrew Haldane – and the governor of the Bank of England – are right. We need to break up our banks, limit their capacity to speculate and bring them back to earth.

That would be to end high finance as we know it, because that does not invest in enterprise or places where credit is socially needed.  The returns there are lower than what it can get elsewhere.

In a similar spirit, see the Stiglitz presentation on financial reform at a large economics conference at Cambridge University a couple of weeks ago.  It comes from a world that doesn't yet exist.  Perhaps it will be revealed by the passing of the Vulcan cloud of ash.

The Goldman Sachs Complaint

Joe Nocera has a good summary of the issues involved in its Goldman Sachs complaint, and the SEC has a condensed description of it. Here are the two key paragraphs:

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.

The SEC's complaint alleges that after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.'s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.

These are our financial geniuses at work on a straight con. The CDO lost 83 percent of its value in the first six months.  Nice.

James Kwak at Baseline has a helpful exegesis on the "type of transaction involved — in which a hedge fund makes a CDO as toxic as possible in order to then short it."  He notes:

It seems like the key will be proving that Paulson influenced the selection of securities enough that it should have been in the marketing documents. Paragraphs 25-35 include quotations from emails showing that Paulson was effectively negotiating with ACA over the composition of the CDO, so it’s pretty clear he had influence. The defense will presumably be that ACA had final signoff on the securities, and Paulson was just providing advice, so Paulson’s role did not need to be disclosed. (I don’t know what kind of standard will be applied here.)

Kwak adds, "no doubt to the annoyance of many, I don’t blame Paulson. It’s Goldman that had the duty to its investors, not Paulson."

Michael Lewis is more explicit about all this in an interview that Kwak quotes elsewhere:

all of the people you mentioned all swallowed a general view of Wall Street, which was that it was a useful and worthy master class, that these people basically knew what they were doing and should be left to do whatever they wanted to do. And they were totally wrong about that. Not only did they not know what they were doing, but the consequences of not knowing what they were doing were catastrophic for the rest of us. It was not just not useful; it was destructive. We live in a society where the people who have squandered the most wealth have been paying themselves the most, and failure has been rewarded in the most spectacular ways, and instead of saying we really should just wipe out the system and start fresh in some way, there is a sort of instinct to just tinker with what exists and not fiddle with the structure.

Lewis also hits this blog's humble theme, the intellectual limits of the mass middle class that continues to prevent it from overcoming its humiliating defeat by financial forces it never bothers to understand:

The question is how does Washington move away from those institutions and make decisions that are in the public interest without regard for the welfare of these institutions. It’s a hard question because . . . this is the problem. Essentially the public and their representatives have been buffaloed into thinking that this subject — financial regulation, structure of Wall Street — is too complicated for amateurs. That the only people who are qualified to pronounce on this are people who are in it. And there are very very few people who aren’t in it in some way who have the nerve to stand up and fight it. . . .

The reporter as much on this beat as anyone in the U.S. Gretchen Morgenson, discusses why John A. Paulson who set this up was not indicted. Paulson's firm released a statement that said in part,

There’s no question we made money in these transactions. However, all our dealings were through arm’s-length transactions with experienced counterparties who had opposing views based on all available information at the time. We were straightforward in our dislike of these securities, but the vast majority of people in the market thought we were dead wrong and openly and aggressively purchased the securities we were selling.

Morgenson (and Louise Story) continue:

After analyzing risky mortgages made on homes in Arizona, California, Florida and Nevada, where the housing markets had overheated, Mr. Paulson went to Goldman to talk about how he could bet against those loans. He focused his analysis on adjustable-rate loans taken out by borrowers with relatively low credit scores and turned up more than 100 loan pools that he considered vulnerable, the S.E.C. said.

Mr. Paulson then asked Goldman to put together a portfolio of these pools, or others like them that he could wager against. He paid $15 million to Goldman for creating and marketing the Abacus deal, the complaint says.

One of a small cohort of money managers who saw the mortgage market in late 2006 as a bubble waiting to burst, Mr. Paulson capitalized on the opacity of mortgage-related securities that Wall Street cobbled together and sold to its clients.

 In a video clip, Story points out that the case seems to be proof that Goldman does bet against instruments it markets to its own clients, contrary to its repeated denials.  In another clip, the SEC's Robert Khuzami answers questions about the compliant.

The complaints are finally getting under way.

Long Slide in the Post-Crisis

Some good books on the financial crisis have come out in the past month, including two I've bought but am still waiting to get time to read. One is 13 Bankers, by Simon Johnson and James Kwak (who also run the blog Baseline Scenario, an excellent source for blow-by-blow commentary on the ongoing struggle for a soupçon of financial reform. Another is Econed, by the author of the blog Naked Capitalism, which details the intellectual failures of doctrinal US economics and their real world impact.

Kwak has a good review of another of the good recent books, The Big Short by Michael Lewis.  Kwak gets at the crucial problem with the financial system in general, which is that the supposedly iron logic of objective market forces to which financial players are all subject in fact masks rules made up by a fairly small number of insiders to maximize their take.  Here's just a taste:

The problem was that the banks, as the swap dealers, got to decide what the swaps were worth. So, for example, Charlie Ledley bought an illiquid CDS on a particular CDO from Morgan Stanley. Five days later, in February 2007, the banks started trading an index of CDOs that promptly lost half its value. But, as Lewis writes, “With one hand the Wall Street firms were selling low interest rate-bearing double-A-rated CDOs at par, or 100; with the other they were trading this index composed of those very same bonds for 49 cents on the dollar” (p. 162).* That is, the market price of the already-issued CDOs didn’t affect the sale price of new CDOs. And what’s more, Ledley’s broker insisted that the price of his CDS (which should have soared as the index of CDOs fell) had not changed. Here you see the banks simultaneously ignoring a market price in two separate ways: once so they can continue selling new assets that are extremely similar — worse, if anything — to assets that they are trading as garbage; and again so they can avoid sending collateral to their hedge fund client.

Got that?  It's people making stuff up, and making a pile of dough as a result. This is finance that has nothing to do with investment, productive or otherwise. Its only impact on society is to damage it.  The rest of us are supposed to believe in its objectivity and defer to the outcome.  How far along are we in knowing enough to think otherwise?

We're looking as usual at a huge gap between the insight of experts and that of the general public.  A sign of where the public discussion is can be found in Jane Hamsher's comment on the its basic non-existence.

The social damage continues to spread. People are looking at Portugal next, and even the best financial commentators, like Simon Johnson, counsel cuts and austerity till the end of financial time.

For example, just to keep its debt stock constant and pay annual interest on debt at an optimistic 5 percent interest rate, the country would need to run a primary surplus of 5.4 percent of G.D.P. by 2012.  With a planned primary deficit of 5.2 percent of G.D.P. this year (i.e., a budget surplus, excluding interest payments), it needs roughly 10 percent of G.D.P. in fiscal tightening.

It is nearly impossible to do this in a fixed exchange-rate regime — i.e., the euro zone — without vast unemployment.  The government can expect several years of high unemployment and tough politics, even if it is to extract itself from this mess.

Neither Greek nor Portuguese political leaders are prepared to make the needed cuts.

Greece's crisis has settled into semi-permanence in the style that is becoming typical of our new post-crisis era: permanent low-level anxiety, permanent austerity, and permanent stagnation in wages. All of this is imposed with a financial logic of inevitability. The continuous message is that there is no escape.  Greece is looking at a lost decade for its society. The West is dealing with a crisis caused by its small, arrogant, uncaring, incredibly rich financial sector by downgrading the resources and the vision of its societies.  After ten more years of this, what visions and aspirations will be left?

The Spineless go to the wall

Jane Hamsher is right in her bitter lament about the Dim "left" cave on health care:

Nobody will take progressives in congress seriously, nor should they. Their threats are idle and they won’t fight for anything they believe in. In the end, they’ll just take turns shaking their fists in futility and alternately sucking so no serious liberal challenge ever emerges to anything.

Tbe pain is visible on Democracy Now as Dennis Kucinich, whos's spent his congressional life as a pirncipled outsider, explains why he switched to Obama after a ride on Air Force One:

it would be impossible to start a serious healthcare discussion in Washington if this bill goes down, despite the fact that I don’t like it at all. And every criticism I made still stands.
I want to see this as a step. It’s not the step that I wanted to take, but a step so that after it passes, we can continue the discussion about comprehensive healthcare reform, . . . But if the bill goes down and we get blamed for it, I think there’ll be hell to pay, and in the end, it’ll just be used as an excuse as to why Washington couldn’t get to anything in healthcare in the near future. 

Clearly Obama and the other Dem leaders were planning to retaliate against Kucinich and other holdouts, perhaps as the party retaliated against Cynthia McKinney in Georgia by running a "moderate" against her in the Demoratic primary.   Goodman and Gonzalez gave Kucinich every opportunity to say that he got something for caving in.  He seems to have gotten only the absence of retaliation.

It's sad because of Kucinich's courageous and unpopular stands against various wars along with other wasteful, destructive stupidity that the U.S. blunders into and then feels entitled to continue - like  the main elements of its awful healthcare system.  Sadder still is his apparent belief that by conceding this time, he will be listened to next time.  Au contraire.

Why does the progressive middle-class think that if it concedes now it will win later? If I agree with you now, will you agree with me later?  Ha ha ha, of course not!

There were some institutions that did work like that: large organizations with clearly-defined roles and job security, professional groups like medical practices, and other structures that institutionalized reciprocity, or codified it informally.  These were humanizing forces in society, even when they were bureaucratic, stratified, exclusionist, and so on. They are being relentlessly eaten away by the external and unilateral use of power, particularly forms of financial control like treatment regulations imposed on doctors by HMOs. That is the time of the iceberg.

Middle-class America  will increasingly approximate the condition of the US Congress, except without the floods of lobbyist cash. The failure continues to be intellectual, as Talk Left points out:

[Nate] Silver can not imagine a progressive bargaining position that threatened the passage of the health bills. No one could imagine it, even progressives. Until they can not only imagine it, but in fact project it in a political negotiation, progressives will remain irrelevant outside of Democratic primaries, when they will receive a plethora of campaign promises sure to be abandoned by pols.

Contradiction in Obama's Economic Philosophy

Commenting on Obama's health care 'summit,' Krugman identifies the pattern that dominates health care and pretty much everything else in national politics: "Democrats [offer] moderate plans that draw heavily on past Republican ideas, and Republicans [respond] with slander and misdirection."

Why do we see this same pattern of compromising Dims and savage Cons year in and year out?  One theory is that the Dims are actually Cons and so by losing to the Cons can get what they secretly want.  This theory works some of the time. But it doesn't explain the Dims tolerance for highly-visible losses, which are supposedly a bad thing. 

Another theory is that the Dims are not really Cons, especially in the sense that they are basically nice, humane people unlike Cons and therefore don't fight to kill and win. They actually like compromise, believe in everyone getting along, have faith in the high road, etc.  This theory is also more than partly true.

This blog has long interested itself in what allows people to formulate a strong position and then actually achieve it. This is equivalent in our terms to avoiding the pursuit of decline and failure, which has become so common in the vast but shrinking middle rungs of American society.

One central precondition is intellectual coherence.  Obama's political weakness is related to the fact that he lacks this.  His health care proposal, weak as it is, assumes an expanded role for government in the delivery of health care.  This in turn assumes that government plays a necessary regulative role in a market-based system dominated, to majoritarian distress, by a small number of large and powerful corporations.  This regulative role further assumes that government is a positive and constructive force in negotiating society's relationships with private entities like Blue Cross.

How does this fit with Obama's overall economic approach?  In a speech to the Business Roundtable last March, Obama offered a good summary of his economic philosophy, so to speak:

I’ve always been a strong believer in the power of the free market. It has been and will remain the very engine of America’s progress — the source of a prosperity that has gone unmatched in human history. I believe that jobs are best created not by government, but by businesses and entrepreneurs like you who are willing to take risks on a good idea. And I believe that our role as lawmakers is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still makes this nation the envy of the world.

But I also know this: Throughout our history, there have been times when the market has fallen out of balance. There have been moments of economic transformation and upheaval when prosperity and even basic financial security have escaped far too many of our citizens. And at these moments, government has stepped in not to supplant private enterprise, but to catalyze it — to create the conditions for thousands of entrepreneurs and new businesses to adapt and ultimately to thrive.

That’s why we laid down railroads and highways to spur commerce and industry — to stitch this nation together. That’s why, even in the midst of civil war, Lincoln launched a transcontinental railroad, and Land Grant colleges and the National Academy of Sciences. That’s why we initiated universal public high schools and passed a GI bill to nurture the skills and talents of all our workers. That’s why Eisenhower built an interstate highway system, and Kennedy pointed us to the moon, knowing that the exploration would lead to unimagined innovations here on Earth.

That’s what we’ve done in the past. And that’s why I’ve chosen to address education, health care, energy and this budget — because we can’t wait to make the investments today that will lead to tomorrow’s prosperity.

Such thoughts are why Cass Sunstein called Obama a "Chicago School Democrat" - the market creates all wealth, except when the market fails, at which point government must fix the market.  This also a "public private partnership" (PPP) philosophy, similar to that espoused by Blair and Brown Labour in the UK.

Unfortunately, Obama's position -- a common one among centrist Dim and Labour elements --  makes neither political nor conceptual sense.  If the market fails with any kind of regularity, then government is also a source of wealth and value. If government is a source of wealth and value, then the market is not the dominant if not the only source of wealth and value.  In the case of health care, if the market is the very engine of American progress, then America's free market system that has placed such enormous profits in the hands of HMOs and insurance corporations has been an amazing success, and we should not now be talking about bringing government in to regulate it.  Cons take continuous advantage of Obama's awkward stance.

The political problem with Obama's position is similar. How can he rally a mass base by chiding Wall Street bankers one day and praising their wealth the next? How can he be taken seriously by saying business should run the economy and then invoking the railroads to say government should help run health care?  The scope and timing of intervention is also always at issue, and you need some coherent principles to decide when and where.

The obvious solution is for Obama to say loudly and often that "government creates wealth" - in exactly the ways he describes in his speech, with quality education being at the heart of value-creation along with universal health care.   Society creates wealth, and government is one instrument and business is another, and in a democracy society gets to decide the scale and scope of the various instruments.  Government and businesses are co-generators, which means that public investments should be both ackowledged and compensated - which would reduce profits for companies that have gotten used to getting all sorts of public stuff for next to nothing, and would challenge American capitalism as it is, which of course Obama has to do if he wants a real recovery, except he thinks we already have one.

Obama's intellectual failure to expound a coherent social-democratic vision of society, which would also be post-capitalist in the sense of being post our inefficient, wasteful, crooked, silly current version of capitalism will, if it continues,  be yet another source of his political failure.

Monopoly Endgame and Middle-Class Decline

Yesterday the NYT ran a very good piece on the rise in the long-term unemployed. One of the featured people is Jean Eisen, out of work for two years. A former comic, she's turned to Christianity because prary offers the kind of health insurance she can afford.

Twice, Ms. Eisen exhausted her unemployment benefits before her check was restored by a federal extension. Last week, her check ran out again. She and her husband now settle their bills with only his $1,595 monthly disability check. The rent on their apartment is $1,380.

“We’re looking at the very real possibility of being homeless,” she said.

The piece states the clear implication:

Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces — some embedded in the modern-day economy, others unique to this wrenching recession — might make it especially difficult for those out of work to find their way back to their middle-class lives.

And also offers a more candid-than-usual explanation of why:

Large companies are increasingly owned by institutional investors who crave swift profits, a feat often achieved by cutting payroll. The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees. Factory work and even white-collar jobs have moved in recent years to low-cost countries in Asia and Latin America. Automation has helped manufacturing cut 5.6 million jobs since 2000 — the sort of jobs that once provided lower-skilled workers with middle-class paychecks.

“American business is about maximizing shareholder value,” said Allen Sinai, chief global economist at the research firm Decision Economics. “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”

Jobs used to grow at a 3.5% rate each year. After 1980, they grew during expansions at under 1% a year.  To make the point as directly as possible, U.S. economic leaders shifted the conditions of revenue growth so that they depended on the reduction of employment growth.  In other words, U.S. expansions become almost-jobless recoveries by design.   The actually jobless recovery after 2003 under George W. Bush was the holy grail of this economic policy.

The Obama Administration is doing what it can to draw a somewhat bent line from Bush to Hooverization.   Its money goes to big banks not small ones, who are not lending to the small businesses that produce the vast majority of new jobs in any recovery.  (See my Capitalist Pal on this crowding out.)  Small business is not recovering, and employment will recover that much more slowly.  Strategic sectors like green energy are on the ropes.  The federal stimulus will not rebuild enough of the crumbling country by in the process hire the hundred thousand a month required just to keep unemployment in place.   Instead, its unemployment bill will mushroom, as people are paid not to work on public projects but because they can't find work. Cash-starved governments will try to contain the mushrooming bill by throwing people off of "safety-net" programs that include welfare: "as of 2006, 44 states cut off anyone with a household income totaling 75 percent of the poverty level — then limited to $1,383 a month for a family of three."  The effect here obviously is to insure that welfare leads to paralyzing, unhealthy poverty.

It's all getting to be too much even for some of the Summers-Rubin Lexus worshipping fans of unhinged business.  Tom Friedman's column is titled "The Fat Lady Has Sung," and has the quip that sums up pretty much everything.

But now it feels as if we are entering a new era, "where the great task of government and of leadership is going to be about taking things away from people," said the Johns Hopkins University foreign policy expert Michael Mandelbaum. 

Ms. Eisen's life story is a history of So. Cal deindustrialization, as she energetically jumps from one industry to the next with a cheery entrepreneurial spirit, only to see that entire industry die or get sent abroad (aerospace, a travel agency, then beauty product sales . . .)

The worst comes nearly last.  Another successfully member of the middle class who hasn't been able to find a job in two years remarks, "“What is going to happen? . . .I worry about my kids. I just don’t want them to think I’m a failure.”  The worst is that many of those on the front lines of middle-class decline don't see the structural problems.  It's hard to imagine, given the incredibly low mental level of most US media, that they ever will.  But without a reason or a will to revolt against this dead-end system, all they can do is spiral wagewise to the bottom.

There's a direct connection between the U.S.'s monopoly-prone economy and wage / employment decline.  It won't change unless members of the ex-middle class start to realize the removing jobs has for thirty years been the U.S. economy's dominant recipie for revenue success.

Obama Heart Banks

When Obama praises the spirit of piling money higher and deeper as the great Spirit of America, and absolves the bank bonusers of any wrongdoing, he makes no sense ethically or economically - finance and its grotesque incomes is grossly inefficient, really unaffordable in our struggling world. But on the level of simple tactics he makes his alleged crackdown on the banks into a joke.  Henceforth all of his stern fingerwaggings will be greeted with a wink and a nod - except in middle America, where the pitchfork crowd signs up for Tea Party populism and waits for the chance to run Obama out of town.

I never thought I'd be seeing him as simply dumb but I am starting to.

Global Hoovermania

The national debt crisis in Greece is an example of a case where a combination of Eurozone rules and financial market pressure will force huge cuts in public spending, damaging both living standards and delaying economic recovery.  On Sunday, the New York Times reported that some of Greece's hidden debt was concealed courtesy of instruments sold to it by Goldman Sachs in 2001.  In November 2009, Goldman Sachs tried to do it again. The Financial Times reported today that EU authorities have requested information about the swaps.

Greece's national debt is over 100% of its annual GDP.  But this is not so horribly out of line with other countries, as can be seen at left and here.

"High" debt is a matter of interpretation, and 40 years of attacks on the existence of government, the public sector, and public debt as a source of public investments has greatly reduced the markets' tolerance for debt levels that are still well below what seemed normal in times of crisis like World War II. Markets put up with high debt levels during war.  If we were serious about, say, decarbonization, we would run 200-300% deficits in gigantic crash programs in solar power, total transportation system reengineering, weatherproofing every building on the planet, you name it, so that there will be great-great grandchilren around to pay the debt we left them.

The interpretation of debt levels as too high is threatening the recovery, since it will force governments to cut spending when they should be increasing it.  This is the plan for Greece, the famous land of Generation 800 Euros (youth salaries per month) and meager economic development outside of coastal estates built on land removed from government protection by arson-set forest fires.

Government employment is a pillar of the middle class everywhere in the world.  It is also being squeezed everywhere: in Sacramento, California, a moron's consensus reigns on the virtues of cutting state employee salaries 5%.  In all countries, public service employment is the crucial gateway to the middle class -- as it was in the United States from the 1940s to the 1960s, for African Americans in particular who faced ongoing discrimination in the private sector. Countries like Argentina that were forced into IMF-style austerity programs that slashed the public sector have one common feature: an incredible shrinking middle class.

Most pundits seem to have learned nothing in all these years. Thomas Friedman recently contrasted two years in the Middle East. 1977 was good -- neoliberal policies implemented in Egypt by Sadat.  1979 was bad -- the Iranian revolution, Whahabi-reaction in Saudi Arabian Islam, etc.  But "liberalization" and "modernization" were themselves the source of the radicalization of mass Islam that Friedman deplores.  They impoverished the great majority in Egypt, ruined Cairo's public systems for starters (on my recent trip there an archictectural institute informed me that 60% of Cairo's housing is "informal" - built by occupants because the private and public sectors both refuse.) 


Krugman points out that the bigger debt problem in the Eurozone is Spain. But for some reason he spends his column attacking the very idea of a single currency in a variable region rather than attacking austerity politics, though he knows in the U.S. case that the focus on debt will kill the recovery.

Since the world needs both recovery and stable currency and debt arrangements across diverse national economies - both of which the financial system has not delivered - Krugman et al. need to figure out how to avoid screwing the populations of countries like Greece.  The world has to learn how Greece can have a modern, efficient, green infrastructure with its current economy, and then discover how to provide the same to about 130 other countries that are in even greater need.

If the EU can't fix Greece, it can't fix anything that needs fixing.

Hitting the Iceberg on Purpose

The simplest summary of President Obama's State of the Union message is that the Wall Street bailout was a success, and the Main Street bailout must stop.  Why else would he point out ongoing suffering and then call for a 3-year freeze in the federal funding that is the only meaningful source of support and social development money in the United States?

For the pre-limbic thought processes that are leading the Democrats into a deliberate steering of economic recovery and their own political power onto the iceberg, see this dismal collection  of inane forgetting of basic politics and economics not to mention the basic purposes of the Democrat party.

The Dismal Collection gets to the backstory behind Krugman's excellent slam of Obama's "deficit-peacock strut." Obama has produced too small a jobs program and too weak a health-cost containment because "our political system doesn’t seem capable of doing what’s necessary." Behind the political failure is mass mental failure: learned and extremely astute people like Obama have their options shaped by 8th grade arguments and personal attacks that wouldn't score any points at all on most issues in most educated countries.

Afghanistan is a good example, and the NYT's London bureau chief John Burns perfectly articulates the incoherent strategy for which Obama is risking his presidency.  "Winning" Afghanistan means winning hearts and minds, but the actual US strategy is to win on the battlefield by killing a lot of Taliban, thus demoralizing them, at which point they will accept our money to switch sides forever to the Stars and Stripes.  This is as dumb as it gets, but Obama is racing down this road because of dimwit beltway concerns about "Obama the man."

Obama is letting himself get blown around by the gale-force winds generated by airhead Repubs and Dims all calling for him to move to a center that is well to the right of Richard Nixon.  He went from the US inventing the world's cheapest solar cells to "building a new generation of safe, clean nuclear power plants in this country" from one paragraph to the next.

Obama's former enthusiasts are getting desperate.  Cenk Uygur says that if the Dims reappoint Bernanke the great Titantic captain  "there’s no helping them and there is no hope in them."  The great summary of this dead end is Jon Stewart's:  "No matter what you do, the Republicans are not going to let you into the station wagon. . . .and you're the majority party. It's your car!"  Later Assif Mandvi explains, "The Democrats are going to need bipartisan support if they're ever going to see Bush's agenda enacted."

Finally: "you can't hurt us anymore. We're already dead."

Stewart's stuff about the Repubs not letting the Dims into their own car gets at some deep Democrat yearning for approval from authoritarian dickheads on the Right, and from the same elements in their own constituencies.  How can their survival do more that degrade us further?

Obama Takes the Wake-Up Call

My hope for Barack Obama always rested on the fact that he was a smart politician in the old school sense - that he would listen to majoritarian pressure and respond to it.  He may have figured out via the loss of Kennedy's seat via a "centrist" Dim to a Republican that economic oligarchy isn't popular.  There seems to be supportive polling data that Coakley didn't lose because she's too liberal.

This week, Obama offered a direct attack on the Supreme Court's neo-feudalist decision to give corporations the free speech rights of citizens, calling it "a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”   And his "populist" shift against banks, read as a shift from Geithner to Volcker,  upset the moderate Financial Times (which called Obama's move both a "declaration of war" on Wall Street and a "Maginot line", and the trading of bank stocks. (Sen. Barbara Boxer also announced her opposition to the reconfirmationl of Ben Bernanke at the Fed.) Again there was strong language:

My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout.  It is exactly this kind of irresponsibility that makes clear reform is necessary.

Still, the proposal itself has no specifics at all.  Obama has never had trouble making a good speech. The trouble is always whether anything comes next to back it up.  I'm doubtful that he has any interest in turning banks back into something more like a service to the public economy.  But at least he's not still asleep.

ADDENDUM.  See this good overview of Bernanke's two failures  - to have seen the housing bubble for what it was and helped deflate it, and to continue to privilege "fighting inflation" over fighting unemployment.

- Fr. Frank offers a definitive summing-up of where Obama is right now.  Offering many useful details, he says, "The president is no longer seen as a savior but as a captive of the interests who ginned up the mess and still profit, hugely, from it."  His muddled non-direction, Fr. F notes, is Dim party is adding to the existing weight of Dim centrist pro-biz confusion and pulling it under  "the Obama administration is so overstocked with Goldman Sachs-Robert Rubin alumni and so tainted by its back-room health care deals with pharmaceutical and insurance companies that conservative politicians, Brown included, can masquerade shamelessly as the populist alternative."

Rocket to the Bottom

The loss of Teddy Kennedy's Senate seat to a Republican is being greeted in France a clear sign of Obama's fall from grace and perhaps from influence.  In the midst of the avalanche of commentary came this poll about how Americans think Obama has done with improving race relations and the position of African Americans.  The WaPo reports that "On the eve of President Obama's inauguration a year ago, nearly six in 10 Americans said his presidency would advance cross-racial ties. Now, about four in 10 say it has done so."

There's far more agreement about this between the right and left than between black and white.  70 percent of "Americans" think Black folks have achieved social parity.  11 percent of Blacks folks agree.  The existential gap persists between those who actually experience being American while Black and those who don't.  So does a deficit in cultural capacity, which I define here as the majority's ability to credit "minority" experience.  The U.S. majority is bad at this, though it must be said that the majorities of most countries also are.

The main race debate in Obama's first year revolved around the arrest of the Harvard professor Henry Louis Gates, Jr. in his own home in Cambridge Massachusetts.  Obama retreated from his initial explicit outrage at police behavior, leaving the outcome as a public teaching moment murky at best.

But race relations are obviously also at stake in Obama's escalation in Afghanistan and inability to reduce the meddling and swaggering and support for tyrants that intensifies rather than suppresses the violence. He's maintained what is widely perceived as a war on Islam, a war on Arabs and on other middle eastern peoples - on non-Western brown folk who object to U.S. sovereignty over their own region of the world. 


The saddest example in the U.S. rescue effort in Haiti.  Haiti is the litmus test of Black conditions in the world as a whole - the first and last successful slave revolt created it as the first Black republic, and its neighbors starting with the U.S. haven't given it a break since.  When Port-au-Prince and many other Haitian cities were flattened in last week's earthquake, Iceland arrived first, and Cuba and Venezuela were there, and France sent various planes including one with field hospitals. The U.S. then arrived, took over the airport, turned back the French plane with field hospitals among others, injected 11,000 heavily-armed troops into the country, with the visuals looking a lot like the U.S. a military occupation. The mainstream media has copped to the fact that the U.S. is not really helping the rescue effort so much as policing an effort that "needs gauze, not guns."  Obama's most visible moment was appearing with former Presidents Clinton and Bush II in a weird show of solidarity not with Haitians but with the white presidents who meddled constantly in Haitian political affairs.  Bush backed the current government's perverse privatization efforts, which resulted in the closing of the country's only cement company and the closing of the country's only flour mill.  That was the kind of American support Obama reflected in posing with those two guys in his ride to the rescue.


It's no wonder Black racial optimism is back where it was before Obama's election.  I still see those lines with hundreds of people waiting in the rain at 5 in the morning to make sure their vote got to count.

Financial Crisis as Mental Problem

The financial crisis continues to foreground a crisis of knowledge: what are people allowed to know? When is what they know allowed to be true?

The financial industry has never faced the extent to which its analyses are skewed by its own financial interests, or how completely the uses of bailout money remain secret.  AIG remains a black box, and more generally we have no idea what any of it is worth once semi-detached from the government guarantees that float it now, and sink the rest of us.

Anne Enright has a nice piece in the London Review of Books on the universal mental unreality.  Called "Sinking by Inches," she writes about Ireland's meltdown as caused in part by Ireland's mental paralysis.

I can understand the denial at the end of the boom; what worries me is the denial that made it. From 2001 to 2007 it was not possible to be off-message about the Irish economy or, especially, about the housing market. You would barely be published. . . . It was no fun being informed, either then or later. People don’t like you for it, and why should they?
One of the strangest feelings, living through a housing boom, is that you are rich or poor not because of the money you earn, but the year you started earning it. It is not a question of effort, but of luck. This was part of the impotence and panic that drove Irish people to buy overvalued houses towards the end of the boom; it was the feeling that we were running up a down escalator and had to grab hold of whatever we could, to stop being swept away. . .
Telling the truth was, in the circumstances, not just boring, it was also unlucky, hexed, taboo. It might even be unclean. Careless talk costs jobs. If the bubble burst it would be your fault for calling it a bubble, because, at the end of the day, it’s not an economy, it’s a mood.

 This is still where the U.S. leadership seems to be, new bank tax or not.  Its main goal is to make the mistakes of the past into something bearable - at least for them.  While they continue to foucs on this, the country as a whole won't be able to tell the truth because it is still afraid of making it all worse.   And so we'll stay stuck with the combination of "impotence and panic" that got us where we are.

Ticking Time Bomb for 2010

There isn't enough commentary out there about how the "recovered" sector of the American economy - the banks - are recovering through continued and massive taxpayer subsidies.  One of my Capitalist Pals had a good piece on it earlier this week. Healthy balance sheets are coming from (1) free money guvmint money (effectively zero interest) for which the banks can charge 5% or whatever; (2) the use of higher-yield Fannie Mae and Freddie Mac securities, although these agencies are floated by bailout funds; and (3) the declaration of actual losses as income:

many of the same banks that received TARP funds were deliberately allowed to mask big losses in the 1980s after their loans to Latin American countries went bust.

Today, banks are doing the same thing by underreporting losses and delinquencies. This means that, even if banks aren't collecting, they can keep counting interest they're owed as if they are getting paid. This allows them to delay the write-down process, and casts doubts on their financial statements.

 The fact that the author of this piece depicts his view as controversial suggests we're living again in Kool-aid World, and that unpleasant surprises await.

Be sure to read the even scarier Part II.

HNY quandmême!

To a Better Next Year

One good thing about the 2000s was the expansion of the blogosphere - the quality of available commentary has never been better, and we can access expertise and insight that otherwise would have been limited to a particular college lecture hall or small-circulation speciality magazine.  So here's to folks I unambivalently celebrate as creators - Ted Newton and his conceptualization of hypertext, Tim Berners-Lee and the universal resource locator, and the thousands of others who put the Toile together as they say in French.

On the decade itself, Krugman's Zero Decade pretty much sums it up for me so nuff said.  Zero economic progress, intellectual suspension between paradigms, no answers to 1990s questions about how to have a productive economy and decent, sustainable life without monopoly rip-offs and exploitation of the global South - actually questions barely asked by the ones in power.  The gap between intelligence and leadership seems as large as ever in my lifetime, and I'm old enough to remember Richard Nixon.

On the absence of establishment intelligence in the United States, Jane Hamsher puts it well:

the right, whose numbers are relatively small and whose views are generally far outside of the main stream, has dominated politics for the past 30 years because they made an alliance with the corporations. It’s only natural that Democrats have sought power by replicating that model, even at the price of destroying the illusion that they’re the “party of the people” and fracturing the support that put Obama in office.

The Democrats are trying to secure their political ascendence by tying up the money, no different than Tom DeLay did. But whereas the Democratic Party represented a net to collect and unite those disaffected with the kleptocracy of George Bush, the actions of the Democrats since securing the White House this time around have dimmed the hopes that the Democrats present a real alternative.

The Bush Republicans flogged social issues in order to obviate the need for populist economic measures. They satisfied the base by treating them to a banquet of God, guns and gays while they looted the taxpayer trough. The Democrats, however, are making a sacrifice play on social issues and enabling corporatism by triangulaing against their own base.  . . . the White House positioned themselves as “centrist” after the widely popular public option was dispensed with, simply because it was something “liberals” seemed to want too.  What they’re forcing, however, is a situation where there is no place for populist liberal discontent to rationally go.

Hamsher ends by seeing a populist alliance opposing "kleptocracy"of the republocrats, but given the 2-party lock this can only be a domestic "war that will last for years."

On the coming War Decade, one need only extrapolate from Glenn Greenwald's piece on the Five Wars and the absence of clear thought about what to do. See also Juan Cole's Top 10 Middle East Crises, which are a fitting epitaph for the decade overall.  Obama seems even more manipulable than Bill Clinton by any accusatory nonsense the Right can dream up about his lack of masculine will to kill the terrorists and their infinite threat.  I'm also old enough to remember the Cold War, when the hysteria could at least base itself in a opposition to a real superpower, the Soviet Union, and its utterly unconquerable unappeasable ally, Red China.  Today's global mobilization against a crazy college dropout who lit his pants on fire only to be subdued by his fellow passangers, all of whom landed safely, and this deranged young man's several dozen committed al-Qaeda allies in Yemen, is frankly pathetic.  Some sorryass superpower we turned out to be, shouting and ranting and flagellating ourselves in public over a security lapse, and making ourselves feel better with threats of world war. 

The worst part is the shock and rage each time that someone obsessed with the US presence in the Muslim world tries to kill some Americans.  What exactly do we expect?  Either we are trying to rule the Muslim world by supporting dictatorial governments and reactionary monarchies everywhere, deploying dozens of military bases and advising local governments in the arts of political repression, scrambling for resources in competition with Europe and Asia, and backing Israel no matter how much it colonizes and mistreats its neighbors, in which case a portion of the affected populations will naturally try to kill us.  Or we will try to get them not to kill us by creating relations of economic equity, sustainable development, and political democracy with real local control (and hence disagreement with U.S. policy and favoring of local rather than U.S. businesss).  Can we grow up enough to even see that there is a choice here?  Not very soon, since the rage that suppresses thought is in sync with the loss of collective intelligence we suffered during the Cheney Years.  Obama doesn't have the chops to escape.

Hopefully, however, we do. Happy New Year no matter what.

The Era of Permanent Discontent

Thanks to Juan Cole for writing up the Top-10 "worst things about the wretched period" of the 2000s - for me the Top-10 signs of decline.  Yes, it was a truly bad start to the new millennium for which we have many dumbass electorates and self-serving elites to thank.  The decades' leaders replaced negotiation with belligerence wherever they found it convenient to them - really, with Iraq, whenever it felt right.  The same goes with finance now and the end - Cole's top 1% who reaped 2/3rds of the gains of the 2000s are getting a free pass from the Obama admin to do as they like.  The same goes with the environment, where the failure of Copenhagen to produce targets and timetables in an utterly quantified management culture that responds only to these will mean the reinflation of fossil fuel use - oil sands, clean coal, the whole 9 yards.

The decade began the Era of Permanent Discontent.  There were mass protests and opposition to policies like the Iraq war that political and business leaders systematically ignored.  Individuals like Dick Cheney were more openly contemptuous of public opinion than others, but it's hard to think of a national or state-level leader who has recently opposed his or her small inner circle or the Ring of Lobbyists - on any issue in order to back a majority view.

Continuing the cycle, obvious rejection of popular positions then produce further protests and widening gap between leaders and the vast majority they claim to lead.  Polling data picked it up: rulers implemented positions accepted by a minority of the public, and this is happening again with the health care "reform," where a "clear marjority" wants a public option (October 2009, December 2009), and where political leaders don't, and so there won't be one. In Europe they call this "post-democracy." In California, it is called minority rule, and a UC professor George Lakoff has started an initiative to end the Proposition 13-based supermajority rule for budgeting and taxes.  This is a great idea. But it needs to confront an electorate that has no experience with or trust in real majority rule.

The twin of permanent discontent is Permanent War.  Bush's "war that will go on for years" has become Obama's Afghanistan escalation and similar rhetoric of standing, dispersed dangers to global security.  Apparently no American executive can govern without Cold War-style insistence that the country is in grave danger from all over.  The benefits to the military and industry are obvious, and so are the benefits to executive authority.  Obama's Wars now involve escalating the drone attacks and secret military incursions into Pakistan that echo the Nixon-Kissinger incursions into Laos and Cambodia that hardened and widened the Vietnam war that they too claimed to be winding down.  In the context of majority demands for public health care, better infrastructure, cheaper higher education, green technology, more and better jobs, war has an important role to play.  The function of war i to make all popular things impossible.

It's worth nothing that finance has come to play a similar spoiling role. Its absorption of somewhere between $17 and 24 trillion has already killed off any new New Deal for the states and their outmoded intrastructures and social systems (the US ranks 12th to 16th in the social distribution of its own core technologies, broadband access).  Finance is increasingly acknowledged to invest largely in unproductive assets, so it's not like we need its domination over the economy because they are about to give back to society - give back new industries, high productivity growth, better living for all.

But the financial sector is good for the political executive function. It concentrates wealth and concentrates the power that goes with it.  Wall Street's importance magnifies Washington's importance, and the leaders of each get enormous personal benefit from the acute stratification of their sector, where all meaningful decisions are made at the top.  The concentration of finance into a few banks that are too big to fail is also good for the military, which operates on the same principle.  Having a superconcentrated financial sector run by insiders has long stabilized corrupt, crony-ridden governments in places like South Korea and Japan. It provides the same function in the United States.

The epoch battle now shaping up is between innovation and control.  Concentration and hierarchy are good for control and bad for innovation.  You can't spread broadband across income groups if you can't distribute and share because your broadband industry is a plutonomy of interlocking monopolists.  But most of our innovation industries, starting with IT, have become oligarchies built up around monopoly rents, and the innovation economist David Mowery has pointed out that software developed with market shares of 80 percent at home and 65% abroad (p 14).  Innovation depended on acquiring monopoly control in the post-war market environment - and on large amounts of military funding.

Where are the forces of innovation that can do without this kind of control?  Mostly lodged in our permanent discontent.  My hope - and fear - is that they will remain dormant until they enter into open revolt against the control-focused governance that now pervades every corner of politics and the economy.

In 1009, Egypt's Fatimid caliph al-Hakim leveled Jerusalem's Church of the Holy Sepulchre to the ground. He then "hacked the church's foundations down to bedrock."  The church was rebuilt in 1048, but it's initial destruction became the cornerstone of the crusade preaching of the Catholic Church. His successor would rebuild the church ing 1048, but Hakim's rash act stirs demands in Europe for a Christian crusade to recover the Holy Land from the "infidels." In 1096, the First Crusade would leave Europe for the Holy Land with more than 30,000 men, and would crystallize the anti-Islamic hostilities and salvific-warrior mentalities that seek to control our destiny today, a thousand years down the road.

Dissociation in a Bad Decade

A few posts this week get close to the heart of the problem.  Fr. Frank's Sunday sermon provides the frame - "As we say farewell to a dreadful year and decade," we have to recognize the following:

The men who played us for suckers, whether at Citigroup or Fannie Mae, at the White House or Ted Haggard’s megachurch, are the real movers and shakers of this century’s history so far.

Fr. Frank replaces Time Man of the Year Ben Bernanke - "as big a schnook as every other magical thinker in Washington" with Tiger Woods, the age's typical con man who piles up tens or hundreds of millions of dollars in personal wealth with a skill base prosthetically extended via an image fabricated by extremely expensive media machinery that is at complete odds with reality.

This blog's technical term for the state of mass suckerdom has been dumbness.  This is a word I also use for dissociation, the systematic though often unconscious concealment of intersubjective reality behind a screen image of the real.

The most effective means is obviously the mass media in general and its hyperdeveloped skill at producing idealized simulacra of reality - simulacra so perfectly cleansed of anomalies that they fit the definition of hysteria.  The source is often a trauma. Thinking of US history in general and of 9/11 in particular, I would say that dissociation is a response to a trauma that suppresses the subject's own role in having produced the trauma.

Everyday examples of dissociation can be found in Fr. Frank's descriptions of hero-worshipping of male sports stars and of faith in Weapons of Mass Destruction in Iraq.  The other huge example that we're very much living with is the securities industry, in which values for securities that brokers made up were assigned through exchanges via mimetic thinking and mutually reinforcing professional networks.

Fr. F rightly starts the dismal decade with the Enron scandal rather than 9/11: 2001 was the year in which its "assets" came gradually to be seen as accounting fabrications.  He gets good play out of the accounting firm Accenture's use of Tiger Woods as its sole emblem of all things virile and triumphant, and then its attempt to scrub Tiger Woods from every piece of company material as though the relationship never existed.  Fr. Frank doesn't mention that "Accenture" was the name that emerged when accounting giant Arthur Andersen had to scrub itself out of existence as the disgraced accounting firm for Enron Inc.

There is an Orwellian aspect to these total reversals: we worship Tiger Woods; we look down on Tiger Woods.  Enron is America's most innovative company; Enron is America's most fraudulent company.  As an educator, I notice first and foremost the absence of learning.  We just go onto the next thing: from Enron's "special purpose entities" to Lehman's "structured investment vehicles," from day-trading in equities to zero-down real estate investing.  The pattern is reinforced by our leaders, who depend on it to maintain their own position.  A recent example was Obama's justification of the escalation in Afghanistan by trying to suffocate reflection with a thick blanket of primal innocence: "unlike the great powers of old, we have not sought world domination."

In his amazing novel 2666, one of Roberto Bolano's main characters, a Spanish specialist in German literature and in particular the works of the elusive Archimboldi, returns to his hotel room in a Mexican border town, puts down

rugs on the bed he didn't sleep in, then . . . sat on his bed and for a fraction of a second the shadows retreated and he had a fleeting glimpse of reality.  He felt dizzy and he closed his eyes. Without knowing it he fell asleep.

Why are we still sleeping?

The effect of the Big Sleep appears in another great framing moment, Glenn Greenwald's continuation of his critique of the Obama administration on health care. He argues that Obama is systematically continuing Clinton's Third Way, which Greenwald defines as corporatism.

It's about more than just letting corporations do what they want.  It's about affirmatively harnessing government power in order to benefit and strengthen those corporate interests and even merging government and the private sector.  In the intelligence and surveillance realms, for instance, the line between government agencies and private corporations barely exists.  Military policy is carried out almost as much by private contractors as by our state's armed forces.  Corporate executives and lobbyists can shuffle between the public and private sectors so seamlessly because the divisions have been so eroded.  Our laws are written not by elected representatives but, literally, by the largest and richest corporations.  At the level of the most concentrated power, large corporate interests and government actions are basically inseparable.

The health care bill is one of the most flagrant advancements of this corporatism yet, as it bizarrely forces millions of people to buy extremely inadequate products from the private health insurance industry -- regardless of whether they want it or, worse, whether they can afford it (even with some subsidies).

Greenwald is right about this "centrist" Democrat philosophy, and about its authoritarian overtones. It's also important to figure out where this corporatism comes from.  Part of it is the media simulacra, of course, providing all the comforts of Babyland for an infantile population.  The deeper harder part comes from systematic and self-protective dissociation from anything that conflicts with an airbrushed image of America that helps us all confront absolutely nothing the country or its leaders actually do - like "seeking world domination" around financial markets, military power, UN climate policy, and so on.

The area where the country's middle classes are being continuously damaged is finance itself.  The financial system created untold trillions of dollars of assets that its own participants determined in the summer and fall of 2008 to be worth little or nothing.  Collapse was averted because governments led by the US Treasury and the Fed stepped in to provide unconditional guarantees that these assets would be worth close to face value.  This was the importance of Treasury Secretary Tim Geithner's "giveaway" (also here, here and here) of 100 cents on the dollar to AIG's counterparties. Even if it wasn't a giveaway, it signaled Total Commitment to whatever fictions finance had been using to pile it high and deeper.  In other words, to avoid collapse, the feds supported dissociation.  This meant the rapid forgetting of what we had momentarily learned about the non-value of financial values through their real support with taxypayer-supplied direct payments, loans, and guarantees. The forgetting continues to this day, when it is hard to find any commentary on the problem assets that remain on everybody's books, because we are now dissociatively engaged in an economic recovery.

How do we make it stop? The old Left mechanism was the exposure of false consciousness through immiseration.  The lie of prosperity (for the large majority) would be exposed through the truth of suffering.

We have plenty of suffering in the dying states.  In the Left Business Observer, Doug Henwood writes,

According to a new ABC News/Washington Post poll, one in three U.S. households reports that a member lost a job over the past year. The effects: 90% report higher personal stress; 62%, anger; 58%, depression.  That translates into 83 million Americans experiencing stress; 58 million, anger; and 52 million, depression, as the result of recen job loss. Not quite four in ten of the job losers report having foudn a new job - and of those who do, half say it's for less pay.  For those unable to find a new job, the emotional effects are severe: 70% are depressed.

The obvious problem is that suffering that leads to depression doesn't lead to change.  Anger is more useful, but can easily be reversed into depression, particularly in a culture like that of the U.S. in which everyone is held personally responsible for failure and there are no structural problems really or exploitative ruling classes etc etc - except the ones you see when you are really angry, and then even your friends avoid you for being the loser you are.

The Left is not doing well right now in defining a new architecture for a egalitarian economy that develops the whole society. It also needs to do better at confronting the psychological blockage to imagining what that would be, starting with acknowledging our own role in getting us here.  I think the key to ending dissociation is ending the threat of being a loser by confronting the fact that in the current situation that is exactly what nearly all of us are.

Getting Rolled AGain

Glenn Greenwald outdoes himself in this unrelenting slam of the Emmanuel-Obama Axis of Nixonism -  except Nixon was more of a New Dealer.  Here's a particularly nice summation:

In essence, this reinforces all of the worst dynamics of Washington.  The insurance industry gets the biggest bonanza imaginable in the form of tens of millions of coerced new customers without any competition or other price controls.  Progressive opinion-makers, as always, signaled that they can and should be ignored (don't worry about us -- we're announcing in advance that we'll support whatever you feed us no matter how little it contains of what we want and will never exercise raw political power to get what we want; make sure those other people are happy but ignore us).  Most of this was negotiated and effectuated in complete secrecy, in the sleazy sewers populated by lobbyists, industry insiders, and their wholly-owned pawns in the Congress.  And highly unpopular, industry-serving legislation is passed off as "centrist," the noblest Beltway value.

 Digby's quite nice on this too.  The key here is the middle section of the paragraph: Obama can directly and coercively give the taxpayer's money first to the "F" in FIRE (finance) and now to the I (insurance) because of the pathetic psychological state of progressives - so pathetic that it's hard to even know if they are progressives or not, or if they know. Would these people respond if exposed and pounded on by a thousand Greenwalds and 10000 Digbys?  How much more failure is it going to take? My only disagreement with Greenwald is that he doesn't sufficiently stress the apparent causal power of a mass mental break.

It's true that Obama is more to blame than Lieberman, but why is Lieberman able to act like one of the regional tyrants that could blackmail the emperor as the western Roman empire disintegrated (e.g. throughout all of the 400s).   This is a sign that Obama has already lost most of his authority, if he ever had it in the first place.  It's also more evidence for Fire Dog Lake's important claim for the practical failure of the Rahm Emmanuel strategy of crippling the left and even the center so they can cut deals with the right.  They have achieved almost nothing this way - unless what they want is in fact FIRE corporatism instead of government.

There are a lot of parallels with Clinton, of course, but it reminds me more of Tip O'Neill's disastrous accommodation of a not-yet-strong Ronald Reagan during the recession of the early 1980s, when instead of fighting him on the air traffic controllers and tax cuts, he found lots of local advantages in caving in. The Dems haven't ever really recovered on the level of strategy or of ideology, and that was almost 30 years ago.  And of course O'Neill was still running scared from the McGovern debacle, which they never analyzed correctly - as is Obama in his desire to be Nixon rather than McGovern (or Carter) in Afghanistan . . .

I like FDL's virtual whip project but am not sure how to scale up opposition to a DC that is completely off the rails and selling itself to the highest bidder as quickly and totally as it possibly can. (This view is compatible with Nick Silver's good rationalist analysis of progressive failure.)  Obama's vaunted Internet strategy was built to campaign the masses and not to rule the brokers in the capitol.  A starting point would be for Obama to engage in a public slicing and dicing of his enemies in a major national address - really hang them by their heels from the telephone poles on the road to Woody's Creek,  as Hunter S. Thompson used to say -  but he's already lost the spirit to rule in the midst of all his orthodox calculations  of compromise, to say nothing of implementing any actual renovative ideas.

Decline And Fall - For No Reason at All

Pretty much the whole sad story of Obama, War President of the Nobel Peace Prize is wrapped up by Glenn Greenwald, so no need to expend extra thought there.  This Greenwald is required reading on the foreign policy portion of the current rapid Democrat slide into Republican policy hell - all for basically no political reason, since the Repubs are widely despised. (See also David Cortright here.)

Same goes for Obama's Republican economic policy - Matt Taibbi this time on the" economic team made up exclusively of callous millionaire-assholes an economic team made up exclusively of callous millionaire-assholes [that] has absolutely zero interest in reforming the gamed system that made them rich in the first place."  Thank you.  Taibbi links the names, a simple way of showing the painful marginalization of any critical thought - finally as insidious and life-sapping a trend in modern America as the pervasive, half-veiled faith in violence. The sorry outcome is that all those Dems from Obama to Frank et al can't move ahead unless, as they were in Fall 2008, they are prodded by simple fear.  With the visible threat past for the immediate Finance Family, it's back to their laissez-faire.

The result with the Obama admin is, as one person puts it, ""Rather than having a team of rivals, they've got a team of Rubins."  How much clearer could it be that Obama is finished as an indepenedent force in US politics?  Rolled like that, you never recover.  At least he won't.

Amidst all the enforcing of progressive timidity by Rahm Emmanuel et al is the sheer timidity of the conventional wisdom here.

Why would leading congressional Democrats, working closely with the Obama administration, agree to leave one of the riskiest of all financial instruments unregulated, even before the issue could be debated by the House? "There was concern that a broad grant to ban abusive swaps would be unsettling," Frank explained.

On this point, Obama foreign policy is even worse than Obamanomics.  Greenwald wraps up the Nobel speech like this:

Indeed, Obama insisted upon what he called the "right" to wage wars "unilaterally"; articulated a wide array of circumstances in which war is supposedly "just" far beyond being attacked or facing imminent attack by another country; explicitly rejected the non-violence espoused by King and Gandhi as too narrow and insufficiently pragmatic for a Commander-in-Chief like Obama to embrace; endowed us with the mission to use war as a means of combating "evil"; and hailed the U.S. for underwriting global security for the last six decades (without mentioning how our heroic efforts affected, say, the people of Vietnam, or Iraq, or Central America, or Gaza, and so many other places where "security" is not exactly what our wars "underwrote").  So it's not difficult to see why Rovian conservatives are embracing his speech; so much of it was devoted to an affirmation of their core beliefs.

The more difficult question to answer is why -- given what Drum described -- so many liberals found the speech so inspiring and agreeable?

 And then the 64 dollar observation: "Yesterday's speech and the odd, extremely bipartisan reaction to it underscored one of the real dangers of the Obama presidency:  taking what had been ideas previously discredited as Republican or right-wing dogma and transforming them into bipartisan consensus."

Dissociation, fear, mindless nationalism, avoidance of solutions to economic problems that would require change, mindless nostalgia, cultural stupidity so deep that it endangers the country: what is it ?

Fr. Frank's Sunday sermon points out that our "particular darkness" is "the disconnect between the corporate culture that is dictating the firing and the rest of us."  And there is the total immunity from the "consequences of their actions."

There's some kind of death knell here for even the illusion of the Dims as a second and oppositional party. There's the Dead Zone politics to come, followed inevitably by far more unrest than we've seen in the US in quite some time.  See the U blog for the local versions unrest - or this poll report for majority desire for the New Deal now abandoned -  as the pseudo-recovery continues to squash the little people and their chldren.

With this in mind, we have to start facing the fact that Obama, who rapidly moved from "change we can believe in" to disappointment to sell-out (to Wall Street), may be entering the territory of "worst thing to happen to the Democrats in decades."