Yves here. Mark Ames wrote this post for our first fundraiser, nine years ago. We’ve turned into a fundraiser staple, since as long as we are afflicted with Larry Summers, this classic is worth reading regularly.
Think of it as our analogue to Christmas perennials like The Grinch That Stole Christmas or It’s a Wonderful Life. But not to worry, Ames being Ames and NC being NC, his piece is the antithesis of sappy. And don’t kid yourself that because Summers hasn’t been all that visible of late, that he’s retired from the public sphere. If and when Team Dem get hold of the White House, Summers will be pushing hard for a big policy position. So be sure to remember Ames’ warning as well as our own: Why Larry Summers Should Not Be Permitted to Run Anything More Important than a Dog Pound.
And in the spirit of Christmas come a couple months early, we hope you’ll leave something nice in our stocking, um, Tip Jar!
Sadly, in recent years, when we’ve rerun this post, we’ve had self-appointed enforcers show up in the comments section, seemingly for the sole purpose of complaining about Ames’ and his partner Matt Taibbi’s writings at The eXile during the US-supported, Ivy League-orchestrated plutocratic land grab in post-Soviet Russia.
The eXile mixed hard-hitting commentary with Hunter Thompson-esque writing and stunts, such as throwing a cream pie with horse semen in it at New York Times reporter Michael Wines…and then writing a piece from the perspective of the horse.
Efforts to discredit Taibbi for his work in Moscow got traction in 2017, curiously, right before the release of his book on the police killing of Eric Garner, I Can’t Breathe. Paste Magazine contacted the women that worked at The eXile, all of whom confirmed that Ames never committed any misconduct toward women, and amplified the curious timing. From Paste:
Paste was able to trace the effort to cast eXile as a factual memoir back to an alt-right author named Jim Goad in 2011. Goad, whose magazine, ANSWER Me!, had been parodied by The eXile…
However, the narrative that the book was an accurate portrayal of the lives Taibbi and Ames led in Moscow wouldn’t really take off until October of this year—ahead of the book tour for I Can’t Breathe, Taibbi’s look at the death of Eric Garner and its aftermath….
How did this happen?
Simply put, for most Americans today, the culture and stereotypes Taibbi and Ames were lampooning are completely foreign and unfamiliar….
“The paper was to be a mirror of the typical expatriate in ‘exile,’ who was a pig of the highest order,” Taibbi explained. “He was usually a Western consultant who made big bucks teaching Russians how to fire workers or privatize markets in the name of ‘progress,’ then at night banged hookers and blew coke and speed. The reality is most of the Westerners in town were there to turn Russia into a neoliberal puppet state by day, and get laid and shitfaced by night. So the paper was a kind of sarcastically over-enthusiastic celebration of this monstrous community’s values.”
By Mark Ames, author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine.
If you’ve been reading Naked Capitalism for any period of time without giving back in donations—and most of us have been hooked from the time we discovered Yves Smith’s powerful, sharp voice and brilliant mind—then you you’ve been getting away with murder. Naked Capitalism is that rare blog that makes you smarter. Smarter about a lot of things, but primarily about Yves’ area of expertise, finance.
By a quirk of historical bad luck, the American Left has gone two generations without understanding finance, or even caring to understand. It was the hippies who decided half a century ago that finance was beneath them, so they happily ceded the entire field—finance, business, economics, money—otherwise known as “political power”—to the other side. Walking away from the finance struggle was like that hitchhiker handing the gun back to the Manson Family. There’s a great line from Charles Portis’s anti-hippie novel, “Dog of the South” that captures the Boomers’ self-righteous disdain for “figures”:
He would always say—boast, the way those people do—that he had no head for figures and couldn’t do things with his hands, slyly suggesting the presence of finer qualities.
That part about the hands—that would refer to the hippies’ other great failure, turning their backs on Labor, because Labor didn’t groove with the Hippies’ Culture War. So the Left finds itself, fifty years later, dealing with the consequences of all those years of ruinous neglect of finance and labor—the consequences being powerlessness and political impotence.
That’s why Yves Smith is so important to anyone who cares about politics and the bad direction this country is taking. In 2008, the Left suddenly discovered that although it could bray with the best of ‘em about how bad foreign wars are, and how wrong racism and sexism an homophobia are, it was caught completely and shamefully by surprise by the financial collapse of 2008. The ignorance was paralyzing, politically and intellectually. Even the lexicon was alien. Unless of course you were one of the early followers of Yves Smith’s blog.
It wasn’t always this way.
Back in the 1930s, the Left was firmly grounded in economics, money and finance; back then, the Left and Labor were practically one. With a foundation in finance and economics, the Left understood labor and political power and ideology and organization much better than the Left today, which at best can parry back the idiotic malice-flak that the Right specializes in spraying us with. We’re only just learning how politically stunted and ignorant we are, how much time and knowledge we’ve lost, and how much catching up we have to do.
Which is why Yves Smith’s Naked Capitalism is one of the 99%’s most valuable asset in the long struggle ahead: She is both analyst and educator, with a rare literary talent (especially for finance). One thing that’s protected the financial oligarchy is the turgid horrible prose that they camouflage their toxic ideas and concepts in. Yves is one of the rare few who can make reading finance as emotionally charged as it needs to be.
Naked Capitalism is our online university in finance and politics and ideology. Whereas other online universities are set up to turn millions of gullible youths into debt-shackled Wall Street feeding cows, Naked Capitalism is the opposite: Completely free, consistently brilliant, vital, and necessary, making us smarter, teaching us how we might one day overthrow the financial oligarchy. One other difference between Naked Capitalism and online university swindles: (Stanley Kaplan cough-cough!) Your donations won’t end up paying Ezra Klein’s salary.
Which brings me back to my whole “Shame on you!” point I was trying to make earlier. When it comes to fundraising, nothing works like shaming. That’s how those late-night commercials work: You’re sitting there in your nice comfortable home, and then suddenly there’s this three-legged dog hobbling into its cage, with big wet eyes, and then some bearded pedophile comes on and says, “Poor Rusty has endured more abuse and pain than you can ever imagine, and tomorrow, he will be gassed to death in a slow, horrible poison death chamber. And you—look at you, sitting there with your Chunky Monkey and your central heating, what kind of sick bastard are you? Get your goddamn Visa Mastercard out and send money to Rusty, or else his death is on your head. I hope you sleep well at night.”
Now I know that this sort of appeal wouldn’t work on the Naked Capitalism crowd—too many economists here, and as everyone knows, you can’t appeal to economists’ hearts because, well, see under “Larry Summers World Bank Memo”… I can imagine Larry watching that late night commercial with the three-legged dog, powering a 2-liter bottle of Diet Coke and devouring a bag of Kettle Salt & Vinegar potato chips, calculating the productive worth of the three-legged dog, unmoved by the sentimental appeal. Larry grabs a dictaphone: “Item: How to end dog-gassings? Solution: Ship all three-legged stray dogs to sub-Saharan Africa. Africans won’t even notice. Dogs saved. Private capital freed up. Problem solved.”
So some of you have no hearts, and some of us have no shame. But we all do understand how vital Naked Capitalism has been in educating us. I’m sure that the other side knows how dangerous a site like this is, because as we become more educated and more political, we become more and more of a threat.
The oligarchy has spent decades on a project to “defund the Left,” and they’ve succeeded in ways we’re only just now grasping. “Defunding the Left” doesn’t mean denying funds to the rotten Democratic Party; it means defunding everything that threatens the 1%’s hold on wealth and power.
One of their greatest successes, whether by design or not, has been the gutting of journalism, shrinking it down to a manageable size where its integrity can be drowned in a bathtub. It’s nearly impossible to make a living as a journalist these days; and with the economics of the journalism business still in free-fall like the Soviet refrigerator industry in the 1990s, media outlets are even less inclined to challenge power, journalists are less inclined to rock the boat than ever, and everyone is more inclined to corruption (see: Washington Post, Atlantic Monthly). A ProPublica study in May put it in numbers: In 1980, the ratio of PR flaks to journalists was roughly 1:3. In 2008, there were 3 PR flaks for every 1 journalist. And that was before the 2008 shit hit the journalism fan.
This is what an oligarchy looks like. I saw the exact same dynamic in Russia under Yeltsin: When he took power in 1991, Russia had the most fearless and most ideologically diverse journalism culture of any I’ve ever seen, a lo-fi, hi-octane version of American journalism in the 1970s. But as soon as Yeltsin created a class of oligarchs to ensure his election victory in 1996, the oligarchs snapped up all the free media outlets, and forced out anyone who challenged power, one by one. By the time Putin came to power, all the great Russian journalists that I and Taibbi knew had abandoned the profession for PR or political whoring. It was the oligarchy that killed Russian journalism; Putin merely mopped up a few remaining pockets of resistance.
The only way to prevent that from happening to is to support the best of what we have left. Working for free sucks. It can’t hold, and it won’t.
There are multiple ways to give. The first is here on the blog, the Tip Jar, which takes you to PayPal. There you can use a debit card, a credit card or a PayPal account (the charge will be in the name of Aurora Advisors).
You can also send a check (or multiple post dated checks) in the name of Aurora Advisors Incorporated to
Aurora Advisors Incorporated
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Please also send an e-mail to yves@nakedcapitalism.com with the headline “Check is in the mail” (and just the $ en route in the message) to have your contribution included in the total number of donations.
So donate now to Naked Capitalism. If you can’t afford much, give what you can. If you can afford more, give more. If you can give a lot, give a lot. Whether you can contribute $5 or $5,000, it will pay for itself, I guarantee you. This isn’t just giving, it’s a statement that you are want a different debate, a different society, and a different culture.
Who knows, maybe we’ll win; maybe we’ll even figure out a way to seal Larry Summers in a kind of space barge, and fire him off into deep space, to orbit Uranus for eternity. Yves? Could it be financed?
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Think of it as our analogue to Christmas perennials like … It’s a Wonderful Life. Yves
Yep, let’s hear it for the wonderful invention of creating multiple, on demand liabilities for the same reserves whereby “money” can be in multiple places at once if we can juggle well and are lucky! /sarc
True, the country was still suffering from a Gold Standard mentality then so the alternative was not good either.
But now, if we’re willing, we can have the honest lending of existing fiat since it is now inexpensive enough for the entire population to use instead of the privately created deposits of a government-privileged usury cartel.
So the choice is no longer Pottersville or an unstable finance system. To think otherwise is to still be afflicted with Gold Standard thinking or worse.
Quite the straw manning.
It’s not a bad movie apart from the pro-fractional-reserve propaganda – almost forgivable for the times, but we know better now, or should.
I like “The Family Man” better though – it’s also about a guy in finance and a “what if” scenario.
I love Radio War Nerd, but I have to say, I really miss the days when Ames was writing regularly. He’s great, as this essay reminds me.
This post was written 9 (?) years ago. This para was prescient, as shown by the high level, coordinated, smear campaign against NC and other real news sites after the 2016 elections.
So some of you have no hearts, and some of us have no shame. But we all do understand how vital Naked Capitalism has been in educating us. I’m sure that the other side knows how dangerous a site like this is, because as we become more educated and more political, we become more and more of a threat.
Enjoyed re-reading this.
Ames’s quote of working for free can’t hold fails for all minimum wage jobs, because it is at that wage that you basically are working for free.
Chuck Brown & The Soul Searchers – We Need Some Money (Long Version)
https://www.youtube.com/watch?v=WYKXVgxBVf4
“I don’t need that wealth and fame, I just want enough to play the game.”
The big problem in developing a successful economy.
We want economic success
Step one – Identify where wealth creation occurs in the economy.
Houston, we have a problem.
Economists do identify where real wealth creation in the economy occurs, but this is a most inconvenient truth as it reveals many at the top don’t actually create any wealth.
This is the problem.
Much of their money comes from wealth extraction rather than wealth creation, and they need to get everyone thoroughly confused so we don’t realise what they are really up to.
This is the purpose of neoclassical economics.
Once trained in this you become economically disorientated.
Paul Ryan had become economically disorientated and Alan Greenspan had to put him straight.
Paul Ryan was worried about how the Government would pay for pensions.
Alan Greenspan told Paul Ryan the Government can create all the money it wants, there is no need to save for pensions.
https://www.youtube.com/watch?v=DNCZHAQnfGU
What matters is whether the goods and services are there for them to buy with that money.
That’s where the real wealth in the economy lies.
The Classical Economists had a quick look around and noticed the aristocracy were maintained in luxury and leisure by the hard work of everyone else.
They haven’t done anything economically productive for centuries, they couldn’t miss it.
The Classical economist, Adam Smith:
“The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money.”
There was no benefits system in those days, and if those at the bottom didn’t work they died. They had to earn money to live.
Ricardo was an expert on the small state, unregulated capitalism he observed in the world around him. He was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
“The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist.
They soon identified the constructive “earned” income and the parasitic “unearned” income.
This disappeared in neoclassical economics.
GDP was invented after they used neoclassical economics last time.
In the 1920s, the economy roared, the stock market soared and nearly everyone had been making lots of money.
In the 1930s, they were wondering what the hell had just happened as everything had appeared to be going so well in the 1920s and then it all just fell apart.
They needed a better measure to see what was really going on in the economy and came up with GDP.
In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.
So all that transferring existing financial assets around doesn’t create wealth?
No it doesn’t, and now you are ready to start thinking about what is really going on there.
It gets worse ……
Every effort has gone into hiding how the monetary system works, and everything about debt, money and banks is obfuscated to the nth degree.
Even the most basic things you take for granted aren’t true.
Banks don’t take deposits or lend money, and this is quite clear in the law. It is important for the legal system to know, but they don’t really want anyone else knowing.
You are not making a deposit; you are lending the bank your money to do with as they please. This is why they can do bail-ins; it isn’t your money once you have put it in the bank.
They are not lending you money; they are purchasing the loan agreement off you with money they create out of nothing.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
Richard Werner explains in 15 mins.
https://www.youtube.com/watch?v=EC0G7pY4wRE&t=3s
This is RT, but this is the most concise explanation available on YouTube.
Professor Werner, DPhil (Oxon) has been Professor of International Banking at the University of Southampton for a decade.
Our knowledge of banking has been going backwards since 1856.
Credit creation theory -> fractional reserve theory -> financial intermediation theory
“A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner
http://www.sciencedirect.com/science/article/pii/S1057521915001477
We let bankers create the money supply from private bank loans.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
We engaged in financial liberalisation and incentivised banks to maximise profit.
What could possibly go wrong?
Bankers make the most money when they are driving your economy towards a financial crisis.
You don’t want to leave them to their own devices.
On a BBC documentary, comparing 1929 to 2008, it said the last time US bankers made as much money as they did before 2008 was in the 1920s.
Bankers make the most money when they are driving your economy into a financial crisis.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.
The bankers loaded the US economy up with their debt products until they got financial crises in 1929 and 2008.
As you head towards the financial crisis, the economy booms due to the money creation of bank loans.
The financial crisis appears to come out of a clear blue sky when you use an economics that doesn’t consider debt.
The economics of globalisation has always had an Achilles’ heel.
The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
Not considering private debt is the Achilles’ heel of neoclassical economics.
Banks – What is the idea?
The idea is that banks lend into business and industry to increase the productive capacity of the economy.
Business and industry don’t have to wait until they have the money to expand. They can borrow the money and use it to expand today, and then pay that money back in the future.
The economy can then grow more rapidly than it would without banks.
Debt grows with GDP and there are no problems.
The UK used to be the great financial superpower and it looks as though we understood this in the past.
https://www.housepricecrash.co.uk/forum/uploads/monthly_2018_02/Screen-Shot-2017-04-21-at-13_53_09.png.e32e8fee4ffd68b566ed5235dc1266c2.png
What happened in 1979?
The UK eliminated corset controls on banking in 1979, the banks invaded the mortgage market and this is where the problem starts.
The transfer of existing assets, like real estate, doesn’t add to GDP, so debt rises faster than GDP until you get a financial crisis.
Before 1980 – banks lending into the right places that result in GDP growth (business and industry, creating new products and services in the economy)
Debt grows with GDP
Bankers don’t make much money
After 1980 – banks lending into the wrong places that don’t result in GDP growth (real estate and financial speculation)
Debt rises faster than GDP
Bankers make lots of money
2008 – Minsky Moment, the financial crisis where debt has over whelmed the economy
After 2008 – Balance sheet recession and the economy struggles as debt repayments to banks destroy money. We are making the repayments on the debt we built up from 1980 – 2008.
Japan has been like this since 1991.
This was the secret of the Asian Tiger economies before they discovered financial liberalisation and had the Asian Crisis.
Their central banks used credit/window guidance to direct bank credit for product purposes and away from financial speculation.
The dusty and forgotten tool, lurking at the bottom of every central banker’s toolbox, which they can use to create financial stability.
Ha sharp reply, i went to the link
So Greenspan tells Paul Ryan, theoretically MMT fine
:)
Whoch economists/ thinkers do you read? As you have a good grasp of maco..
The globalists found just the economics they were looking for.
The USP of neoclassical economics – It concentrates wealth.
Let’s use it for globalisation.
Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
“a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped”
This is what it’s supposed to be like.
A few people have all the money and everyone else gets by on debt.
Just wrap it in a new ideology, neoliberalism, and no one will notice its dodgy, old 1920’s neoclassical economics, which still has its old problems.
The economics of globalisation has always had an Achilles’ heel.
The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
Not considering private debt is the Achilles’ heel of neoclassical economics.
No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
As you head towards the financial crisis, the economy booms due to the money creation of bank loans.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
The financial crisis appears to come out of a clear blue sky when you use an economics that doesn’t consider debt, like neoclassical economics.
At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
1929 – US
1991 – Japan
2008 – US, UK and Euro-zone
The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart
How did they do that?
Davos 2018 – The Chinese know financial crises come from the private debt-to-GDP ratio and inflated asset prices
https://www.youtube.com/watch?v=1WOs6S0VrlA
The black swan flies in under our policymakers’ radar.
They are looking at public debt and consumer price inflation, while the problems are developing in private debt and asset price inflation.
The PBoC knew how to spot a Minsky Moment coming, unlike the FED, BoE, ECB and BoJ.
The same ploys have been used globally.
It was interesting to hear about the takeover of the Russian media.
You should always look for the same tactics being used elsewhere.
The US did have a very diverse media, unlike the UK.
The Clinton administration passed the legislation so that it could consolidate to the point where nearly all the US media was owned by six companies.
You may not like Fox, but this does maintain the pretence there is still choice.
An interesting story from Europe.
When visiting Europe at the time (I was based in Tokyo in the 1990s), and meeting my peers, the chief economists at other banks, I would of course discuss what in my view was the highly worrying prospect of these plans to abolish the D-Mark. I was astonished by their reaction. About half of them insisted that those plans were so lunatic that, of course, they would not be implemented. ……….
The other half of the chief economists, like me, recognised that a single currency would be introduced, no matter how nonsensical the economics, since it was a political project. (The economics being bad, the politics was even worse: the end of democracy in Europe). They agreed with me that it was going to be a disaster. I asked the chief economist of what was then the fourth largest German bank: „If you think so, why don’t you speak up about this? You are forecasting gloom and doom, but I don’t see any reports by you or your bank about it.“ His answer was shocking: He said that there had been clear instructions from the boards of all the large German banks to their staff that no report on the abolition of the D-Mark and the introduction of a European single currency that was in any way negative was allowed to be published. The economists in the private sector had been muzzled by their bosses. The same I heard from journalists. So the German media only quoted the rigged reports from the banking economists.” Professor Richard Werner
Europe’s media is well controlled.