Category Archives: The destruction of the middle class

Michael Hudson: Whither Greece? Without a National Referendum Iceland-Style, EU Dictates Cannot be Binding

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

The fight for Europe’s future is being waged in Athens and other Greek cities to resist financial demands that are the 21st century’s version of an outright military attack. The threat of bank overlordship is not the kind of economy-killing policy that affords opportunities for heroism in armed battle, to be sure. Destructive financial policies are more like an exercise in the banality of evil – in this case, the pro-creditor assumptions of the European Central Bank (ECB), EU and IMF (egged on by the U.S. Treasury).

As Vladimir Putin pointed out some years ago, the neoliberal reforms put in Boris Yeltsin’s hands by the Harvard Boys in the 1990s caused Russia to suffer lower birth rates, shortening life spans and emigration – the greatest loss in population growth since World War II. Capital flight is another consequence of financial austerity. The ECB’s proposed “solution” to Greece’s debt problem is thus self-defeating. It only buys time for the ECB to take on yet more Greek government debt, leaving all EU taxpayers to get the bill. It is to avoid this shift of bank losses onto taxpayers that Angela Merkel in Germany has insisted that private bondholders must absorb some of the loss resulting from their bad investments.

The bankers are trying to get a windfall by using the debt hammer to achieve what warfare did in times past.

Bill Gross: Bond Vigilante, Minsky Convert

Cross-posted from Credit Writedowns In the end, I hearken back to revered economist Hyman Minsky – a modern-day economic godfather who predicted the subprime crisis. “Big Government,” he wrote, should become the “employer of last resort” in a crisis, offering a job to anyone who wants one – for health care, street cleaning, or slum […]

Republican Lynch Mob Looking Awfully Hard to Find Rope With Which to Hang Elizabeth Warren

I’ve been keeping an eye on the Elizabeth Warren beat, although my expectation is that the skirmishes now will pale in significance compared to whatever does or does not happen on what the Republican hope will be her ritual execution at the full committee hearing of the House Oversight committee on July 14.

This situation has become an intriguing bit of political theater. The Republican have increasing become one-trick ponies. Their strategy has been to take an extreme position, scream like bloody murder, act like they have no intention of negotiating, and watch the Dems capitulate. But particularly with Obama, capitulation is tantamount to throwing Br’er Rabbit in the briar patch: it’s exactly where the Democrats like to go, but they need political cover for selling out their badly abused “base”.

The hyperventilating and bullying strategy backfired spectacularly last month in subcommittee hearings with Warren chaired by Patrick McHenry. But the Republicans have convinced themselves that if they double down, they’ll come out winners. I don’t know how much of this is reptile brain reflex on overdrive, in that they are capable only of fight or flight and even flight is no longer an option.

Two Supreme Court Rulings Give Big Companies “Get Out of Liability Free” Cards

If you had any doubts that the US has become a corpocracy, two fresh rulings by the Supreme Court should seal any doubt. They are stunningly bad, in that they reduce or gut the reach of well-settled law over large companies, to the degree that it will take very little in the way of effort for companies to organize their affairs so as to escape liability for their actions in areas that affect large numbers of citizens.

The through line in both rulings is the creative and selective use of the notion of corporate “personhood”. That personhood has been the basis for the extension of a whole raft of rights to corporations, including, perversely, the Constitutional right of free speech. Yet the same notion which has been used to confer privileges that companies lack in other countries is at the same time being construed so as to vitiate accountability, when ordinary people find it mighty hard to escape the consequences of their actions. I’m certain the Founding Fathers, who were wary of concentrated power, would be spinning in their graves at the logic and effect of recent decisions on this front.

Alex Andreou: Democracy vs Mythology – The Battle in Syntagma Square

By Alex Andreou, a successful lawyer turned actor living in London. Cross posted from SturdyBlog

I have never been more desperate to explain and more hopeful for your understanding of any single fact than this: The protests in Greece concern all of you directly.

What is going on in Athens at the moment is resistance against an invasion; an invasion as brutal as that against Poland in 1939. The invading army wears suits instead of uniforms and holds laptops instead of guns, but make no mistake – the attack on our sovereignty is as violent and thorough. Private wealth interests are dictating policy to a sovereign nation, which is expressly and directly against its national interest. Ignore it at your peril. Say to yourselves, if you wish, that perhaps it will stop there. That perhaps the bailiffs will not go after the Portugal and Ireland next. And then Spain and the UK. But it is already beginning to happen. This is why you cannot afford to ignore these events.

More Dubious Research: “It Would Take 62 Years in New York to Repossess the Homes in Severe Default or Foreclosure”

An article at the New York Times, “Backlog of Cases Gives a Reprieve on Foreclosures,” is more than a little frustrating in that it takes some high level factoids about the mortgage mess and fails to draw the right inferences from them.

The premise of the piece is that in some states, the average time to foreclosure has become so attenuated that it would take decades at current rates to clear the backlog. Consider these dramatic-sounding statistics:

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.

The convention in writing is to list the most important cause first. Thus by giving “the foreclosure system is bogged down by the volume of cases” pride of place implies that the “foreclosure system” being overloaded is the biggest cause.

But this level of abstraction is misleading. There is no “foreclosure system”; that turn of phase implies a single overarching set of procedures. As the mere mention of judicial versus non-judicial states indicates, each state has its own laws and case history as to what is proper practice. Referring to a “system” when there is none is also likely to lead many readers to think in term of the system that is involved in the foreclosure process, the judicial system, and to incorrectly infer that courts being overloaded is a major culprit. The vagueness of the expression, in other words, has the effect of directing attention away from the fact that it is the banks’ own machinery that is the most gunked up.

Dubious Research: The More Debt Students Have, The Higher Their Self Esteem

It’s a sign of the times that your humble blogger is having to create finely stratified typologies for the various types of ~~propaganda~~ dubious research being deployed to promote the idea that rule by our new financial overlords, despite the considerable evidence to the contrary, really is for our own good.

We’ve already instituted the Frederic Mishkin Iceland Prize for Intellectual Integrity for special-interest-group- favoring PR masquerading as research.

However, Mishkin is a Respected Personage, and the initial Mishkin Iceland Prize recipients, Charles Calomiris, Eric Higgins, and Joe Mason, presumably knew they were writing utter bunk and were handsomely compensated for attaching their names to less than credible arguments. That suggests we need a separate category for the more mundane, bread-and-butter shilldom that is dressed up to look like serious academic work. Let’s call it the Lobsters Really Want to be Your Dinner Prize.

Michael Hudson: Free Money Creation to Bail Out Financial Speculators, but not Social Security or Medicare

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College

Financial crashes were well understood for a hundred years after they became a normal financial phenomenon in the mid-19th century. Much like the buildup of plaque deposits in human veins and arteries, an accumulation of debt gained momentum exponentially until the economy crashed, wiping out bad debts – along with savings on the other side of the balance sheet. Physical property remained intact, although much was transferred from debtors to creditors. But clearing away the debt overhead from the economy’s circulatory system freed it to resume its upswing. That was the positive role of crashes: They minimized the cost of debt service, bringing prices and income back in line with actual “real” costs of production. Debt claims were replaced by equity ownership. Housing prices were lower – and more affordable, being brought back in line with their actual rental value. Goods and services no longer had to incorporate the debt charges that the financial upswing had built into the system.

Financial crashes came suddenly. They often were triggered by a crop failure causing farmers to default, or “the autumnal drain” drew down bank liquidity when funds were needed to move the crops. Crashes often also revealed large financial fraud and “excesses.”

This was not really a “cycle.” It was a scallop-shaped a ratchet pattern: an ascending curve, ending in a vertical plunge. But popular terminology called it a cycle because the pattern was similar again and again, every eleven years or so. When loans by banks and debt claims by other creditors could not be paid, they were wiped out in a convulsion of bankruptcy.

Stephen Roach: America is a Zombie Nation just like Japan

Cross-posted from Credit Writedowns Stephen Roach has written an Op-Ed in today’s Financial Times that is worth reading. He outlines his version of Richard Koo’s Balance Sheet Recession theorem, opining that “the global economy is being hobbled by a new generation of zombies – the economic walking dead.” His main points are: American consumers are […]

Inept Obama “Anybody but Warren” Stance Reveals Fundamental Bank v. Middle Class Fault Line

It is obvious that Elizabeth Warren should head the Consumer Financial Protection Bureau. No less than our favorite NC nemesis, the staunch Administration defender Economics of Contempt, has said she is “tailor made” for the job. In the face of increasingly vocal bank opposition to the notion of an effective bank watchdog for consumers, she’s done better than anyone anticipated. And despite the Republican bluster about using a pro forma session to keep the Senate in business to block a recess appointment, the Democrats could break that maneuver if they wanted to.

So why does Team Obama try to hide its choice not to appoint her behind silly “compromises” like its trial balloon of serving up the CFPB’s number two, Raj Date, as a candidate to lead the agency? The Republicans have already said they will approve no one unless they can cut off CFPB’s air supply by controlling its budget. You can’t negotiate with someone who won’t negotiate. Your options are to defy them or capitulate.

So this “compromise” is an inept sleigh of hand to shift responsibility for the Adminsitration’s refusal to appoint Warren on the Republicans.

The failure of the Team Obama to move beyond this impasse is revealing. It isn’t merely, as we have repeatedly mentioned, a sign that the Administration is in bed with the banksters. That’s a given. We predicted that Warren would not get the job.

But what is astonishing is how she has managed to out maneuver them and how Team Obama has failed for months to come up with responses. It isn’t as if this crowd feels any compunction to hide the contempt it has for the idea of keeping prior promises; just look for some of many examples, at this video Lifting the Veil, from 7:00 to 13:00, or at Glenn Greenwald’s discussion of how in mere weeks what was promised to be a mere fly over exercise in Libya is now turning into another nation-building exercise.

The Warren fiasco reveals deeper layers of the Administration’s character defects: its indifference to the plight of the middle class and its tactical incompetence

Obama Still Desperately Seeking Anybody But Warren to Head New Consumer Agency

The Administration is playing true to its craven form. And it isn’t hiding that sorry fact terribly well either.

The latest public-be-damned ploy by the Obama Administration is the floating the name of Raj Date, a former McKinsey consultant and financial services industry executive currently ensconced in the nascent Consumer Financial Protection, as the possible new head of the agency.

Remember the state of play on the nomination of the head of the Consumer Financial Protection Bureau. That individual is to be in place as of July 21. Even assuming everyone plays nicely, the timetable is now too short to go through the conventional approval process, meaning a recess appointment is the only way to get a permanent leader in place.

The Republicans have taken the stance that they are not prepared to be bound by the law, meaning Dodd Frank, despite the fact that most of what is promised to do was kicked over to studies and rulemaking, which assured it will be watered down to nothingness. 44 Republican Senators wrote a letter saying they won’t approve of any nominee from either party unless the CFPB is ~~gutted~~ reformed. And they are trying to block a recess appointment through the use of a “pro forma” sessions, as they did over the Memorial Day break and presumably will over the July 4 holiday.

But the Republican intransigence works to Obama’s advantage, were he not fundamentally opposed to elevating Warren.

“Lifting the Veil”

Mark Ames referred me to the documentary “Lifting the Veil.” I’m only about 40 minutes into it and am confident it will appeal to NC readers, provided you can keep gagging in the sections that contain truly offensive archival footage (in particular, numerous clips of Obama campaign promises).

Ames’ mini-review:

It begins with John Stauber, one of the great anti-PR writers, and historian Sharon Smith laying out the flat rancid truth: That the Democratic Party of today is the Big Co-apter. The Republicans have always been the party of corporate interests; and the Democrats portray themselves as agents of social change and progressive/populist opposition to corporate power, but the Democratic Party’s job is to co-apt these anti-corporate movements and subvert them to the same (or a different faction of) corporate interests.

To complete our two-corporate-party farce, we have an alleged third choice, a so-called opposition “Third Party,” the largest “neither left nor right”/”neither Democrat nor Republican” third party for the past three decades. And that party is…ta-dum!…Libertarianism. Which was nothing but a corporate PR project designed to co-apt the whole realm of Third Party opposition and subvert it to the most radical corporate agenda of all. In other words, even our Third Party/outside-the-system party is nothing but the most purified, most extreme pro-corporate party of all!

At this point you have to assume that the oligarchy is just laughing at us. “Hey, here’s an idea–let’s make the opposition to our fake-two-party system nothing but our corporate wish-list we send to Santa every year, and package that as the radical opposition.” “No way Mr Koch, there’s no way they’ll buy it–everyone today who’s against the two-party system is on the radical Left.” “Just give me a couple of decades, and a few billion dollars, you’ll see…” CUT TO TODAY: “Holy shit, you were right, Chuck! Ah-hah-hah-hah! The suckers have nowhere to go but right into our mouths–doors one, two and three our ours! Mwah-hah-hah!”

As black activist Leonard Pinkney says, “The Democrats are the foxes, and the Republicans are the wolves–and they both want to devour you.” So what does that make Libertarians? Avian flu viruses?