The Pecker solution. Plus debt, growth, and the top excuse offered by Wall Street parasites.

Lots of brief topics on debt and society and politics, this time, and if you make it to the end I promise something deeply thought-provoking for you economics wonks...but first a comment on the Bezos-Pecker imbroglio.

Jeff Bezos brought to life my decadal proposal that someone torch the foundation of all mafia empires - blackmail. I've long held that today's world is only explicable if hundreds, maybe thousands of powerful people are being blackmailed, each thinking he or she is all alone. (It's a top Kremlin tactic, going back to the czars.) I portrayed a gutsy politician shattering the dam (in a started novel) unleashing a flood of confession-revelations that save civilization. But sure, a rocket-building, SF-loving, unafraid zillionaire makes sense.
(The classic line: "You say you have negatives? Great! Print me some glossies please?)

Jeff should follow this fantastic essay with another, urging more of the blackmailed to come forth. As I describe here.

In fact, my old idea of a "Henchman's Prize" might lure out even more. Notice how this path doesn't just mean escape from the blackmailer's clutches. In Jeff's case, it leads to a kind of elevation and redemption. As I point out in an open letter to every new Latin American president who claims to want to end the cycles of graft, one speech - one declaration - could lift the monstrous cloud. Indeed, just a few weeks after I published my appeal to the new president of Mexico, Andres Manuel Lopez Obrador hinted at something similar, without providing (alas) details.

Ah well, if no one will listen to me, well then perhaps the world will listen to the richest man in the planet. And yes, we do have (and desperately need) friends in Cloud City.

== Saving civilization from high debt and slow growth? ==

I confess an ulterior motive for praising this cogent article by Tim Morgan. It begins with daunting news -- it's not only in the developed world that prosperity growth has stalled. The fast-rising upper half of the developing world has been the engine of the world economy for 20+ years, but that boiler is apparently cooling. And when you lack growth, then the fast-rising rate of debt - fueling rentier asset bubbles and braking money velocity - becomes more than just a problem. It becomes a poison.

  

(To be clear, the Republican Party raved that Supply Side ("voodoo") tax gifts to the rich would both stimulate growth and reduce public debt. How many times must you prove 100% diametrically wrong before you lose credibility?)

Morgan is not without hope. There are ways to fix this, and they are rooted in what's worked ever-better for 200 years... entrepreneurial enterprise that is kept truly competitive by thoughtful-adaptive regulation that limits inevitable oligarchic cheating, of the sort that Adam Smith denounced and that our parents in the Greatest Generation wisely outlawed. And so we get to my favorite paragraph:

"The good news is that we’re not going into this new era wholly lacking in knowledge. The trick is to understand what that knowledge really is. Keynes teaches us how to manage demand – or can teach us this, so long as we don’t turn him into a cheerleader for ever bigger public spending. Likewise – if we can refrain from caricaturing him as a rabid advocate of unregulated and unscrupulous greed – Adam Smith tells us that competition, freely, fairly and transparently conducted, is the great engine of innovation. More humbly, or perhaps less theoretically, but surely more pertinently, experience tells us that the “mixed economy” of optimised private and public provision works far better than any extreme."

Several members of my blog community have linked to this, asking if I wrote it originally, so consistent is it with my own drums -- the study of Adam Smith and fiscally responsible Keynsianism, along with the spectacular success story of public investment in research, education, health and infrastructure, which can only be denied by the hysterically delusional.

No I didn't ghost write that -- (I lived in Britain for a couple of years, but would never spell "optimised" that way; shudder.) But I do recommend having a look. Tim Morgan continues:

"Going forward, we should anticipate the collapse of the “everything bubble” in asset prices, and should hope that we don’t, this time, go so far into economic denial as to think we can cure this with a purely financial “fix”. I’m fond of saying that “trying to fix an energy-based economy with financial fixes is like trying to cure an ailing pot-plant with a spanner”. We should understand popular concerns, which seem to point unequivocally towards a mixed economy, extensive redistribution and an economic nationalism that needs to be channelled, not simply vilified."

None of this will happen unless the last remaining Knowledge Castes who cling to the mad right finally acknowledge what the scientists, teachers, journalists, civil servants, skilled workers, and almost every fact-using profession - including the maligned "deep state" protectors - all know. That the worldwide mafia-commie-oligarchy axis is no friend of anything we value. They are the Olde Feudal Enemy of every type of freedom and progress. And it will take all of us to achieve what the Greatest Generation did, a whole human lifetime ago.

 Save civilization.

== Again, the greatest judo move Pelosi could pull... ==

While the reform package that will be passed by Democrats in the U.S. House of Representatives consists of all good things that will help improve ethics, efficiency and fairness, it's still fairly minor stuff. Democrats should pass rules that really change the dynamic, like permanently giving some power to the minority! 

Why do this, when that minority party is Republican? Because Democrats will be out again, sooner or later, silenced and impotent... unless they set precedents now!

 My top proposal? Give every member of the House one subpoena per term, that can compel anyone to testify for 2 hours before a committee.

Sure, some GOPpers will use such a power to irritate and pursue grudges (virtually the only use to which they put subpoenas and hearings, when they were majority!) So? That means they'll be approving this minority right, institutionalizing it. (Maybe make that vow a necessary part of using their subpoenas.) But other Republican legislators will wait, hoping to use their one subpoena to benefit the home district. And why not? Pulling them away from their caucus is bad?

We've seen how the lack of such a minority power kept Congress from meaningfully exercising any meaningful oversight, when the only grownups (Democrats) had zero power to investigate anything at all. Envision how just 200 hours of such testimony, this last term, would have empowered Dems to apply accountability, even from a minority.

The crux: letting goppers vent blowhard-steam when they are in minority is a small price for letting demmies apply real accountability, when they have their minority turn.

It would also vest individual members with a measure of autonomy that might possibly lift their gaze from pure partisanship. 

It's one of several proposals in my FACT Act.

== The most fundamental lie of Wall Street Parasitism ==

Among the dumbest but most effective religious dogmas is the rationalization that Wall Street parasites provide a ‘valuable service’ in the “creation of liquidity, raising capital for growing businesses and determining proper price levels.” 

These are utter and diametrically-opposite-to-true lies, as shown in this article on the Evonomics site (where Adam Smith would be publishing, today.) But the essay doesn’t go far enough. The whole justification for Wall Street's “proper price arbitrage” excuse is actually insane on a basis of physics and biology… thermodynamics, in particular.

Dig it. All living things exist by creating pools of reduced entropy (their living bodies) by tapping a high quality energy flow to create order inside the body and export more entropy into the environment. Eventually that entropy departs as infrared that flows into space. (Idiotically blocking that outward drainage with greenhouse gas is a related-but-separate topic.) 

Now focus: it is energy GRADIENTS or downhill FLOWS of energy — the steeper the better — that living creatures use, the way differences in height power a water mill, or differences in heat propel a steam engine.

Plants turn the steep gradient of high quality sunlight into carbohydrates. Herbivores take the high concentrations in plant carbs and turn them into more herbivores. That packs-in concentrations carnivores can then access. Health comes when there are only a few such gradients, letting each one be steep enough for the plants-herbivores-carnivores to each thrive.

Oh, but sometimes parasites wedge in and tap these gradients, by sucking sap or blood, in effect making the flow more shallow. Look at a plant or animal afflicted by parasites and tell me it is healthy!  And yes, you are having the "aha!" moment right now. Because that's exactly what “proper-price-seeking” arbitrage or micro-trading of equities does to the “value” of a stock or commodity, making a million nibbles or cuts in order to flatten the slopes! While the parasite (trader/broker/HFT-program) sucks a little value each trade, the company or pension fund loses the gradient or value difference that its life depends upon.

Oh, but the parasites croon “see how the price differences (energy gradients) are flattening? It’s a gooood thing! A goood thing!” 

Surely you've seen how some wasps implant parasite eggs that make the cricket ignore its victimization? These are parasitic wasps. You are the cricket.

Maybe some of you have heard or seen this argument elsewhere… I never have, even though it utterly disproves the “proper price discovery” rationalization of Wall Street parasites. What I’ve described is a “contradiction of capitalism” far more deadly than any described by Marx. It’s why - in the words of Douglas Adams - these guys will be “first against the wall” when the revolution comes.

Oh, do you want to prevent a violent, French-Russian style Revolution? Want an American style generational reform instead? One that re-invigorates a flat-fair-competitive market economy? 

Well then these guys should be First Against The Wall.

== Finally... the China Dilemma ==

This is BY FAR the most important article you can read about China's leadership caste, by an Australian diplomat/journalist of immense insight. Join the site (free) in order to read it.

Follow this with my own insights, which dovetail with Garnaut's, but bring in Chinese PRC mythologies about central planning and AI.

What's missing from both analyses is the context of Xi's uneasy alliance with the other major, anti-western player... the Putinist-Mafia front, the arc that Vladimir Putin has built for a new Warsaw Pact, stretching from Moscow to Crimea, Ankara, Lataika, Beirut, Damascus, Baghdad to Tehran. It is a despotic swathe whose connecting tissue is not ideology -- the Russians are embryonic-czarist, Erdogan is Sunni, Assad is Alawite, and the Muktadists+Ayatollahs are Shiite. What's the connective tissue then?

The Saudis -- did you see Putin's gleeful high-five with Mohammed bin Salman, a few months ago? -- may be genuinely terrified of Iran... though I am starting to doubt it. They have every reason to join Putin. Why?

Because the common thread is an affiliation of mafia clans with wholly-owned national sovereignties. Ideology is not as important as snuffing out the rule of law. And especially a unified-shared loathing of one particular western innovation -- the non-governmental NGO.

In this context, the position of the Chinese clarifies. They share an allied goal of demolishing constitutionalism and rule of law and western confident individualism. 

At the same time, the Chinese do have an ideology and a Confucian sense of order. Moreover, they know that eventually they will have to confront these mafias. Moreover, the West is the source of all good things. It must be bled at a careful rate that keeps us too weak to interfere, but still laying golden eggs.

The Chinese also feel time is on their side. It is not on the side of the Mafias, who know they have this one decade to wreck us, or else all (for them) will be lost.

So Do Outcomes Matter More than Rhetoric?

Get ready, because I am about to use a concept from Basic Calculus to reveal to you Americans out there a lie that you’ve been taught to believe - almost all of you. No matter which party you support, you “know” one thing about their attitudes and behavior... how Republicans and Democrats differ toward deficit spending. Alas, what you "know" is exactly opposite to what is true.

Let’s start with the fact that the U.S. posted a $130 billion budget deficit in May and the smallest shortfall for the first eight months of a fiscal year since 2008, as a stronger economy and rising employment bolster revenue. This trend reiterates a core difference between the two major U.S. political parties, when it comes to federal budgetary responsibility.

Okay, here it is:

The crucial 2nd derivative of debt… the pace at which the rate-of-change of the federal deficit is itself changing… either moving toward fiscal disaster or away from it… has been positive (toward accelerating debt) during almost every year of every Republican administration since Eisenhower.

In stark and dramatic contrast - that crucial metric is always negative (deceleration) every year of every Democratic administration.

Let that sink in, because it is diametrically opposite to the rhetoric and propaganda and fulminations that have become accepted “truthy” notions in our minds. So? Are you a slave of truisms? Or are you capable of noticing facts that stare you in the face, and are nearly always true?

Why is the 2nd derivative more valid than - say - looking at the simple size of this year’s budget deficit? Because our fiscal situation carries momentum from actions taken three or five years ago, even a decade. Stepping on the brakes does not instantly stop your hurtling car — it decelerates your rush toward that cliff. The 2nd derivative tells you - almost instantly - whether an administration is at least trying to be fiscally responsible.

Let’s examine the 2nd derivative of debt in action. Have a look at this chart of the US federal deficit as a fraction of the nation’s GDP. Wherever the curve is seen to be turning, go ahead and guesstimate a rough CENTER to that stretch of curve. Of course things are bumpy, so a little subjective smoothing is called for, shrugging off blips. But if, across any 3 to five year span, the center point of your curve lies ABOVE, then the nation’s debt is on a worsening track.

If the center of the curve is BELOW, then there's an improving trend, decelerating an arterial hemorrhage, so that it starts to curve back down, or even moving toward surplus. Think convex versus concave.

Now recall that GOP administrations began in 1969, 1981, 1989 and 2001. Democratic administrations began in 1977, 1993 and 2009. Now go draw your curves, find those center points. It truly is amazing!

Let me reiterate. The rate of rate of change of debt is positive (toward reckless debt) during almost every year of every Republican administration (post Eisenhower). It is negative (building momentum toward prudence) in every year of every democratic administration, (post Johnson).

Now add in this bald-faced fact. That Bush Administration accounting tricks deliberately kept the costs of the Afghanistan and Iraq Wars “off the books” for half a decade, letting them finally slam the formal deficit just when economic mismanagement sent the economy into hell, leaving behind a mess that included hyper-velocity debt. In other words, the 2006-2007 “dip” is a lie.

Likewise “Congress controls the purse strings” is a silly excuse. The GOP controlled Congress both for 6 years before Bill Clinton left office and for 6 years after. Yet the 2nd Derivative was negative in the first six and swung sharply positive the very instant a GOP president replaced him, and Clinton could no longer veto the annual Supply Side Voodoo Economics Bill, opening our arteries to the (non) "job-creator caste."

This is not just overwhelming, this rule correlates so perfectly that it seems almost at the level of physical law. Hence, any “fiscal conservative” who supports the GOP - no matter what the rationalization - would have to be either stupid or out of his cotton-pickin’ mind.

== Perspective time ==

I am libertarian enough to want budgets that are relatively balanced. Yes, a small amount of deficit spending is harmless and probably stimulating, especially if spent on national underpinnings like children and infrastructure. A moderate amount can be written off by tipping the scales toward slight inflation. Still, most economists think that a combined national/corporate/personal debt greater than 300% of GDP is in a Problem Zone, and I don't disagree.

On the other hand, we have already seen how bizarre it is for the American right to fetish on debt, when every post-Eisenhower GOP president sent deficits skyrocketing and every demo prez fought them back under control.

But is the United States an especially spendthrift and debtor nation? Look at this chart and you decide. It's possible... just possible... that there are other matters that deserve equal footing on our national agenda. Like problem solving  and becoming a scientific and advanced nation again.

And putting people to work preventing 60,000 defective bridges from falling down.

== The underlying agenda? ==

In fact, the current U.S. budget shortfall would be well in the safe zone, were it not for the lingering Bush tax cuts for the uber-rich (and residual effects from Bushite wars). It would be one thing if Supply Side assurances (“the cuts will pay for themselves as job-creators invest!”) ever came true… even once, in the decades since the Laffer Cult sprouted. But that voodoo never came true. Ever. Not one prediction. Even once. But it is still pushed. Wonder why?

== The oligarchs step up ==

In what might have been a scene taken from the pages of EXISTENCE, 250 individuals flew into London for a conclave of the world's richest people and estates, with the formal agenda of preventing revolution by making capitalist societies more inclusive.  Their combined assets, estimated at $30 trillion — amount to roughly one-third of the total investable wealth in the world. If money is power, then this is the most powerful group of people ever to focus on income inequality.

The titans of commerce and finance didn't necessarily fly to this meeting in London out of a sense of ethics or moral duty, though that may be a motivation for some. For many, says conference organizer Lynn Forester de Rothschild, it's a sense of self-preservation. Capitalism appears to be under siege.  "It's true that the business of business is not to solve society's problems," she says. "But it is really dangerous for business when business is viewed as one of society's problems. And that is where we are today."

Question: were there meetings behind the open meetings, as I depict in fiction? Well?  Do any of YOU out there, reading this, happen to know?

Here’s the deal. These are the good billionaires! Here’s another secret confab, one that is endearingly free of any “help the world” rationalizations: Secret Summit: 24 Hours with the Koch Brothers.

== Ah, statistics… ==

Okay. If you can’t beat em…

Drugs, prostitution and smuggling (ie Hookers & Blow) will be part of Italy’s GDP as of 2014, and prior-year figures will be adjusted to reflect the change in methodology, the Istat national statistics office said today. The revision was made to comply with European Union rules, it said.

== And finally, the Big Lie propaganda about the American Revolution ==

Said Ben Franklin: Note I have removed the Franklin "quotation" of dubious provenance.  Still, the cited article is interesting.

The notion that the American Revolution was somehow against “government” and “taxation” in general, and not - as all the Founders said - against oligarchy and rule by monopolists and feudal lords - is among the most hilarious conflations and orwellian propaganda campaigns of our lifetimes.