The Pentagong Show

The Pentagong Show
United State of Terror: Is Drone War Fair?

Monday, March 25, 2013

The Ideas of March: Hare cuts for Easter, Bunny.

Free harecuts for the balled.

After each segment of a presentation in a seminar I was taking, the proctor would pause and ask, "So what have we learned?". After 2008, and now, watching as the Euro rises to $1.30, in terms of the global banking system, the answer is obviously a loud, "Not a thing". At least collectively. Some of the more astute observers of the rolling crises, Doug Noland of, being, as usual, not only among them, but heads and shoulders above them, have noticed that, just as the world was irremediably, irredeemably changed following the fall of Lehman's, the ramifications of the Cyprus imbroglio, were miscalculated by those who decided it should happen (it's been hinted that, just as Lehman's was to teach the markets a lesson they missed following the Bear-Stearns debacle, Russia was in the cross-hairs for the Cyprus take-down).

One of the entries on Zerohedge actually speculated about "Moral Hazard", which , per Wikipedia, is, 

In economic theory, a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. In other words, it is a tendency to be more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by others.

I'm sorry, am I missing something here? Is that not identical to the definition of the entire financial system? This is exactly what CDS were developed for. The entire unregulated derivatives market known as the shadow banking system is totally dependent on moral hazard. When all the banks are labeled TBTF, then that means, by definition, that the risks are borne, not by the institution, its officers, or its shareholders, but by the lenders of last resort, the tax-paying public. When Fannie Mae, Freddie Mac, and the FHA swallow whole, at 100% of their par value, CDO's, ABS and MBS, issued by the banks at interest rates of 3.5% for a mortgage of 30 years time, when inflation is artificially massaged to a much lower number than its real value, so that the losing nature of those loans is disguised, it is the banks, selling to the FED, a risk,  the potential costs and burdens of which they know will be borne wholly by someone other than themselves: they who wrote the loan, booked the profits, collected their bonuses and padded their pensions, took none of the risk, the judicious weighing and evaluation of which, their elevated salaries and other compensations are based upon. And since the main underlying basis of the economy is now the housing market, then the major underlying basis of the economy is one completely comprised of moral hazard.

A term, by the way, which was in many articles having to do with the financial industry in general and banking in particular, that has, since 2008, completely disappeared from the discourse, for, I would suggest, the very reason stated above: that's all the financial system is composed of now, and that, for lack of a better word, is, always has been, simply a gussied up way of saying, fraud. Which suggests the other reason the term is no longer bandied about, because there's no reason to play such word games when the niceties of the vernacular are no longer needed; why use 4 syllables to describe what one does quite adequately? But since most people, have the wrong idea of what fraud actually is, I thought I'd include the definition I found on the most excellent Insitituional Risk Analytics website in a letter from Frederick Feldkamp, entitled, "Fraud is Fraud": 

JP Morgan’s latest “whale-trade defense”—that “senior management acted in good faith and never had any intent to mislead anyone"—is self-condemning. Actionable “fraud” includes a right to rescind transactions based on innocent lies that mislead others. Those misled cannot sue for “damage” unless intent to defraud is shown, but rescission for innocent fraud is law throughout the US and other “common law” nations. Anyone misled by a false statement can use fraud to rescind transactions made with the liar in reliance on the lie.
To suggest otherwise is beyond stupid. No nation ruled by law can permit liars to PROFIT by lying. 

A rather succinct way of implying that the US is no longer a nation ruled by laws, because, simply as an example, the Iraq War was waged for what were always, but are only now admitted to be, entirely trumped up reasons, in other words, fraudulently. Yet the Bush regime, its cronies and lobbyists, all profited most handsomely from this deception.

And yet, to further quote the IRA article:

The world’s biggest and “best” bank, responsible for assets supported by liabilities that exceed the gross domestic product of Britain, backstopped by the accumulated wealth of every citizen of the US, must not be permitted to assert lack of “intent” as an “escape” from accountability.

Yet the war criminals who destroyed a people and a culture half a world away are allowed to simply step down from power and go on to write books, give tours, do paintings of dogs while sitting in their bathtubs, without a whisper of the crimes against humanity they committed for their own aggrandizement  having first made sure that the ICC would have no jurisdiction over their actions (President Bill Clinton signed the ICC treaty but President GW Bush “unsigned” the treaty in 2001, signaling his administration’s intent to commit crimes that could theoretically subject U.S. military and government officials to jurisdiction of the court).

But of course, that doesn't matter, only when the fraud reaches into your own pocket in such an obvious and direct way do people actually call it by its right name. Because just as the 'moneyness' of financial instruments such os CDO's and MBS's was proven illusory, the moneyness of money is now being called into question. What you have is not what you think you have, so although everyone's decisions about their future is based on their understanding of where they stand now, where that is is no longer an unknown unknown  but a known unknown and decidedly at risk, as the Credit Crunch morphs into the Cash Crunch, with Cap'n Crunch Bernanke at the helm playing the role of Ahab, spreading fraud by hiding risk as he mono-maniacally chases after the White Whale of asset-price-support as the Pequod economy gets engulfed in a maelstrom of his own making. The Empire always strikes back, it is true, but it is becoming more and more apparent to a larger and larger segment of the population, that as the unknown unknowns become known unknowns that were secretly known by those in the know, sooner or later the Empire strikes out. And that will be a Foul Ball indeed.

Tuesday, March 12, 2013

From Jet Setters and Go Getters to a Nation of No Netters.

No Netters: Life without a net.
In an article despairing about how Americans have given up on retirement, or at least on saving for it, the Business Times concludes that "Americans have thrown the towel" (sic) (they fail to elaborate at what, or with what expected result), presumably for the reason that health care (they really mean health insurance, but we've all somehow decided that it amounts to the same thing) costs are so out of line, that they make it impossible to save anything. This means that Social Security and Medicare, passed with the intention of providing medical treatment and retirement security for all, have had the exact opposite effect: they have instead made both of those goals completely unobtainable for anyone but the few invited to the Buffet table. 

And far from learning from this disaster, we've decided to make it worse by including housing, education, and now, with the food-stamps program, food, into the areas of life where, via Federal governmental largess, the necessities of life are put farther and farther out of reach of any but the wealthy few. Just as no one can hope to get through college now without a student loan that will beggar them for life, or buy a house without a federal subsidy in the form of interest rates below inflation, which is then deductible, which basically means its paid for by the underclass who will never own property, because it's impossible for them to save, given that they have to pay for your house instead, but that's OK, 'cause they'll never own stocks either, because the Fed, to keep those ridiculously low interest rates, in order for it to appear that housing values are rising in a deflating economy, is pumping billions of dollars a month, 85billion, to be exact, amounting to $1.2 trillion a year, into the stock market, albeit indirectly, to keep its valuation above its real worth as well. What this amounts to is, while other government finances go into sequestration, the Fed showers the rich with free money, that they have so little inclination to spend, they shove into the stock market to make a quick buck. The worse that can happen is that you lose money that magically appeared in your pocket in the first place.

And just as tuition and medical costs have skyrocketed out of reach of any without a loan or grant, or employer-based health insurance: No job? No health insurance (that's the modern State's mantra), now we've decided that same dynamic should be applied to housing and now food. Soon, without governmental assistance, you simply won't be able to eat, as food-stamps users develop the same psychology we saw made manifest during the Bush era, where no one cared how much their house cost, as it was going up, up, up anyway, and healthcare, well isn't the government paying (aren't YOU the government, in a Democracy?)?

And the Deloitte Center for Financial Services, publishers of the report on which the Business Times article was based, is wondering why no one is saving for retirement? Well, no, not really; in our new Uber Capitalism environmental Corporations may now be people, but they don't care about any other people, only themselves, and its the flow into their funds that they're concerned about, not anyone's well-being or retirement security. Under an Uber Capitalist regime, neither of those exist. Retirement funds are made available for the investment industry to skim their cream off of everyone's earnings, and leave them destitute  Put it in stocks, you lose your capital when the market plummets, leave it in non-interest paying accounts, and it gets eaten alive by a raging inflation that supposedly doesn't exist, even as foodstamps, students loans, Fannie Mae, Freddy Mac, FHA, all using the same techniques that caused the richest investment banks in the history of the world to crash and burn, force the prices of more and more of the necessities of life skyhigh and out of reach.

As the automobile has proven, and computers and the internet are showing once again, once society pursues a technology into the realm of economic necessity, it is whatever makes that technology viable, not human existence, that becomes all-important, all-consuming. The War Department, which we coyly refer to as 'Defence', is a good instance of this. Even as it drags us into conflict all over the world, hoovering cash from the Treasury, engaged in Nation Building on an unprecedented scale, undertaken by the then President Bush who ran on the platform of, "We are not in the business of Nation -building" to spend more US tax-payer dollars, having cut the rate of those benefitting the most from Federal Largess, the Uber Rich. All with the known result of trashing the domestic economy. But it doesn't matter, the War Machine is so integral to the US economy that even as it tears it apart and allocates all of its resources to itself, gutting the very foundation for the weatlh it needs to exist, all in the name of a nameless Security State, it cannot be dismantled. Even if we wanted to ... which we don't ... it would be impossible to extricate our economy from its iron grip. And once one element becomes so intractable as to suck everything unto itself, the only alternative more benign forms of industry have is to try to do the same. 

So instead of providing healthcare, the health idustry provides mega dollars to heathcare professionals and manufactureres of MRI equipment, and yes, that would be Asians, specifically Chinese. Defence that provides no security, merely makes more of the world's people want to do us harm; cars that provide no mobility, but  alter the entire globe's weather patterns, putting at risk the food that makes us sick, leaving us fair game for a Healthcare industry that bleeds us more than a Medieval doctor; housing that we are urged to own, but will never manage to pay for, education that teaches nothing but conformity and shackles its students with intractable debt, all in preparation for a job that will never materialize, as better-educated workers from poorer eoconomies will be imported, and paid less, and accept that they'll receive no benefits, to take them.

In the Triumphalist euphoria following the dissolution of the Soviet Union, I shuddered as I watched the masses celebrate their 'victory' over the only system in the world that was forcing Capitalism to pretend to care about the lives of people. As long as a seemingly viable alternative existed, the facade was kept in place. But within a mere generation, everything I predicted about what the capitalists were really up to has been proven true as every aspect of life has been made more and more insecure, and fraud, usually called insurance, in some form or another, has taken over the entire economy. Capitalists are criminals. That has always been the case. They espouse Greed as their mantra: it's all that matters, and greed is, the last time I looked, listed among the deadly sins. For a nation of self-proclaimed Christians to heed the siren call of a bunch of criminals that 'greed is good', and never blink an eye, is to suggest that something very dark and murky is stirring in the hearts of those citizens. They are tacitly saying that they will commit any crime, go to any length, to have what they deserve (whatever that may be, most of us actually have no idea, as long as it's MORE).

In so doing, we have destroyed everything that actually has any real value. War is once again upon our doorstep, and a worldwide conflagration awaits only the lighting of that one ill-advised match. As we all stand poised with bated breath, let's hope the exhalation of it will be enough to blow that match out. But I wouldn't hold my breath.