Obama speaks, Fascism the Cure

I don't want to do the Republicans' work for them, dragging down Obama, or help the McCain or Nader ticket succeed in beating him. As a result I've been trying, with great effort and restraint, to push criticism of Obama lower down in my blog posts. With this post, I could no longer suppress this urge.

In his July 25th speech in Berlin, Obama said "walls between Muslims and Jews cannot stand, they must be torn down." "The greatest danger of all is to allow new walls to divide us from one another," Obama said. This comment came on the heels of a trip to Israel where at one point Obama crossed the Israel's apartheid wall to meet with Palestinian leaders in the West Bank.

Like the War on Terror, which works under the principle that security of one people justifies any action against another, Israel's wall harasses Palestinians in the West Bank. Over 100 Palestinians have died in hospitals in Gaza, waiting for life-saving medicines to be delivered. Is the needless murder of innocents security for Israel or state-sponsored terrorism?

Under Bush, Israel has greatly expanded its settlement building in the occupied West Bank.

Late in his speech, Obama had the audacity to say that "our allegiance has never been to any particular tribe or country" despite advocating the eternal and unconditional defense the state of Israel, no matter what. Pandering to AIPAC displayed the extent of Obama's commitment to the Jewish tribe--or at least the Zionists who've hijacked that religion.

I also don't know where Obama stood in August of 2006 when Israel attacked Lebanon when he claims "we must support the Lebanese who have marched and bled for democracy." The bleeding continues, Mr. Obama, as Lebanese children play with the millions of US-made cluster bombs that the Israelis dropped, alongside civilian areas shelled with Depleted Uranium projectiles.

Obama was sounding quite Bush-like in pronouncing the urgency of the War on Terror. Lines like "this is the moment when we must defeat terror and dry up the well of extremism that supports it," could have been taken out of any post-9/11 Bush speech. With Obama, the impression is that he will bring change, but apparently little change is forthcoming in the scope and intentions of the insidious War on Terror, a political creation that's become simply too large to stop, like any Federal program that generates its own bureaucratic momentum.

Obama has made Afghanistan the central front in the war on terror."We have too much at stake to turn back now," he said, which is a lot like the gambler who has to keep dropping coins into the slot machine in order to compensate, hopefully, for all he's lost.

In a Clintonesque piece of triangulation, Obama brought up the highly implausible notion of ridding the world of nuclear weapons. Since the days of the Pershing medium range missile based in Europe in the late '70s, Europeans have opposed nuclear weaponization of the continent, so making a hollow promise like that falls on eager ears, and earns large applause.

One picture on HuffPo captures the Obama sensation that has swept crowds in the United States. In one still photo, just above advertisement, to the right of a young woman climbing on the crowd), a presumably German man raises his hand in a Sieg Heil fashion. The gesture appears to be spontaneous, and made me wonder just what kind of base charisma Obama exudes, and how similar his reception might have been to Germans succumbing to Hitler in the 1930s.

The cult of personality that surrounds Obama scares me in the same way. Just what have the Obamanatics bought into? Like the rise of Hitler, we have no way of knowing just what absolute power would do to Obama. Certainly, Obama doesn't sound like any demagogue, but neither did Hitler. It was only after he'd tightened his grip on power that the raging lunatic side came out.

Comparing the rise of Hitler to Obama seems ludicrous on a number of levels. For one thing, Obama talks about engagement and peace. Didn't Hitler, though, claim to be building a stronger Germany for the purpose of securing the peace? Obama is also multi-racial, tolerant, and diversity-minded, with a background and values wholly inconsistent with any traditional definition of fascism.

Could Obama lead the US into some sort of nanny-state, where political correctness is enforced with rigid authority, a sort of neoliberal dictatorship where corporations and government rule? I'd say this threat is virtually nil, however seeing Congress capitulate again and again to Bush, I'd say the rise of a dictatorship is not impossible now that our Constitutional rights have been eviscerated. And corporate money controls elections as well.

Limits on executive power have been breached like never before, and could easily by abused by a democratically elected leader in the future. Government can now spy on Americans, hold them without charges. The idea that government power would only be directed at "enemies" is in itself a matter of perspective, as politically speaking, one side's enemies are simply the competition.

Italian dictator Mussolini did say that if fascism ever came to America it would be a greatly perfected version of the ideology--an almost friendly brand of control barely recognizable to the people who lived under it.

Writing in the Toronto Star in 2005, Paul Bigioni writes about the potential rise of fascism here:

Before the rise of fascism, Germany and Italy were, on paper, liberal democracies. Fascism did not swoop down on these nations as if from another planet. To the contrary, fascist dictatorship was the result of political and economic changes these nations underwent while they were still democratic. In both these countries, economic power became so utterly concentrated that the bulk of all economic activity fell under the control of a handful of men. Economic power, when sufficiently vast, becomes by its very nature political power. The political power of big business supported fascism in Italy and Germany.(source)

American pride may have taken a few knocks, but our national pride is nowhere near as injured as Germany's was after World War I. 9/11 was clearly an event that stirred our nation into action in the form of military occupation of two countries. But it wasn't as if we'd been ripped apart by total war--instead 9/11 was an isolated incident, a dastardly deed.

Also, the condition of the economy appears far better than post-World War I Germany, which suffered hyperinflation. While inflation is rising rapidly, it still has far to go.

Hitler was much more about stroking the fires of German nationalism, a sensitive topic on the heels of the defeat in World War 2, followed by a crumbling economy and humiliating reparations paid out to the victorious allies. From the economic crisis came political opportunity.

Throughout the world, the Great Depression ushered in new political programs which attempted to reinvigorate the economy through a union of corporate and government interests. Fascism could only have risen out of the ashes of economic calamity--people who unaffected by crisis seldom feel any need to change.

Roots of crisis

Economic failures can speed up political changes. In this, failure points that escalate into crises become opportunities for the rich and powerful. Just how much of our business cycle is engineered to fail? Maybe by shunning sustainability, the masters of our economic universe set us on a course of economic self-destruction, which ultimately becomes a vehicle by which they can amass greater wealth and through it, political control.

Bigioni explains the economic roots of fascism:

It is particularly perilous to forget about the economic origins of fascism in our modern era of deregulation. Most Western liberal democracies are currently in the thrall of what some call market fundamentalism. Few nowadays question the flawed assumption that state intervention in the marketplace is inherently bad.
As in Italy and Germany in the '20s and '30s, business associations clamour for more deregulation and deeper tax cuts. The gradual erosion of antitrust legislation, especially in the United States, has encouraged consolidation in many sectors of the economy by way of mergers and acquisitions.

We're told greed is good. Regulatory standards are relaxed, in a form of government called laissez faire, or do nothing. Now as long as everyone's making money, interest rates are low, everything is fine. It's as if everything works better if government will just stay out. Hedge funds are emblematic of this surge in wealth; a half dozen or so hedge fund managers "earn" over $1 billion per year.

In an unregulated environment, people get greedy. Easy profits that had earlier come through the availability of low interest debt--like those of the mortgage industry--dry up.

Keeping rates of return on investments becomes increasingly challenging--to keep sales up gets harder and harder the higher they go. Eventually profit forecasts get harder to meet. It's been said that if something can't last forever, it won't.

Then comes the downside, the inevitable down-cycle. Profits drop. Banks like IndyMac collapse overnight. Foreclosures sky-rocket. Then economic activity slows and unemployment rises, expanding the recession from a few industries to the overall economy.

Rumors circulate as to the eleventh hour shenanigans that preceded the demise of this financial institution, or that company. Congressional inquiries are launched, investigation launched of banks that may have committed fraud in their last days. Hedge managers fake their own deaths.

In a turnaround from laissez faire government, all of a sudden the government gets active, under the premise that it must act to stabilize the market. In reality, it's compensating for the consequences of inadequate regulatory enforcement and overly expansive monetary policies. The Fed opens up a discount window, accepting junk-rated mortgage-backed securities for triple-A U.S. government bonds. The FDIC steps in, taking over insolvent banks. All of a sudden, previous decisions to deregulate the mortgage and commodities markets are reexamined.

A precedent exists for minimizing the role of government in present day America. Paul Bigioni explains in his article on fascism:

As in pre-fascist Germany and Italy, the laissez-faire businessmen call for the state to do their bidding even as they insist that the state should stay out of the marketplace. Put plainly, neo-liberals advocate the use of the state's military force for the sake of private gain. Their view of the state's role in society is identical to that of the businessmen and intellectuals who supported Hitler and Mussolini. There is no fear of the big state here. There is only the desire to wield its power. Neo-liberalism is thus fertile soil for fascism to grow again into an outright threat to our democracy. (source)

Liquidity Crisis

In the rush to get everyone's money out, financial institutions must provide more and more liquidity, or cash, to placate those who want out. A run on the banks is what this used to be called--now it's simply phrased as a shortage of liquidity.

Earlier this year, one money center bank, Citigroup, went to sovereign wealth funds and rich sheiks in the Gulf states to gather some $7 billion in capital, to shore up its books as its mortgage portfolio sagged. These oil-producing nations, particularly the Saudi monarchy who is so close to Bush the Younger (as well as the Elder) have seen their dollar holdings explode during his reign, as apparently two wars in the heart of the world's oil basket have been good for business. Should we be surprised that we have no program for energy conservation, save the laissez faire reaction which says people will be forced to use less as it gets more costly, costs which flow to Big Oil and people like the 15-of-the-19 Saudis?

Well, at least our oil money comes back to us. Wait, it doesn't come back to us, it goes to Citigroup, who then uses for the altruistic purpose of balancing its books, to compensate for reckless purchases of mortgage-backed securities.

At least repatriating oil money via Citigroup isn't as ludicrous as the Saudis buying billions of dollars of US military hardware, then letting it rot in the desert. Then again, a good number of Americans are employees by Defense Industries USA, one of the corporate entities that compromises the nexus with the National Security State. While they may not make things that better the world, or do anything to defend us, at least the military industrial complex makes something real, physical, tangible and doesn't just push piles of money around. The financial system, on the other hand, is like a supreme tapeworm that drains the dollar of its value, and sends billions into a black hole through excessive risk-taking that produces nothing except more debt and burden.

On Thursday, New York Attorney General Cuomo announced an investigation into auction rate securities. Apparently bankers sold their personal holdings even as the banks talked up these "exotic derivatives." This is but one effort in what will be many to uncover the extent of wrong-doing, even as the consequences cascade out of control.

Regulatory crisis or Naked opportunism?

A great example of regulatory collapse is Enron, which transfered many accounts overseas, which would later lead to its collapse and a energy crisis on the West Coast with soaring prices. Enron's failure was preceded by a de-regulatory effort in the trading of energy contracts made by then-senator Phil Gramm of Texas, who recently made the news claiming the recession existed not in reality, but was rather a product of the imagination--a "mental recession" (link). Graham has since left his position as one of McCain's economic advisers. It's worth noting that Enron was George Bush's top corporate contributor for the 2000 Election.

Corporate executives have participated in the looting of the entities over which they are supposed to exert fiduciary responsibility. Enron executives talked up their company's stock while they liquidated their own positions. Closer to home, I remember a buyout of Indianapolis Power and Light (IPALCO) by energy consortium AES a few years back. IPALCO executives managed in selling their company, then sold out completely, just before the purchasing company knew they'd bought a loser and the stock of the acquirer tanked.

Just like Enron, many employees were caught holding IPALCO stock in their 401(k) accounts, which meant they could only sell after the merger, long after their stock had been converted into shares of the acquirer. To up morale--and the company's stock price, employees are fed the line that the company is doing well. Invariably many do buy in to the rhetoric and end up owning more shares than they should.

Considering a great deal of the employees' financial security is tied to their continued employment, investing in company stock doubly risky--a collapse of company means both losing a job and nest egg. Still, employees are enticed to buy company stock. Often the purchase price is subsidized, though not reduced as low as that offered to the top executives through their stock purchase plans, which also tend to allow larger sales. Company executives are typically given more liberal rules for selling company stock within their private retirement plans--set up as a perk for company managers--and often sell at the peak.

Of course, the executives know the true value of their company, which is one reason analysts treat internal stock sales--which must be reported quarterly to the SEC--very seriously. If an executives is selling, it could mean that Skip and Biffy need a summer home in the Hamptons. Or it could mean that Skip knows his employer's stock will soon become worthless because of all the off-shore, off-balance accounts set up in the Cayman Islands have become worthless.

A buyout offers a great incentive to cook the books. In some ways, it represents a market-thyself achievement of the highest order. "Yes, of course we'd be a wonderful complement to your existing lines of business, Mr. Acquirer," executives could say. "A purchase of our company would do great things for you bottom line," so on and so forth the spin goes.

Meanwhile the executives can wait for the opportune time just before acquisition, when the market is likely to bid the price up to its high point, then sell. Unlike the peons at the lower levels, who are typically limited in the maximum quantity of stock they can move, executives can dump almost limitless quantities. IPALCO executives end up being sued by 1,800 company employees, who were unable to liquidate their holdings of company stock before the parent of the acquiring company, AES, tanked.

Indiana Governor Mitch Daniels, then Budget Director for the Bush White House, got caught up in the IPALCO scandal (link). Daniels was latter cleared of any wrong-doing, showing that there are in fact two versions of justice depending on one's tax bracket and level of political influence.

Tax avoidance

Now while I'm all for making a lot of money, I don't think it's fair to make workers on the payroll have to pay more in taxes than the executives who are simply cashing in capital gains--not exactly working for it in a way that earns my respect.

It's a belief among advocates of supercapitalism or investor-class capitalism, now in the mainstream, that taxes are such an inhibitor to business growth that they need to be held low or, in the case of some of the ultrarich, utterly done away with! While investor capital does stimulate business activity, I just think the idea of a billionaire paying a lower tax rate than his maid is ridiculous. Warren Buffet apparently agrees with me.

Then there are many executives take also involve dodging those pesky taxes which they don't feel like paying. Rather than pay taxes--their brand of capitalism is all about greed--the super-rich have chosen to dump profits overseas. Apparently even capital gains tax rate of 20% is too high.

Recently a former UBS employee in the tiny nation of Liechtenstein came forward with a list of private banking clients, which he proceeded to send to the tax authorities in the wealthy people's home nations. Eager to protect their reputation for discretion--others might call it secrecy, the government of Liechtenstein--titan of nations that it is--has decided to pursue the whistleblower, Heinrich Kieber by charging him with a violation of the nation's banking laws (source). He's now in hiding, hero to the far more populous group of taxpayers--which probably includes you, unless you've managed to salt away some little nest egg in some overseas tax haven. The ultrarich on Kieber's list, however, have begun the process of pay penalties to avoid jail time. Some of the alleged tax cheats have been brought before a Senate investigatory panel, according to ABC News.

Speaking of off-shore accounts, Citibank recently put back on its books over $1 trillion of loans made off-the-books. It's as if the money disappeared, then flew back to the Citigroup's headquarters. You'd think the newfound assets would be to Citigroup what finding a $20 bill in your blue jeans before you put them in the wash would be to you, but the money isn't reacquired, it's simply debt that's resurfaced. These assets don't really represent assets at all, but rather debt--promises to pay which may or may not be fulfilled.

As anyone who's seen the Jim Kirwan's excellent video about money knows, money represents not an accumulation of capital, but rather a promise to pay--a debt. So upside down has our monetary system become, that we now believe we are accepting something of value--money--by accepting nothing more than a promise to be paid back.

Making money the new-fashioned way

Unlike the medieval period, the Federal Reserve (actually a private corporation) can simply lend us more money created out of thin air. There's no real asset backing the currency, only a pledge to pay to the holder the face value. The holder of the IOU receives a guarantee of repayment, but there's nothing that says the value will be maintained.

Now the more debt that the US government accumulates, the less reliable the promise that the holder of debt becomes. Also, in the digital age, when the creation of money is as simple as a few strokes of the keyboard, the monetary system is rife with opportunities for abuse.

The Treasury Department prints the bills at a penny or so each and gives them to the Fed to use. To spend money, our government actually borrows the people's money back, and pays interest to those who buy our Treasuries in exchange. By the way, I just saw that the states of the Gulf region are on the way to becoming the largest foreign holder of U.S. Treasuries, exceeding the Japanese, who've held the top spot for decades, at some $500 or so billion.

No investor will simply just sit on currency notes, so the Gulf nations buy interest-producing federal securities. Are the U.S. Treasuries we send to the Gulf states for their oil actually worth something? Sure, but they are worth less every year, and higher denominations will have to be offered in order to pay the equivalent amount of inflation-adjusted interest going forward. Higher interest rates reward these foreign speculators and keep them buying dollars. No matter what interest rate the Fed sets, foreign creditors need to receive more interest on their investments--if not, the price of those securities in the open market will fall to the point their yields become attractive.

So the Fed can offer money for virtually free--interest rates are now at 2%, which is almost free--to other banks. They've also taken the extraordinary step of allowing brokerages to swap mortgage securities of questionable value to the Fed in exchange for Treasury notes. That's right-you, the U.S. taxpayer, are supporting the losers in the free-wheeling, under-regulated mortgage-backed securities market.

U.S. Treasuries are more secure because they are backed by the full faith and confidence of the U.S. government, a term which essentially means that money will be created out of thin air and given out in exchange for the bonds. This makes for a liquid market, which means that anyone can buy or sell Treasuries without fear that the investment will become worthless, just worth less.

On the other hand, all these bailouts cost money. Freddie Mac and Fannie Mae are called Government-sponsored entities (GSEs) because they carry an "implicit" guarantee that the government will bail them out. This is of course grossly unfair to those of us who own our homes outright, or don't want to carry a mortgage, or make money from mortgages.

Freddie Mac was created during the Depression era, to push what is and was essentially a political goal to increase home ownership. The idea is that by supporting private-sector investments into housing development, the housing industry--traditionally a vital piece of the American economy--will grow. The implicit designation has undoubtedly created moral hazard for the managements of Freddie and Fannie, which means risks that should have been avoided were instead assumed.

Summary

As the example of the Soviet Union showed, command control economic decisions really don't work--the act of government meddling just ends up precipitating more meddling. The theory of business cycles would indicate that down cycles are a natural part of the capitalist system. Yet despite the President's rhetoric, our government is now intervening on a regular basis in the markets. Paradoxically, much of the problems in the financial system could be traced to government's failure to regulate and the Fed's chronically low interest rates which made money almost free for lenders. Apparently, so determined was our government to expand the politically popular housing industry that it allowed mortgage brokers and lenders to cheat, distort incomes in a gold rush to sell as many houses as possible.

The result: overcapacity and foreclosures on a scale not seen since the Great Depression. Rather than reduce demand for housing as prices went up, the gold rush kept boosting prices until the entire market collapsed. House prices in some levels have fallen by 50%. Plus there's the contagion effect--one foreclosure leads to others. And the housing construction industry--always a darling of the politicians, particularly Republicans--has suffered losses far greater than they would have if government had done its job, regulated the mortgage industry, and not tried so hard to make money available to developers and lenders through the Fed.

The Freddie and Fannie bailouts could be in the trillions of dollars. Meanwhile, all those newly minted dollars will hit circulation. I'm not sure how big our money supply is, but $5 trillion for the banks is already a certainty, and Freddie and Fannie could well cost just as much. Bush has tripled the money supply since coming into office--is it such a surprise that the dollars out there now buy less? Adding ten to twenty trillion to our money supply will devalue the amount of dollars out there, making prices go up for anything we import, or anything that uses a lot of energy in its production or transportation, as those costs will rise. Oil prices will go up, and not because we can't drill, but because the dollar--which is ultimately a commodity whose supply will reflect its price--are being over-produced and over-lent.

Starving the beast is an approach which attempts to cut government spending but systematically eroding the public treasury to the point it can be controlled out of necessity. One way out of spending less is to inflate the money supply. While costs go up, the government can restrain expenditures at a slower rate than it can print and borrow dollars, which is easy because they are simply paper, fiat currency. Ironically, if it weren't for the Fed, our government probably would have depreciated our currency even more, robbing from all of us, especially those on fixed incomes.

It's been said that necessity is the mother of invention. Where there exists a will to defraud others, people will find a way to avoid regulatory standards. One of the easiest and cost-effective methods to rip people off is to legalize the theft through the passage of laws. Virtually every piece of legislation passed by Congress contains some benefit to one industry or another. Corporate lobbying in Washington just recently passed the $1 billion mark. Compared to the tax savings from just one piece of legislation, corporate lobbyists can return in benefit to their corporate sponsor benefits many magnitudes larger than their expense. Why make money the old fashioned way when you can lobby Congress for free breaks instead. Naturally whatever corporations don't pay must in turn be borrowed or taken from individuals. Once the easily available credit dries up--victim of higher interest rates or growing doubts over the fiscal solvency of our government--higher taxes are the only possible consequence. By exerting influence over politicians, corporations are first in line for the gravy train, and can redirect the tax burden to individuals.

US Economic Future

Things are certainly bleak for the US. In the short term, we must contend with huge bailouts, or as Robert Borosage has written, "Wall Street socialism. Their losses are socialized; their profits are pocketed. You and I will pay for their failures" or what has been phrased as "the socialization of losses and privatization of profits."

One look at Baby Boomer savings rates will tell you that the money simply isn't there to retire. Many will toil until they die, like the serfs of the medieval period. Medical benefits will continue to shrink for all except the wealthy, who are entitled to good health care if they have government jobs, or enough income. Scolding the poorer classes for their limitless needs and constantly unfilled wants is an old game for the gentry, who've always seen themselves as the bestowers of wealth and privilege, the caretakers of wealth and well-deserving recipients of the blessings of the divine.

The middle classes were always viewed suspiciously by the ruling elite, as this is where most revolutions begin. The poor were simply too exhausted with their labors to entertain any notions of wealth or freedom from political repression. For them, this is how their lives always had been and always would be--there was no escape for them, or so they thought. Social mobility was not only restricted but advancement almost impossible.

America could well be turning back the clock to the medieval period. Americans work more hours than people of any other nationality. Yet we don't appear to be advancing in our quality of life relative to other nations.

Of course there will always be the trappings of higher technology, and some protections for the health and financial security, but to the rich most of the spoils will go. More and more wealth is controlled by the top 1-2% of the population. Most of the decent jobs in such a society go to those who service the ruling classes, or those who protect them.

I guess we will know how far we've regressed when public funds run out. Already spending on "social services" is at grave risk. The bastion of the Right--the military--competes with other needs, rhetoric is naturally introduced which defends the fiscal propriety of national security and need to protect the American people.

So where to now? Looks like things aren't going to work out here, and that the political system is so dominated by corporate and Zionist influence based on political contributions. Will we continue down the path to Hell: war with Iran, and economic ruin in a financial system that's teetering on the edge of collapse?

Ultra-low interest rates ostensibly benefit our society have turned out to be a giant credit trap which has mired millions of Americans in homes they cannot sell for what they owe. Lower tax rates--a Bush mantra based on Friedman's Chicago School of Economics argument that government regulation and taxation slow economic growth--just mean the continued degradation of our nation's fiscal status as uncontrolled spending amasses debts too large to pay back. Inflation is a method that relieves debtor of their burden--they can simple pay back old loans with new, less valuable dollars.

Here's Gerald Celente of trendsresearch.com as quoted on rense.com:

Despite calls from the business media and politicians from both parties for government intervention to rescue the failing institutions, there are no bailouts, buyouts, quick fixes or magic remedies that will save America's economy from going under. The formula is simple and the outcome predictable: The more money the government prints to cover the multi-trillion dollar losses, the weaker the dollar gets. The weaker the dollar gets, the higher inflation goes. The higher the rate of inflation, the more it costs to live. With wages going down and unemployment going up, the poorer the nation becomes. Americans will be facing the worst economic times in living history, and so too will much of the world.

Once the current business cycle bottoms, we'll know just how much damage a laissez faire approach to the financial markets does, and the costs of the short-term greed as brokers are fired by the thousands and banks continue to fail. Last week, rumors in the markets spread about the insolvency of Lehman Brothers, and a possible bankruptcy filing by GM, whose stock has regressed to levels of more than 50 years ago.

The precipitous drop in bank stock values has coincided with the creative accounting gimmicks. Sinking stock values should ring warning bells, if not for government regulatory and accountants, than for investors who are reluctant to invest in American financials. Instead of letting the financial companies earn their just reward--getting punished by the market--Congress just restricted naked short sales, which has lead to a rally in their stock prices. In the long-term, this kind of meddling will likely discourage investment.

Economically, things just aren't getting better, but somehow people think they will get where they want to go simply if they wish hard enough, a sort of Peter Pan reality. Buddhists might tell you all that well see is transient, ultimately an illusion. Human nature makes living in abject denial of the facts not only possible, but a guiding motif.

Other resources

Worth seeing/reading is an interview of Naomi Klein on DemocracyNow.

William Engdahl writes about "The Financial Tsunami -- the next big wave is breaking: Fannie Mae Freddie Mac and US mortgage debt" at onlinejournal.com.

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