Remembrance of Things Past – Part 2

Crud Layer 2

The intention of it all.
What a catastrophe, they cried. What a horrific financial debacle, the sky is truly falling and we must have all your money right this instant lest even more dire events come to pass… how could this have happened? Who could have foreseen this… Whoa!, wait just a minute, it kinda looks like some folks did see it coming:

Simon Johnson was the former chief economist for the IMF, presumably he knows what he’s talking about and knows whom he is talking about as well. He makes a statement part way through his interview with Bill Moyers that is absolutely staggering, in reference to a statement by one of Morgan Stanley’s top officials, Johnson says:

“What he’s basically saying is business as usual. Go about your daily lives. Get the bonuses. Re-brand them as awards. But it really shows you the arrogance, and I think these people think that they’ve won. They think it’s over. They think it’s won. They think that we’re going to pay out ten or 20 percent of GDP to basically make them whole. It’s astonishing.”

Mr. Johnson goes on to describe the coup de main that occurred last fall as eerily familiar to him. It’s the exact scenario the IMF and the World Bank have used for decades to destroy the economies of Third World countries, except this time it was used on the US – deliberately.

Another part of the puzzle is revealed almost by accident by Representative Paul Kanjorski (D-PA). In a C-SPAN interview on his opinions about the financial crisis, Rep. Kanjorski makes the following statement:

“On Thursday (Sept 18, 2008), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. “It would have been the end of our economic system and our political system as we know it.”

Another piece drops into place courtesy of Matt Taibbi who writes an article in Rolling Stone, titled:
“Inside The Great American Bubble Machine” here
Where he shows that Goldman Sachs has been involved in the engineering and manipulation of every market financial crisis of the 20th – and now the 21st – centuries. It is interesting to note that no other company has GS’s history of placing (one might almost say: infiltrating) so many, many partners in positions of authority in the US government (and other influential positions) :

Henry H. Fowler – 58th United States Secretary of the Treasury (1965-1969)
Robert Rubin – Former United States Treasury Secretary, ex-Chairman of Citigroup.
Henry Paulson – Former United States Treasury Secretary.
Joshua Bolten – former White House Chief of Staff
Jon Corzine – Governor of the State of New Jersey.
Michael Cohrs – Head of Global Banking at Deutsche Bank
Jim Cramer – founder of TheStreet.com, best selling author, and host of Mad Money on CNBC
Ashwin Navin – President and co-founder of BitTorrent, Inc.
George Herbert Walker IV – member of the Bush family and current managing director at Neuberger Berman
Robert Zoellick – United States Trade Representative (2001-2005), Deputy Secretary of State (2005-2006), World Bank President.
Mark Carney – Current Governor of the Bank of Canada
Neel Kashkari – former Assistant Secretary of the Treasury for Financial Stability
Malcolm Turnbull – Australian politician, currently the federal leader of the Liberal Party of Australia.
John Thain – former Chairman and CEO, Merrill Lynch, and former chairman of the NYSE.
Robert Steel – Chairman and President, Wachovia.
Reuben Jeffery III, Under Secretary of State for Economic, Business, and Agricultural Affairs (2007-)
Romano Prodi, Prime Minister of Italy twice (1996-1998 and 2006-2008) and President of the European Commission (1999-2004)
Mario Draghi, governor of the Bank of Italy (2006- )
Massimo Tononi, Italian deputy treasury chief (2006-2008)

Way too cozy for effective regulation of the financial industry, note discussion below of how GS alumnus Henry Paulson torpedoed a GS rival to trigger the Obama Election Financial Crisis.

Last, let’s go to Professor James Galbraith (yes, son of…) on the causes of the financial crisis (From the Texas Observer):

Causes of the Crisis
James K. Galbraith
May 01, 2009

Mr. Moderator, you ask what is the root cause? My reply is in three parts.

First, an idea. The idea that capitalism, for all its considerable virtues, is inherently self-stabilizing, that government and private business are adversaries rather than partners…; the idea that regulation, in financial matters especially, can be dispensed with. We tried it, and we see the result.

Second, a person. It would not be right to blame any single person for these events, but if I had to choose one to name it would be… former Senator Phil Gramm. I’d cite specifically the repeal of the Glass-Steagall Act—the Gramm-Leach-Bliley Act—in 1999, after which it took less than a decade to reproduce all the pathologies that Glass-Steagall had been enacted to deal with in 1933.

I’d also cite the Commodity Futures Modernization Act, slipped into an 11,000-page appropriations bill in December 2000 as Congress was adjourning following Bush v. Gore. This measure deregulated energy futures trading, enabling Enron and legitimating credit-default swaps, and creating a massive vector for the transmission of financial risk throughout the global system. …

Third, a policy. This was the abandonment of state responsibility for financial regulation… This abandonment was not subtle: The first head of the Office of Thrift Supervision in the George W. Bush administration came to a press conference on one occasion with a stack of copies of the Federal Register and a chainsaw. A chainsaw. The message was clear. And it led to the explosion of liars’ loans, neutron loans (which destroy people but leave buildings intact), and toxic waste. That these were terms of art in finance tells you what you need to know. …

The consequence … is a collapse of trust, a collapse of asset values, and a collapse of the financial system. That is what has happened, and what we have to deal with now.

Can “stimulus” get us out?

As a matter of economics, public spending substitutes for private spending. … But it is not self-sustaining in the absence of a viable private credit system. The idea that we will be on the road to full recovery and returning to high employment in a year or so therefore seems to me to be an illusion.

And for this reason, the emphasis on short-term, “shovel-ready” projects in the expansion package, while understandable, was a mistake. As in the New Deal, we need both the Works Progress Administration … to provide employment, and the Public Works Administration … to rebuild the country. …

The risk we run, in public policy, is not inflation. It is lack of persistence, a premature reversal of direction, and of course the fear of large numbers. If deficits in the trillions and public debt in the tens of trillions scare you, this is not a line of work you should be in.

The ultimate goals of policy are not measured by deficits or debt. They are measured by the performance of the economy itself. Here Leader Armey and I agree. He spoke with approval, in his remarks, of the goals of 3 percent unemployment and 4 percent inflation embodied in the Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978. Which, as a 24-year-old member of the staff of the House Banking Committee in 1976, I drafted.

Professor Galbraith leaves out some key components in my opinion, such as Alan Greenspan, the Ayn Randite Chairman of the Fed who blithely ignored his duties to regulate the Federal Reserve, choosing instead to allow classic laissez faire capitalism to pillage the economy unchecked until, at last, there was just nothing left to steal. And the original cardboard cutout president: Ronald Reagan – this dumb cluck bought into every idiot notion of trans-national capitalism extant and held the door open for every lowlife scumbag thief in the entire political/financial spectrum. Yes, I’m talking about Gingrich and Gramm and Norquist and all the rest of the neo-con bastards who have tried to take this country apart brick by brick for almost 30 years.

And last, but certainly not least, there is our Glorious Leader…

Crud Layer 3

The Zen of the Con
…How did BO(zo) get elected anyway? All the hype aside let’s look at what happened in the last six weeks of the general election campaign (and let’s leave the primaries alone, I’m still burning about them but that’s a story for another day).

In the middle of September it was looking bad for BO(zo). His numbers weren’t going anywhere and McCain was trending up. It was looking increasingly like McCain had the momentum and could win by 1 or 2 points in November.
Then several very important things happened in quick succession:

1. Financial crises were triggered on several fronts simultaneously (see above). I say ‘triggered’ because these crises did not happen sui generis they were very deliberately set off to gain a desired effect.

2. Major financial backers moved en mass to back the Obama campaign.

3. Ad buys by the Obama campaign increased to a ratio of 3-4 to 1 and in some cases 10 to 1 over the McCain campaign.

4. The Obama campaign collected almost $200 million in September.

Do you really think that Obama got $200 million in September 2008 because Grandma emptied the cookie jar and little Suzie gave up her lunch money? …really?

The financial ‘crisis’ that had everyone running around in the middle of the night doing their Chicken Little imitations was, first – very real but, second – artificially initiated. The fact is that this crisis could have occurred at any time over the last 2-3 years, the entire thing was being held together by spit, baling wire …and mutual terror, the Wall Street Guild of Thieves knew that the jig was nearly up, they just didn’t want it to go Postal while their hands were in the till.
The most likely tipping point was in the spring of 2008 when Bear Stearns collapsed but that was papered over by a shotgun marriage to JPMorgan/Chase (do some research on those names and your head will explode), why? Because a financial collapse at that time served no useful purpose, the Bush administration had one foot out the door, there wasn’t going to be an impeachment or even an investigation and it was way too far from the election to make any difference – people who can’t find Iraq on a map simply can’t be expected to remember a financial crisis that happened six whole months ago, jeez!
Ah, but there was a convenient fall guy close at hand for Treasury Secretary Henry Paulson (ex-CEO of, wait for it… Goldman Sachs) in the form of Lehman Bros a fierce competitor of GS and run by Richard Fuld, a personal enemy of Hank Paulson who thought he was truly pond scum (it’s all relative in the financial services world). So, in early September, as things were beginning to sour for BO(zo), some calls were made, some rumors launched, some flags went up in the air and, lo and behold, Lehman Bros is denied the help that was given to Bear Stearns just six months earlier although both firms were in strikingly similar situations – and Wall Street went down in flames.

Think I’m a garden variety conspiracy nut? Read on…

Bush/Cheney knew in 2006 that there weren’t going to be any repercussions for any of their crimes (remember Nancy “Impeachment is off the table.” Pelosi?) so they forged on with their plans to control the agenda of the four years 2008-2012.
Foreign policy was already charted so far as they were able, the Iraq war was winding down and the Bush/Cheney policy of having a standing US army in Iraq borders for decades to come was as safe as possible. Think I’m wrong? Take a look at Bush’s pronouncements on the size and length of stay for US forces and then compare them to what BO(zo) is actually doing there, identical aren’t they?
But foreign policy is Republican meat & potatoes, the real problem was how to:

1. Continue to suck the blood out of the US economy, while

2. Laying the groundwork for a Republican victory in 2012

The economy is usually a solid Democratic issue, when it’s bad the people vote in the Dems to fix is (so they can then vote in the Repubs to steal it all again, there now, isn’t that all clear?). But no one gets out alive if they’ve got a financial disaster on their hands, yes, I know FDR was the exception but he was exceptional – do you think BO(zo) has those kinds of chops?
So, how to create a continuing financial train wreck that will devastate the country long enough to guarantee a Republican White House in 2012?

First, you have to have a ‘useful fool’ to front for you – this is why BO(zo) won the nomination, his Astroturf campaign was actually supported again and again by generous donations from the corporate elite, not the netroots support you heard so much about (I can show you exactly how this was done: it’s fun, foolproof and completely untraceable).

Next, you need to manufacture a compelling financial narrative that does three things:

1. Shuts down real consideration of issues in the election in favor of knee jerk responses to perceived impending disaster.

2. Mandates predetermined actions for at least a year, probably two – guts the opposition in the 2010 elections and guarantees no meaningful action until 2012.

3. Remains so radioactive it drowns the ‘useful fool’ as it becomes impossible to blame the previous administration for the continuing debacle.

Hmmm… sounds very familiar, doesn’t it?

Last, there is the Law of Maximum Inertia of Stupidity. Ever hear of Quintus Fabius Maximus Verrucosus? No? Well, he was the unfortunate guy the Roman Senate put in charge of defeating Hannibal in the Second Punic War. Hannibal was a military genius who had brought his army from Carthage in North Africa (about where Tunis is today) and was merrily romping about northern Italy pillaging and burning anything in his path with gay abandon. The Senate had sent several other generals to get rid of this pest but they kept being massacred (along with several tens of thousands of troops) as Hannibal thought up new and clever ways of running circles around them.
Fabius (for short) knew he was no match for Hannibal in the field but he also knew that Hannibal was vulnerable because his supply lines were very, very long. Fabius harried Hannibal’s foraging parties, never engaged in a pitched battle, kept his own lines internal so Hannibal had no chance to march directly on Rome. In short, Fabius waged a war of attrition, wearing down Hannibal’s resources until he had to abandon the campaign. He did it so well that it’s now called the Fabian Strategy.

What the heck does this have to do with the here and now?
Well, over the past eight years the Bushies have been assiduous in placing and replacing mid and senior-level posts in government with dyed-in-the-wool neocon soldiers. In the last two years of the Bush/Cheney administration there was a concerted effort to get these parasites ensconced in the civil service where they can never be dislodged. Remember the fanatics they got into the Justice Department? Well, it looks like they were doing the same thing in every other government department.

The feckless Democrats have either completely ignored this maneuver or are just too damn dumb to think of it, I‘m not sure which. So they are now confronted with a solid wall of bureaucracy that is fundamentally opposed to everything they are supposed to stand for. Good luck to Team Obama in getting any results through this Fabian crew.

Not that they need help in screwing up their follow through. Huge numbers of political positions remain unfilled six months into the Obama administration’s first year – the kinds of positions that do the grunt work on getting legislation passed and programs funded and implemented. No one seems to care about the actual workings of government. Important positions at crucial agencies, Treasury for instance, remain unfilled – now because no one wants the jobs. Anyone with a brain can see the train wreck coming and no one wants to be on board when it happens. To top it all off, the cabinet departments themselves are in disarray, since Obama has appointed a Czar for almost every cabinet post no one knows where the actual governing power lies: Who gives the orders? Who has the imprimatur to carry them out? And most important: to whom does Obama listen?
We don’t have a government, we have a Persian court.
Stay tuned for RoTP – Part 3