Final 8-30-11 Perversity, Harshness and Finding the Right SOB

Americans have lost confidence in our governing elites. The Republicans, with their harsh austerity agenda, are putting the burden of recovery on the people. President Obama has to learn to be harsh with the the real culprits, the bankers who are still whip sawing his Administration and the economy.

For the past 30 years, through every President and Congress, bankers conspired with the politicians to deregulate the economy. Our governing elites, especially our deregulated financiers, were able to take so much money for themselves that their greed caused a financial crisis and a Depression. Before 1985, the financial sector never received more than 16 percent of corporate profits. By this decade they were getting 41 percent of the total. This greed almost brought the global economy down. It still could, for this is not over, not by a long shot.

We have been here before. We are living through a "lesser" repeat of the Great Depression. The 10 years from 1998 to 2008 reflect the same crushing income inequality, the same investment bubbles, the same banking crisis, the same global contagion, the same corruption, and the same extravagance as the "Roaring 20s." But 2008 is not 1929. The economy and the rules changed. This time we did significantly better because Federal Reserve Chairman Ben Bernanke knew what to do and did it, up to a point.

The economy did not spiral down into a Great Depression. Output dropped by 4 percent, not 40 percent. Unemployment rose to 10 percent, not 25 percent. The banking industry did not collapse. The stock market dropped sharply but nothing that compared to 1929-31. Then the Dow fell from 381 on September 3, 1929 to 41 on July 8, 1931, almost 90 percent. The extraordinary, and sometimes extralegal, action by Chairman Bernanke and the Federal Reserve was bold and effective. Of course, the New Deal alphabet soup of SEC, FDIC and other safeguards were in place and worked.

The Bush and Obama administrations were not so bold. Their proposals were and are perverse. They will clearly not create the jobs and purchasing power necessary to end the recession. This perversity, doing the worst thing possible, arises from a strange coalition of Republicans, their Tea Party right wing, Obama's curious obsession to compromise and a completely unrepentant financial sector. Together they conspired to let the debt and deficit crisis, a problem for 20 years from now, overshadow the desperate need for an economic stimulus that would create jobs.

The financiers demanded and got trillions of dollars of government bailout money to rescue them from a financial crisis their incompetence and greed created. Now they are negotiating with the 50 state attorneys general to buy complete civil and criminal immunity for a measly $20 billion. They were able to so water-down Obama's Wall Street Reform and Consumer Protection Act (Dodd-Frank) that it perversely ensures continuation of the status quo, another financial crisis and a continuation of our current Depression.

So far, there is no plan in place or even being discussed to repair our morally and financially bankrupt financial sector. It continues careening lawlessly through our lives, fraudulently creating foreclosure documents, making huge profits on the trillions of dollars the Federal Reserve lent them and, at the same time, not doing their job of providing investment funds that would provide work and wages.

All the powers-that-be are focused on the debt ceiling crisis. They are determined to force austerity on working families. But lower wages, smaller benefits, and slashed entitlements will destroy, not create jobs. The bankers who actually created the crisis are being rewarded with privileged access to the Fed's piggy bank, extraordinary profits, legal immunities and continued domination of our economy. All offer perverse outcomes and a slower economy.

John Maynard Keynes once stated the hope that economists would someday be as useful and exciting as dentists. So shouldn't be with bankers. We should hope the banking will someday generate all of the excitement of the public utility like water and sewer.

Banking was close to this from the 1934 formation of the SEC to the deregulation of the 1980s. There were controls on how much interest could be charged, what kind of financial instruments could be offered and how banks could organize and risk their own money versus their customers' money. The banks; used a 3-6-3 system; they paid 3 percent interest to borrow money, lent that money at 6 percent and played golf at 3 PM.

That system worked for all of us and financed the most prosperous, most stable and longest period of middle class middle class middle class growth in American history. Yet no one is prepared to be harsh with the financial sector: it is now too rich to be bought, too strong to be controlled and too big to fail.

FDR appointed Joe Kennedy, Jack's father and one of the nastiest traders ever to stride Wall Street, to head the SEC when it was formed. Why can't President Obama find an SOB like that when we need him.

Final 9-13-11 A Crime against Ourselves

The attacks on the World Trade Center, the Pentagon and Flight 93 were horrendous crimes. Nothing was supposed to be the same again. In reality, the potential impact should not have been financially, militarily or politically consequential. The impact became enormous only because we made it that way. We chose to turn a politically motivated crime into a system-threatening act of civilizational war, which it certainly was not. From there it has been all downhill and we have no one to blame but ourselves.

It wasn't that long ago, the 1990s leading up to 2000, that things were pretty good. Economically, the American economy was growing in size and efficiency, with a budget surplus and little or no inflation. Militarily, the Soviet Union and the Cold War had melted away; no military foe could threaten us. In foreign affairs, the European Union was completing its political unification and China was moving toward a market-oriented economy. Politically, the most serious problem seemed to be lying about sex. America stood as a colossus, the envy of the world.

Then came 9/11 and all bets were off. Ten years later we have depression-level unemployment, a "Long War," an intrusive national security state and the expectation that things will get worse with a further loss of civil, human and privacy rights. You can tell how bad it is from the politically muted commemoration of 9/11, especially the lack of self congratulation or the usual American triumphalism.

The conventional wisdom on the causes and consequences of the 9/11 attacks and these subsequent 10 years reflects the spin of those who were in charge and making some very bad decisions. The official line, as presented by the pundits and press, says that the president found his voice at the attack site and rallied a united America to face a forever changed and insecure world. The extremist Muslim terrorists were met firmly with a Global War on Terror. The president quickly and effectively carried the attack to the Al Qaeda haven in Afghanistan and by invading and occupying Iraq removed the possible threat of the use of weapons of mass distruction by Saddam Hussein.

The president told us that nothing was the same but that we could and should act as though it were the same and go shopping.

The actual narrative is something quite different. It is a different world after the 9/11 attacks because we chose to call those atrocities acts of war rather than crimes. We essentially militarized our response. We claimed the right to do whatever we thought appropriate to protect our national interest. We acted without any regard to the rules of warfare, the Geneva conventions or common sense. We set up the National Security State which gave us a permanent state of war or what the Bush administration hopefully called "The Long War." Those atrocities turned the world against us.

That "permanent state of war" became the excuse for everything. The invasion and occupation of Iraq may have cost us $3 trillion but we are going to eventually, and maybe even shortly, leave Iraq and the mess we made. But if Iraq is transitory, the Long war is not. America now has armed forces in almost a 100 countries and is fighting in a half-dozen wars (Libya, Yemen, Somalia, Afghanistan, and Pakistan) that we know of.

In the attempt to maintain normalcy in America, the response to 9/11 was outsourced to corporate America, the military-industrial complex. The response was privatized and offered to the highest bidder. Pres. Eisenhower warned us about the "acquisition of unwarranted influence" by the military-industrial complex. Terrorism replaced the communist menace to ensure that that influence continued and remained beyond political control. It is the reason we have a Long War. We now spend wastefully on security to the neglect of everything else. We can't afford schools, highways or public service but we can afford anything that supposedly heightens security. We have to feed the beast we have created with profits and the lives of the young and the poor.

In 10 years we have gone from an open, almost carefree society to a locked down, closed off community of shared fear. The security industry dominates our lives. We have to be screened by metal detectors before entering any public building. Every community has to have a black-hooded, armored SWAT team At last count there were 1, 271 government organizations and 1, 931 private companies in the counterterrorism and intelligence community.

The legacy of 9/11 is that America gave up, to quote Benjamin Franklin, "essential liberty to purchase a little temporary safety." We got neither. We have to end this war on ourselves and find a way, to use a World War II phrase, to "return to normalcy."