The Rot Our Rulers Have Wrought

Going down: "It's an express elevator to hell!"


As the elevator doors opened to receive him on the 109th floor, the meek little man -- we'll call him Steve -- was preoccupied with work-related thoughts.


A slightly built man with unfortunate coke bottle glasses and a downright tragic haircut, Steve had little time in his unremarkable life for anything other than work.


The doors closed behind him with the predictable muted ring, and Steve yielded himself to the familiar, comforting insipidity of the Muzak that enveloped him. Scant seconds later, that anesthetizing caress was rudely interrupted by a decidedly unfamiliar jerking sensation and a loud snap.

For the smallest perceptible fraction of an instant, just long enough for Steve to realize what had happened, the elevator car seemed to be suspended -- and then it began a catastrophic uncontrolled plunge from the top of the skyscraper. Steve found himself racing toward the ultimate unwanted invitation at the rate of 9.8 meters per second squared.


As the mortally stricken elevator bucked and shuddered, Steve frantically pounded at the alarm, dimly remembering that there was an attendant on duty who might be able to activate an emergency brake. He had no way of knowing that the uniformed attendant had surrendered himself to slumber, and neither heard the urgent buzzing of the alarm nor saw Steve's horrified face on the closed-circuit TV monitor.


The car continued to accelerate as gravity's pitiless grip tightened on its hapless prize. A scream gathered in Steve's throat and began to tear its way out when suddenly he saw a flash of light to his left.


From that burst of radiance coalesced the oddest sight Steve had beheld -- the "Buddy Smooth Trio," a beatnik ensemble of vocalist, drummer, and upright bass. At this moment of ultimate mortal peril, these heralds from some unseen realm had arrived to comfort and reassure Steve. As his rhythm section laid down a solid groove, and an unseen horn section added some posh accents, Buddy Smooth shared the glad tidings with Steve:

You're gonna win; you're gonna go
You're head of the pack, you're king of the show.
You're on the move -- straight to the top!
You're way out in front -- you'll never stop!
You're gonna win ... you're gonna win!


In defiance of reason and the inevitable fate that faculty understood, Steve found himself oddly comforted by the message.


Yeah, I'll be all right, he thought as he involuntarily bobbed to the beat. Something will happen to stop this before it hits the bottom.


"I'm gonna w-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-i-n-n-n-n-n-n," Steve sang tonelessly at the top of his lungs as the elevator continued its inexorable course toward the center of the earth, a trajectory that would soon be rudely interrupted by the earth's unyielding surface.


That vignette was one of several masterpieces of random, ironic advertising used to promote the Comedy Central cable network about a decade and a half ago. Each variation on the theme -- immediate, non-negotiable doom briefly deferred when the mystical jazz trio materializes -- ended with Penn Gillette's gruff baritone admonishing the audience: "Think positive -- there's always Comedy Central."


This was a brilliant, if ephemeral, bit of marketing. For our present purposes, however, both poor Steve's fate, and the brief, delusional epiphany that comforted him in the seconds prior to his demise, offer a very suitable metaphor for our economy. The elevator is still plunging, and its death-dive is accelerating. The laws that dictate the impending crash are as unalterable as the law of gravity, and the realities against which we will soon collide as remorseless as the ground that greets a runaway elevator.


Yet there are some who, heeding the song of a mystical jazz trio only they can hear, are muttering to themselves: "Yeah, it'll be all right. Something will stop this before it hits bottom." This happy illusion has been abetted by the supposed rally of the dollar, which has led some -- including the clinically deranged Jim Cramer -- to say that we've reached the bottom and begun a turn-around. Well, wouldn't it be lovely to think so?


Banks are failing with the hebdomadal consistency of a politician's election-year church attendance. The rot spreading through the banking industry is quickly destroying the foundations of some very large institutions: Merrill Lynch and Wachovia are in severe peril of failure, with write-offs much larger than assets on hand.


The familiar prescription, of course, is more "liquidity" from the Fed, but this is the main vector along which the contagion is spread. Stock values for Fannie Mae and Freddie Mac are collapsing as investors accelerate the inevitable outcome -- a decline in share price to zero. This result will most likely come as the result of a federal bail-out, a prospect clearly anticipated in the rescue bill enacted just weeks ago.

His name is Mudd: Fanne Mae CEO Danniel H. Mudd, who richly deserves to be kissed "upside the cranium with an aluminum baseball bat."


The corporatocracy in charge of Fannie and Freddie are being sheltered from their own criminal incompetence and malignant dishonesty. How criminally incompetent were they, you ask? The Washington Post recently reported that Daniel H. Mudd, the delightfully named CEO of Fannie Mae, boasted in a January 2007 internal memo that expanding the company's portfolio of sub-prime and other, ahem, exotic mortgages was an unqualified success, since it was a way of "optimizing our business."


Sure, Fannie knew those loans had already started to reek, but -- with the same delusional assurance Steve displayed in mid-plunge -- Mudd insisted that those feculent loans would be miraculously sanitized by year's end. And even as the stench of those loans grew unbearable, Fannie continued to underwrite them as a way of gaining market share.


The same conditions prevailed over at Freddie Mac, with CEO Richard Syron learning no later than 2004 that the company's financing of bad loans posed "an enormous financial risk ... to the company and the country."


Weep not for Mudd and his fellow malefactors; they're feeling no pain and, we can assume, based on previous performance, no embarrassment. Meanwhile, new "accountability" standards, largely inspired by the malfeasance of that same politically protected corporate elite, are being passed along to relatively responsible lenders who seek to finance or re-finance homes.


While this is the kind of pain we must expect if anything is to be salvaged from this economy, to be of any real help that pain would have to be distributed more equitably, something that will never happen as long as the criminals running Fannie and Freddie are backstopped by the "full faith and credit" -- I pause here for a moment of hysterical, incredulous laughter -- of the Regime.

Syron's song: "Don't worry, be happy, send money," croons Freddie Mac CEO Richard Syron, seen here clumsily improvising a Hula dance during congressional hearings into his company's criminal misconduct.

Shareholders in Fannie and Freddie are being annihilated, but the bondholders will do all right. Significantly, one of the chief foreign bondholders is Moscow, which is most likely in the mood not to do us any favors.


At the beginning of the year, Russia had about $100 billion (roughly one-sixth of its gold and forex reserves) invested in Fannie and Freddie paper. Moscow made a tidy $1 billion off that paper during the first half of the year. Ivan hasn't been hurrying lately to buy more, but he hasn't dumped any, either.


If and when Moscow executes the Big Dump, it will likely come for strategic, rather than strictly pecuniary, reasons. It would profit handsomely if Washington nationalizes Fannie and Freddie outright, a move that would have roughly the same effect on our economy that putting a rocket booster on the retreating end of the free-falling elevator would have on poor Steve. The luxury of Moscow's position is that it can either use its financial leverage against us, or simply wait for Washington to finish destroying what remains of our wealth.


Either way, commented deputy finance minister Dmirty Pankin during a recent news conference, the effect on Russia would be "minimal." Either way, the United States, which (as European historian and commentator John Laughland explains) is presently a more socialist system than post-Soviet Russia, is headed for a world-historic crash, and there's not a thing Buddy Smooth, or Ben Bernanke, can do to prevent it.


It's a new and unwelcome variation on an old and familiar story: Washington, blinded by hubris, has been micro-managing a far-flung empire even as our country descends into rot and ruin.


Already, many states are haunted by the ghost-towns of would-be exurbs, and the residential sections of many cities have become blighted with vacant houses and choked with overgrown weeds. Grim vistas of that kind give a true glimpse of our economic condition, a reality check as reliable, and as unwelcome, as the picture of Dorian Gray.



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Dum spiro, pugno!

The Big Bailout: America as a Full-Spectrum Kleptocracy

Where this is headed: Eventually the thieves will turn on each other. In fact, it's happening right now.



Its name somewhat anachronistically means "assembly of old men." George Washington famously -- and, it must now be admitted, with excessive optimism -- characterized it as an institutional saucer intended to cool legislation passed in the intemperate heat of the moment. Its members demand, with entirely unwarranted self-approval, to be called, collectively, the World's Greatest Deliberative Body.


Sober observers understand it to be the most corrupt legislative assembly in human history. To those characterizations of the United States Senate we must now add another, perhaps the final one: Gravedigger of the republic.


With the Senate's passage of the Fannie Mae/Freddie Mac bailout last Saturday (July 26), the United States of America has now become the world's first full-service kleptocracy, a form of government described earlier in this space as a government of, by, and for the robbers.


We are supposed to pretend to believe that the Senate, so great was its anxiety over the nation's economically distressed homeowners, met in a rare Saturday session for the sole purpose of administering the balm of Gilead on hardworking families who confront the bleak prospect of foreclosure.


There may be people who believe such a thing, or at least profess to do so. They are pretty much the kind of people who believe that peace, prosperity, and progress will magically ensue after next January 20, when the Holy One, Barack Obama (peace be upon him) ascends to the presidency, not astride a White Horse, but rather mounted upon a flying unicorn that emits healing rainbows from its butt.


No, it's not the travails of the productive that would earn such attention from the Senate. When the Senate sacrifices so much as a minute of its down time, it does so not to relieve our burdens, but to add to them in the interest of their fellow parasites.


Thieves in suits, the private sector version....

When Congress created the Federal Reserve in 1913, it did so in a lame-duck session. The Fed's proponents described its handiwork as an independent entity that would prevent "panics" and maintain the integrity of our currency and financial system.


The Fed was presented to the public in pseudo-populist drag: It was supposedly the bane of the big banking interests. This was, in every particular, a conscious inversion of the truth. The Fed was, is, and every shall be a product and protector of those interests. It has practically destroyed the value of US currency, and engineered numerous financial crises, including the one currently unfolding.


The measure passed last Saturday is being described to the public as a "homeowner" bailout. It is nothing of the sort. It supposedly creates an independent oversight mechanism to rein in the excesses of Fannie and Freddie. This, too, is an unalloyed falsehood.


Let us disambiguate the key issue right now. This is a measure to nationalize Fannie and Freddie, plundering the population at large -- through direct taxation, the more insidious tax called inflation, or both -- to bail out two fascist entities that have been used to enrich the politically connected super-rich through the most corrupt means imaginable.


Furthermore, this measure prefigures the eventual nationalization of the entire financial system under the supervision of an executive branch official with practically unlimited power to appropriate and allocate funds without congressional action. OK, sure, he has to file a report with Congress regarding his expenditures. But this takes place after the fact, and Congress will be able to do nothing but complain, if it can bestir itself even to that extent.


Thieves in more expensive suits, the public sector version: The Senate Democratic leadership. The Republicans, of course, are just as bad, if not worse.


Congress has yielded its war powers to the executive branch. It has now effectively surrendered the power of the purse, as well. What, then, remains by way of the legislative branch's ability to check the executive?


Nobody responsible for this is willing to admit that truth; they're too busy taking refuge in contrived ambiguities.


The figure sent out to pollute headlines and palliate a nervous public last week was that fixing Fannie and Freddie will cost "at least" $25 billion. That's a bit like saying there are "at least" 25 gallons of water in Lake Michigan.


The Congressional Budget Office, in an artful display of tactical equivocation, said that the bailout could cost anything from $100 billion down to "nothing." That latter estimate would be dismissed as magic thinking were it not a transparent and cynical effort to propagate such delusion among that part of the public paying attention to the ongoing economic collapse.


As the Wall Street Journal summarized, the $25 billion figure was arrived by following a time-honored government accounting algorithm: Some accountant at the CBO threw a dart at the wall. In fact, the bailout measure places in the hands of Treasury Secretary Henry Paulson the discretionary authority to pour as much money into Fannie and Freddie as he deems necessary. He can extend an unlimited credit line to either or both of those government-chartered companies; he can use federal funds to buy shares in either, or both.


There is no limit to what can be spent on the bailout, or the extent of government involvement it will entail. In his efforts to lobby congressional Republicans on behalf of the bailout, Paulson reportedly assured them that he has "no intention" of using those extraordinary powers. This means, of course, that they will be used immediately. It also means, inevitably, that Fannie and Freddie will be nationalized, and that taxpayers will pay the full burden of the bailout.


Senate Republicans -- clap-torn whores, every one of them -- put up a show of reluctance, perhaps because the White House likes a little role-playing action of that sort. This meant that Treasury Secretary Paulson had to convene several meetings with Republicans in order to pretend to overcome their reluctance to support a measure that will impecuniate their constituents in order to pay off the imponderably huge bad debts assumed by politically protected thieves.


The Fannie/Freddie bailout is another example of the familiar equation behind corporatism (or, to use the more loaded synonym, fascism): The risks are subsidized, the losses are socialized, and the profits are privatized.


There are former corporate executives who spend their days looking at striped sunlight and showing with their backs to the wall for crimes identical to those of former Fannie CEO Franklin D. Raines and his comrades. But because Raines and his posse used a Government-Sponsored Entity to commit their crimes, they're free to enjoy nearly all the fruits of their fraud.


The Great Poker Face, he ain't: Paulson looks on in visible alarm as his dimwitted boss pontificates on the supposed health of the US economy.


I find it remarkable that next to nothing has been said by way of condemning Raines and his fellow corporatist thieves.


Doing so is nearly as unthinkable as permitting those two government-sponsored companies to fail, as they should.

According to former Treasury Secretary Lawrence Summers, the bailout wouldn't be necessary if people were willing to do their part by throwing their money away without the government forcing them to do so: "Emergency legislation was necessary because market participants were unwilling to buy Fannie and Freddie's debt; investors doubted that the government-sponsored enterprises were healthy enough to repay it and did not draw sufficient reassurance from the implicit guarantee of federal support." This is why, according to Summers, "Anyone who cares about the health of the US economy should welcome the ... rescue plan for Fannie Mae and Freddie Mac...."















Quick quiz: What's the difference between a common armed robber (such as this convenience store bandit), and the Federal Reserve? The first steals money from the cash register; the second steals the value of the money in the cash register.



Imagine an armed robber lecturing his victim that it wouldn't have been "necessary" to threaten the victim's life, and the lives of his family, if they had simply handed over their money on demand, and you'll have a suitable moral parallel to the statement above. Eventually -- and for that, read "pretty damn soon" -- the entire daisy-chain of fraud we call our financial system will devolve into a scene of violent chaos akin to the denouement of Reservoir Dogs, only immeasurably bigger and unimaginably bloodier.


Already, the robber's pact holding the system together is starting to fray, as fractional reserve banks start gagging on each other's IOUs. Witness the fact that cashier's checks being issued by California's newly federalized IndyMac bank aren't being honored by other banks: Customers who cash out of IndyMac are finding that they won't be able to access their funds for up to two months. It's not difficult to imagine the impact this will have on households who expected to use those funds to make mortgage or tax payments, or have other irrepressible financial needs.


It took roughly a tithe of FDIC's deposit insurance fund to bail out IndyMac. Last week's bank failures -- First National Bank of Nevada and Arizona's First Heritage Bank -- involved combined assets of about $3.6 billion.

With Wachovia, Washington Mutual, and many other major banks primed to blow, the day will soon come when -- in the words of James Kunstler -- the FDIC will simply "choke and croak on this wad of losses.... When American depositors get screwed out of their deposits" -- as they already are; vide the observation above regarding IndyMac's dodgy cashier's checks -- "the full force of the fiasco will drag the dollar underwater like the legendary Kraken of old preying on a babe thrown overboard. Then the forces of darkness will really be loosed."


Last week, Congress went on record regarding its priorities: With a handful of noble exceptions (conspicuous among them the stalwart Rep. Ron Paul of Texas), they demonstrated a willingness to ruin what remains of the dollar and destroy the Middle Class in order to rescue -- temporarily -- the uber-rich Robber Class.


The people responsible for this betrayal will be campaigning in their districts during the coming weeks. It would be instructive to them, and may be heartening to their victims, to see at least a few of them on the receiving end of timely and forceful rebukes, delivered in language -- and other expressive conduct -- appropriate to the occasion, and prevailing security environment.



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Dum spiro, pugno!

Why Aren't We Furious?

"Temperature -- rising; vision -- blurring; rage -- taking over!"


A few nights ago, at the end of a day devoted to productive and pacific pursuits, after you had surrendered to a few hours of well-earned sleep, the people who presume to rule us raided your bank accounts.


No, I'm not referring to the Regime's ability to monitor your financial transactions, a power displayed to dramatic effect in the prostitution sting that ended Eliot Spitzer's lamentable career. Yes, you've probably been subject to totalitarian scrutiny of that sort at some point as well, but that's a topic for another occasion.


Right now, I'm talking about the Federal Reserve's most recent wealth redistribution plan, through which hundreds of billions of "dollars" will be created in an effort to stave off bank failures -- an effort that will not succeed.


To create this so-called "money," the Fed has to steal the value of what each of us has earned, saved, or invested.


Imagine how outraged you would be to learn that a thief had stolen your identity and used it to siphon your savings in small, subtle increments, until you and your family are driven into destitution.
















The dollar's value vs. Swiss franc over the past six months: When the dollar's trend-line begins to look like an Alpine ski run, you know things are getting nasty.



This is exactly what the Fed and the Regime it serves are doing to you right now -- bleeding your wealth with silent implacability. Over the past six months alone, the "dollar" has shed one-fifth of its value (as measured against other currencies). Run the math, which is simple enough for even Sean Hannity to understand (assuming that we s-p-e-a-k r-e-a-l-l-y s-l-o-w-l-y and illustrate our points with pretty pictures): At that rate, by mid-2010, the dollar would be entirely worthless.

But there's no reason to assume that the decline will continue at its present rate. None at all.


Things will only get worse from here.


Some analysts keep warning that the dollar may abdicate its role as the world's reserve currency, thus mimicking the trajectory of the last global imperial currency, the British pound.


These warnings were timely half a decade ago. They are badly out of date now: The dollar has already lost that status for merchants in Manhattan, investors and entrepreneurs in India, peasants in Bolivia, businessmen in Brazil ... that is, in the view of people who work, earn, save, and invest and have the option of conducting their affairs in currencies other than the Hegemon's increasingly worthless fiat scrip.

At least they burn: A German housewife finds a suitable use for her country's useless currency during the hyperinflation of 1923. Some have suggested at least one other possible use for fiat currency, but unfortunately it's neither soft nor absorbent enough.


James Howard Kunstler, whose blog is as indispensable as its tragically appropriate name is unpronounceable in polite company, dispels the booming, buzzing confusion and lays bare the stark reality of our predicament:


"The US faces a pretty stark choice right now: it can let the losers take their losses -- both the big institutions who created and traded in fraudulent securities, and all the "little guys" who borrowed too much money trying to get rich quick, or trying to live like the millionaires they see on TV. We can let them go down, and suffer the consequences of their bad choices (and maybe prosecute some of the culpable bankers and corporate executives); or, in an effort to let these losers off the hook we can wreck the whole machinery of capital by making our medium-of-exchange worthless."


"The people in charge -- both in and out of government -- can't face the losses, so for now they've apparently decided to wreck the currency," he concludes.



Those people know what they're doing, and they understand the inevitable result. Alan Greenspan, who deserves to taken to the Great Pit of Carkoon and there be fed to the Sarlacc,**
has admitted that the economy he manipulated for decades is headed "over a cliff" (which, if you'll forgive me for belaboring a point, is where Greenspan should be headed -- right over a cliff and into the remorseless beak of the all-powerful Sarlacc).


A few weeks ago Greenspan advised Arab investors to flee from the dollar he had debauched. The course being followed by his successor, Ben "Auto-Gyro" Benanke, is intended to insulate the wealthiest and best-connected members of the corporatist elite while exposing the rest of us to ruin.


















"I shall leave you as they left Weimar Germany: Marooned in a dead economy ... buried beneath inflated currency..."

"BERNANNNNNNNKEEE!"


Why aren't we incensed by this? Where are the rivulets of rage that would eventually coalesce into one mighty, cleansing flood of fury?


Sure, Americans get pissed whenever they see the price of gas vaulting to new highs, or find that their grocery bill has suddenly and dramatically put on weight. They get bent out of shape when they go to the local Big Box Mart and find that the promised "low prices" are suddenly steeper than they expected. They're increasingly anxious with each passing month, as the essentials of living become increasingly expensive, despite soothing assurances from our rulers that "inflation" is negligible.

















Sure, we're permitted --nay, encouraged -- to worry about stuff like this: A bomb disposal officer inspects a backpack accidentally abandoned near Wall Street. We have the Regime's permission to take alarm over "threats" of this kind, as it suffocates our liberties and obliterates our wealth.


And as the American middle class founders in debt, the ruling caste has never done better.


Consider the job performance of Congress since 2001. Through a combination of native corruption and emasculated deference to an overtly dictatorial Chief Executive, Congress has created the most imponderable government debt in history. It has permitted our nation to become mired in two distant wars of attrition, with a final estimated price tag of something in excess of $3 trillion. It has annihilated the Bill of Rights and common law due process protections while abetting the malignant growth of a militarized garrison state. It has institutionalized torture, the ne plus ultra of tyrannical depravity.


If job performance of this kind were subject to market discipline, practically everybody on Capitol Hill (with at least one noble exception) would be reduced to selling plasma. Instead, the incumbents who have wrought this disaster enjoy almost unassailable job security, making themselves wealthy while leaving productive people impecunious. Between 2004 and 2006, the net worth of the typical Congressbeing increased by 84 percent; the median net worth of senators was $1.7 million, that of the lowly tribunes of the masses in the House a mere $675,000.


Granted, politics has always been a lucrative profession, in the worst sense of that expression. Previous republics have degenerated into kleptocratic empires and succumbed to both financial and moral. But that historic perspective should whet our outrage, rather than blunting it.


"That public men publish falsehoods Is nothing new. That America must accept Like the historic republics corruption and empire Has been known for years. Be angry at the sun for setting If these things anger you."


With all due respect -- and much of it is due -- to the author of those words, there was nothing inevitable about our nation's descent into empire. And yet ... here we stand, at the brink of utter ruin.


Why aren't we furious about this?


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Dum spiro, pugno!

_____
*I use the term "dollar" here in reference to Federal Reserve Notes for the sake of conversational convenience. Since being deprived of its connection to gold, the currency issued by the Federal Reserve has ceased to be a dollar in any authentic sense.

**Within the Sarlacc's digestive tract, Greenspan would "find a new definition of pain and suffering as [he is] slowly digested over a thousand years."