Article 43


Bad Moon Rising

Sunday, January 12, 2014

Bad Moon Rising Part 66 - Book As China Goes, So Goes the World


As China Goes, So Goes the World
How Chinese Consumers Are Transforming Everything

By Karl Gerth
Hill and Wang

In this revelatory examination of the most overlooked force that is changing the face of China, the Oxford historian and scholar of modern Asia Karl Gerth shows that as the Chinese consumer goes, so goes the world. While Americans and Europeans have become increasingly worried about Chinas competition for manufacturing jobs and energy resources, they have overlooked an even bigger story: ChinaҒs rapid development of an American-style consumer culture, which is revolutionizing the lives of hundreds of millions of Chinese and has the potential to reshape the world. 

This change is already well under way. China has become the worlds largest consumer of everything from automobiles to beer and has begun to adopt such consumer habits as living in large single-occupancy homes, shopping in gigantic malls, and eating meat-based diets served in fast-food outlets. Even rural Chinese, long the laggards of consumerism, have been buying refrigerators, televisions, mobile phones, and larger houses in unprecedented numbers. As China Goes, So Goes the World reveals why we should all care about the everyday choices made by ordinary Chinese. Taken together, these seemingly small changes are deeper and more profound than the headline-grabbing stories on military budgets, carbon emissions, or trade disputes.

Posted by Elvis on 01/12/14 •
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Sunday, December 29, 2013

Bad Moon Rising Part 65 - 1914 And Today


Will 2014 See a Repeat of 1914?

By James G. Wiles
American Thinker
December 29, 2013

Will 2014 see a repeat of 1914?

That’s the provocative question asked in a PENETRATING ESSAY by Oxford don Margaret MacMillan that is causing quite a stir around the world since it first appeared on the Brookings Institution’s website on December 14. 

Here’s the question that Professor MacMillan addresses: does CHINA’S REEMERGENCE as a dominant economy and world power for the first time since the 1400s THREATEN a new world war? MacMillan’s conclusion?

Quite possibly.  Even more startling, the LEAD EDITORIAL in the year-end double issue of The Economist reaches the same conclusion.

And foreign policy scholar Walter Russell Meade of Bard College ADDRESSES THE SAME TOPIC in his own online essay, entitled “The End of the End of History.”

All told, they constitute a year-end triptych of essential foreign policy reading.  For, remarkably in the Age of Obama, all these liberal writers condemn the dangerous foreign policies of not only the current administration in Washington, but also the leaders of the Western alliance, including Japan’s Prime Minister Shinzo Abe.

Cold War historian Anne Applebaum on Thursday added HER OWN TAKE in the Washington Post.  Applebaum wrote that, while no renewal of the Cold War is in prospect, China and Russia are plainly probing U.S. alliances and defenses for weaknesses—and exploiting those weaknesses when they find them.

As 2013 ends, it turns out that much-reviled former U.S. Secretary of Defense Donald Rumsfeld was right.  Weakness is provocative.  And, as Anne Applebaum wrote this week, the Obama administration’s weakness abroad is showing.

So, are China, Japan, and the United States inevitably headed for a world-ending collision like that among Great Britain, France, Russia, Austria-Hungary, and Germany in the First World War?  There’s probably no more important question in the world today.  And, as our authors all note, that question is not receiving anywhere near the attention it deserves.

Besides the current shoving match in East Asia, it’s the 2014 centennial commemoration of the beginning of the Great War that is prompting this new scholarship.  MacMillan’s essay—and her new book, from which it proceeds, The War That Ended Peace: the Road to 1914 (2013)—are only part of it.  Yet her personal and academic background give Margaret MacMillan’s argument special force.

A Canadian, MacMillan is the granddaughter of the late British Prime Minister Lloyd George.  As a historian, she’s the author of the best-selling—and highly recommended—Paris 1919 (2003) on the Versailles Peace Conference.  After writing about the treaty that ended the First World War (and largely led to the second one), it was natural to turn to the causes of that war.

The Guns of August, as Barbara Tuchman titled her 1962 study of WWI’s outbreak, aborted the world’s first economic globalization.  Do developments in Asia and elsewhere threaten to do so again today?

MacMillan’s short answer is taken from Mark Twain.  History doesn’t repeat itself, Twain said.  “But it does rhyme.”

Then she turns to the evidence.  She notes, drawing on her new book, the disquieting parallels between 2014 and 1914.  Here they are in brief, using the names of the players in 1914:

* A globalized economy in which Germany and the United Kingdom were each other’s largest trading partners.  A smug belief, among the intelligentsia and national leaders of the day, that this fact made war impossible.  Also a belief that existing international arrangements will be able to prevent an outbreak of mass warfare.

* An arms race, especially at sea.

* A revolution in communications, science, and technology, making possible a new paradigm for violence and ways of killing.  A military not facing the consequences of the new technology of human killing for strategy, tactics, and casualty rates.

* A rising Germany seeking an equal “place in the sun” with the British Empire, control of sea lanes to overseas colonies, and sources of raw materials and living space for its soaring population.  A fading France, once already beaten by Germany, now outnumbered and outgunned by Germany and fearful of the future.

* Not least, weak, indecisive, and inexperienced leadership on the British and French side (not to mention Imperial Russia) and a thrusting, hot-tempered, and dominating kaiser on the other.

Then there occurred, as Bismarck predicted, “some damn thing in the Balkans.” The Economist’s leader identifies the modern counterparts to these players (and places) of 100 years ago.  Regular readers of American Thinker won’t need it.

Thus, Professor Margaret MacMillan’s take.  Now, a little context.

Unsurprisingly, it was former Secretary of State Henry Kissinger who first noted the new American foreign policy challenge posed by the rise of China.  It was, after all, President Richard Nixon and his then-national security advisor Kissinger who ended Red China’s isolation from the Western nation-state system in 1972.

In On China (2011), Kissinger wrote that the Chinese leadership itself has been keenly aware of whether China’s rise in the 21st century will parallel that of Germany in the 20th.  And they are also keenly anxious to refute that comparison.  Kissinger devoted the last section of his book to the famous 1907 CROWE MEMORANDUM.

That key British Foreign Office documentassured Great Britain’s leaders that confrontation with Imperial Germany was inevitable and recommended a hard line by the British government against future German demands.  The result, seven years later, was World War I.

Kissinger’s conclusion in 2011, however, was that a benign debut of China on the world stage is both desirable and possible—but that the relationship needs constant managing.  You might call Kissinger’s prescription “the Gulliver Strategy.” China, Kissinger argued, needs to be enmeshed, as a player but not a prisoner, within the existing structure of international agreements and organizations.

It’s far from clear, however, that that’s what the new Chinese leadership wants.

In particular, rather like the Imperial Chinese government’s reaction to the first European ambassadors in the late 1700s, a Chinese leader in 2014 might well ask himself why his ancient nation should buy into a Westphalian world system that China did not help create.  All the lines on the map were drawn by the European powers (and the U.S.) when China was on its knees!  America’s insistence that China stay within those lines—not to mention the U.S. Navy’s insistence on steaming 5,000 miles from their own home and only 100 miles off the Chinese coast—looks remarkably like, in Chinese eyes, a re-run of “containment.”

That’s especially the case given China’s historical perception of itself as the center of the world and of its culture and nationality as superior to all others.

There is simply no evidence that those fundamental Chinese attitudes—noted as well by Teddy White in his memoir, In Search of History (1978)—have changed since the coming of Mao and his Communists (whom White knew as a Chinese-speaking correspondent in China) to power in 1949.  To the contrary, White (who traveled with Nixon back to China in 1973) found them still very much present.  Nor has the current Chinese leadership’s belief—accurate, unfortunately—that China was victimized, dismembered, exploited, and oppressed by the European powers in a series of wars and “unequal treaties” in the nineteenth and twentieth centuries.

Japan’s brutal occupation, war, and crimes against humanity in China during the Second World War has not been forgotten, either.  Prime Minister Abe’s VISIT THIS WEEK to the controversial Yasukuni Shrine in Tokyo has only rubbed this wound raw again.

Yet “peaceful rise” has been the by-word in Beijing’s public statements for some years.  The problem is that the Chinese leadership’s actions—at least in the eyes of China’s neighbors—do not match their words.

Indeed, in the last month, we have seen a series of actions by the Chinese government in the East and South China Seas.  First, on November 23, Beijing unilaterally proclaimed an air defense identification zone (ADIZ) in the East China Sea overlapping islands claimed by both China and Japan.  That’s made Japan, South Korea, Vietnam, and the Philippines distinctly more belligerent towards the Chinese.

Second, three weeks ago, an American guided-missile frigate and the Chinese naval vessels escorting China’s new aircraft carrier came within two hundred yards of a high seas collision.  The U.S. says the confrontation occurred in international waters.  China’s account as to what transpired on December 5 DIFFERS RADICALLY from the U.S. Navy’s account.

Pretty clearly, the USS Cowpens was shadowing the new Chinese carrier.  And, pretty clearly, the Chinese admiral didn’t like it.

Why should they?  Once again, China has history—and more than a little merit (in terms of foreign policy realism)—on its side.  Imperial China, centuries ago, controlled all these disputed areas.  Ming China also ruled large parts of what is now Russian Asia.

Thus, it can be argued that, from a great power perspective, all China is seeking in its nearby territorial space is what the United States has possessed in the Caribbean and the Western Hemisphere since its unilateral proclamation of the Monroe Doctrine in the 1820s and America’s building of the Panama Canal in the early 1900s.

So, what’s the real game here, as what Walter Russell Meade has labeled “the Game of Thrones in Asia” continues to build?  As Anne Applebaum writes, “China surely doesn’t want (another) war with the United States.  What is Beijing after?”

One distinct possibility is that China’s island disputes with Japan, the Philippines and Vietnam and its proclamation of an ADIZ in the East China Sea—especially if that move is followed with the proclamation of an ADIZ in the South China Sea—are all merely markers to be traded away by Beijing in a high-stakes game whose real objective (and ultimate prize for China) is the recovery of Taiwan.  The loss of what General Douglas MacArthur called “an unsinkable aircraft carrier” off the Chinese coast would set the United States’ presence in East Asia back significantly.

Beijing may even be ultimately seeking something larger: a grand bargain with the United States to remake Asia.  China and the United States, after all, fought a conventional war against each other in Korea from 1950 to 1953.  At least 33,000 Americans died and at least 150,000 Chinese in a two-and-a-half-year war.  Very few Americans remember this.  Almost all Chinese do.

China’s insistence today on the so-called nine-dotted line, the first and second island chains, the string of pearls, and all the rest needs to be evaluated in the light of that history as well.

If the negotiated restoration to Beijing of Taiwan (say, after a plebiscite) could be made part of a “Grand Bargain” between China and Washington that also addresses the presence of U.S. troops in South Korea in the context of solving the problem of a nuclear (and unstable, not to mention a humanitarian disaster) North Korea, the United States, in my judgment, might find the Chinese well-disposed to deal.

But such a grand bargain would upend the existing post-WWII security arrangements in East Asia.  It would also greatly discomfort America’s allies in the region.  It might destroy ASEAN and the American-Japanese mutual security treaty.  A nuclear-armed Japan would be only one short-term result.

And such discussions could certainly not be undertaken by the current administration.  Yet, such a grand bargain with America—which would restore China to its historical position in Asia—may very well be what the new Chinese leadership wants.

What must be faced, therefore—Barack Obama’s much-hyped “pivot” to Asia notwithstanding—is that we are now in danger of a repeat of experiencing, with China, Bismarck’s “some damned thing in the Balkans”: an international incident triggering a shooting war. Such a causus belli is most likely to occur not between us and the Chinese, but between China and Japan or China and South Korea.

As the Economist said this week, unless all the pushing and shoving is brought under control, the risk to peace in Asia is high.  And, it should be noted, there is yet another potential major actor in this mix.  India—like China, a rising nation of over a billion people—is also building a blue-water navy, including aircraft carriers.  The Indian and Japanese navies HELD JOINT MANEUVERS last week.

Barring a grand bargain between Washington and Beijing, the ultimate stakes, of course, are control of the Straits of Malacca (through which most of the world’s oil passes) and the Indian Ocean—including the entrance to the Persian Gulf.  Existing international law and United States foreign policy, enforced by the U.S. Navy, are to regard these bodies as part of the “global commons.”

It is far from clear that China—which is totally dependent, at the moment on Middle East oil (hence its covetousness of the undersea petroleum riches of the China Seas)—agrees.

As Stratfor’s Robert D. Kaplan wrote three years ago in Monsoon: the Indian Ocean and the Future of American Power (2011), there is a major arms race underway—and it is in Asia.  Without a deal resulting in changes to the post-Korean, post-Vietnam status quo, the pressure cooker there of rising nationalism, historic enmities, economic need, and decreasing elbow room will only continue to build.

What can be done in the interim—at least until there can be a change in administrations in Washington—is the subject of the lead editorial in this week’s Economist.  The piece is entitled “Look Back in Angst.” Without mentioning Professor Margaret MacMillan by name, the Economist notes the same similarities (and differences) between 1914 and 2014 which her Brookings Institution essay notes.

Their prescription for today, which assumes (contrary to Beijing’s apparent intentions, it should be noted) a continuation of the current status quo, is twofold:

- arrangements should be put in place between China and the United States on how to address a military outbreak or political implosion in nuclear-armed North Korea; and

- the United States should get back in the game of being the essential global player.

The Economist statement on the latter point is a remarkable condemnation of current American diplomacy.  They write(emphasis in original):

The second precaution that would make the world safer is a more active American foreign policy. Despite forging an interim nuclear agreement with Iran, Barack Obama has pulled back in the Middle East-witness his unwillingness to use force in Syria. He has also done little to bring the new emerging giants-India, Indonesia, Brazil and, above all, China-into the global system. This betrays both a lack of ambition and an ignorance of history. Thanks to its military, economic and soft power, America is still indispensable, particularly in dealing with threats like climate change and terror, which cross borders. But unless America behaves as a leader and the guarantor of the world order, it will be inviting regional powers to test their strength by bullying neighbouring countries.

The Economist’s views, thus, dovetail neatly with those expressed by Anne Applebaum.

Finally, we have Walter Russell Meade.  In a provocative essay of his own in the current issue of The American Interest entitled “The End of History Ends,” Meade builds on many of the insights which Stratfor’s Robert D. Kaplan offered on the impact of geography on world history and foreign and military policy in The Revenge of Geography: What the Map Tells Us About Coming Conflicts and the Battle Against Fate (2013).

Kaplan’s point, argued con brio, was that “geopolitics” and the need for geopolitical thinking have returned to American foreign and military policy with a vengeance.  And the future cockpit of conflict for geopolitics, he says, is certain to be Eurasia ("the World Island” or “the Pivot,” in the words of earlier thinks) and the Indian Ocean.  The Indian Ocean littoral was the subject of Robert Kaplan’s previous book, Monsoon.

Meade has plainly read Kaplan (and, no doubt, the earlier thinkers on geopolitics whom Kaplan discusses).  Meade’s piece, like his online blog, calls for a new U.S. grand strategy—particularly in Asia—to replace the Euro-centric one put in place by the Truman administration after the end of the Second World War.

In short, the challenge for the next American president may be to remake American foreign policy to reflect a new geopolitical reality.  How this was done the last time was described by Truman’s former secretary of state, Dean Acheson, in his aptly titled Present at the Creation (1970).

All in all, it’s been a rich harvest this year in writing about geopolitics and grand strategy.  Hard questions are being asked.  With the shoving match underway in, under, and above the East and South China Seas, the ferment among defense experts and geopolitical thinkers is sure to continue.

Is anyone in the White House and at the top of the U.S. State Department listening?

On the evidence, probably not.


Posted by Elvis on 12/29/13 •
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Sunday, December 08, 2013

Bad Moon Rising Part 64 - America For Sale


China poised to play debt card for U.S. land
Communist nation could control American soil as ‘development zones’

By Jerome R Corsi
January 20, 2013

Barack Obama֒s involvement in the DeMar Second Amendment case was previously reported in Chapter 7 of Jerome R. Corsis AMERICA FOR SALE: FIGHTING THE NEW WORLD ORDER, SURVIVING THE GLOBAL DEPRESSION, AND PRESERVING USA SOVEREIGNTY.

NEW YORK - Could real estate on American soil owned by China be set up as “development zones” in which the communist nation could establish Chinese-owned businesses and bring in its citizens to the U.S. to work?

That’s part of an evolving proposal Beijing has been developing quietly since 2009 to convert more than $1 trillion of U.S debt it owns into equity.

Under the plan, China would own U.S. businesses, U.S. infrastructure and U.S. high-value land, all with a U.S. government guarantee against loss.

Yu Qiao, a professor of economics in the School of Public Policy and Management at Tsighua University in Beijing, proposed in 2009 a plan for the U.S. government to guarantee foreign investments in the United States.

WND has reliable information that the Bank of China, China’s central bank, has continued to advance the plan to convert China’s holdings of U.S. debt into equity owned by China in the U.S.

The Obama administration, under the plan, would grant a financial guarantee as an inducement for China to convert U.S. debt into Chinese direct equity investment. China would take ownership of successful U.S. corporations, potentially profitable infrastructure projects and high-value U.S. real estate.

Jerome Corsi exposes the globalists’ plan to put America on the chopping block in America for Sale: Fighting the New World Order, Surviving a Global Depression, and Preserving USA Sovereignty,Ӕ available at WNDs Superstore.

The plan would be designed to induce China to resume lending to the U.S. on a nearly zero-interest basis.

However, converting Chinese debt to equity investments in the United States could easily add another $1 trillion to outstanding Obama administration guarantees issued in the current economic crisis.

As of November 2012, China owned $1.17 trillion in U.S. Treasury securities, according to U.S. Department of Treasury and Federal Reserve Board calculations published Jan. 16.

Concerned about the unrestrained growth in U.S. debt under the Obama administration, China has reduced by 97 percent its holdings in short-term U.S. Treasury bills. ChinaҒs holding of $573.7 billion in August 2008, prior to the massive bank bailouts and stimulus programs triggered by the collapse in the U.S. mortgage market, dwindled to $5.96 billion by March 2011.

Treasury bills are short-term debt that matures in one year or less, sold to finance U.S. debt. Holdings of Treasury bills are included in the $1.17 trillion of total Treasury securities owned by China as of November 2012.

In addition to a national debt in excess of $16 trillion, the U.S. government in 2010 faced over $70 trillion in unfunded obligations, including Social Security and Medicare benefits scheduled to be paid retiring baby boomer retirees in the coming decades, with unfunded obligations showing no sign of being reduced with Congress at a deadlock over reducing federal government spending.

Yu Qiao observed that if the U.S. dollar collapsed under the weight of proposed Obama administration trillion-dollar budget deficits into the foreseeable future, holders of U.S. debt would face substantial losses that the Financial Times estimated would devastate Asians’ hard-earned wealth and terminate economic globalization.

“The basic idea is to turn Asian savings, Chinas in particular, into real business interests rather than let them be used to support U.S. over-consumption,” Yu Qiao wrote, “reflecting themes commonly suggested by Chinese government officials. While fixed-income securities are vulnerable to any fall in the value of the dollar, equity claims on sound corporations and infrastructure projects are at less risk from a currency default,” he continued.

The problem is that, in a struggling U.S. economy, China does not want to trade its investment in U.S. Treasury debt securities, with their inherent risk of dollar devaluation, for equally risky investments in U.S. corporations and infrastructure projects.

“But Asians do not want to bear the risk of this investment because of market turbulence and a lack of knowledge of cultural, legal and regulatory issues in U.S. businesses,” he stressed. “However if a guarantee scheme were created, Asian savers could be willing to invest directly in capital-hungry U.S. industries.”

Yu Qiaos plan included four components:

China would negotiate with the U.S. government to create a “crisis relief facility,” or CRF. The CRF would be used alongside U.S. federal efforts to stabilize the banking system and to invest in capital-intensive infrastructure projects such as high-speed railroad from Boston to Washington, D.C.

China would pool a portion of its holdings of Treasury bonds under the CFR umbrella to convert sovereign debt into equity. Any CFR funds that were designated for investment in U.S. corporations would still be owned and managed by U.S. equity holders, with the Asians holding minority equity shares that would, like preferred stock, be convertible.

The U.S. government would act as a guarantor, providing a sovereign guarantee scheme to assure the investment principal of the CRF against possible default of targeted companies or projects.

The Federal Reserve would set up a special account to supply the liquidity the CRF would require to swap sovereign debt into industrial investment in the United States.

The CRF would lessen Asians’ concern about implicit default of sovereign debts caused by a collapsing dollar, Yu Qiao concluded. “It would cost little and help the U.S. by channeling funds to business investment.”



Mysterious plans to build upstate NY “China City of America”

By Geoff Earle
NY Post
December 4, 2013

A Long Island businesswoman wants to build a massive Chinese DisneylandӔ in the Catskills which would include an amusement park, huge mansions and a דForbidden City laid out according to the principles of Feng Shui.

The China City of America scheme could bring thousands of wealthy Chinese immigrants to the tiny Sullivan County town of Thompson, under a federal program that lets foreigners get visas by investing $500,000 in the US.

The mastermind behind the plan, Sherry Li, says the development would eventually draw $6 billion in foreign investment.

ԓWe can kind of view it as a Chinese concept of Disney so itגs going to have lot of attractions for families, she said.

The designs for China City include a college, 1,000 residences, a Chinese-themed retail center and possibly a casino.

The place would feel like a trip to China just 90 miles outside New York city, as one area would mark parts of the Chinese Zodiac while another would have 16 buildings representing the major Chinese dynasties.

ԓEach dynasty will have its building and will have rides go with it, Li said at a town council meeting in May where she pitched the original plan.

China CityԒs website features golden dragons, and projects an initial investment of $325 million with $10 million going to a דTemple of Heaven, $24 million on a hotel and entertainment complex, and $20 million to construct a ԓForbidden City.

It also projects a $65 million infusion from the U.S. government Ԗ without naming what agency would make the contribution.

ItӒs multiple phases. No project is going to happen in one day. Its going to be step-by-step,Ҕ Li told the Post, saying the amusement park component would get built in a later phase.

The plan is now under consideration by the leaders of Thompson, population 15,000.

Its already getting a lot of opposition.

ғIt actually seems surreal but unfortunately it is real, said Paula Medley, an activist who heads a local environmental group.

ԓThis is kind of a combination of pie-in-the-sky and ethnic solidarity and showmanship and a federal program that sort of facilitates this sort of thing. Its really an odd mix,Ҕ said David North, who authored a new report picking apart China Citys proposal for the D.C.-based Center for Immigration Studies.

Others questioned its link to the federal visa program, known as EB-5.

ғIt sounds like an EB-5 scam, said Laura Corruzi, a New York City attorney who vacations in the area. ԓThe financials dont really support the $6 billion project.Ҕ

The Thompson town council has had at least five meetings on the project, with the latest Tuesday night.

Li wouldnt reveal the number of investors she has lined up, but she said most were Chinese nationals.

“Whoever is interested [will] invest with us. At this point we don’t have [Chinese] government investors at all,” she said, describing her own background only as being “in the financial industry.”

It’s in the thousands of apartments, houses it’s huge,” said Thompson town supervisor Tony Cellini. He said the total population of Chinese coming in eventually could equal the town’s if the developers fulfill all their wishes.

“We’re not certain we have the infrastructure to handle all that at this point,” he added.

“I believe China City is very serious but they’ve got a long road ahead of them to get all their approvals.”


Posted by Elvis on 12/08/13 •
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Sunday, October 20, 2013

Bad Moon Rising Part 63 - Breaking Free From The United States


The de-Americanisation of the world has begun - emergence of solutions for a multipolar world by 2015

Public announcement GEAB N78
October 16, 2013

Its one of those times when history accelerates. Whatever the outcome of the negotiations on the shutdown and debt ceiling, October 2013 is one of them. It’s the deadlock too far which has opened the eyes of those who still support the United States. A leader is followed when he is believed, not when he is ridiculous.

Building a de-Americanised world: this statement would have raised a smile a few years ago. At most it would have passed for provocation by Hugo Chavez. But when we are seeing the United States bankruptcy in real-time and it’s an official Chinese press agency that SAYS SO, the impact isnt the same. In reality, it’s describing out loud a process which is already well underway: simply, its now allowed to SPEAK ABOUT IT in public. At least US government deadlock has the merit of loosening tongues Let there be no mistake, this analysis hasn’t appeared in the Chinese media by chance, and it reflects Beijing’s hardening tone.

In fact, if the whole world is holding its breath before this pathetic game of the US elite; it’s not out of compassion, its to avoid being swept away in the fall of the world’s first power. Everyone is trying to free itself from American influence and let go of a United States permanently discredited by recent events over Syria, tapering, shutdown and now the debt ceiling. The legendary US power is now no more than a nuisance and the world has understood that its time to de-Americanise.

This perspective and speaking the UNSPEAKABLE is finally freeing-up a whole range of solutions which, until now, were simply signs, even still repressed by some. These solutions are speeding-up the construction of the world afterwards and opening on a multipolar world organised around major regional blocs. After a review of American setbacks, in this GEAB issue our team will analyse the forces which are shaping this changing world. In the “Telescope” section we also take a look at the actual state of US society which, behind the mirror of the stock market and finance, explains the collapse of the American way of life and take part in this look with hindsight at the US model. Finally, we update our annual country-risk assessment to complete the global picture and, of course, give our traditional recommendations and the GlobalEurometre.

Layout of the full article:
1. “No we can’t”
2. A succession of crises
3. Shutdown: the laughing stock of the world, but a forced laugh
4. De-Americanisation at all levels
5. The petrodollar is dead, long live the petroyuan
6. China shows Euroland the way
7. Russia, South America: following de-westernisation

This public announcement contains sections 1, 2 and 3

“No we can’t”

How times change. The whole world has forgotten the words freedom, hope and the famous saying “Yes we can” representative of US society in the eyes of previous generations to now only speak of taper, shutdown or ceiling. This isn’t exactly the same dynamic and the positive image has become outright negative.

It’s striking to see the extent to which the current US situation confirms the old adage that trouble never comes alone. In a six-week period, first of all humiliation by Russia over Syria, then its central bank which admits it’s impossible to reduce QUANTITIVE EASING; the inability to pass a budget which means federal government SHUTDOWN, a shutdown lasting well beyond what is reasonable. Negotiations on the debt ceiling at a standstill two days from the deadline; the United States ordered by the G20 to ratify the IMF reform which it has been blocking for the last three years, and by the World Bank and the IMF to put its finances in order. And now the Chinese shot across the bows.

A succession of crises

This succession of crises is quite worrying for the country and demonstrates unprecedented acceleration and an impending shock. There is some fatality in these crises. But there is also a dose of strategic recovery. Thus, the shutdown has been exploited by Obama to put pressure on the Republicans into voting for raising the debt ceiling, a much more important deadline for the United States. This is obviously only a partial success, but we can still expect a temporary raising, which postpones all the problems for a few weeks (7); however, its still possible that the tragic path is chosen, because it’s no more the domain of a rational decision and therefore cannot be forecast.


In fact, whilst observers are focusing on the Tea Party which, in the same way as minority shareholders are able to control a company through a holding, has managed to hijack the Republican Party and American society; it could be read another way. Many Americans see the reality in front of them: their country is bankrupt. Consequently, is it better to postpone the confrontation with reality, at the risk of amplifying the problems, or is it better to resolve them now? The majority of the population don’t take a DIM VIEW of a payment default . Besides, what other solution is there ultimately? Is there no desire amongst Republicans to precipitate the crisis? It’s the ideal situation because they can blame the Tea Party which has stated unequivocally that no agreement is better than a bad agreement. What we mean is that, this time, or probably on another occasion in the near future, they might well be tempted to cut the Gordian knot.

Likewise, a strategic recovery certainly took place when the Fed backtracked on reducing its quantitative easing. Why did it let everyone believe right up to the last minute that it would reduce QE3 without doing so in the end? Its the first time that it has taken investors by surprise, all 100% convinced of a tapering given in the forward guidance, a well-established principle. Is there no connection between the gross insider trading proved to have taken place at the time of the Fed’s ANNUNCEMENT, which had to be worth billions of dollars to the perpetrators? All this supports our theory of desperate US financial institutions which must be bailed out discreetly by such operations, at the risk of undermining the Feds credibility. Again, short-term solutions which make the situation worse but which push back the fatal deadline a little further. We are no longer the only ones to ring the alarm bell on these American banks: the Bank of England is expecting major banks to fail which, according to it, have lost the status of TOO BIG TO FAIL. We therefore repeat our warning on this subject.

Like a boxer, all these blows that the country has taken has made it groggy and it only lacks the last one to floor it. If it doesn’t come from a US payment default in October, it will be another deadline which has been pushed back which, this time, wont yield.

Shutdown: the laughing stock of the world, but a forced laugh

When we wrote in the GEAB NO 77 on the budget vote: no doubt a compromise will be found at the last minute or, more likely, a few hours or even a few days after the deadlineГ, one cannot help but notice that we still underestimated the political differences in Washington since the several days which we had in mind have turned into weeks. The daily newspaper, Le Monde, had the headline on its website of Washington’s sorry spectacle. But, in the end, this shutdown hasn’t had a disproportionate impact on the financial markets, so its all for the better which many Republicans seem to think who are adapting well to a federal government paralysis and the cuts in public spending which follow.

This isn’t the opinion of countries with large holdings of US Treasury bonds , which feel held hostage by the United States . They are stunned by the US indefensible casualness and by the irresponsible attitude of who, until recently, was the boss. If the country defaults on its debt the shockwaves will certainly be terrible. However, this wouldn’t be the end of the world because a possible default could simply take the form of delayed payment for the few days; moreover different parts of the world would be unequally affected according to the extent of their de-coupling from the US economy. No, the country that will suffer most from this solution (and any other for that matter) will really be the United States itself. For the record it holds two thirds of its own public debt.


This is why the best governed countries have already begun this major de coupling, with China in the lead which knows from Sun Tzu that “when it thunders, IT’S TOO LATE to cover ones ears.”


Posted by Elvis on 10/20/13 •
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Tuesday, October 08, 2013

Bad Moon Rising Part 62 - Breaking Bad


“What is the chief end of man?--to get rich. In what way?--dishonestly if we can; honestly if we must.”
- Mark Twain, 1871

Martial Law and the Economy: Is Homeland Security Preparing for the Next Wall Street Collapse?

By Ellen Brown
Global Research
October 7, 2013

Reports are that the Department of Homeland Security (DHS) is engaged in a massive, covert military buildup. An ARTICLE in the Associated Press in February confirmed an open purchase order by DHS for 1.6 billion rounds of ammunition. According to an op-ed in Forbes, thats enough to sustain an Iraq-sized war for over twenty years. DHS has also acquired heavily armored tanks, which have been seen roaming the streets. Evidently somebody in government is expecting some serious civil unrest. The question is, why?

Recently revealed statements by former UK Prime Minister Gordon Brown at the height of the banking crisis in October 2008 could give some insights into that question. An article on BBC News on September 21, 2013, drew from an explosive autobiography called Power Trip by Brown’s spin doctor Damian McBride, who said the prime minister was worried that law and order could collapse during the financial crisis. McBride quoted Brown as saying:

If the banks are shutting their doors, and the cash points arent working, and people go to Tesco [a grocery chain] and their cards aren’t being accepted, the whole thing will just explode.

If you can’t buy food or petrol or medicine for your kids, people will just start breaking the windows and helping themselves.

And as soon as people see that on TV, that’s the end, because everyone will think thats OK now, that’s just what we all have to do. Itll be anarchy. That’s what could happen tomorrow.

How to deal with that threat? Brown said, We’d have to think: do we have curfews, do we put the Army on the streets, how do we get order back?

McBride wrote in his book Power Trip, “It was extraordinary to see Gordon so totally gripped by the danger of what he was about to do, but equally convinced that decisive action had to be taken immediately.” He compared the threat to the Cuban Missile Crisis.

Fear of this threat was echoed in September 2008 by US Treasury Secretary Hank Paulson, who reportedly warned that the US government might have to resort to martial law if Wall Street were not bailed out from the credit collapse.

In both countries, martial law was avoided when their legislatures succumbed to pressure and bailed out the banks. But many pundits are saying that another collapse is imminent; and this time, governments may not be so willing to step up to the plate.

The Next Time WILL Be Different

What triggered the 2008 crisis was a run, not in the conventional banking system, but in the “shadow banking system,” a collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but are unregulated. They include hedge funds, money market funds, credit investment funds, exchange-traded funds, private equity funds, securities broker dealers, securitization and finance companies. Investment banks and commercial banks may also conduct much of their business in the shadows of this unregulated system.

The shadow financial casino has only grown larger since 2008; and in the next Lehman-style collapse, government bailouts may not be available. According to President Obama in his REMARKS on the Dodd-Frank Act on July 15, 2010, “Because of this reform, . . . there will be no more taxpayer funded bailouts - period.”

Governments in Europe are also shying away from further bailouts. The Financial Stability Board (FSB) in Switzerland has therefore required the systemically risky banks to devise “living wills “setting forth what they will do in the event of insolvency. The template established by the FSB requires them to “bail in” their creditors; and depositors, it turns out, are the largest class of bank creditor. (For fuller discussion, see my earlier article HERE.)

When depositors cannot access their bank accounts to get money for food for the kids, they could well start breaking store windows and helping themselves. Worse, they might plot to overthrow the financier-controlled government. Witness Greece, where increasing disillusionment with the ability of the government to rescue the citizens from the worst depression since 1929 has precipitated riots and threats of violent overthrow.

Fear of that result could explain the massive, government-authorized spying on American citizens, the domestic use of drones, and the elimination of due process and of posse comitatus (the federal law prohibiting the military from enforcing law and order on non-federal property). Constitutional protections are being thrown out the windowin favor of protecting the elite class in power.

The Looming Debt Ceiling Crisis

The next crisis on the agenda appears to be the October 17th deadline for agreeing on a federal budget or risking default on the governments loans. It may only be a coincidence, but two large-scale drills are scheduled to take place the same day, the “Great ShakeOut Earthquake Drill” and the “Quantum Dawn 2 Cyber Attack Bank Drill.” According to a Bloomberg news clip on the bank drill, the attacks being prepared for are from hackers, state-sponsored espionage, and organized crime (financial fraud). One interviewee stated, “You might experience that your online banking is down . . . . You might experience that you can’t log in.” It SOUNDS LIKE a dress rehearsal for the Great American BAIL-IN.

Ominous as all this is, it has a bright side. Bail-ins and martial law can be seen as the last desperate thrashings of a dinosaur. The exploitative financial scheme responsible for turning millions out of their jobs and their homes has reached the end of the line. Crisis in the current scheme means opportunity for those more sustainable solutions waiting in the wings.

Other countries faced with a collapse in their debt-based borrowed currencies have survived and thrived by issuing their own. When the dollar-pegged currency collapsed in Argentina in 2001, the national government returned to issuing its own pesos; municipal governments paid with “debt-canceling bonds” that circulated as currency; and neighborhoods traded with community currencies. After the German currency collapsed in the 1920s, the government turned the economy around in the 1930s by issuing MEFOӔ bills that circulated as currency. When England ran out of gold in 1914, the government issued Bradbury poundsӔ similar to the Greenbacks issued by Abraham Lincoln during the US Civil War.

Today our government could avoid the debt ceiling crisis by doing something similar: it could simply mint some trillion dollar coins and deposit them in an account. That alternative could be pursued by the Administration immediately, without going to Congress or changing the law, as discussed in my earlier article here. It need not be inflationary, since Congress could still spend only what it passed in its budget. And if Congress did expand its budget for infrastructure and job creation, that would actually be good for the economy, since hoarding cash and paying down loans have significantly shrunk the circulating money supply.

Peer-to-peer Trading and Public Banks

At the local level, we need to set up an alternative system that provides safety for depositors, funds small and medium-sized businesses, and serves the needs of the community.

Much progress has already been made on that front in the peer-to-peer economy. In a September 27th article titled “Peer-to-Peer Economy Thrives as Activists Vacate the System,” Eric Blair reports that the Occupy Movement is engaged in a peaceful revolution in which people are abandoning the established system in favor of a sharing economy.Ӕ Trading occurs between individuals, without taxes, regulations or licenses, and in some cases without government-issued currency.

Peer-to-peer trading happens largely on the Internet, where customer reviews rather than regulation keep sellers honest. It started with eBay and Craigslist and has grown exponentially since. Bitcoin is a private currency outside the prying eyes of regulators. Software is being devised that circumvents NSA spying. Bank loans are being shunned in favor of crowdfunding. Local food co-ops are also a form of opting out of the corporate-government system.

Peer-to-peer trading works for local exchange, but we also need a way to protect our dollars, both public and private. We need dollars to pay at least some of our bills, and businesses need them to acquire raw materials. We also need a way to protect our public revenues, which are currently deposited and invested in Wall Street banks that have heavy derivatives exposure.

To meet those needs, we can set up publicly-owned banks on the model of the BANK OF NORTH DAKOTA, currently our only state-owned depository bank. The BND is mandated by law to receive all the states deposits and to serve the PUBLIC INTEREST. Ideally, every state would have one of these “mini-Feds.” Counties and cities could have them as well. For more information.

Preparations for martial law have been reported for decades, and it hasn’t happened yet. Hopefully, we can sidestep that danger by moving into a saner, more sustainable system that makes military action against American citizens unnecessary.




America Has Become a “Cheater-Take-All” Nation
Why do people like Tyler Cowen still equate wealth with merit? Many rich people are just crooks.

By William Black
October 4, 2013

Tyler Cowens new book Average is Over: Powering America Beyond the Age of the Great Stagnation warns that inequality will only get worse as a “hyper-meritocracy” of smart, energetic people at the top commanding machines and data speed ahead and the lazy, not-very-bright folks at the bottom fall further behind.

One thing seems to be left out of the discussion: those hyper-meritocrats are led by criminal morons.

Cowen’s embrace of Social Darwinism assumes that the winners have a selective advantage that arises from merit - which Cowen conflates with the ability to create wealth.  This is passing strange as we are still suffering from an orgy of wealth destruction led by the winners.  The people who grew wealthiest were often the people most responsible for the largest destruction of wealth in history.  That it is an anti-meritocratic system.  We do not live in a “winner-take-all” nation.  We increasingly live in a “cheater-take-all” system.

What Cowen has missed is the famous (but nearly famous enough) warning sounded by George Akerlof and Paul Romer in 1993 in their classic article “Looting: The Economic Underworld of BANKRUPTCY FOR PROFIT.”

“[M]any economists still [do] not understand that a combination of circumstances in the 1980s made it very easy to loot a [bank] with little risk of prosecution. Once this is clear, it becomes obvious that high-risk strategies that would pay off only in some states of the world were only for the timid. Why abuse the system to pursue a gamble that might pay off when you can exploit a sure thing with little risk of prosecution? (Akerlof & Romer 1993: 4-5).”
The result of these perverse incentives is the epidemics of accounting control fraud that drive our recurrent, intensifying financial crises.  In the savings and loan debacle, for example:

“The typical large failure [grew] at an extremely rapid rate, achieving high concentrations of assets in risky ventures. [E]very accounting trick available was used… Evidence of fraud was invariably present as was the ability of the operators to milk the organization (NCFIRRE 1993).”

The large Enron-era frauds were all accounting control frauds.

“Worse, when cheaters prosper, market forces become perverse because of the “Gresham’s dynamic” in which bad ethics drives good ethics out of the markets and professions.” George Akerlof explained this in his most famous article on “Lemons” in 1970.

“[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”

Akerlof was not the first expert to understand the dynamic.

“The Lilliputians look upon fraud as a greater crime than theft.  For, they allege, care and vigilance, with a very common understanding, can protect a man’s goods from thieves, but honesty hath no fence against superior cunning. . . where fraud is permitted or connived at, or hath no law to punish it, the honest dealer is always undone, and the knave gets the advantage” (Swift, J. Gullivers Travels: 1726).

The mortgage fraud crisis occurred because the fraudulent CEOs whose banks created the twin epidemics of mortgage origination fraud deliberately generated a series of Gresham’s dynamics that produced an unethical race to the bottom in the professions that aided and abetted the loan origination fraud.  The earliest warnings of this were made by honest appraisers in 2000.

From 2000 to 2007, a coalition of appraisal organizations delivered to Washington officials a public petition; signed by 11,000 appraisers. [I]t charged that lenders were pressuring appraisers to place artificially high prices on properties [and] blacklisting honest appraisers and instead assigning business only to appraisers who would hit the desired price targets ( FCIC 2011: 18).

A national survey of appraisers conducted in early 2004 found that 75 percent of appraisers had been urged within the prior 12 months to inflate an appraisal.  A 2007 survey found that the percentage of appraisers reporting that they had been urged to inflate an appraisal within the past 12 months had risen to 90 percent, and honest appraisers were forced to pay a high price for refusing to give in to the coercion: 68 percent reported losing a client and 45 percent did not get paid for their work.  Note that a Greshams dynamic does not have to drive all the honest professionals out of the field to produce epidemic levels of fraud. Even if only a small percentage of the appraisers are suborned they can inflate all the appraisals required.

New York Attorney General (now, governor) Cuomo’s investigation of Washington Mutual (WaMu) found that it had blacklisted honest appraisers. Cuomo described WaMu as typical of nonprime lenders.

Similar Gresham’ dynamics have been documented in many crises and professions.

“[A]busive operators of S&L[s] sought out compliant and cooperative accountants.  The result was a sort of “Gresham’s Law” in which the bad professionals forced out the good.” (NCFIRRE 1993).

Modern executive compensation is also a superb device for enlisting the aid of hundreds or even thousands of employees and officers and suborning internal controls.  It also reduces whistleblowing.

Don’t just say: ”If you hit this revenue number, your bonus is going to be this. It sets up an incentive that’s overwhelming. You wave enough money in front of people, and good people will do bad things,” Franklin Raines:  CEO, Fannie Mae.

Raines’ analysis was correct, which explains why the bonus system he put in place was so successful in turning Fannie Mae into one of the world’s largest and most destructive accounting control frauds.

“By now every one of you must have 6.46 [earnings per share (EPS)] branded in your brains.  You must be able to say it in your sleep, you must be able to recite it forwards and backwards, you must have a raging fire in your belly that burns away all doubts, you must live, breath and dream 6.46, you must be obsessed on 6.46 After all, thanks to Frank, we all have a lot of money riding on it.  We must do this with a fiery determination, not on some days, not on most days but day in and day out, give it your best, not 50%, not 75%, not 100%, but 150%.”

“Remember, Frank has given us an opportunity to earn not just our salaries, benefits, raises, ESPP, but substantially over and above if we make 6.46.  So it is our moral obligation to give well above our 100% and if we do this, we would have made tangible contributions to Frank’s goals.” (Mr. Rajappa, head of Fannie’s internal audit, emphasis in original.)

The second epidemic of loan fraud by lenders created the epidemic of fraudulent liar’s loans.  The liar’s loan epidemic interacted with the appraisal fraud epidemic to hyper-inflate the real estate bubble and created a financial catastrophe. The fraudulent leaders of nonprime lenders deliberately created a Greshams dynamic among their loan officers and their loan brokers.  Loan brokers did most of the dirty work (giving the lenders deniability) of inflating appraisals and putting the lies in liar’s loans.

“More loan sales meant higher profits for everyone in the chain. Business boomed for Christopher Cruise, a Maryland-based corporate educator who trained loan officers for companies that were expanding mortgage originations. He crisscrossed the nation, coaching about 10,000 loan originators a year.” (FCIC 2011: 7)

‘His clients included many of the largest lenders, Countrywide, Ameriquest, and Ditech among them. Most of their new hires were young, with no mortgage experience, fresh out of school and with previous jobs ‘flipping burgers,’ he told the FCIC.  Given the right training, however, the best of them could easily earn millions.” (FCIC 2011: 8)

“He taught them the new playbook: You had no incentive whatsoever to be concerned about the quality of the loan, whether it was suitable for the borrower or whether the loan performed.” He added, “I knew that the risk was being shunted off. I knew that we could be writing crap. But in the end it was like a game of musical chairs. Volume might go down but we were not going to be hurt.” (FCIC 2011: 8)

“I knew that we could be writing crap.  Under the incentive structures deliberately created by the officers controlling the lenders the loan officers had no incentive whatsoever to be concerned about the quality of the loan, whether it was suitable for the borrower or whether the loan performed.” To ensure that their new loan officers understood and responded to the perverse incentives the fraudulent lenders hired people like Christopher Cruise to train them to understand and act in accordance with those incentives.

The general reader may be confused as to why the CEOs leading the fraudulent lenders were deliberately creating incentives to make enormous numbers of bad loans.  The fraud Ӕrecipe for an accounting control fraud optimizing fraudulent income by making (buying) bad loans has four ingredients.

1.Grow extremely quickly by
2.Making (buying) bad loans at premium yield
3.While employing extreme leverage, and
4.Providing grossly inadequate allowances for loan and lease losses (ALLL)

This is the recipe that produces what Akerlof and Romer aptly described as a “sure thing” and that hyper-inflated the bubble and drove the crisis.  The recipe produces three sure things: the lender (purchaser) of crap[py] loans will immediately report record income, the controlling officers will promptly be made wealthy through modern executive compensation, and the firm will suffer severe losses.

It is simple to follow the recipe.  No skill is required.  The fact that the recipe can be employed simultaneously by the originator/seller and the buyer of the fraudulent loans explains why the secondary market followed the financial version of “dont ask; don’t tell.”

Even the former head of the professional association of mortgage brokers, while trying to minimize the success of the Gresham’s dynamic, actually conceded its critical importance.

Marc S. Savitt, a past president of the National Association of Mortgage Brokers, told the Commission that “while most mortgage brokers looked out for borrowers’ best interests and steered them away from risky loans, about 50,000 of the newcomers to the field nationwide were willing to do whatever it took to maximize the number of loans they made.” He added that some loan origination firms, such as Ameriquest, were “absolutely corrupt” (FCIC 2011: 14).

Ameriquest was not some random lender.  It was the fraudulent lender that first developed liar’s loans and it was for many years the largest originator and seller of fraudulent loans.  Its CEO, Roland Arnall, was made wealthy by the fraud wealthy enough to make the large political contributions that got him appointed our Ambassador to the Netherlands after the fourth time Ameriquest was subject to government sanctions.  It was Ameriquest that WaMu and Citicorp rushed to acquire even though Ameriquest was the most notorious lender in America.

Sadly, Savitt’s estimate of fraudulent loan brokers was far too low.  When entry is easy and becoming a mortgage broker was simple - and the financial incentives to commit fraud are powerful the result is horrific.

According to an investigative news report published in 2008, between 2000 and 2007, “at least 10,500 people with criminal records entered the field in Florida, for example, including 4,065 who had previously been convicted of such crimes as fraud, bank robbery, racketeering, and extortion.” (FCIC 2011: 14).

A loan broker could make $2,000 to $20,000 by getting a single bad loan approved.  But he got nothing if the loan was not approved.  The brokers knew that that if they put the borrower into a liars loan the broker would receive a higher fee because such loans had a higher interest rate (which increased the broker’s compensation).  The brokers knew that the lender would not verify the borrowers reported income on a liar’s loan.  If the broker inflated the borrowers income the lender was far more likely to approve the loan.  The broker, but not the borrower, knew how much to inflate the borrower’s stated income.

[Many originators invent] non-existent occupations or income sources, or simply inflat[e] income totals to support loan applications. Importantly, our investigations have found that “most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.” Tom Miller, AG, Iowa, 2007 testimony to Fed.

It was the lenders and their agents that put the lies in liar’s loans and that used coercion to inflate appraisals.  No honest lender would create the perverse incentives sure to lead to fraudulent epidemics of liar’s loans and inflated appraisals.

The constants present in each of our three modern financial crises (the S&L debacle, the Enron-era scandals, and the mortgage fraud crisis) were that the crises were driven by epidemics of accounting control fraud and that during the expansion phase of each crisis neo-classical economists praised the worst frauds as brilliant innovators who understood the importance of technological advances.  The economists assured us that the massive compensation that the fraudulent CEOs awarded themselves was the just result of an emerging meritocracy.  The reality was the opposite.

“Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting.  Nor, unaware of the concept, could they have known how serious it would be.  Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better.  “If we learn from experience, history need not repeat itself.” (George Akerlof & Paul Romer.1993: 60).

Cowen does not discuss financial fraud, Akerlof and Romers findings, or the Gresham’s dynamic in his book even though they are central to his purported thesis.  He simply assumes that the financial frauds were made wealthy because they were “more productive.” They were the opposite of productive.  Cowen has adopted, implicitly, the label that Christopher Cruise, the lead training official that the fraudulent lenders chose to train their loan officers, used.

Most of their new hires were young, with no mortgage experience, fresh out of school and with previous jobs “lipping burgers,” he told the FCIC.  Given the right training, however, the best of them could “easily earn millions.” (FCIC 2011: 8)

Cruise and Cowen simply assume that whoever can earn millions represents the bes of Americans.  It can, but it can also represent the worst of us.  Finance has become dominated by the worst of us, which is why we have recurrent, intensifying financial crises driven by their fraud epidemics.  Cowen looks at the results of our hyper-anti-meritocracy system of finance, a gaudy whorehouse bedecked with red neon lights.  Cowen concedes in his book (though it does lead to any analytical inquiry) that finance executives are currently the largest winners in gaining wealth despite causing the massive loss of societal wealth in the ongoing crisis.  Without even discussing fraud or why the people who are the leading destroyers of wealth were the largest beneficiaries and experienced the greatest growth in wealth since 2009 Cowen describes finance as if it were a temple of meritocracy.  Cowen has demonstrated that when Akerlof and Romer said of economists twenty years ago - that now we know better - about fraud and financial crises they were far too optimistic about their profession.




Why Breaking Bad’s Walter White Is the Epitomal Greedy American CEO
Walter White has a lot in common with the Masters of the Universe.

By RJ Escow
October 1, 2013

Before the post-finale Breaking Bad chatter dies down for good, lets not overlook one of the show’s most instructive features: In many ways, Walter White is a quintessentially modern American CEO. While White spouted a lot of figures and formulas in five seasons of television, but theres one number his character embodied more than any other: the 1 percent, and his insatiable drive to be part of it.

It’s all there: the ego, the entitlement, the testosterone-fueled drive to come out on top, and the sense that money, not character or relationships, defines a persons worth. Above all else, there’s the sense that even the most venal and criminal of enterprises becomes ennobling when you earn lots of money for it.

I’m not saying that every chief executive officer is like Walter White. The ones who invent a product, create jobs, build wealth for themselves and others, are a different breed. They’re also increasingly rare, as more and more CEOs earn their livings by manipulating politicians, deceiving shareholders, and playing a better game of corporate politics than their competitors.

If you don’t think Walter White was brilliant at corporate politics, as brilliant as Jamie Dimon or any other real-life CEO, think again: His relationship to Gus Fring alternated between braggadocio and utter servility, and ultimately ended with murderous treachery. What corporate executive hasn’t seen that drama played out over and over (if not with the last part enacted so literally)?

Walt’s is a story of sublimated drives released by unforeseen events. Consider his character arc: Brilliant chemist once owned one-third of a company that’s now worth billions, but was cheated out of his share somehow (possibly by himself). He became a mild-mannered, lower-middle-income chemistry teacher in Albuquerque, where he might have been content to remain until terminal cancer forced him into an existential crisis. Then, confronted with a lifetimes worth of resentment, Walt’s drive to become a master of that universe kicks in.

Soon after that, Walter White joins the 1 percent then ascends to the 0.1 percent, the 0.01 percent, and beyond. What does he say to his wife in his shattering telephone tirade during the episode - Ozymandias:

“You, you have no right to discuss anything about what I do. Oh, what the hell do you know about it anyway? Nothing. I built this. Me. Me alone. Nobody else!”

This speech mixes cunning and fury, guile and animal rage, as Walt calculatingly exonerates Skyler while at the same time breaking down with genuine emotion.

White can make more of a case for having built something than most American CEOs, many of whom depend on implicit or direct government support for their wealth. (Think Jamie Dimon at JPMorgan Chase, David Cote at defense contractor Honeywell, or Jeffrey Immelt at GE and GE Capital.)

Walt, on the other hand, actually did build his own empire. But he had a lot of help, from line employees like Badger and Skinny Pete, from organizational predecessors like Gus Fring, and most of all from loyal lieutenant Jesse Pinkman, whom Walt sometimes treated like a son but never like a business equal. Walt displayed CEO characteristics from the start, snarling at his underling and demanding near-impossible accomplishments from him. Arrogant and entitled, Walt took on Jesse’s successes as his own. He couldnt bring himself to praise an underling, even when it would serve his business interests. Only after Jesse rejects a partnership offer and points out that Walt consistently criticized the quality of his work is White able to say “Your meth is good, Jesse. As good as mine.”

In the beginning, Jesse only became his partner because White threatened to turn him in to the authorities. But their tense partnership works, thanks to Walt’s insatiable drive. They gradually take over the distribution networks for their product, a project mainly achieved through murder, a technique which distinguishes Walt from his more mainstream peers.

Like many CEOs, Walt was a perfectionist, a taskmaster with decidedly anal-retentive tendencies. This is not always a bad thing in an executive, by any means, and Walt’s obsessive traits help build his enterprise into a success. In fact, Walt’s emphasis on customer satisfaction puts him ahead of many other American CEOs. There’s no room for error with these people, Walt says of their clients.  Too bad more executives don’t think that way about their customers.

But Walt was always a cheater, on matters large and small. Early on, when he and Jesse flip a coin to decide who must kill their captive Krazy-8, Walt loses and promptly asks: “Best two out of three?”

He was a con artist, too, and the person he conned most successfully was himself. That may be the most distinctive trait he shares with so many of his fellow CEOs: the ability to believe hes a self-made man, a ‘job creator’, indispensable.

Consider the quote at the beginning of this piece. Contrary to WaltӔs self-important ravings, he didnt Ғcreate an $80 billion business. He took over a business that was already thriving when Gus Fring ran it. And it didnӔt go “belly up, Ҕdisappear, or otherwise Ӕcease to exist when Walt left for the snow-covered wilds of New Hampshire. It continued to thrive, with distribution in LydiaӔs capable hands and manufacturing WaltҖs specialty adequately being handled by a gang of neo-Nazis and Jesse as a captive worker.

Walt was always able to convince himself he was a good person, a wise person, even an enlightened being. He purloins a quote from no less a sage than the Buddha when, early on, Jesse asks why he wants to go into the meth business.

“I am awake,” Walt answers.

When the Buddha achieved enlightenment and his peers saw the spiritual transformation in him, they asked if he was a god, a human being, or something else. “I am awake,” replied the Buddha.

As we quickly learn, Walter White is no Buddha.

It’s no mistake that Walt says his business is “big enough to be listed on NASDAQ.” Thats where technology businesses, presumably including his old company Gray Matter, list their stocks. Walt doesn’t see himself as a drug dealer; he’s a tech entrepreneur.

Walter also had a habit of deluding himself into thinking he was on the side of justice. Like his peers in Fix the Debt, it was easy for him to confuse his own well-being and that of his heirs with the best interests of the world as a whole. After he terrorizes and threatens his wealthy ex-partners into passing drug money to his unknowing son (an act that would morally horrify the boy), he assumes the moral high ground. “Cheer up, beautiful people,” he tells them. “This is where you get to make it right.”

The law was never an impediment for Walter White. In fact, he derived a physical pleasure from breaking it. “Why was that so good?” Skyler asks him after they have sex in the car. “Because it was illegal,” says Walt.

Like many a CEO, Walt saw everything in terms of winning and losing. He poisoned a child and bombed a nursing home to defeat Gus Fring, and when Fring was dead and Skyler asked what happened, Walts answer said it all: “I won.” It was reminiscent of the way Wall Street traders would cheat their own customers, then get off the phone and exult, “I ripped his face off.”

Like many other CEOs, Walt claimed all his misdeeds were done for the sake of his family. That places a moral burden on his wife that isn’t lifted until the final episode, when he admits: “I did it for me.” That moment of honesty places Walter White on a higher moral plane, at least in that respect, from many of his more legitimate peers.

In the end, it’s all about male competition, a drive that leads to arguably the best soliloquy of the series:

Who are you talking to right now? Who is it you think you see? Do you know how much I make a year? I mean, even if I told you, you wouldn’t believe it Ԓ No, you clearly don’t know who you’re talking to, so let me clue you in. I am not in danger, Skyler. I am the danger. A guy opens his door and gets shot and you think that of me? No. I am the one who knocks!

Fans of this powerful speech may have forgotten that when it was delivered, Walt had just escaped a long stretch of degrading servitude and yes, danger Ŗ at the hands of Gus Fring.

“Say my name,” White says to a meth distributor, completing the process of ending his seemingly endless period of humiliation and near enslavement. Walt’s denial of this humiliation - his refusal to admit it even happened - leads to his final run of hubris and his inability to leave the meth business behind. As with his real-life contemporaries, there is never enough money, enough power, enough ego gratification, to satisfy Walter White.

Viewers who watched the final episode of Breaking Bad didnחt realize they had already seen Walt die. Walter White didnt die from a gunshot wound, lovingly caressing a piece of equipment in the meth lab. He died the day he left for New Hampshire, because thatҒs the day his business continued to exist without him.

The title of the last episode was Felina (an anagram of finale). Its also the name of the woman in Marty Robbins’ song “El Paso,” in which a fugitive cowboy returns to see the love of his life one last time, even though he knows hell die in the attempt: “One final kiss and Felina, goodbye.”

The cowboy couldn’t live without Felina, his love. But Walter White, American CEO, couldnt fully love a human being. In a flashback to his romance with fellow chemist and future billionaire Gretchen Schwartz, a dialog about the chemical components of a human being ends this way:

Gretchen: What about the soul? 
Walt: The soul? There’s nothing but chemistry here. 

Walt’s true love was his business and his product. His days in that snowbound cabin were a kind of hellish afterlife, because without his business Walt is no longer alive.

Walter White tied up the loose ends in his life before dying as he wanted to die. That, more than anything else, separates him from his CEO peers in the real world. As some of them are starting to learn, in real life its not always that easy to close the door on the misdeeds of the past.


Posted by Elvis on 10/08/13 •
Section Bad Moon Rising
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