Category: zerohedge

Authored by John Whitehead via The Rutherford Institute,

“Politicians are more likely than people in the general population to be sociopaths. I think you would find no expert in the field of sociopathy/psychopathy/antisocial personality disorder who would dispute this… That a small minority of human beings literally have no conscience was and is a bitter pill for our society to swallow — but it does explain a great many things, shamelessly deceitful political behavior being one.”

– Dr. Martha Stout, clinical psychologist and former instructor at Harvard Medical School

Twenty years ago, a newspaper headline asked the question: “What’s the difference between a politician and a psychopath?”

The answer, then and now, remains the same: None.

There is no difference between psychopaths and politicians.

Nor is there much of a difference between the havoc wreaked on innocent lives by uncaring, unfeeling, selfish, irresponsible, parasitic criminals and elected officials who lie to their constituents, trade political favors for campaign contributions, turn a blind eye to the wishes of the electorate, cheat taxpayers out of hard-earned dollars, favor the corporate elite, entrench the military industrial complex, and spare little thought for the impact their thoughtless actions and hastily passed legislation might have on defenseless citizens.

Psychopaths and politicians both have a tendency to be selfish, callous, remorseless users of others, irresponsible, pathological liars, glib, con artists, lacking in remorse and shallow.

Charismatic politicians, like criminal psychopaths, exhibit a failure to accept responsibility for their actions, have a high sense of self-worth, are chronically unstable, have socially deviant lifestyles, need constant stimulation, have parasitic lifestyles and possess unrealistic goals.

It doesn’t matter whether you’re talking about Democrats or Republicans.

Political psychopaths are all largely cut from the same pathological cloth, brimming with seemingly easy charm and boasting calculating minds. Such leaders eventually create pathocracies: totalitarian societies bent on power, control, and destruction of both freedom in general and those who exercise their freedoms.

Once psychopaths gain power, the result is usually some form of totalitarian government or a pathocracy. “At that point, the government operates against the interests of its own people except for favoring certain groups,” author James G. Long notes. “We are currently witnessing deliberate polarizations of American citizens, illegal actions, and massive and needless acquisition of debt. This is typical of psychopathic systems, and very similar things happened in the Soviet Union as it overextended and collapsed.”

In other words, electing a psychopath to public office is tantamount to national hara-kiri, the ritualized act of self-annihilation, self-destruction and suicide. It signals the demise of democratic government and lays the groundwork for a totalitarian regime that is legalistic, militaristic, inflexible, intolerant and inhuman.

Incredibly, despite clear evidence of the damage that has already been inflicted on our nation and its citizens by a psychopathic government, voters continue to elect psychopaths to positions of power and influence.

According to investigative journalist Zack Beauchamp, “In 2012, a group of psychologists evaluated every President from Washington to Bush II using ‘psychopathy trait estimates derived from personality data completed by historical experts on each president.’ They found that presidents tended to have the psychopath’s characteristic fearlessness and low anxiety levels — traits that appear to help Presidents, but also might cause them to make reckless decisions that hurt other people’s lives.”

The willingness to prioritize power above all else, including the welfare of their fellow human beings, ruthlessness, callousness and an utter lack of conscience are among the defining traits of the sociopath.

When our own government no longer sees us as human beings with dignity and worth but as things to be manipulated, maneuvered, mined for data, manhandled by police, conned into believing it has our best interests at heart, mistreated, jailed if we dare step out of line, and then punished unjustly without remorse—all the while refusing to own up to its failings—we are no longer operating under a constitutional republic.

Instead, what we are experiencing is a pathocracy: tyranny at the hands of a psychopathic government, which “operates against the interests of its own people except for favoring certain groups.”

Worse, psychopathology is not confined to those in high positions of government. It can spread like a virus among the populace. As an academic study into pathocracy concluded, “[T]yranny does not flourish because perpetuators are helpless and ignorant of their actions. It flourishes because they actively identify with those who promote vicious acts as virtuous.”

People don’t simply line up and salute. It is through one’s own personal identification with a given leader, party or social order that they become agents of good or evil.

Much depends on how leaders “cultivate a sense of identification with their followers,” says Professor Alex Haslam. “I mean one pretty obvious thing is that leaders talk about ‘we’ rather than ‘I,’ and actually what leadership is about is cultivating this sense of shared identity about ‘we-ness’ and then getting people to want to act in terms of that ‘we-ness,’ to promote our collective interests. . . . [We] is the single word that has increased in the inaugural addresses over the last century . . . and the other one is ‘America.’”

The goal of the modern corporate state is obvious: to promote, cultivate, and embed a sense of shared identification among its citizens. To this end, “we the people” have become “we the police state.”

We are fast becoming slaves in thrall to a faceless, nameless, bureaucratic totalitarian government machine that relentlessly erodes our freedoms through countless laws, statutes, and prohibitions.

Any resistance to such regimes depends on the strength of opinions in the minds of those who choose to fight back. What this means is that we the citizenry must be very careful that we are not manipulated into marching in lockstep with an oppressive regime.

Writing for ThinkProgress, Beauchamp suggests that “one of the best cures to bad leaders may very well be political democracy.”

But what does this really mean in practical terms?

It means holding politicians accountable for their actions and the actions of their staff using every available means at our disposal: through investigative journalism (what used to be referred to as the Fourth Estate) that enlightens and informs, through whistleblower complaints that expose corruption, through lawsuits that challenge misconduct, and through protests and mass political action that remind the powers-that-be that “we the people” are the ones that call the shots.

Remember, education precedes action. Citizens need to the do the hard work of educating themselves about what the government is doing and how to hold it accountable. Don’t allow yourselves to exist exclusively in an echo chamber that is restricted to views with which you agree. Expose yourself to multiple media sources, independent and mainstream, and think for yourself.

For that matter, no matter what your political leanings might be, don’t allow your partisan bias to trump the principles that serve as the basis for our constitutional republic. As Beauchamp notes, “A system that actually holds people accountable to the broader conscience of society may be one of the best ways to keep conscienceless people in check.”

That said, if we allow the ballot box to become our only means of pushing back against the police state, the battle is already lost.

Resistance will require a citizenry willing to be active at the local level.

Yet as I point out in my book Battlefield America: The War on the American People, if you wait to act until the SWAT team is crashing through your door, until your name is placed on a terror watch list, until you are reported for such outlawed activities as collecting rainwater or letting your children play outside unsupervised, then it will be too late.

This much I know: we are not faceless numbers. We are not cogs in the machine. We are not slaves.

We are human beings, and for the moment, we have the opportunity to remain free—that is, if we tirelessly advocate for our rights and resist at every turn attempts by the government to place us in chains.

The Founders understood that our freedoms do not flow from the government. They were not given to us only to be taken away by the will of the State. They are inherently ours. In the same way, the government’s appointed purpose is not to threaten or undermine our freedoms, but to safeguard them.

Until we can get back to this way of thinking, until we can remind our fellow Americans what it really means to be free, and until we can stand firm in the face of threats to our freedoms, we will continue to be treated like slaves in thrall to a bureaucratic police state run by political psychopaths.

The biggest chunk of the earnings pie is increasingly split by fewer and fewer companies.

In the U.S. for example, Visual Capitalist’s Jeff Desjardins points out that about 50% of all profit generated by public companies goes to just 30 companies — back in 1975, it took 109 companies to accomplish the same feat:

This power-law dynamic also manifests itself at a global level — and perhaps it’s little surprise that the world’s most profitable companies generate mind-bending returns that would make any accountant blush.

Which Company Makes the Most Per Day?

Today’s infographic comes to us from HowMuch.net, and it uses data from Fortune to illustrate how much profit top global companies actually rake in on a daily basis.

The 20 most profitable companies in the world are listed below in order, and we’ve also broken the same data down per second:

The Saudi Arabian Oil Company, known to most as Saudi Aramco, is by far the world’s most profitable company, raking in a stunning $304 million of profits every day. When translated to a more micro scale, that works out to $3,519 per second.

You’ve likely seen Saudi Aramco in the news lately, though for other reasons.

The giant state-owned company has been rearing to go public at an aggressive $2 trillion valuation, but it’s since delayed that IPO multiple times, most recently stating the listing will take place in December 2019 or January 2020. Company-owned refineries were also the subject of drone attacks last month, which took offline 5.7 million bpd of oil production temporarily.

Despite these challenges, Saudi Aramco still stands pretty tall — after all, such blows are softened when you churn out the same amount of profit as Apple, Alphabet, and Facebook combined.

Numbers on an Annual Basis

Bringing in over $300 million per day of profit is pretty hard to comprehend, but the numbers are even more unfathomable when they are annualized.

On an annual basis, Saudi Aramco is raking in $111 billion of profit per year, and that’s with oil prices sitting in the $50-$70 per barrel range.

To put this number in perspective, take a look at Chevron. The American oil giant is one of the 20 biggest companies on the S&P 500, but it generated just $15 billion in profit in 2018 and currently sits at a $221 billion market capitalization.

That puts Chevron’s profits at roughly 10% of Aramco’s — and if Aramco does IPO at a $2 trillion valuation, that would put Chevron at roughly 10% of its market cap, as well.

Authored by Scott Ritter via The American Conservative,

How events in Afghanistan, Astana, Adana, and Ankara all led to the victory of Russian diplomacy over U.S. force…

The ceasefire agreement brokered by Vice President Mike Pence and Secretary of State Mike Pompeo on Thursday accomplishes very little outside of putting window dressing on a foregone conclusion. Simply put, the Turks will be able to achieve their objectives of clearing a safe zone of Kurdish forces south of the Turkish border, albeit under a U.S. sanctioned agreement. In return, the U.S. agrees not to impose economic sanctions on Turkey.

So basically it doesn’t change anything that’s already been set into motion by the Turkish invasion of northern Syria. But it does signal the end of the American experiment in Syrian regime change, with the United States supplanted by Russia as the shot caller in Middle Eastern affairs.

To understand how we got to this point, we need to navigate the four A’s that underpin America’s failed policy vis-à-vis Syria—Afghanistan, Astana, Adana, and Ankara.

The first, Afghanistan, represents the epitome of covert American meddling in regional affairs—Operation Cyclone, the successful CIA-run effort to arm and equip anti-communist rebels in Afghanistan to confront the Soviet Army from 1979 to 1989. The success of the Afghanistan experience helped shape an overly optimistic assessment by the administration of President Barack Obama that a similarly successful effort could be had in Syria by covertly training and equipping anti-Assad rebels.

The second, Astana, is the capital city of Kazakhstan, recently renamed Nur Sultan in March 2019. Since 2017, Astana has played host to a series of summits that have become known as “the Astana Process,” a Russian-directed diplomatic effort ostensibly designed to facilitate a peaceful ending to the Syrian crisis, but in reality part of a larger Russian-run effort to sideline American regime change efforts in Syria.

The Astana Process was sold as a complementary effort to the U.S.-backed, UN-brokered Geneva Talks, which were initially convened in 2012 to bring an end to the Syrian conflict. The adoption by the U.S. of an “Assad must go” posture doomed the Geneva Talks from the outset. The Astana Process was the logical outcome of this American failure.

The third “A”—Adana—is a major city located in southern Turkey, some 35 kilometers inland from the Mediterranean Sea. It’s home to the Incirlik Air Base, which hosts significant U.S. Air Force assets, including some 50 B-61 nuclear bombs. It also hosted a meeting between Turkish and Syrian officials in October 1998 for the purpose of crafting a diplomatic solution to the problem presented by forces belonging to the Kurdish People’s Party, or PKK, who were carrying out attacks inside Turkey from camps located within Syria.

The resulting agreement, known as the Adana Agreement, helped prevent a potential war between Turkey and Syria by formally recognizing the respective sovereignty and inviolability of their common border. In 2010, the two nations expanded the 1998 deal into a formal treaty governing cooperation and joint action, inclusive of intelligence sharing on designated terrorist organizations (i.e., the PKK). The Adana Agreement/Treaty was all but forgotten in the aftermath of the 2011 Syrian crisis, as Turkey embraced regime change regarding the Assad government, only to be resuscitated by Russian President Vladimir Putin during talks with Erdogan in Moscow in January 2019. The re-introduction of the moribund agreement into the Syrian-Turkish political dynamic successfully created a diplomatic bridge between the two countries, paving the way for a formal resolution of their considerable differences.

The final “A”—Ankara—is perhaps the most crucial when it comes to understanding the demise of the American position in Syria. Ankara is the Turkish capital, situated in the central Anatolian plateau. In September 2019, Ankara played host to a summit between Erdogan, Putin, and Iran’s President Hassan Rouhani. While the ostensible focus of the summit was to negotiate a ceasefire in the rebel-held Syrian province of Idlib, where Turkish-backed militants were under incessant attack by the combined forces of Russia and Syria, the real purpose was to facilitate an endgame to the Syrian crisis.

Russia’s rejection of the Turkish demands for a ceasefire were interpreted by the Western media as a sign of the summit’s failure. But the opposite was true—Russia backed Turkey’s demand for a security corridor along the Turkish-Syrian border, and accepted Ankara’s characterization of the American-backed Syrian Defense Forces (SDF) as “terrorists.” This agreement, combined with Turkey’s willingness to recognize the outcome of Syrian presidential elections projected to take place in 2021, paved the way for the political reconciliation between Turkey and Syria. It also hammered the last nail in the coffin of America’s regime change policy regarding Bashar al-Assad.

There is little mention of the four A’s in American politics and the mainstream media. Instead there’s only a skewed version of reality, which portrays the American military presence in Syria as part and parcel of a noble alliance between the U.S. and the Kurdish SDF to confront the ISIS scourge. This ignores the reality that the U.S. has been committed to regime change in Syria since 2011, and that the fight against ISIS was merely a sideshow to this larger policy objective.

“Assad must go.” Those three words have defined American policy on Syria since they were first alluded to by President Obama in an official White House statement released in August 2011. The initial U.S. strategy did not involve an Afghanistan-like arming of rebel forces, but rather a political solution under the auspices of policies and entities created under the administration of President George W. Bush. In 2006, the State Department created the Iran-Syrian Operations Group, or ISOG, which oversaw interdepartmental coordination of regime change options in both Iran and Syria.

Though ISOG was disbanded in 2008, its mission was continued by other American agencies. One of the byproducts of the work initiated by ISOG was the creation of Syrian political opposition groups that were later morphed by the Obama administration into an entity known as the Syrian National Council, or SNC. When Obama demanded that Assad must step aside in August 2011, he envisioned that the Syrian president would be replaced by the SNC. This was the objective of the Geneva Talks brokered by the United Nations and the Arab League in 2011-2012. One of the defining features of those talks was the insistence on the part of the U.S., UK, and SNC that the Assad government not be allowed to participate in any discussion about the political future of Syria. This condition was rejected by Russia, and the talks ultimately failed. Efforts to revive the Geneva Process likewise floundered on this point.

Faced with this diplomatic failure, Obama turned to the CIA to undertake an Afghanistan-like arming of Syrian rebels to accomplish on the ground what could not be around a table in Geneva.

The CIA took advantage of Turkish animosity toward Syria in the aftermath of suppression of anti-Syrian government demonstrations in 2011 to funnel massive quantities of military equipment, weapons, and ammunition from Libya to Turkey, where they were used to arm a number of anti-Assad rebels operating under the umbrella of the so-called “Free Syrian Army,” or FSA. In 2013, the CIA took direct control of the arm and equip program, sending teams to Turkey and Jordan to train the FSA. This effort, known as Operation Timber Sycamore, was later supplemented with a Department of Defense program to provide anti-tank weapons to the Syrian opposition.

American efforts to create a viable armed opposition ultimately failed, with many of the weapons and equipment eventually falling into the hands of radical jihadist groups aligned with al-Qaeda and, later, ISIS. The emergence of ISIS as a regional threat in 2014 led to the U.S. building ties with Syrian Kurds as an alternative vector for implementation of its Syrian policy objectives.

While the fight against ISIS was real, it was done in the context of the American occupation of fully one third of Syria’s territory, including oil fields and agricultural resources. As recently as January 2019, the U.S. was justifying the continued presence of forces in Syria as a means of containing the Iranian presence there; the relationship with the SDF and Syrian Kurds was little more than a front to facilitate this policy.

Turkish incursion into Syria is the direct manifestation of the four A’s that define the failure of American policy in Syria—Afghanistan, Astana, Adana and Ankara. It represents the victory of Russian diplomacy over American force of arms. This is a hard pill for most Americans to swallow, which is why many are busy crafting a revisionist history that both glorifies and justifies failed American policy by wrapping it in the flag of our erstwhile Kurdish allies.

But the American misadventure in Syria was never going to end well—bad policy never does. For the American troops caught up in the collapse of the decades-long effort of the United States to overthrow the Assad government, the retreat from Syria was every bit as ignominious as the retreats of all defeated military forces before them. But at least our forces left Syria alive, and not inside body bags—which was an all too real alternative had they remained in place to face the overwhelming forces of geopolitical reality in transition.

President Trump has more cash on hand than any single Democratic primary candidate, a product of his unorthodox campaign that started amassing money his first day in the White House, a move no other president in U.S. history has done.

While President Trump is gearing up for the general election, there are still 18 Democratic candidates who are fighting to become the party’s nominee in the primary. As Statista’s Sarah Feldman notes, Senator Bernie Sanders has the most cash on hand, followed closely by Senator Elizabeth Warren. Mayor Pete Buttigieg rounds out the three leading Democrats by cash on hand. All top three Democratic hopefuls have over double the cash that former Vice President Joe Biden has on hand. Former Vice President Joe Biden has a moderate $9 million in cash, a number that hasn’t changed much since last quarter.

You will find more infographics at Statista

The amount of cash on hand includes money from fundraising, and any funds from any previous presidential, senate, or congressional campaigns. The cash on hand metric provides insights into how much wiggle room campaigns have to grow their staff, expand their operations, and develop their advertising strategy. Candidates need to do all three to gain traction in early primary and caucus states.

Many of the middling and cash-strapped candidates will be in danger of running out of funds, or not meeting the DNC’s stringent fundraising threshold to make the next debate stage. The fundraising requirement involves getting 130,000 donors, 400 of whom need to be from at least 20 states.

Just days after China’s GDP unexpectedly dropped to a sub-consensus 6.0%, the lowest in three decades (with Beijing now set to reveal a 5-handle GDP in the coming months), China watchers were convinced that this week would start with Beijing again lowering its “Libor rate“, i.e., the previously discussed Loan Prime Rate, especially with the Fed expected to cut rates once again next week. However, that did not happen as China kept its one-year prime rate for new corporate loans unchanged in October, at 4.2%, and above the 4.15% consensus estimate. The five-year benchmark was also kept unchanged at 4.85%.

As we reported previously, the Loan Prime Rate, also called China’s “Libor”, is a revamped market indicator of the price that lenders charge clients for new loans, and is linked to the rate at which the central bank will lend financial institutions cash for a year. The rate, which is updated once a month, is made up of submissions from a panel of 18 banks, although ultimately it is Beijing that sets the final rate.

Analysts were quick to step in and “explain” away the unexpected move: Commerzbank’s Zhou Hao said that a static one-year rate shows China “may be trying to balance the shrinking margins of banks with support to the real economy,” adding that “the PBOC remains restrained on policy easing.”

The market, however, was less sanguine, as the PBOC’s lack of easing was promptly taken as an ill-omen: China’s government bonds dropped while money-market rates climbed, amid bets that the policy makers are not in a rush to loosen monetary policy (why? perhaps China’s gargantuan debt load and rapidly devaluing currency have something to do with it). On Monday, the yield on 10-year sovereign notes rose three basis points to 3.22%, the highest since July 1, while the costs on 12-month interest-rate swaps advanced to the highest level since late May.

While the Chinese economy has been under pressure amid a prolonged trade dispute with the US, many have expected that the central bank would match the Fed’s easing and lower corporate borrowing costs and further cut bank reserve ratios. However, so far the PBOC hasn’t embarked on an aggressive stimulus program as some market watchers had hoped.

“It’s not in line with market expectations,” said ANZ Bank China economist Zhaopeng Xing. “The PBOC intends to reserve room for future headwinds.”

Well, if that’s the case, then the headwinds hit just one day later, when the PBOC used open market operations to inject the largest amount of cash into the banking system since May, flooding the local financial system with a net 250 billion in reverse repos (for those confused, a reverse repo in China is the equivalent of a repo in the US, and vice versa). One day later, on Wednesday, the PBOC injected another 200 billion in net liquidity: the biggest two-day liquidity injection since January.

Yet despite the significant 2-day liquidity injection on part with the Fed’s own “Not QE” which is injecting no less than $60BN in new reserves into the economy every month, signs in China’s money markets pointed to expectations of continued liquidity tightness in the financial system. The cost of one-year interest rate swaps, a measure of traders’ expectations of liquidity tightness, climbed 2 basis points to 2.80%, the highest since late May, while the overnight repurchase rate climbed 11 bps to its highest level since July.

So why was this “strong” indication by Beijing that it would match the Fed’s own liquidity injections met with a collective shrug by the market? Because, similar to America’s repocalypse in September,  it came just before an Oct. 24 deadline for companies to pay tax, which traditionally increases the demand for cash and tightens liquidity.

“It’s said to be hard to borrow money in the market this morning mainly due to the coming tax submission which was postponed to this Thursday”, said Zhaopeng Xing, markets economist at ANZ Bank China. Xing said he expected tightness in money market to continue this week.

In other words, despite hopes (and in some cases, prayers) that the PBOC will finally ease aggressively to stimulate Chinese, and global growth and capital markets, China’s credit impulse is set for another sharp drop…

… now that it has become very clear that at least until the 2020 US election, China refuses to aggressively ease, boosting the global and US economy in the process, even if it means its own economy is set to suffer more. The good news: at least Xi Jinping can blame ‘trade war’ for the upcoming lowest Chinese GDP print on record, even if by now everyone knows that trade war is China’s least worry.

According to Russian official statements which followed marathon talks between Russian President Vladimir Putin and his Turkish counterpart Tayyip Erdogan on Tuesday, some 500 ISIS terrorists and dangerous jihadists have escaped prisons in northern Syria since Turkey commenced its military incursion on Oct. 9.

Russian Defense Minister Sergei Shoigu said on Tuesday that “Moscow estimated that up to 500 people, including Islamist fighters, had escaped from captivity in northern Syria after their guards left their posts.” Shoigu added that measures were being taken for Russian and Syrian forces to capture them. 

Washington also confirmed Tuesday that ISIS terrorists have escaped; however, a top State Department official cited only “dozens” freed. 

Perhaps shielding the White House from further criticism over the matter, special representative for Syria, James Jeffrey, testified before the Senate when asked how many “hardened” Islamic State fighters had gone free: “We don’t have high numbers but it was very few so far… for the moment very few.”

“I would say dozens at this point,” Jeffrey told the hearing. The top White House appointed envoy added that there’s no plan to recapture them, and additionally that 10,000 still remain under Kurdish supervision.

Within days of the start of Turkey’s operation against the Kurdish-led Syrian Democratic Forces, SDF leaders announced they couldn’t possibly provide adequate security to guard ISIS prisoners while simultaneously fighting off the Turks and their invading proxies. 

Here’s James Franklin Jeffrey, US envoy to Syria, telling Chris Coons that “dozens” of ISIS fighters have escaped detention in Syria after Trump abandoned the Kurds. Jeffrey added that there’s no plan to recapture them, and 10,000 remain under Kurdish supervision. pic.twitter.com/TyYbxOhhES

— Aaron Rupar (@atrupar) October 22, 2019

Multiple reports have since detailed large-scale prison breaks, which suggests the Russian figure of 500 escaped is more accurate over and against the US designating “dozens”. 

Meanwhile, just after agreeing to a deal with Russia on Tuesday, Erdogan claimed the US “has not completely fulfilled its promises in Syria,” which will require Turkey to “take the necessary steps”. He added: “If we make compromises we would open the way for the terrorist organisation,” according to NTV. 

Turkish media is hailing the Turkey-Russia deal as “a better-than-expected outcome” for Erdogan: 

According to the agreement, the Kurdish People’s Protection Units (YPG) militia will withdraw to beyond 30 kilometres (19 miles) from the Turkish border, and leave the towns of Tel Rifaat and Manbij.

Russia and Turkey will hold joint patrols in a 10-kilometre-deep area to the east and west of the ground covered by Turkey’s Operation Peace Spring.

Russia is expected to send additional troop reinforcements to the region as a result of the deal. 

Defense Minister Shoigu said, “As for additional troops, we naturally believe… that additional equipment will be needed for patrolling since the border is rather extensive and the patrolling should be serious and substantial so that we could avert any serious incidents.” 

US media pundits as well as hawkish Congressional leaders who oppose the US draw down in Syria have pushed the dubious claim that Assad and Russia coming back into eventual control of of northeast Syria will only result in a resurgent Islamic State. 

Authored by Matt Stoller via Vice.com,

The following is an excerpt from Goliath: The 100-Year War Between Monopoly Power and Democracy.

In 1985, the Dow Jones average jumped 27.66 percent. Making money in stocks, as a journalist put it, “was easy.” With lower interest rates, low inflation, and “takeover fever,” investors could throw a dart at a list of stocks and profit.

The next year was also very good. The average gain of a Big Board stock in 1986 was 14 percent, with equity market indexes closing at a record high.

For the top performers, the amounts of money involved were staggering.

In 1987, Michael Milken awarded himself $550 million in compensation. In New York City, spending by bankers—a million dollars for curtains for a Fifth Avenue apartment, a thousand dollars for a vase of precious roses for a party—was obscene. A major financier announced in the Hamptons one night that “if you have less than 750 million, you have no hedge against inflation.” In Paris, a jeweler “dazzled his society guests when topless models displayed the merchandise between courses.” In west Los Angeles, the average price of a house in Bel Air rose to $4.6 million. There was so much money it was nicknamed “green smog.”

Ambitious men now wanted to change the world through finance. Bruce Wasserstein had been a “Nader’s Raider” consumer advocate; he now worked at First Boston as one of the most successful mergers and acquisitions bankers of the 1980s. Michael Lewis wrote his best-seller Liar’s Poker as a warning of what unfettered greed in finance meant, but instead of learning the lesson, students deluged him with letters asking if he “had any other secrets to share about Wall Street.” To them, the book was a “how-to manual.”

Finance was the center, but its power reached outward everywhere. The stock market was minting millionaires in a collection of formerly sleepy towns in California. Sunnyvale, Mountain View, Los Altos, Cupertino, Santa Clara, and San Jose in the 1960s had been covered with “apricot, cherry and plum orchards,” and young people there often took summer jobs at local canneries. Immediately after Reagan’s election, in December of 1980, Apple Computer went public, instantly creating 300 millionaires, and raising more money in the stock market than any company since Ford Motor had in its initial public offering of shares in 1956. A young Steve Jobs was instantly worth $217 million.

Meanwhile, the family farmer had lots of people who said they were friends at election time – even the glamorous music industry put on a giant “Farm Aid” concert in 1985 to raise money for bankrupt growers. But there was no populist leader like Congressman Wright Patman had been during the New Deal in the Democratic Party anymore. On the contrary, “new” Democrats like Dale Bumpers and Bill Clinton of Arkansas worked to rid their state of the usury caps meant to protect the “plain people” from the banker and financier. And the main contender for the Democratic nomination in 1988, the handsome Gary Hart, with his flowing—and carefully blow-dried—chestnut brown hair, spoke a lot about “sunrise” industries like semiconductors and high-tech, but had little in his vision incorporating the family farm.

It wasn’t just the family farmer who suffered. On the South Side of Chicago, U.S. Steel, having started mass layoffs in 1979, continued into the next decade, laying off more than 6,000 workers in that community alone. Youngstown, Johnson, Gary—all the old industrial cities were going, in the words of the writer Studs Terkel, from “Steel Town” to “Ghost Town.” And the headlines kept on coming. John Deere idled 1,500 workers, GE’s turbine division cut 1,500 jobs, AT&T laid off 2,900 in its Shreveport plant, Eastern Air Lines fired 1,010 flight attendants, and docked pay by 20 percent. “You keep saying it can’t get worse, but it does,” said a United Autoworker member.

And all the time, whether in farm country or steel country, the closed independent shop and the collapsed bank were as much monuments to the new political order as the sprouting number of Walmarts and the blizzard of junk-mail credit cards from Citibank. As Terkel put it, “In the thirties, an Administration recognized a need and lent a hand. Today, an Administration recognizes an image and lends a smile.”

Regional inequality widened, as airlines cut routes to rural, small, and even medium-sized cities. So did income inequality, the emptying farm towns, the hollowing of manufacturing as executives began searching for any way to be in any business but one that made things in America. It wasn’t just the smog and the poverty, the consumerism, the debt, and the shop-till-you-drop ethos. It was the profound hopelessness.

Within academic and political institutions, Americans were taught to believe their longing for freedom was immoral. Power was re-centralizing on Wall Street, in corporate monopolies, in shopping malls, in the way they paid for the new consumer goods made abroad, in where they worked and shopped. Yet policymakers, reading from the scripts prepared by Chicago School of Economics “experts,” spoke of these changes as natural, “scientific,” a result of consumer preferences, not the concentration of power.

By the time of the 1992 election, there was a sullen mood among the voters, similar to that of 1974. “People are outraged at what is going on in Washington. Part of it had to do with pay raises, part of it has to do with banks and S&Ls and other things that are affecting my life as a voter,” said a pollster. That year, billionaire businessman Ross Perot ran the strongest third-party challenge in American history, capitalizing on anger among white working-class voters, the Democrats who had switched over to Reagan in the 1980s. He did so by pledging straightforward protectionism for U.S. industry, attacking the proposed North American Free Trade Agreement (NAFTA), and political corruption. Despite a bizarre campaign in which he withdrew and then reentered the race, Perot did so well he shattered the Republican coalition, helping throw the election to the Democrats. There would be one last opportunity for the Democrats to rebuild their New Deal coalition of working-class voters.

The winner of the election, Bill Clinton, looked like he might do so. He had run a populist campaign using the slogan “Putting People First.” He attacked the failed economic theory of Reagan, criticized tax cuts for the rich and factory closings, and pledged to protect Americans from foreign and domestic threats. “For too long, those who play by the rules and keep the faith have gotten the shaft,” Clinton said. “And those who cut corners and cut deals have been rewarded.” His campaign’s internal slogan was “It’s the economy, stupid,” and the 1992 Democratic platform used the word “revolution” 14 times.

As a candidate, Clinton’s Democratic platform called for a “Revolution of 1992,” capturing the anger of the moment. But the platform was written by centrist Democratic Leadership Council boss Al From, and for the first time since 1880 there was no mention of antitrust or corporate power, despite a decade with the worst financial manipulation America had seen since the 1920s. This revolution would be against government, in government, around government. In 1993, a book came out on lobbying in Washington. Wayne Thevenot, a Clinton donor, laid out the new theme of the modern Democratic Party: “I gave up the idea of changing the world. I set out to get rich.”

Like Reagan, Clinton went after restrictions on banking. Reagan sought to free restrictions on finance by allowing banks and non-banks to enter new lines of business. Clinton continued this policy, but over the course of his eight years attacked restrictions on banks themselves. In 1994, the Clinton administration and a Democratic Congress passed the Riegle-Neal Interstate Banking and Branching Efficiency Act, which allowed banks to open up branches across state lines. Clinton appointed Robert Rubin as his treasury secretary, super-lawyer Eugene Ludwig to run the Office of the Comptroller of the Currency, and reappointed Alan Greenspan as the chairman of the Federal Reserve.

All three men worked hard through regulatory rulemaking to allow unfettered trading in derivatives, to break down the New Deal restrictions prohibiting commercial banks from entering the trading business, and to let banks take more risks with less of a cushion. Citigroup finally got an insurance arm, merging with financial conglomerate Travelers Group, approved by Greenspan, who granted the authority for the acquisition under the Bank Holding Company Act. In 1999, Clinton and a now-Republican Congress passed the Gramm-Leach-Bliley Act, which fully repealed the Glass-Steagall Act that had shattered the Houses of J.P. Morgan and Andrew Mellon. The very last bill Clinton signed was the Commodity Futures Modernization Act of 2000, which removed public rules limiting the use of exotic gambling instruments known as derivatives by now-enormous banks.

Clinton signed the Telecommunications Act of 1996, which he touted as “truly revolutionary legislation,” and this began the process of reconsolidating the old AT&T as the “Baby Bells” merged. At the signing ceremony, actress Lily Tomlin reprised her role as a Ma Bell operator. Huge pieces of the AT&T network came back together, as Baby Bells merged from seven to three. Clear Channel grew from 40 radio stations to 1,240. In 1996, the Communications Decency Act was signed, with Section 230 of the Act protecting certain internet businesses from being liable for wrongdoing that occurred on their platform. While not well understood at the time, Section 230 was one policy lever that would enable a powerful set of internet monopolies to emerge in the next decade.

Clinton also sped up the corporate takeover of rural America by allowing a merger wave in farm country. Food companies had always had some power in America, but before the Reagan era, big agribusinesses were confined to one or two stages of the food system. In the 1990s, the agricultural sector consolidated under a small number of sprawling conglomerates that organized the entire supply chain. Cargill, an agricultural conglomerate that was the largest privately owned company in America, embarked on a series of mergers and joint ventures, buying the grain-trading operations of its rival, Continental Grain Inc., as well as Azko Salt, thus becoming one of the largest salt production and marketing operations in the world.

Monsanto consolidated the specialty chemicals and seed markets, buying up DeKalb Genetics and cotton-seed maker Delta & Pine Land. ConAgra, marketing itself as selling at every link of the supply chain from “farm gate to dinner plate,” bought International Home Foods (the producer of Chef Boyardee pasta and Gulden’s mustard), Knott’s Berry Farm Foods, Gilroy Foods, Hester Industries, and Signature Foods. As William Heffernan, a rural sociologist at the University of Missouri, put it in 1999, a host of formal and informal alliances such as joint ventures, partnerships, contracts, agreements, and side agreements ended up concentrating power even further into “clusters of firms.” He identified three such clusters—Cargill/Monsanto, ConAgra, and Novartis/ADM—as controlling the global food supply.

The increase in power of these trading corporations meant that profit would increasingly flow to middlemen, not farmers themselves. Montana senator Conrad Burns complained his state’s farmers were “getting less for our products on the farm now than we did during the Great Depression.” The Montana state legislature passed a resolution demanding vigorous antitrust investigations into the meatpacking, grain-handling, and food retail industries, and the state farmer’s union asked for a special unit at the Department of Justice to review proposed agricultural mergers. There was so little interest in the Clinton antitrust division that when Burns held a Senate Commerce Committee hearing on concentration in the agricultural sector, the assistant attorney general for antitrust, Joel Klein, didn’t bother to show up. “Their failure to be here to explain their policies to rural America,” said Burns, “speaks volumes about what their real agenda is.”

In the Reagan era, Walmart had already become the most important chain store in America, surpassing the importance of A&P at the height of its power. But it was during the Clinton administration that the company became a trading giant. First, the corporation jumped in size, replacing the auto giant GM as the top private employer in America, growing to 825,000 employees in 1998 while planting a store in every state. The end of antitrust enforcement in the retail space meant that Walmart could wield its buying power to restructure swaths of industries and companies, from pickle producers to Procter & Gamble. Clinton allowed Walmart to reorder world trade itself. Even in the mid-1990s, only a small percentage of its products were made abroad. But the passage of NAFTA—which eliminated tariffs on Mexican imports—as well as Clinton’s embrace of Chinese imports, allowed Walmart to force its suppliers to produce where labor and environmental costs were lowest. From 1992 to 2000, America’s trade deficit with China jumped from $18 billion to $84 billion, while it went from a small trade surplus to a $25 billion trade deficit with Mexico. And Walmart led the way. By 2003, consulting firm Retail Forward estimated more than half of Walmart merchandise was made abroad.

Clinton administration officials were proud of Walmart, and this new generation of American trading monopolies, dubbing them part of a wondrous “New Economy” underpinned by information technology. “And if you think about what this new economy means,” said Clinton deputy treasury secretary Larry Summers in 1998 at a conference for investment bankers focusing on high-tech, “whether it is AIG in insurance, McDonald’s in fast-food, Walmart in retailing, Microsoft in software, Harvard University in education, CNN in television news—the leading enterprises are American.”

It was also under Clinton that the last bastion of the New Deal coalition—a congressional majority held by the Democrats since the late 1940s—fell apart as the last few holdout southern Democrats were finally driven from office or switched to the Republican Party. And it was under Clinton that the language of politics shifted from that of equity, justice, and potholes to the finance-speak of redistribution, growth and investment, and infrastructure decay.

The Democratic Party embraced not just the tactics, but the ideology of the Chicago School. As one memo from Clinton’s Council of Economic Advisors put it, “Large size is not the same as monopoly power. For example, an ice cream vendor at the beach on a hot day probably has more market power than many multi-billion-dollar companies in competitive industries.”

• During the 12 years of the Reagan and Bush administrations, there were 85,064 mergers valued at $3.5 trillion.

• Under just seven years of Clinton, there were 166,310 deals valued at $9.8 trillion.

This merger wave was larger than that of the Reagan era, and larger even than any since the turn of the twentieth century, when the original trusts were created. Hotels, hospitals, banks, investment banks, defense contractors, technology, oil—everything was merging.

The Clinton administration organized this new concentrated American economy through regulatory appointments and through non-enforcement of antitrust laws. Sometimes it even seemed they had put antitrust enforcement itself up for sale. In 1996, Thomson Corporation bought West Publishing, creating a monopoly in digital access to court opinions and legal publishing; the owner of West had given a half a million dollars to the Democratic Party and personally lobbied Clinton to allow the deal. The DOJ even approved the $81 billion Exxon and Mobil merger, restoring a chunk of the Rockefeller empire.

Clinton advisor James Carville very early on in Clinton’s first term noted what was happening.

“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter,” he said.

“But now I want to come back as the bond market. You can intimidate everybody.”

Toward the end of Clinton’s second term, with a transcendent stock market, bars in the United States began switching their television sets from sports scores to CNBC, to watch the trading in real time.

In the 1990s, it wouldn’t be Herbert Hoover overseeing a bubble, it would be a Democrat.

* * *

Finally, Matt pointed out on Twitter that:  “This chapter is about Clinton. But there are two chapters before about how Reagan facilitated the merger boom of the 1980s. Our problems came through both parties. Both. That is crystal clear.“

A new bill brought by a Massachusetts state legislator would make it a crime to maliciously call someone a “bitch” within the commonwealth, the Free Beacon reports. 

Democrat Daniel J. Hunt (whose last name was surely a playground favorite) introduced “An Act regarding the use of offensive words,” which would fine individuals $150 for a first offense, while repeat offenders would face a $200 fine, up to six months’ imprisonment, or both. 

Section 53 of chapter 272 of the General Laws, as appearing in the 2016 Official Edition, is hereby amended by adding the following subsection:-

(c) A person who uses the word “bitch” directed at another person to accost, annoy, degrade or demean the other person shall be considered to be a disorderly person in violation of this section, and shall be subject to the penalties provided in subsections (a) and (b). A violation of this subsection may be reported by the person to whom the offensive language was directed at or by any witness to such incident.

“Any time a constituent approaches me with something that is of concern to them, I follow through with it,” he said. “In this instance, someone asked me to file a bill that they deemed was important and I thought it was a good exercise to let that bill go through the process,” Hunt told the Boston Herald. 

Cambridge civil rights attorney Harvey Silvergate says Hunt’s bill isn’t legal. 

“If it’s challenged in court, it will take minutes for a judge to see through it,” said Silvergate. “It doesn’t have a prayer of surviving, so why should the Legislature even burden us — the citizens, the press and the courts — why would they burden us with this nonsense? Surely they must have more important things to do.” 

Authored by Dan Mitchell via International Liberty blog,

California is suffering a slow but steady decline.

Bad economic policy has made the Golden State less attractive for entrepreneurs, investors, and business owners.

Punitive tax laws deserve much of the blame, particularly the 2012 decision to impose a top tax rate of 13.3 percent.

I’ve already shared some anecdotal evidence that this tax increase backfired.

But now we have some scholarly evidence from two Stanford Professors. Here’s what they investigated.

In this paper we study the question of the elasticity of the tax base with respect to taxation using microdata from the California Franchise Tax Board on the universe of California taxpayers around the implementation of Proposition 30 in 2012. This ballot initiative increased marginal income tax rates… These increases came on top of the 9.3% rate that applied to income over $48,942 for singles and $97,884 for married couples, and also in addition to the 1% mental health tax that since 2004 had applied to incomes of over $1 million. The reform therefore brought the top marginal tax rate in California to 13.3% for incomes of over $1 million.

For those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax policy.

A high measure of elasticity means a large “deadweight loss” since taxpayers are choosing to earn and/or report less income.

And that’s what the two scholars discovered.

Some high-income taxpayers responded to the big tax increase by moving.

We first study the extensive margin response to taxation, and document a substantial one-time outflow of high-earning taxpayers from California in response to Proposition 30. Defining a departure as a taxpayer who went from resident to non-resident filing status, the rate of departures in 2013 over 2012 spiked from 1.5% after the 2011 tax year to 2.125% for those primary taxpayers earning over $5 million in 2012, with a similar effect among taxpayers earning $2-5 million in 2012.

By the way, you won’t be surprised to learn that California taxpayers increasingly opted to move to states with no income tax, such as Florida, Nevada, and Texas.

Other taxpayers stayed in California but they chose to earn and/or report less income.

We combine these results on the extensive margin behavioral response with conclusions of analysis of the intensive margin response to Proposition 30. …we use a differences-in-differences design in which we compare upper-income California resident taxpayers to a matched sample of non-resident California filers, for which there is relatively rich data… Our estimates show a substantial intensive margin response to Proposition 30, which appears in 2012 and persists… We find that California top-earners on average report $522,000 less in taxable income than their counterfactuals in 2012, $357,000 less in 2013, and $599,000 less in 2014; this is relative to a baseline mean income of $4.15 million amongst our defined group of California top-earners in 2011. …the estimates imply an elasticity of taxable income with respect to the marginal net of tax rate of 2.5-3.3.

In the world of public finance, that’s a very high measure of elasticity.

Wonky readers may be interested in these charts showing changes in income.

By the way, guess what happens when taxpayers move, or when they decide to earn less income?

The obvious answer is that politicians don’t collect as much revenue. Which is exactly what the study discovered.

A back of the envelope calculation based on our econometric estimates finds that the intensive and extensive margin responses to taxation combined to undo 45.2% of the revenue gains from taxation that otherwise would have accrued to California in the absence of behavioral responses. The intensive margin accounts for the majority of this effect, but the extensive margin comprises a non-trivial 9.5% of this total response.

We can call this the revenge of the Laffer Curve.

By the way, it’s quite likely that there has been a resurgence of both the “extensive” and “intensive” responses to California’s punitive tax regime because the 2017 tax reform restricted the deductibility of state and local taxes. This means that the federal government – for all intents and purposes – is no longer subsidizing California’s backwards fiscal system.

P.S. Makes me wonder if California politicians will turn Walter Williams’ joke into reality.

Due to the skyrocketing price of pork amid an ongoing shortage, rural Chinese are dusting off traditional dog meat recipes which had lost appeal until recently, SCMP reports. 

“Why not choose dog meat if you want some meat?” recommended a waiter in Wan’an county located within Jiangxi province.

As we noted weeks ago, the price of China’s favorite food has skyrocketed after a widespread outbreak of African swine fever resulted in the slaughter of millions of pigs – causing an estimated 1 trillion yuan ($140 billion) of direct losses. In September, the price of pork nationwide skyrocketed 69% over a year earlier according to China’s National Bureau of Statistics – pushing Beijing’s CPI up to 3%, the limit of their inflation tolerance for 2019. 

China accounts for over half the pork eaten worldwide, and given a continued decline of the country’s stockpile, prices are expected to rise further. 

As pork prices continue to soar, discontent is growing among the public, especially among low-income groups. It is also dampening consumer sentiment and belies Beijing’s attempts to convince people of the country’s bright economic future.

In a supermarket in the county’s town centre, the price of lean pork was 72 yuan (US$10) per kilogram while pork rib cost 74 yuan (US$10.50) a kilogram – more than double what was being charged a year ago and at least as high as prices in major cities like Shanghai and Beijing.

“Pork only costed a dozen yuan per 500 grams last year, now it’s more than 30 yuan,” said Liang Meilu, who runs five small kindergartens across the county. –SCMP

With many Chinese now priced out of pork, local supermarkets are selling rabbit meat even cheaper than normal at 43.6 yuan ($6.50 US) per kilogram. Those in Wan’an – officially labeled as a “county of poverty” by Beijing until 2018, are having a hard time even locating pork. The average salary in the region is around $353 (US) per month – around 25 – 33% less than those in large Chinese cities. 

As a result, “most pork vendors have gone out of business because few rural residents, whose incomes are even lower than the county average, can afford it, according to Liu Gang, a villager in Jian county in Jiangxi,” SCMP reports. 

“It’s not only expensive, but it’s also hard to purchase pork meat in rural villages,” said Liu, adding “Many pigs died in nearby pig farms due to African swine fever earlier this year.” 

The country’s live hog population, which accounted for about half of the global total in 2018, had fallen 41.1 per cent at the end of September from a year earlier, according to a survey of 400 counties by the Ministry of Agriculture and Rural Affairs. It is unclear how much further it will fall before it bottoms out.

The Chinese government has instituted emergency measures to boost pig supply, trying desperately to help farmers expand production while scrambling to import pork to sure up supply. China’s imports of pork rose 43.6 per cent to 1.32 million tonnes in the first nine months of this year, according to China’s General Administration of Customs. –SCMP

Until China’s pork problem is behind them, looks like dog is back on the menu.