Tag: news

Authored by Charles Hugh Smith via OfTwoMinds blog,

The global crisis is not merely economic; it is the result of profound financial, sociological and political trends described by Marx, Kafka, Orwell and Huxley.

The unfolding global crisis is best understood as the convergence of the dynamics described by Marx, Kafka, Orwell and Huxley. Let’s start with Franz Kafka, the writer (1883-1924) who most eloquently captured the systemic injustices of all-powerful bureaucratic institutions–the alienation experienced by the hapless citizen enmeshed in the bureaucratic web, petty officialdom’s mindless persecutions of the innocent, and the intrinsic absurdity of the centralized State best expressed in this phrase: “We expect errors, not justice.”

If this isn’t the most insightful summary of the current moment in history, then what is? A lawyer by training and practice, Kafka understood that the the more powerful and entrenched the institution and its bureaucracy, the greater the collateral damage rained on the innocent, and the more extreme the perversion of justice.

We are living in a Kafkaesque nightmare where suspicion alone justifies the government stealing from its citizens, and an unrelated crime (possessing drug paraphernalia) is used to justify state theft.

As in a Kafkaesque nightmare, the state is above the law when it needs an excuse to steal your car or cash. There is no crime, no arrest, no due process–just the state threatening that you should shut up and be happy they don’t take everything you own.

All these forms of civil forfeiture are well documented. While some would claim the worst abuses have been rectified, that is far from evident. What is evident is how long these kinds of legalized looting have been going on.

Taken: Under civil forfeiture, Americans who haven’t been charged with wrongdoing can be stripped of their cash, cars, and even homes. Is that all we’re losing? (2013)

Stop and Seize (six parts) (2013)

When the state steals our cash or car on mere suspicion, you have no recourse other than horrendously costly and time-consuming legal actions. So you no longer have enough money to prove your innocence now that we’ve declared your car and cash guilty?

Tough luck, bucko–be glad you live in a fake democracy with a fake rule of law, a fake judiciary, and a government with the officially sanctioned right to steal your money and possessions without any due process or court proceedings–legalized looting.

They don’t have to torture a confession out of you, like the NKVD/KGB did in the former Soviet Union, because your cash and car are already guilty.

This is where Orwell enters the convergence, for the State masks its stripmining and power grab with deliciously Orwellian misdirections such as “the People’s Party,” “democratic socialism,” and so on.

Orwell understood the State’s ontological imperative is expansion, to the point where it controls every level of community, markets and society. Once the State escapes the control of the citizenry, it is free to exploit them in a parasitic predation that is the mirror-image of Monopoly capital. For what is the State but a monopoly of force, coercion, data manipulation and the regulation of private monopolies?

What is the EU bureaucracy in Brussels but the perfection of a stateless State?

As Kafka divined, centralized bureaucracy has the capacity for both Orwellian obfuscation (anyone read those 1,300-page Congressional bills other than those gaming the system for their private benefit?) and systemic avarice and injustice.

The convergence boils down to this: it would be impossible to loot this much wealth if the State didn’t exist to enforce the “rules” of parasitic predation.

Aldous Huxley foresaw a Central State that persuaded its people to “love their servitude” via propaganda, drugs, entertainment and information-overload. In his view, the energy required to force compliance exceeded the “cost” of persuasion, and thus the Powers That Be would opt for the power of suggestion.

He outlined this in a letter to George Orwell:

“My own belief is that the ruling oligarchy will find less arduous and wasteful ways of governing and of satisfying its lust for power, and these ways will resemble those which I described in Brave New World.

Within the next generation I believe that the world’s rulers will discover that infant conditioning and narco-hypnosis are more efficient, as instruments of government, than clubs and prisons, and that the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging and kicking them into obedience.”

As prescient as he was, Huxley could not have foreseen the power of mobile telephony, gaming and social media hypnosis/addiction as a conditioning mechanism for passivity and self-absorption. We are only beginning to understand the immense addictive/conditioning powers of 24/7 mobile telephony / social media.

What would we say about a drug that caused people to forego sex to check their Facebook page? What would we say about a drug that caused young men to stay glued to a computer for 40+ hours straight, an obsession so acute that some actually die? We would declare that drug to be far too powerful and dangerous to be widely available, yet mobile telephony, gaming and social media is now ubiquitous.

Servitude comes in many gradations and forms. Relying on the Federal Reserve to constantly prop up our pension and mutual funds lest reality cause them to collapse is a form of servitude; we end up worshiping the Fed as our omnipotent financial saviors.

That the Fed is unelected and impervious to democracy or the will of the people is forgotten; all that matters is that we love our servitude to it.

The Central State has the power via helicopter drops of cash to individuals and corporate bailouts to buy complicity. Since the human mind rebels against hypocrisy and insincerity–we can all spot a phony–we subconsciously persuade ourselves of the rightness and inevitability of servitude and self-absorption.

And that is how we come to love our servitude; we persuade ourselves to believe it’s acceptable and normal rather than deranged and destructive.

I have covered these topics in depth in my books Resistance, Revolution, Liberation: A Model for Positive Change and Survival+: Structuring Prosperity for Yourself and the Nation.

Last but not least, we come to Marx. As Marx explained, the dynamics of state-monopoly-capitalism lead to the complete dominance of capital over labor in both financial and political “markets,” as wealth buys political influence which then protects and enforces capital’s dominance.

Marx also saw that finance-capital would inevitably incentivize over-capacity, stripping industrial capital of pricing power and profits. Once there’s more goods and services than labor can afford to buy with earnings, financialization arises to provide credit to labor to buy capital’s surplus production and engineer financial gains with leveraged speculation and asset bubbles.

But since labor’s earnings are stagnant or declining, there’s an end-game to financialization. Capital can no longer generate any gain at all except by central banks agreeing to buy capital’s absurdly over-valued assets. Though the players tell themselves this arrangement is temporary, the dynamics Marx described are fundamental and inexorable: the insanity of central banks creating currency out of thin air to buy insanely over-priced assets is the final crisis of late-stage capitalism because there is no other escape from collapse.

Having stripped labor of earnings and political power and extracted every last scrap of profit from over-capacity (i.e. globalization) and financialization, capital is now completely dependent on money-spewing central banks buying their phantom capital with newly printed currency, a dynamic that will eventually trigger a collapse in the purchasing power of the central banks’ phantom capital (i.e. fiat currencies).

When there is no incentive to invest in real-world productive assets and every incentive to skim profits by front-running the Federal Reserve, capitalism is dead. Paraphrasing Wallerstein, “Capitalism is no longer attractive to capitalists.”

We can see this for ourselves in the real world: if “renewable energy” was as profitable as some maintain, private capital would have rushed in to fund every project to maximize their gains from this new source of immense profits. But as Art Berman explained in Why the Renewable Rocket Has Failed To Launch, this hasn’t been the case. Rather, “green energy” remains dependent on government subsidies in one form or another. If hydropower is removed from “renewables,” all other renewables (solar, wind, etc.) provide only 4% of total global energy consumption.

Japan’s stagnation exemplifies Marx’s analysis: Japan’s central bank has created trillions of yen out of thin air for 30 years and used this phantom capital to buy the over-valued assets of Japan’s politically dominant state-capitalist class, a policy that has led to secular stagnation and social decline. If it weren’t for China’s one-off expansion, Japan’s economy would have slipped into phantom capital oblivion decades ago.

Kafka, Orwell, Huxley and Marx called it, and we’re living in the last-gasp stage of the cruel and unsustainable system they described. So sorry, but investing your phantom capital in FANG stocks, Tik-Tok and virtual-reality games will not save phantom capital from well-deserved oblivion.

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My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

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A former New York Police Commissioner told Fox News on Monday that he heard up to 600 NYPD cops are on the verge of either retiring or quitting following the events of the last 2 weeks, during which NYC saw some of the most violent demonstrations in the country. The protests saw violence perpetrated against police by violent instigators and looters who operated in organized crews. However, a flurry of optically terrible videos of police attacking peaceful or nonviolent protesters have turned Democratic politicians in the city, including the mayor, decidedly against the NYPD.

New York City Police Commissioner Bernard Kerik appeared on Fox News for the second time in a week (following an appearance on Tucker Tuesday evening that was criticized by the Washington Post) over the weekend to share the troubling news.

After years of clashing with 1 Police Plaza, Mayor de Blasio announced on Sunday that he would implement recommendations from a ‘racial inclusion’ committee led by his wife, which recommended shifting funding from the NYPD to youth and social services organizations.

The mayor’s decision to side with demonstrators who attacked police in a few isolated instances (like when a group of protesters surrounding an NYPD police van) largely soured the rank and file and union leaders, who have slammed de Blasio as incompetent, and have urged him to step down.

Last week, NY Comptroller (and, according to some, mayor-in-waiting) Scott Stringer recommended shaving $1.1 billion from the NYPD budget over four years. Currently, the city spends ~$6 billion a year on maintaining the country’s largest police force, with about ~45k sworn officers and thousands more civilian employees.

This has shattered what little remained of police morale over the past 2 weeks, as the media and the public have largely ignored the hundreds of cops who have been injured and dozens who have been hospitalized – with several even killed. One of the most gruesome incidents involved a cop being hit by a car in Brooklyn.

“You have some in the hospital. But there were over 300, 300 injuries. And the thing that scares me, judge, I’m hearing close to 600 cops have either put in their papers, or they’re talking to the department about resigning or retiring, like this is insane,” he said.

Kerik served as Giuliani’s police commissioner during 9/11 and its aftermath, though his reputation was later tarnished by corruption charges that led to a jail term.

Giuliani, who participated in the interview with Kerik, relished the opportunity to tear into de Blasio.

“This action did not have to happen if we had a vaguely competent mayor. This should have been stopped five days ago. I mean, couldn’t they have stopped some of that? We have watched now over and over again people looting, throwing Molotov cocktails, burning cars, and now putting our police in prison, in hospitals, and virtually no major arrests are made,” Giuliani said. “The mayor should step down. He’s incompetent.”

Watch a clip from the interview here.

With stocks recovering all 2020 losses, one would think that the economy is firing on all cylinders. Unfortunately, based on the message just sent out by the Fed, nothing could be further from the truth.

While the market still waits for the Fed to officially start making loans on its Main Street Lending Program, today at 330pm, the Fed announced that it expanded the eligibility criteria for this facility “to allow more small and medium-sized businesses to be able to receive support.” The facility will be open for eligible lenders “soon,” while the burden on banks that create the loans would be lessened.

Changes to the eligibility criteria include:

• Lowering the minimum loan size for certain loans to $250,000 from $500,000;
• Increasing the maximum loan size for all facilities;
• Increasing the term of each loan option to five years, from four years;
• Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
• Raising the Reserve Bank’s participation to 95% for all loans.

In short: America’s small businesses – and we mean really small business, those which desperately need as little as 250K to survive yet can’t find willing bank lenders – are in such dire shape that only the Fed has the willingness to step in and bail them out as banks refuse to take on the credit risk.

To juice bank interest in participating, going forward they will be required to hold only 5% of the loans on their balance sheet for all three facilities, far less than the 15% they had to hold previously.

“Supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery,” Powell said in the statement explaining the expansion. “I am confident the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period.”

And here is the Fed again confusing solvency with liquidity, and assuming that just because business incur billions more in debt they will somehow become more viable or retain workers. Unfortunately, as we discussed on Friday, this simply won’t happen because whereas US corporations have already issued over $1.1 trillion in IG debt, the bulk of its has been retainer (or is being used to fund dividends and buybacks), even as millions of workers are being let go.

The Fed also unveiled that The Main Street program will be open for lender registration soon, and the central bank will start buying loans “shortly afterward.” The three facilities are backed by a $75 billion investment from the Treasury Department that’s part of the $454 billion allocated by Congress in the CARES Act for the Fed’s emergency-lending programs during the coronavirus pandemic. Expect the entire investment to be wiped out over the next few years as all the companies that take out the Fed-guaranteed loans file for bankruptcy anyway.