Month: September 2017

Authored by James Howard Kunstler via Kunstler.com,

Poor old Karl Marx, tortured by boils and phantoms, was right about one thing: History repeats itself, first as tragedy, second as farce.

Thus, I give you the Roman Empire and now the United States of America. Rome surrendered to time and entropy. Our method is to drive a gigantic clown car into a ditch.

Is anyone out there interested in redemption?

I have an idea for the political party out of power, the Democrats, sunk in its special Okefenokee Swamp of identity politics and Russia paranoia: make an effort to legislate the Citizens United calamity out of existence.

Who knows, a handful of Republicans may be shamed into going along with it.

For those of you who have been mentally vacationing on Mars with Elon Musk, Citizens United was a Supreme Court decision — Citizens United v. Federal Election Commission 558 U.S. 310 (2010) — which determined that corporations had the right, as hypothetical “persons,” to give as much money as they liked to political candidates.

This “right” devolved from the First Amendment of the constitution, the 5-4 majority opinion said — giving money to political candidates and causes amounts to “freedom of speech.” The Citizens United ruling opened the door for unlimited election spending by corporations and enormous mischief in our national life. Then-President Obama — a constitutional law professor before his career in politics — complained bitterly about the opinion days later in his State of the Union address, saying that the court had “reversed a century of law to open the floodgates, including foreign corporations, to spend without limit in our elections.”

And for the next seven years he did absolutely nothing about it, nor did the Democratic Party majority in congress. Rather, they vacuumed in as much corporate campaign money as possible from every hokey political action committee (PAC) from sea to shining sea, especially in the 2016 presidential election starring Hillary “It’s My Turn” Clinton. It turned out to not be her turn in large part because the voters noticed the stench of corruption wafting off this toxic flow of corporate money, which Hillary was using to vastly outspend her billionaire opponent, troll that he was.

Of course, corporations have not always been what they are deemed to be today. They evolved with the increasingly complex activities of industrial economies. Along the way — in Great Britain first, actually — they were deemed to exist as the equivalent of legal persons, to establish that the liabilities of the company were separate and distinct from those of its owners. In the USA, forming a corporation usually required an act of legislation until the late 19th century. After that, they merely had to register with the states. Then congress had to sort out the additional problems of giant “trusts” and holding companies (hence, anti-trust laws, now generally ignored).

In short, the definition of what a corporation is and what it has a right to do is in a pretty constant state of change as economies evolve. And insofar as the current economy is sinking like the RMS Titanic — and our republic as a mode of governance with it — surely the time has come to redefine in legislation the role and existential nature of a corporation in this polity. This homework assignment should be given to the Democratic members of congress, since they are otherwise preoccupied only with hunting for Russian gremlins and discovering new sexual abnormalities to protect and defend.

The crux of the argument is that corporations cannot be said to be entirely and altogether the equivalent of persons for all legal purposes. In law, corporations have duties, obligations, and responsibilities to their shareholders first, and only after that to the public interest or the common good, and only then by pretty strict legal prescription. It may be assumed that the interests of corporations and their shareholders are in opposition to, and in conflict with, the public interest. And insofar as elections are fundamentally matters of the public interest, corporations must be prohibited from efforts to influence the outcome of elections.

That’s your assignment Chuck Schumer, Nancy Pelosi, and the rest of the Democratic Party leadership. Get serious. Show a little initiative. Do something useful. Draw up some legislation. Get behind something real that might make a difference in this decrepitating country. Or get out of the way and let a new party do the job.

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The lack of prosecution of US bankers responsible for the great financial crisis has been a much debated topic over the years, leading to the coinage of such terms as “Too Big To Prosecute”, the termination of at least one corrupt DOJ official, the revelation that Eric Holder is the most useless Attorney General in history, and of course billions in cash kickbacks between Wall Street and D.C. And, naturally, the lack of incentives that punish cheating and fraud, is one of the main reasons why such fraud will not only continue but get bigger until once again, the entire system crashes under the weight of accumulated theft, corruption and Fed-driven malinvestment. But what can be done? In this case, Vietnam may have just shown the way – sentence embezzling bankers to death. Because if one wants to promptly stop an end to all financial crime, few things motivate as efficiently as a firing squad.

According to the BBC, the former head of a major Vietnamese bank has been sentenced to death for his role in a fraud case involving some 800 billion dong (which sounds like a lot of dong, but equals roughly $35 million) of illegal loans. Nguyen Xuan Son, who served as general director of OceanBank, was convicted of embezzlement, abuse of power and economic mismanagement. Bank founder, tycoon Ha Van Tham, and dozens of other banking officials are also on trial, accused of lending violations.

Nguyen Xuan Son was sentenced to death at the People’s Court in Hanoi

Meanwhile, dozens of former employees also received lengthy prison sentences in the major corruption trial. Because OceanBank is partially-state owned, Son’s crime of mishandling state money was thought to be particularly serious. After leaving the bank, he rose to be head of state oil giant PetroVietnam. As Reuters reported previously, PetroVietnam and Vietnam’s banking sector are at the heart of a sweeping corruption crackdown in the communist state.

The four officials are accused of intentional breaches of state rules over a loss-making investment in Ocean Group’s banking unit, police said in an online statement.

 

Investigations into PetroVietnam made global headlines last month when Germany accused Vietnam of kidnapping Trinh Xuan Thanh, a former official of a PetroVietnam unit, from a park in Berlin and forcing him home to face charges of financial mismanagement.

 

A Politburo member who was a former PetroVietnam chairman and a vice trade minister have also been sacked from their positions as part of the crackdown — unusual moves in a country where such senior officials are rarely dismissed.

To be sure, Vietnam is one of the world’s biggest executioners, according to Amnesty International, but this is said to be the first time in years that the death penalty has been given to such a high-flying former official. Back in 2013, another former banker, Vu Quoc Hao, the former general director of Agribank Financial Leasing Co, was also sentenced to death by lethal injection for embezzling $25 million (or what Goldman would call “weekend lunch money”) a case which however was relatively low profile and received little international attention. 

Earlier in the day, OceanBank’s ex-chairman Ha Van Tham, once one of the richest people in Vietnam, was jailed for life on the same charges, and for violating lending rules. Judge Truong Viet Toan said: “Tham and Son’s behaviour is very serious, infringing on the management of state assets and causing public grievances, which requires strict punishment.”

The bank’s ex-chairman Ha Van Tham was jailed for life

More details from BBC:

In total, 51 officials and bankers stood trial, accused of mismanagement leading to losses of $69m (£50m).

 

The case comes amid a massive anti-corruption crackdown in Vietnam, which is ranked as one of the most corrupt countries in Asia. It is ranked 113th out of 176 countries on Transparency International’s corruption perceptions index.

 

The government has vowed to tackle the issue in order to boost the country’s economic growth. In May, a top Vietnamese official was sacked for “serious violations” while running PetroVietnam.

And yet,  while one could be left with the impression that this is a case of justice finally being done, even today’s sentences appears to have an element of corruption to them: according to BBC, the blitz, while tackling corruption, has mainly targeted opponents of Communist Party chief Nguyen Phu Trong.

Still, no matter the circumstances, an outcome such as this in the US remains impossible: after all it is America’s very own embezzling bankers that control the legislative and judicial branches, and most recently, the executive not to mention the central bank, which is why deterrence of any substantial scale will never take place in the US and small, medium and large-scale theft will continue unabated, with the occasional slaps on the wrist, until there is nothing left to steal.

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Authored by Raul Ilargi Meijer via The Automatic Earth blog,

The film Koyaanisqatsi was released in 1982. The title means ‘life out of balance’ in the language of the Hopi, a Native American tribe who live(d) mainly in what is now north-east Arizona. It is directed by Godfrey Reggio with music by Philip Glass and cinematography by Ron Fricke. There are no actors, and no dialogue. Philip Glass’s music underlies a series of film fragments that contrast the beauty of American nature with the noise and pollution mankind has added to it. Wikipedia:

The film consists primarily of slow motion and time-lapse footage of cities and many natural landscapes across the United States. The visual tone poem contains neither dialogue nor a vocalized narration: its tone is set by the juxtaposition of images and music. Reggio explained the lack of dialogue by stating “it’s not for lack of love of the language that these films have no words. It’s because, from my point of view, our language is in a state of vast humiliation. It no longer describes the world in which we live.”

Due to its initial success, Reggio and Glass made two sequels to the film, Powaqqatsi (1988), meaning “parasitic way of life” or “life in transition”, and Naqoyqatsi (2002) which means “life as war”, “civilized violence” and “a life of killing each other”. If you haven’t seen them, they come highly recommended.

Koyaanisqatsi is an fitting term to describe not only our world in general, but also our economies. They are severely out of balance, and getting more so every day. But economies, like nature, need at least a minimum in balance. If that disappears, this lack of balance will tip them over. It is somewhat strange that this is not being recognized, and not even discussed.

It’s as if people think that when almost all wealth goes to a select very few, an economy can still continue to function. It can’t. The rich getting continually richer means the poor getting poorer (as overall growth is slow or non-existent), until the latter reach a point where they can no longer afford even basic necessities. That’s when parts of an economy will start dying, in the same vein that parts of a living body, an organism, die off when the supply of blood, nutrients and oxygen is cut off.

For an economy to function, it needs money to flow through it the same way a body needs blood to flow. If all the money gets increasingly concentrated in just a small area, the economy stagnates. We measure the flow of money as velocity:

 

If that graph would describe a human body, it would be in an ambulance on the way to ER. The only times velocity of money have been as low as today was during a Great Depression and a World War.

The ever richer rich cannot spend enough to keep things moving. They can buy stocks and bonds and houses, but they can’t buy all the groceries and clothing that the poor and middle class no longer can. But it’s those things that keep the economy humming along.

An economy as unbalanced as the one we presently have is bound to perish. The rich are killing their own economies by trying to get richer all the time. And they have no idea that’s what happens. It’s sort of baked into their understanding of what capitalism is. Or neo-liberalism if you want.

We should look upon, and handle, our economies and societies as living, and vibrant, systems, but we’re miles away from any such understanding. Our education systems are gross failures when it comes to this, and our media, owned by the rich, support anything that will make them richer. Even though that is suicidal for everyone involved. We are a tragic species in many more ways than one.

This has nothing to do with political views, with socialism or communism or any ism, it’s a simple empirical observation. It’s not about ‘everyone deserves their fair share’, but about if they don’t get their share, no economy will be left to hand out any shares even to the rich. If the rich want to get richer, they will need a functioning economy to get there.

In other words, someone will have to call a halt, or at least a pause, to the pace at which they’re getting richer, or their quest for riches will become self-defeating. Literally every single human being can grasp this, but hardly anyone even considers it. At their peril.

Here’s just a small example from CNBC, there are thousands just like it:

The Top 1% Of Americans Now Control 38% Of The Wealth

America’s top 1% now control 38.6% of the nation’s wealth, a historic high, according to a new Federal Reserve Report. The Federal Reserve’s Surveys of Consumer Finance shows that Americans throughout the income and wealth ladder posted gains between 2013 and 2016. But the wealthy gained the most, driven largely by gains in the stock market and asset values. The top 1% saw their share of wealth rise to 38.6% in 2016 from 36.3% in 2013.

 

The next highest 9% of families fell slightly, and the share of wealth held by the bottom 90% of Americans has been falling steadily for 25 years, hitting 22.8% in 2016 from 33.2% in 1989. The top income earners also saw the biggest gains. The top 1% saw their share of income rise to a new high of 23.8% from 20.3% in 2013. The income shares of the bottom 90% fell to 49.7% in 2016.

Now, you may think: 38%, how bad is that?, and you may be forgiven for thinking that way. After all, you’re in a majority there. To understand the severity of what’s happening, you need to look at the trends:

This one from the New York Times, annotated by Charles Hugh Smith, is very revealing too. What happens is that just as we find ourselves in a stagnating/shrinking economy, the rich get richer fast. They can do that because central banks are releasing trillions of dollars in QE, but also because the system is geared towards eviscerating the poor, and increasingly the middle class as well:

And this is amplified by the ultra-low rates policies central banks have been pushing over the past decade. They allow for the ever poorer to keep up appearances of wealth by plunging into debt ever deeper, but they don’t allow for their living conditions, their jobs, their savings, their pensions, to recover. They do the exact opposite. As this graph from Mike Lebowitz, one of many to show the same trendline, goes to show:

This is not an American phenomenon, though it’s more pronounced stateside. And Trump’s tax reform plans promise to only make it worse. It looks like Bernie Sanders might be the only politician in the US to stop it, but what are the odds of that? We live in a system that is warranting economic suicide for everyone including its own proponents, and we’re blindly following it like so many lemmings.

The Koyaanisqatsi film doesn’t have a happy Hollywood ending, and it makes no pretense of it. Our Koyaanisqatsi economy will not end with ‘they lived happily ever after’ either. The protagonists wouldn’t know how to achieve that. They don’t understand what makes an economy run, and keeps it running.

And they don’t want to understand, because they think it’ll make them less rich. Nobody gives balance a second’s thought. Presumably because they think the system, like nature, will eventually balance itself. And they’re right in that. They just haven’t considered what that balancing act might mean for them personally.

if you’re rich, good on you. But don’t forget what made it possible for you to gather your riches, or you’ll lose them, and probably a lot more too.

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In what looks like a naked coverup meant to obscure the fact that the Department of Justice's decision to launch a criminal investigation into possible Russia-Trump collusion was based on a lie, Reuters reports that the DOJ and FBI are resisting a Congressional subpoena from to turn over documents that would reveal details about how the infamous "Trump dossier" factored into their decision to launch said investigation.

Despite receiving the subpoena from US Intel Committee Chairman Devin Nunes, the FBI is steadfastly refusing to turn over the documents because the agency says they would purportedly compromise an ongoing criminal investigation (the FBI’s investigation into Mueller). More likely, the agency’s intransigence stems from fears that the one Russia collusion narrative that Democrats have actively worked to suppress could come back to haunt them.

The U.S. House of Representatives Intelligence Committee issued subpoenas in August seeking “any and all documents” about both agencies’ dealings with former MI6 officer Christopher Steele, according to a letter seen by Reuters from committee chairman Devin Nunes, a Trump supporter.

 

Steele compiled the so-called Trump dossier, which Trump was told by FBI director James Comey contained salacious material about the businessman-turned president. Trump and his associates have said the dossier’s contents were false.

As we noted earlier this month when the subpoenas were first filed, the now-infamous Trump dossier was provided to the FBI even though it contained knowingly inaccurate allegations. Russia-born financier and Putin opponent Bill Browder revealed as much during an explosive piece of testimony to the Senate Judiciary Committee over the summer that was multilaterally ignored by the media, when he claimed that the document was indirectly financed by a “senior Russian government official.”

Unsurprisingly, Nunes and his fellow Republicans are spearheading the subpoena effort, while Democrats on the committee, including leading anti-Trumper Adam Schiff, have resisted their efforts at every turn, claiming the subpoenas are part of a plan to try and "discredit" the dossier's author, former British intelligence officer Christopher Steele.

To be sure, many of the claims Steele made in the dossier have already been discredited. For example, the FBI has found no evidence, for example, supporting the dossier’s its claim that an attorney for Mr. Trump went to the Czech Republic to meet Kremlin officials, U.S. officials said. The attorney has also denied the claim.

For their part, Republicans on the committee contend that understanding the genesis of the dossier, and whether it was created with the explicit intention of sabotaging Trump, is important.

Meanwhile, the Senate Judiciary Committee has also been battling with the Justice Department for months over its request to interview two FBI officials about Trump’s dismissal in May of Comey as FBI chief, according to letters from the committee and the department. On Sept. 22, it agreed that it would be “appropriate” for the officials to testify provided that it would be in a classified setting and did not interfere with Mueller’s inquiry.

Not unlike the Ring of Sauron from “The Lord of the Rings”, the Trump dossier has created problems for everyone who has touched it. Buzzfeed is being sued for defamation by an individual who was named in the dossier in a case that bears several eerie similarities to the Hulk Hogan lawsuit that killed Gawker. CNN published a series of embarrassing clarifications and retractions. Fusion GPS, the firm that hired Steele, has been widely criticized for its role in creating the document, and one of its founders was finally compelled to privately testify before a Senate committee after months of dragging his feet.

It has embarrassed the DOJ, which reportedly cited some of its unproven allegations as justification for launching a criminal probe into the Trump campaign – a probe that has dragged on for nearly nine months now, without producing anything that looks like actionable evidence against the president.

It’s long past time for the intelligence agencies to come clean about how the document factored into their thinking. Considering the volume of leaks meant to convey the implication of shadiness without providing anything in the way of actual evidence of collusion, it’s understandable why Trump’s loyalists in Congress want to expose the lies underpinning the collusion narrative.
 

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Authored by David Stockman via The Daily Reckoning,

The Donald’s strong point isn’t his grasp of policy detail.

The nine page bare-bones outline released this week is nothing more than an aspirational air ball that lacks virtually every policy detail needed to assess its impact and to price out its cost.

It promises to shrink the code to three rates (12%, 25%, 35%), for example. But it doesn’t say boo about where the brackets begin and end compared to current law.

Needless to say, a taxpayer with $50,000 of taxable income who is on the 15% marginal bracket today might wish to know whether he is in the new 12% or the new 25% bracket proposed by the White House. After all, it could change his tax bill by several thousand dollars.

Similarly, to help pay for upwards of $6 trillion of tax cuts over the next decade, it proposes to eliminate “most” itemized deductions. These “payfors” would in theory increase revenues by about $3 trillion.

Then again, the plan explicitly excludes the two biggest deductions — the charitable deduction and mortgage deduction — which together account for $1.3 trillion of that total.

And it doesn’t name a single item among the hundreds of deductions that account for another $1 trillion of current law revenue loss. They’re just mystery meat to be stealthily extracted during committee meetings after Congressman have run the gauntlet of lobbyists prowling the halls outside.

Stated differently, after nine months of work these geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them.

In fact, this latest nine pages of puffery contains just 1,500 words — including obligatory quotes from the Donald and page titles.

I hate to get picky, but the Donald’s team has been on the job for 250 days now. And all they came up with amounts to just three words each per day in office.

Worse still, even as this “framework” opens the door to unrelenting demagoguery from the Dems about helping the rich, it does virtually nothing for Flyover America.

And it surely leaves the rust belt workers who voted for Trump in western Pennsylvania, industrial Ohio, the Michigan auto belt and the manufacturing centers of Wisconsin and Iowa with absolutely nothing to show for their efforts.

That’s right. There are 122 million tax filers in the U.S. (or 83% of the total) with AGI (adjusted gross income) under $100,000. And they would get essentially zero net cuts under the vague scheme presented Wednesday. Most pay virtually no Federal income tax anyway.

But you would never have guessed that the new nine-page plan is one big nothingburger for the bottom 83% of taxpayers based on the Donald’s oratory at Indianapolis yesterday. He essentially preached a storm in favor of the “little guy.”

That is, the Donald’s narrative was the same old threadbare story which claims the average worker is being crushed by Federal income tax payments and gets unfairly tangled up in the complexity of the IRS code without the benefit of high-priced tax lawyers and loophole-savvy financial advisors.

Accordingly, the Donald promised to “unrig” the tax code for these little guys, thereby keeping faith with the millions of dispossessed citizens of Flyover America who voted for him last November.

Except, except… the whole Indianapolis narrative is essentially nonsense.

This isn’t 1981 and there is no raging inflation and bracket creep propelling the middle class into tax tyranny. In fact, owing to indexing and large increases in the standard deduction and personal exemption over the last 35 years, the income tax has essentially morphed into a Rich Man’s Tax.

Stated differently, the Donald’s new tax reform airball promises to make filing with the IRS more palatable to rank and file America. Yet 101 million taxpayers (69%) have no exposure to the complexity of the IRS code at all. They owe virtually nothing.

And I mean nothing. Among the 148 million income tax filers, the bottom 53 million owed zero taxes in the most recent year (2014), and the bottom half (74 million) paid an aggregate total of just $45 billion.

So let me be very clear. There was still $4 trillion left in the collective pockets of these 122 million taxpayers — even after the IRS had its way with them!

By contrast, the top 4% or 6.2 million filers paid $802 billion in Federal income taxes. That amounted to nearly 58% of total Federal income tax payments.

Now, I do not object to putting some of that $802 billion back into the pockets of the top 4% — given that many of them are small businessmen and the proverbial “job-creators” who make the economy grow.

But incentivizing the job creators in this manner should not be financed on the backs of future taxpayers via borrowing. It must be paid for with spending cuts as a first resort, and less onerous taxes — such as consumption taxes.

Even if a Keynesian demand side tax cut was a good idea, which it isn’t, the fact is there is not much more that could be put “back in their pockets” by means of income tax cuts.

So the truth is, you could have scratched this so-called “framework” on a yellow pad in one hour on January 20 if you had even a general grasp of Trump’s vague campaign promises.

But had you stopped there you should have been promptly fired because in the form presented Wednesday the plan is a minefield of unanswered questions. It will tie the Congressional tax-writing process in knots for months to come — if not indefinitely.

Beyond that, there is another factor that shows why the Donald is barking up the wrong tax tree. The Fed has generated such gigantic financial bubbles and caused all financial assets to become so massively overvalued that incentives for the rich are not really in short supply.

Stated differently, Janet Yellen and the other Keynesian liberals on the Fed have generated more “trickle-down” wealth and rewards than the Gipper could ever have imagined back in 1981.

The $45 trillion in household wealth gains since the 2009 bottom — which has overwhelmingly accrued to the top tier of households which own most of the financial assets — vastly overshadows any possible benefits from lower tax rates, even at the top of the income ladder.

If the bottom 83% don’t pay much tax in the first place, and if the top 4% who pay most of the taxes are not to be indulged for social policy/equity purposes, what’s the point of the whole income tax cut charade?

In fact, that’s why after nine months the Trump tax plan is still a 1,500 word air ball.

What it actually amounts to is amateurish stumbling around the K-Street corridor where every single “loop-hole” that can’t be named will be shot down.

In all, this plan is so embarrassingly weak that Mnuchin and Cohn should be fired on the spot.

Yesterday also demonstrates why the casino is such a dangerous fantasy land. It rose to yet another all-time high Wednesday apparently on the back of a tax cut plan that is virtually guaranteed to eat itself alive on Capitol Hill.

The chickens are coming home to roost. Indeed, if such domestic fowl could fly Washington’s skies would soon be dark with them.

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