Originally posted at Golem XIV blog,

In every country I can think of, the sovereignty and wealth of the Nation, which was once the embodiment of the power and will of the people,  is being butchered and sold to the highest bidder. Everywhere, the Nation and the people within it, are under attack. Not from without by terrorists but from within. Because in every country the people who run the State have largely decided they no longer wish to serve the people but prefer instead to serve the interests of a Global Over-Class.

Of course we are not encouraged to see this clearly or if we do, certainly not to speak of it to others. And many of those we might try to talk to, do not want to hear.

Many of us prefer instead to find what warmth we can in the false and threadbare beliefs fed to us by the quisling elite of the State and their close friends and allies in a rigged and corrupted ‘free’ market. Together they tell us that whole functions of our nation which we built and treasure, are no longer viable because they are at odds with the ‘realities’ of a global economy. The more ideological of them proclaim that the state, whenever and wherever it tries to do good, will always and by necessity do harm. The more ‘realist’ among them tell us that once inalienable liberties, must now be curtailed or suspended in the name of defending the ‘nation’ from outside enemies. And yet I want to argue it is now, not ever us or the nation that is being defended or empowered.  It is always and everywhere a small elite who own and control both the State and the Markets who are being defended.

In my view, we are, in most industrialized countries, watching the machinery of the State being used to betray the Nation in favour of global finance and the elite who own it. It is a familiar betrayal in the third world. One we have all watched with sordid complacently as the wealth of nation after nation is gutted for the benefit of the few. The disease is now with us.

I want to make it clear, as I have before, that I am neither libertarian nor anarchist and therefore have no ideological distrust of the State. In my opinion, there have been times and places, when the machinery of the State did animate and represent some of the wishes of the at least some of the people – of the Nation. There have been instances when the State was, in many, though certainly not in all ways, the means by which the great ideal, of government of the people, by the people, for the people, was made real. The creation of the National Health Service in Great Britain is one shining example.

I think that great ideal of government by and for the people is being butchered – for profit. The Nation-State is dying, because any given arrangement of power can be corrupted and will be, by those who benefit from it most – those who hold its powers – in this case the powers of the State  – IF people cringingly let them. And that it what we are doing.

We are allowing the elite of the State, to convince us that we are ‘all in it together’, and to claim that our interests and their interests are still one and the same. But they are not. And we must come to see this clearly – and soon. As long as we deny the truth, that they are not standing ‘with us’, and do not have our best interests at heart – until we can face these self evident but chilling truths, then we are never going to see them for what they have become nor see their actions for what they are.

I think it is critical that we disentangle in our minds the State and the interests of those who control it, from those of what I am calling the Nation. The State and the Nation are not the same. They are, in fact, at war.

The Propaganda War

Our problem and their advantage is that it is deeply ingrained in us to see the State and the Nation as almost interchangeable. The very name, ‘The Nation State’ inclines us to believe that the State and Nation are one and therefore that any action taken by the State, no matter how harsh or unfair it might seem to us, must necessarily be for our good. It allows those who control the State to hide their narrow selfish interests behind a smokescreen of talk about the Nation.

This intentional confusion of Nation and State is everywhere in reporting about global finance and trade.

Battle lines drawn for EU-US trade talks

Cried a recent headline in the Telegraph. To me, it reads intentionally like an old fashioned report of a war.  Wars of any sort are fantastically useful for the elite of the State because wars, better than anything else, encourage people to collapse the State and the Nation together in their minds. Faced with an external enemy it is the State and those who guide it, who marshal our defenses and face the enemy.  And so we are encouraged to assume that when the EU and the US meet it will be ‘our side’ fighting for us, against theirs. But will it?

In reality it will be unelected, largely un-named trade representatives supported and surrounded by a legion of  lawyers, advisors and lobbyists, nearly all of whom will be recently seconded from or still in the pay of global corporations,  who will meet behind closed doors to negotiate in secret. Whose interests will they be fighting for?

They, with the help of a largely supine and grovelling media, will claim to be there for you.  They will be decked out in flags and called by the names of our nations or national groupings, such as the EU. But the truth will be otherwise. Behind the national name plate a largely unseen machinery will be almost entirely corporate. Both sides will be there to seek advantage, not for you the people, not for the nations whose flags they use as camouflage , but for the corporations who pay them. The US delegation will seek advantage for US based global corporations and the EU delegation will seek advanage for EU based global corporations. Both sides will be hailed victorious.  The real question – very carefully never ever raised by the compliant media –  will be who lost? And the answer, studiously unreported, will be the ordinary people of both sides.

The object of the whole endeavour is to roll back soveriegn protections and powers in favour of an ‘unregulated’, unfettered, free market. How can I make such a sweeping claim? Because we have seen the results of over 200 previous Free Trade Agreements which these same people have negotiated and agreed previously. Just think of NAFTA.

If you think those agreements have benefited you, rather than, as I claim, the global corporations parasitical upon your nation and mine , then show me the proof. Don’t trot out platitudes about increased GDP without showing me who owns that GDP.  Don’t bore me with text-book clap trap about how much corporations contribute unless you show me how much tax those corporations actually pay versus how much they quite legally move off-shore to low tax or no tax havens. Show me figures. I challenge you.

In part two I will return to this, and to explain what Bilateral trade Agreements are and what extrordinary and completely anti-democratic new power the State has given to corporations to over-rule Nations and to sue them for democratic decisions corporations do not like.

For now lets move from trade and finance to the actions of the machinery of State itself.

The NS
A: Is It American, or British? 

Is the title of a recent paper written by Edward Spannaus at Executive Intelligence Review.

What makes the author think the NSA’s primary loyalty is to either, other than simply being used to thinking they must be? The NSA and its UK counterpart, GCHQ,  exist in thoir respective nations but is it really sensible to assume they feel loyal to the people who live there? And yet the author and his paper, like so many who are trying to understand what is going on around us, are stuck in the logic of what I think is now a world gone by.

If you were to ask someone from the NSA or GCHQ who they worked for would they immediately say, ‘the people’ or would they say ‘the NSA’ or ‘GCHQ’?

All those organs of power whose names and acronyms we are familiar with exist officially as servants of the… well of the what? Of the People? Of the Nation? Or of the State? Once power is created, it does not have to remain loyal to its creators. Any organization will come over time, as ambition eclipses morality, to regard its own survival and rise to greater power as paramount.  Its original purpose will be drowned in a rising tide of inward looking ambition and greed for power.

It is my contention that we have become so used to the word and the idea of ‘the Nation-State’ that we have forgotten it is a compound of two very different things.

One more example, as quoted at Zerohedge,

Melissa Harris-Perry, from the otherwise progressive cable channel MSNBC, critized Snowden’s behavior as “compromising national security.”

But is it really National Security Mr Snowden compromised or State Security? When someone appeals to ‘National Security’ the unspoken assumption is that they are talking about your security and mine.  We, after all, are ‘the Nation’.  But I wonder if Mr Snowden might be more accurately described as having compromised the State’s security rather than the Nation’s. Which doesn’t sound nearly as good, does it? State security has a ring of the Stasi about it. And for good reason. Protecting the interests and security of the State is quite different from protecting the interests of the people who make up the Nation. One is about protecting you and me. The other is more about protecting the position, power and wealth of those who make up the State and its various organs of power. State security is about the security of the jobs and social postion of those who are ‘the State’. It is about the security of a particuar arrangement of power and those who benefit from that arrangement.  Which one does the NSA or GCHQ serve? Which did Mr Snowden really compromise by revealing the extent of the NSA’s and GCHQ’s indiscriminate and unlawful spying upon ordinary and innocent citizens?

If we wish to hold on to the fiction that the NSA and GCHQ work for their respective Nations then how do we explain that the people we elect, even very senior members of the State, even within the government of the day, had NO idea what the NSA or GCHQ were doing? Certainly the NSA and GCHQ were financed by us, and draw their original legitimacy from us, but they no longer answer to those who we elect. So who do they answer to? To what are they loyal and to whom do they report?

Think of how different ‘One Nation under God’ sounds from “One State under God”.

My point is that we are so used to thinking of the State – our elected officials and the machinery that carries out their wishes, as being part of the Nation, loyal to it and us, that we are not seeing clearly that this relationship has ended. I am not saying that the old relationship between Nation/People, State and Market has altogether gone. It has not. Not everyone in the State has forsaken their old loyalties. We are in a moment of transition. But I am saying we need to see the new relationship more clearly, if we possibly can, because only then can we defend ourselves.

We are at war, we need to know who our real enemies are and take up arms against them.

The New World Order

While everyone agrees you cannot stuff a square peg into a round hole, when it comes to the new and unfamiliar, humans have a dreadful habit of trying. I think this is particularly true at the moment. The world is changing, a new order of things is taking shape around us but we are loathed to see it because we insist on trying to see everything through the lens of the previous world order.

The old order was laid out from left to right: Communist to Libertarian. From those who felt the State was there to guarantee certain protections and provide a minimum of welfare and service, over to those who felt any intervention from the State was no more than an abuse of power by a group of self serving insiders. Largely this is still the range of thought and opinion. Those on the Left see the Free Market as the greatest danger to liberty, welfare, justice and fairness, and regard the State as our best protection against it. While on the Right the fears are exactly the same but the State is now the great danger and the market the best protection. Each side regards the other as hopelessly, even criminally, misguided. Each side sees the other advocating that which will bring disaster.

Into this sterile and suffocating tweedledumness a new ideology and power has grown. It is neither Libertarian nor Left, but has been called both. The Libertarians have seen how eagerly and constantly this new politics intervenes in and distorts the market and cries “Socialism”. Which, it has to be said, makes anyone who knows anything about Socialism gasp with amazement. Nevertheless you can read this ‘it’s socialism’ opinion in most of the right wing press and on most blogs where Libertarians comment, such as ZeroHedge or The Ticker.

On the other hand the Left sees the way the new politics intervenes on behalf of and protects the interests of the wealthy (The financial class and global corporations) doing nothing about tax avoidance, nothing to regulate the banks, insisting instead that the only answer is more free market, less regulation and austerity to be borne by those least able to bear it – and sees clear evidence that this new politics is right wing and libertarian.

Both sides seems only able to see things in terms of the labels and world view they are used to and as a consequence see nearly nothing at all. The truth, I suggest, is that we are at a moment when an entire cultural form is ending. At such times it is not one part or another, government or market, which corrupts and breaks, which betrays the values it was meant to embody and ceases to do the job for which it was created, it is all parts at once. All parts of our society have become corrupted.

We must move beyond the politics of the last century, seeking to blame all ills on a corrupt and captured State or alternatively on a corrupt, captured and rigged market. BOTH are true. Both are corrupt. Neither is working for us. A new elite exists in every nation, has control over every State but which has no loyalty to the Nation of people in which it exists any more than a tape worm is loyal to the creature in whose body it feeds and grows.

The New World Order has its own ideology which does not fit happily on the old left to right axis.

The new
ideology is not fully formed yet, but already it is clear that it is not Libertarian because unlike Libertarianism, the new ideology believes the State should be very powerful and large and should intervene. But neither is it Socialist, because unlike the Left the new ideology believes those interventions should be on behalf of the wealthy not the poor.

It’s a new world. We need to see it anew.

In Part Two I will look in more detail at what I merely introduced almost in passing in this introduction: the new and rapidly mutating and evolving ideology in the world of Finance,  in particular at Bilateral Investment Treaties which are the real danger point inside the Trade Agreements currently being negotaited.  And  the mutation of the security and Intelligence world into something that spies upon Nations rather than working for them, in the serivce of a new ‘Greater Good’.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/AdrFAxozXis/story01.htm Tyler Durden

With the duration of the current bull market now the 4th longest in history, we thought it worth noting just how unusual this business cycle has been. As the following chart shows, the current ‘expansion’ has lasted longer than 80% of all the 33 previous NBER expansionary periods. Of course, given projections from Wall Street to the Fed, there will never be another recession (by decree) ever again…

 

 

But The Fed already broke a record in one thing…

 

This is the longest duration of “easing” on record…

(@Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/kaRT0IgAXEc/story01.htm Tyler Durden

Outspoken MEP Daniel Hannan summed up the day’s political machinations rather aptly

 

Did I hear that properly? Obama doesn’t like how the US Constitution works, because it’s getting in his way?

— Daniel Hannan (@DanHannanMEP) November 21, 2013

 

 

Of course, as is the “rule” it would seem in US politics, what one has said in the past is irrelevant compared to what one needs now…

 

As a Senator in 2005, Pres Obama opposed changing the filibuster rule. WH says GOP use of filibuster as a tactic is worse now.

— Mark Knoller (@markknoller) November 21, 2013

 

 

But back to Daniel to explain…

The US Senate was designed precisely to be a brake on transient majorities. Delay isn’t an abuse of its function; it *is* its function.

— Daniel Hannan (@DanHannanMEP) November 21, 2013

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_DO58hu0SlU/story01.htm Tyler Durden

Submitted by F.F.Wiley of Cyniconomics blog,

With my kids getting older, I no longer get much chance to play “What’s wrong with this picture?” This is the game you’ll occasionally find on a children’s menu that’s based on a picture with, say, a guy holding an upside-down umbrella while pulling a child on a leash and pushing a dog in a stroller.

A new opportunity arose, though, with Larry Summers’ recent speech at the IMF and Paul Krugman’s follow-up blogging. The two economists’ messages are slightly different, but I’ll combine them as if they came from the same person, whom I’ll call SK. And then I’ll try to figure out what’s wrong with their “picture,” which SK might boil down like this:

The fact that CPI inflation was subdued in the last decade tells us there’s something missing in our understanding of the housing bubble. Without inflation, there couldn’t have been excess demand or irresponsible monetary policy. But how is this reconciled with the recovery’s inadequacy? If demand was normal and policy responsible, why is the economy in such bad shape? [Dramatic pause.] Well, maybe, the “natural” real interest rate is about -2 or -3%! And because the zero lower bound prevents us from achieving this rate, we need even more stimulus (of all types) than we thought. Essentially, we need to manufacture bubbles to achieve full employment equilibrium.

With this new line of reasoning, SK have completely outdone themselves, but not in a good way. Think Jamie Dimon’s infamous “that’s why I’m richer than you” quip. Or, Bill Dudley’s memorable “but the price of iPads is falling” excuse for increases in basic living costs. (Dudley needed to be reminded that you can’t eat an iPad.) Dimon and Dudley managed to encapsulate in single sentences much of what’s wrong with their institutions. Yet, they showed baffling ignorance of faults that are clear to the rest of us.

Being academic economists, SK haven’t managed to reduce their Dimon/Dudley moment to a one-liner. But in the argument above, they’ve collected in a single place a remarkable number of the flaws in their approach. I’ll take a crack at listing them below, or at least a few of the more obvious ones. Here are five possible problems with SK’s “picture”:

#1: Low inflation does not equal reasonable demand and responsible policies

As we discussed here, the Fed misinterpreted the consequences of disinflation throughout the boom. Greenspan and Company lowered interest rates when inflation threatened to fall below their target of 1 to 2%, and this only worsened the malinvestment that continues to hold back the economy today. But inflation was subdued because a certain country lifted hundreds of millions of people out of poverty by building new factories and paying wages of a few dollars a day. And this country then loaned us the proceeds from its cheap exports, adding to our credit boom.

In other words, the Fed’s interpretation of inflation was more flawed than usual, even backwards. Disinflation was explained by cheap imported goods, which meant abundant foreign capital, which meant a larger credit boom, which meant too much demand. Contrary to SK’s narrative, policymakers made huge errors by not only failing to recognize that this dynamic is unsustainable, but by encouraging it with cheap money.

#2: The Phillips curve? Really?

In addition to applying the faulty logic of the Fed’s inflation target, SK revert to early Keynesian misconceptions. They rely on the idea that inflation becomes a problem if and only if stimulus continues beyond full employment (and even in the short-term). This Phillips curve thinking was discredited in the 1970s. We saw then that high inflation can coexist with high unemployment and weak demand. We saw more recently that low inflation can coexist with low unemployment and excessive demand. In either case, inflation is clearly more complicated than SK believe it to be.

#3: Mandating Keynesian planners to achieve “equilibrium” is just asking for trouble

As part of their embrace of the Phillips curve in the 1960s, Keynesians estimated that the unemployment rate could be pushed as low as 4% without triggering inflation, and set out to do just that. In other words, 4% was said to be a “full employment equilibrium.” But this notion of equilibrium is deeply flawed, as is the Keynesians’ confidence in achieving such a target. Their first instance of active policymaking – in the Kennedy and Johnson administrations – led eventually to the Great Inflation that was said to be impossible, while we’re still waiting on that 4%. Since the Great Inflation, Keynesians redesigned their theoretical models while concocting many variations, but none of them explain the economy’s true behavior.

One fundamental problem with the Keynesian approach is this: The benefits of policy stimulus are invariably followed by costs that the models fail to capture and planners fail to consider. In the world of Keynesian theory, for example, an economy can cruise along at its full potential without ever suffering the consequences of a reversal of past stimulus. In the reality of a modern credit-based economy, on the other hand, good times lead to imbalances that accumulate like dead wood in a dry forest, which then ignites after stimulus turns to restraint. And not only have Keynesian (including monetary) stabilization policies repeatedly led to instability, but there’s an enormous pile of dead wood at the Treasury Department (public debt) that’s yet to catch fire.

There are many other dimensions to this topic, but I’ll leave it alone for now to address other specifics in SK’s hypothesis.  I do recommend reading Arnold Kling’s ”PSST” theory, though, which is a quicker and more current counter-argument to Keynesian equilibrium concepts than, say, the two volumes and 1095 pages of Joseph Schumpeter’s Business Cycles.

#4: Your father’s natural interest rate doesn’t fit the SK narrative

While there are different notions of “natural interest rates” embedded in specific Keynesian models, Krugman claims that his use of the term matches Knut Wicksell’s classic definition from 1898. Wicksell’s natural rate arises from the preferences of private borrowers and lenders in the absence of central bank interventions, or even money, for that matter. In other words, it’s a purely market-driven rate for private, not public borrowers. Although Wicksell theorizes that several different formulations equate to the same figure (for example, his natural rate is also the marginal return on capital), none of these could plausibly b
e said to have been negative through the last cycle, as SK speculate.

Worse still, Wicksell held that prices are neither rising nor falling at the natural rate, implying that SK’s logic is upside-down.  Under Wicksellian thinking, positive inflation suggests that natural real rates would have to be higher, not lower, than observed market rates, in order to come closer to his stable price criterion.

#5: Umm, bubbles are really not a sensible route to full employment

We’re clearly in Dimon/Dudley territory here, and Tyler Durden already posted the ultimate rejoinder. I’ll just add an observation.

Recall that Krugman was widely lambasted for this housing bubble recommendation he offered in 2002:

[My] basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. (By “moribund,” I mean that investment falls chronically short of savings at the existing interest rate, which is higher than the natural rate, and this prevents the economy from reaching full employment equilibrium.) And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Okay, full information: That’s not the exact excerpt. I added the sentence in parenthesis, just to show that Krugman’s latest call for bubbles uses the same logic as the 2002 recommendation.

Now, Krugman tried with all his might to convince us after the bust that he didn’t really mean what he wrote. But it’s easy to see through these denials – there’s no other way to interpret the 2002 article. And today, he’s making virtually the same recommendation once again.

These inconsistencies beg the question: What does Krugman really want us to believe? Does he recommend bubbles for a stagnant economy, or not?

To explore possible answers, I’ll turn to my usual speculation about personal incentives and motives. As soon as I saw the renewed call for bubbles, I wondered what was behind it. At first, I saw nothing more than a refreshed case for more stimulus. But maybe there’s more to it?

Consider that both economists take regular hits for their complicity in the mess we’re in today – Krugman for his housing bubble advice and short-termism, Summers for blocking financial regulation while leading the charge against those who suggest our banks are a tad unsafe.

Consider also Krugman’s observation that “[Summers] says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.”

Can you see where I’m going with this?

If SK convince their peers that a bubble was actually needed in 2002, while regulation would have been counterproductive, they can pull off a 180° on their legacies. Instead of being “bums who brought us the housing bust,” they can be “heroes who delivered full employment despite a negative natural real interest rate.” Even without broad acceptance of their new idea, they can at least rationalize past decisions in their own minds.

Now, I have no idea if this is really what’s driving them. They may themselves be unaware of their motivations. But it seems reasonable to point out that their new narrative overturns past errors. You can almost imagine SK in zebra stripes, emerging from a booth review to inform the crowd there was no foul on the previous play. Thanks to the notion that bubbles are not only within the rules, but encouraged, Keynesians retain the ball with their field position intact.

And up in the luxury boxes, by the way, sits Jamie Dimon, as he’s richer than you. His guest, Bill Dudley, quietly gnaws on an iPad.

Welcome to today’s economy.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gcayd_PWkbQ/story01.htm Tyler Durden

Perhaps this should have been a “Humor” post but in possibly the most ironic news story of the day, New York-based SEC employee Steven Gilchrist was charged with three counts of making false statements regarding the nature of his personal financial holdings. As WSJ reports, the 48-year-old compliance examiner at the agency, allegedly certified that his stock holdings were in compliance with the agency’s ethics rules, when in reality he had held shares of six companies that agency staffers are barred from holding. The SEC is “very disappointed that an employee allegedly made false statements to conceal prohibited holdings after being told by our ethics office to divest.” Gilchrist, unlike Cohen, faces a maximum 15 year sentence!

 

Via WSJ,

Mr. Gilchrist was arrested Tuesday morning and released on his own recognizance after a court appearance, according to the Manhattan U.S. Attorney’s Office.

 

The arrest is tied to a recent probe of the personal financial holdings of some SEC employees in New York by U.S. prosecutors and the SEC’s internal watchdog, which The Wall Street Journal reported on last week.

 

…

 

“As an SEC examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity,” Manhattan U.S. Attorney Preet Bharara said in a news release. “Instead, as alleged, he violated the SEC’s internal rules about stock ownership and repeatedly lied to the SEC about his holdings.”

 

…

 

Mr. Gilchrist allegedly told the agency that he no longer held the stocks and also certified using the agency’s computer compliance system that his holdings were in keeping with the rules when neither was true, the complaint said. Mr. Gilchrist also allegedly bought 100 shares of J.P. Morgan Chase & Co. stock online through the joint account without getting the required approval for purchase with the SEC.

 

…

 

The release said Mr. Gilchrist faces a maximum sentence of 15 years in prison.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Wr9DlmxArew/story01.htm Tyler Durden