Democracy promotion and regime change is the primary goal for Neo-conservative empire building. An example is the Director of Freedom House, he was previously with PNAC , the Jacobin club of our generation, received a government post for resume padding , and eventually winds up in the current post. It is how they place their people in key organizations to pursue the agenda. The Founding Mothers of R2P are Obama’s key advisors so their influence will naturally be reflected in his public comments. As the Mommas wanted to bombs away on Syria and he didn’t points to him not being a true R2Per or at least not as ideologically strident. I believe his problem is there are differing factions within his administration pushing their goals and undermining him at the same time, one in particular doing it intentionally. He lacks the experience or understanding to thwart this and therefore he goes from one crisis on fire to the next instigated by his own pyromaniacs. In the current day affairs, it is best to understand Russia, India and China along with many smaller countries as the rational actors with the US and EU in a stupor of false thinking caused by drinking from the poisoned chalice of moral superiority. The rational actors are working for a global system of stability and peace for their own domestic prosperity through international institutions. After all the disruptions (Nato expansion, Iraq, Georgia, Libya etc.), the Ukrainian Crisis was the proverbial straw breaking the camel’s back for Russia because a plan for transitional government was diplomatically agreed to, then broken with a violent overthrow (courtesy of the intentional pyromaniac). If this action was accepted, then could any agreement in the future (i.e. Syria) be trusted? Putin responded as a responsible statesman would when the national interests were directly challenged. Too fanciful, what the Rational Actors would want from a future US president is one who will keep their word , respect the interests of others, and have enough control over the administration that the rest of the government follows suit. Thomas
I made this comment by Thomas into a post. I would like to see a full throated discussion here of the various international elements of the Jacobin project. pl
I agree to a point with Thomas.
US, NATO, and EU policy is all over the map, and the Obama Administration is not a consistent actor. The primary problem with the Obama Admin is that amateurs are in charge, and are unable to recognize when they are being played.
Where I differ is the idea that Putin’s Russia is a rational actor. While Putin may be taking advantage of the clown show at NATO and the EU to makes some plays which will raise his stakes at home, in the long run this won’t work out well for anyone, particularly those with an address in Russia.
I think you are absolutely right. A brilliant post.
In relation to Obama, although I – to put it mildly – do not warm to him, it seems to me that one has to recognise the difficulty of the position in which he found himself.
Both in relation to the economy, and to foreign policy, he found himself coming to the Presidency as a figure lamentably lacking in prior experience.
Moreover, the people with prior experience – in particular the Clinton-era people – were precisely the people who had managed to make a total shambles of everything, and who displayed no inclination whatsoever to radical rethinking.
Accordingly, what Obama completely lacked was a constituency which had reasonably coherent answers to the actual problems facing the United States, and a strategy for mobilising support for these among both sections of the country’s elites and the population in general.
Whatever his personal limitations and failings – and I have a lot of sympathy with the indictment of ‘walrus’ on Obama’s ‘narcissism’ – it was a dreadful hand for anyone to have to play.
It is troubling how the many unqualified for high position in the USA get those positions. THE PETER PRINCIPLE?
Thank you for the Rothko representation.
All, this was a response to Madhu on the Off Ramp Thread.
Why is he not a rational actor? The only thing he did was bolster the forces on the Crimea with Spestnaz troops and under the total allowed by treaty.
Today, he joined with the OSCE to send an observer mission to the Ukraine. There are reports of the Bandera boys running wild and shaking down everyone perhaps the EU will finally see for themselves.
Maybe he is just a narcissist which is why he had no plan or overthinks everything and can’t get what he wants.
There is the famous quote of him saying to the Elite I am the only thing standing between you and the pitchfork crowd. Most take this as him saying he was one of them. I read it as he was trying to reach a compromise with them and made a rookie ruler’s error by not be able to back it up while they gave him a lesson in domestic power politics by undercutting him. And the error comes from him not reaching outside his circle for advice or support either from former government officials or the public at large.
The real issue is that a faction of the Elite has some control and is full steam ahead for their idolatrous vision, damn us all if we get in the way.
Obama and the few honorable people within the government are the last line of defense before another burning crisis leads to a 21st century Great War. As your prophetic namesake implies in his 3:16, Lord I await patiently the day of distress. It sure seems that it is arriving.
The big picture:
America’s current heading aims towards implosion. Bush started at $5.7T 58% national debt/GDP ratio 2000. Neocons took advantage of 9/11 to foist a revenge war in Iraq; we won every battle, and lost the war, ending at $10T 70% ND/GDP 2008. Wall St’s subprime meltdown now has us at over 100%, $17T, and ballooning. We’re running $0.6T – $1.1T deficits. This scenario has the US currency / Medicare imploding in about 15-30 years, if interest rates never go up and no other wars are started–unrealistic.
The takeaway is, survival after 2009 requires a substantially different set of reflexes than even 2000. Neocons are replaying the 1960’s. The next $5T war may very well sink the economy.
The Chinese have got a tiger by it’s tail as they try to deleverage their credit bubble. What happens to commodity producers like Russia if commodity prices decline and are sustained at the lower end of the range as China’s growth tapers?
IMO, an important reason for the implosion of the Soviet Union was their inability to finance their “socialist” inefficiencies as commodity prices deflated through the 80s.
How will an “interventionist” leadership structure that dominate both parties and the “PR game” of US politics deal with the potential financial instabilities of systemic global leverage?
Sanctions are going to hurt the West too. And a heck of a lot of ordinary people in the West are going to have a bad taste in their mouths over how this revolution in Ukraine was handled. Are NATO countries really happy about being led around on leash by a leader (the US/Obama) with his “going rogue” up to moment of the revolution in Ukraine? There is a somewhat united front about sanctions (led by the US and Canada, which have hardly an important economic relationship with Russia), and stern words from the Dane Rasmussen, but all this is surely just papering over a Pinata of anger inside the organisation over what has transpired.
It won’t work out well for Russia, but I don’t think they’ll feel that what they did was wrong or evil. It certainly won’t work out well for NATO.
the greatest danger is to the USA economy, if Mr. Putin is forced by sanctions or other nonsense to
to react strongly: destroy the petrodollar economy – demand payment in species, other fiat currencies excluding the $. [Do recall that Saudi’s greatest trade partner is China, another major power wanting to get out of the petrodollar business] .
Diversifying his commodity trade to the Far East, thus cutting dependence on EU/NATO cohort and the game is up.
There is no way that the USA will have the capacity to export oil and gas in sufficient quantities to save EU from the wrath of Russian Federation, were Mrs. Merkel and the rest too obnoxious.
Its all about forcing down our throats multiculturalism and more decadent hedonism dressed up as freedom.
The Jacobin/Globalist moral rage goes back to Russia banning homosexual pedophiles trying to groom children, and now we’re seeing World War G over it.
There are no grownups left.
I agree with Thomas’ points, however we need to include Egypt – has the Obama administration already forgotten the Morsi’s mob attacking the US embassy on 9/11/2012? Oh, right, Obama supported the overthrow of the Egyptian government and installation of the one backed by Muslim Brotherhood ideology and Obama was opposed to the people of Egypt supporting the el-Sisi and the Egyptian army in ousting the MB. We also need to add Turkey as well since we are seeing exactly what Prime Minister Recep Tayyip Erdogan is doing to their ‘democracy.
The track record of results of the neocon leadership is one of failure – Iraq, Afghanistan, Egypt, Syria, now Ukraine. Why is the administration so unwilling to jettison the those whose ideology has led him to implement policies so damaging to the national interest?
This very well-written comment seems to deny any agency to the Ukrainian people. I’m picturing little characters in a video game, completely controlled by joysticks in Washington and Moscow. Did the author consider the possibility that Western Ukrainians really, really didn’t want to fall back under Russian influence? What was Obama supposed to do, send the Marines to protect Yanoukovich?
If we look at actual actions rather than just talk, I’m not sure there’s anything “Jacobin” about the current administration. The early “surge” in Afghanistan might qualify, but after that it seems that the people actually in charge have learned their lesson. I understand that Obama himself resisted persistent calls to bomb Syria or to escalate the situation in Ukraine.
This administration’s most “kinetic” policy is the drone program in Pakistan, which doesn’t seem very Jacobin to me.
Finally I’m surprised to see Lybia in the list, as I seem to remember that the Colonel himself supported Khadafi’s removal.
You have to differentiate between big things and small things. Libya was a low cost small thing that has cost the US little. It was little more difficult than the Reagan expedition to Grenada and could have been cheaper if better conceived and executed. it was a low cost way to get rid of someone who, along with his pals, was a prevaricating pain in the ass for many years.
Yes, Obama has learned not to listen to the Mommas and the Poppas too much, but that does not lessen the disaster that he brought upon the US by listening to neocon policy asses and hyper ambitions COIN mad generals. pl
At least NATO forces will not be in the Black Sea right away to provoke a confrontation.
Just a modest reminder: the US is situated on another continent from Russian Federation. Crimea is thousands miles away and it is peopled predominantly by Russians. The State Dept. has handed Crimea to Putin; he would have never attempted to take over Crimea if not the involvement of the amateur players.
The absurdity of wailing on endangerment of the US by a popular referendum thousands miles away is more than clownish. Somebody needs an enemy to keep generous funding.
Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative viewpoints, by actively suppressing dissenting viewpoints, and by isolating themselves from outside influences. – Wikipedia.
Isn’t Washington the ultimate environment for the game of “who is in and who is out”? I have personal experience of senior management practicing Groupthink and it destroyed the company, but by then I was gone; they could not countenance an iconoclast in their midst. I believe Col. Lang suffered a similar fate at one time.
These R2P and Neocon folk really do believe they can write the script for the world. However they are badly educated as far as history is concerned and like many leaders today they have no life experience outside politics to perhaps guide them. Couple with that the self selecting tendencies of narcissists and you have a recipe for bad, very bad, public policy over many years as Mr. Habakkuk has observed.
My personal view, not shared by many, is that Americas current preeminence is an accident of history. America reaped the economic benefits of Two world wars which beggared all possible opponents. American commentators then took this windfall as evidence of moral, social and economic superiority and politicians proceeded accordingly. Hence the rubbish about how the rest of the world “wants to be like us”.
In reality, I think the current network of Fifty states is not only supremely economically wasteful but ungovernable – in the sense of being able to respond quickly to external shocks. Then of course there is the problem of the political process being totally dominated by the rentiers who are slowly killing the economy – for example, I read somewhere that Elon Musk can’t sell his electric cars in New Jersey directly on line because their law requires the use of dealerships – another bunch of rentiers.
I don’t really see anything happening that is going to avoid the country’s ultimate fate; the takeover of government by a military strong man(Petreaus?) and the continued looting of the economy by the rentiers until the hollowing out causes the same implosion as happened to the USSR.
My own assessment is that Europe and the former British empirewe are just about through with dealing with the effects of the First world war one hundred years ago and that another Thirty to Forty years must pass before the final ripples of World War Two die out. Somewhere between now and then it will become obvious that their systems of government and economics are superior – in terms of economic utility, despite, no doubt, American efforts to sabotage or simply hide this truth. A case in point is the abomination of Obamacare – Europe and the rest of us have had single payer for over Forty years with no ill effects.
The question then becomes in the mean time how do we avoid a Sarajevo incident followed by nuclear armageddon? Has anyone in Washington read The Guns Of August or Christopher Clarkes masterpiece?
I wonder if the sanctions on Russia will not play out to favor Putin. They will wedge the interest of Germany with the west. In time this could stress Germany’s solidarity with the west in international affairs especially when economic sanctions are involved. At any rate, India has reaped huge rewards from trading with Iran despite economic sanctions.
Anyways, I don’t believe in laws that cannot be enforced. And I don’t believe it wise to apply economic sanctions to Russia when we know they will not work.
Actually Putin has probably given NATO a new lease on life. Not that it was on life support, exactly, but barging into Crimea just reminded all his neighbors of why Russia makes them nervous.
toto. I know that S… happens. But the in relations between the US, Europe, Russia, and Ukraine it is not an option for the US to not at least be interested and informed, if not heavily involved. It’s negligent of the US to be otherwise.
Obama ought to have being phoning Putin throughout this crisis as it happened to, if it were the case, disclaim any high-stakes US involvement, and reassure Putin that the US noted Russia’s concerns about the new government marginalizing the Russian population in the Ukraine, or its economic interests. And Obama could have leaned heavily on “our man” Yatsenyuk to not reward the far right, let alone the Nazis with a place his government, and he ought to have counseled him bring in political players from the East, and to delay making major economic or political association until after an election. Instead we have the EU swoop in like Vultures to sign association agreements, and Obama feting at the White House an unelected man who’s government just had the token decency to rescind their new law banning the language spoken by ~%40 of his populace.
Russia has obviously made mistakes, but it is highly unlikely that Russia would have taken the course of action it did if the United States had properly behaved towards it and towards the government in Ukraine. Either immediately reassured Russia and clearly communicated with it. Or else, if the US’s policy was deliberate, have at least have had the decency to talk it through widely within the military/congress/NATO. From the government’s reaction, and NATO partner’s reactions, you absolutely know they didn’t do that.
So Obama didn’t communicate with Putin, or allies. Why? Maybe because the US was really was heavily invested in one political outcome in Ukraine. Maybe this was being done without direct White House involvement, and no one was interested enough to take the President through how dangerous the situation could become. Maybe Yatsenyuk really was our man, and he had the US’s full knowing support to kick Russia in the balls (scary to think).
Any explanation you can think of, it has to involve stupendously gross negligence on the part of the US, since it has risked, however small, an unthinkable Russia-US war, has certainly profoundly shaken the confidence of any NATO members, and it certainly has resulted in a Russia-US-Western schism of enormous proportion that will have large future ramifications. Every facet of this comes out against US interests as far as I can tell. Everyone’s interests. Nobody, nobody, absolutely nobody, wanted this.
Bush was just an idiot. Before undertaking them, he communicated his idiotic adventures to the world (enemies even!) publicly (and I’m sure well before to our allies and perhaps Russia). There are no words to describe what has transpired here with Obama. The world and the United States are far, far less safe now than two months ago. Job One of the President: keep the US safe. Negligence on the armageddon scale.
Sic Semper Tyrannis (22 Mar 14)
Dear Col. Lang,
Your request for a “full throated discussion” of the many aspects of these various projects is daunting. On the one hand, I might offer the observation that much of what is underway is a long-term project following the defeat of Senator Barry Goldwater in 1964 and a concerted effort to build up as constituency for conservative values, one result being massive investments in think tanks and programs with endowments provided by wealthy benefactors to promote their vision of conservatism and what was needed to reverse the apparent decline in support for conservatives. I would cite those of Adolph Coors and William Scaife-Mellon to name just two. One result of these programs was what I think of as the indoctrination and funding of future intellectuals, the result of which bears only some resemblance to the values of Goldwater. I would cite this from his 1960 ghosted autobiography in 1960: “Those who seek absolute power, even though they seek it to do what they regard as good, are simply demanding the right to enforce their own version of heaven on earth. And let me remind you, they are the very ones who always create the most hellish tyrannies. Absolute power does corrupt, and those who seek it must be suspect and must be opposed. Their mistaken course stems from false notions of equality, ladies and gentlemen. Equality, rightly understood, as our founding fathers understood it, leads to liberty and to the emancipation of creative differences. Wrongly understood, as it has been so tragically in our time, it leads first to conformity and then to despotism” (The Conscience of a Conservative) http://en.wikiquote.org/wiki/Barry_Goldwater. I believe his warning here was not taken to heart. The current-day Jacobins appear to have honored it only in the breach.
I would add to this the war-weariness of many Americans after the very divisive period of our involvement in Vietnam, especially the sacrifices of more than 50,000 Americans often perceived as wasted blood and treasure. The debacle of Nixon’s Whitehouse with Watergate along with the failure to provide both guns and butter as promised by Johnson earlier, followed by Carter’s presidency, with stagflation and the lack of foresight in regard to the fall of the Shah, the hostage crisis in 1979 and the failed rescue attempt followed by the election of President Reagan in 1980, and his ability to provide the pretexts for interventions in Granada and Nicaragua seemed to give Americans a sense that we could succeed where previously we had failed in military interventions. George H. W. Bush’s destruction of Saddam Hussein’s forces and tanks, in which the operant term for me was “air supremacy” not “air superiority” led to the belief that with such supremacy we could project force across the globe unchallenged, especially after MAD seemed to be off the cards. The collapse of the Soviet Union and the fall of the Berlin Wall and the raising of the Iron Curtain after 1989 led to a progressive NATO expansion toward the very heart of any invasion of Russian.
The trauma of 9-11 (with the irony that Putin the first foreign leader to express condolences and support for our anti-terrorism campaign) and the invasion of Afghanistan led to American access to the Stans, a vital logistical supply line for our forces there, further encircled Russia.
All of this is background to the current stand-off involving the United States and Russia, especially with the possibility of the Ukraine becoming a member of NATO, a situation that would put Russia in an even more threatened geo-political position. While the United States has advanced the Monroe Doctrine in regard to its security for over 200 years, Putin will be seen by many Russians and others as calling hypocrisy on the recent statements from the US, whether by Secretary Kerry, Vice-president Biden, or President Obama. This is just one part of the analysis you asked for Colonel. Please do correct me, all or any, for my misapprehensions or outright mistakes. I will leave it to others to chime in in regard to Professor Chalmers Johnson’s wonderful, knowledgeable and prescient analyses in his trilogy: Blowback, The Sorrows of Empire, and Nemesis, that might provide one more line of analysis, perhaps in need of updating, for a further chorus in the discussion.
I will add by way of personal anecdote that among my earliest memories as a child was overhearing hushed voices discussing Korea (my father being a veteran and other teachers being called up for one more stint of service when I was three or four), then I recall the term Suez, and my parents fear, more palpable a few years later, Makarios and Cyprus and violence against the British colonials,the Sputnik, Battista and Castro, the space race, along with decolonization in Africa, the Cuban Missile Crisis, the Bay of Pigs and fallout shelters and air-raid drills throughout my elementary and junior high-school years. It seems to me that many among those younger and some among those older than I seem to have forgotten or repressed them—or perhaps never experienced them.
Agreed on all points. If you thought that I was asserting there would be an upside to all this, I was not. Whether or not the Russians feel this was wrong or evil matters not in the slightest.
I can see that Obama’s lack of preparation for dealing with the economic crisis he walked into may be understandable. After all, economics has been made to seem an awfully arcane business.
Should we cut him as much slack when it comes to foreign policy? I don’t think so. He rode into office in no small part on the back of his anti Iraq war stance and was well aware of the public’s growing weariness with overseas adventures.
In “Neocons Have Weathered the Storm”, Robert Perry discusses the fatal errors that allowed the neocons to not only survive the post-Iraqi fallout but to thrive. (If someone here at SST first pointed me to this article, apologies for not giving credit.)
“And, despite Obama’s opposition to the neocons’ obsession with endless warfare, he didn’t purge them from his administration. Neocons, who had burrowed deep inside the U.S. government as “civil servants” or “career foreign service officers,” remained as a “stay-behind” force, looking for new allies and biding their time.
Obama compounded this “stay-behind” problem with his fateful decision in November 2008 to adopt the trendy idea of “a team of rivals,” including keeping Republican operative (and neocon ally) Robert Gates at the Defense Department and putting hawkish Democrat Hillary Clinton, another neocon ally, at State. The neocons probably couldn’t believe their luck.”
There’s much more and while little of it is entirely new, to me at least it was a particularly useful summation of the nature of the “Jacobin” problem we’re discussing in this thread.
I don’t believe this will pan out well in the end for Putin, the Russians, or anyone else (save the sort that get fabulously wealthy when armed conflict occurs). If I am right, Putin will not turn out to have been a rational actor. If Putin dies of old age as King Of All He Surveys, I am wrong.
Does my post in any way indicate that I would disagree with you???
To quote the President, “Elections have consequences.”
So McCain, the Kagans, and Bill Kristols of this world are back to their old tricks because of Russia’s religious traditionalism? Sure, Obama’s stupid Olympics boycott was due to Putin’s position on the gays but the neocons don’t care about that.
If the clowns and criminals who make up the “leadership” of the West attempt to get too cheeky with Putin he can remind them that most of the supplies and equipment that goes to the troops in Afghanistan use Russian railroads. I think this would stop this nonsense real quick.
Terrific comment IMO! The great question for the next year and decade!
H! Your memory of events seems close to my own as I reach 72 this August! Where are the snows of yesteryear?
ALL: One theme that seems overlooked in this thread is the reliance of Putin on Russian historical relationships to the Crimea and then presence of co- or shared linguistics. Should this become the basis for the adoption of FP by many other countries the world might become even more scary.
Fortunately to date I don’t believe US military or other U.S. interventions have been based on either defending co-religionists, co-linguistics, or a shared culture and perhaps the USA is exceptional from that standpoint.
I perhaps differ from some in that I believe English and the dollar will be substantially less significant over the next decades. Perhaps the Internet will have its own language!
When have the neocons not wanted the worst excesses of modern American culture shoved down the throats of everyone else in the world?
Remember how we were going to turn Afghanistan into a modern liberal democracy?
I too believe the dollar will eventually lose its reserve currency status. The rest of the world is tired of paying what amounts to the Roman tax for the privilege of using the dollar. I see no viable replacement currency at this time, however.
Perhaps some Bitcom like creature of technology eventually?
When the day does arrive, all economic hell will break loose in this country. No more of those green government checks in the mail for one thing.
Do you care to venture a guess on timing?
“I perhaps differ from some in that I believe English and the dollar will be substantially less significant over the next decades. Perhaps the Internet will have its own language!”
For an interesting riff on these thoughts, the novel ‘Snow Crash’ by Neal Stephenson is a great read. Written in 1992, it was way ahead of its time. It has some very humorous thoughts on the dollar, and its predictions about the internet and a universal language are both wildly interesting and entertaining.
ALL: Did I ever mention that almost 500M in central Europe Germanic by language or culture or both?
I think the socialized medicine of EU , Canada, and Japan has had the adverse effect of reducing substantially the development of new drugs; by far the majority of those drugs have come from the United States.
That also goes for new life-saving techniques and technologies.
Again, in terms of the new businesses, EU and Japan are not event a distant second to US.
I would like to draw your attention to the Internet and the World Wide Web – first conceived through DARPA and later developed by Barnes-Lee at CERN – it was in US that its potential was fully realized and from where the Web conquered the Earth.
The closest thing to the Web and the Internet in Europe was the French Minitel – a device and service that was a forerunner of the Web but, unfortunately, did not find traction for multiple reasons.
It is noteworthy, however, that Mr. Putin includes ALL Russian speakers, regardless of any minority status, be it linguistic or tribal. In this respect Mr. Putin’s announcement that there are 3 official languages in Crimea is far more unifying than the pseudo equality between whites and blacks, Indians, Asians in the USA.
When the Soviet Union broke into 15 states, I was certain that Ukraine and Belarus as well Northern Kazakhstan would revert back to the control of the Prince of Moscow – that ties of blood and history cannot be disentangled so quickly and so formally.
I think we are at the intermediate stages of the reclamation of the Slavic lands of the former USSR; which began in 2008.
I do not know when this reclamation will end but I think that large parts of Ukraine as well as Northern Kazakhstan will rejoin the effective control of Moscow.
And nothing can be done to stop this – many of these artificial states will not endure.
If Uzbekistan – population 25 million – decides to invade and take over the gas-rich Turkmenistan – there is no way to prevent it or roll it back.
I do not think that there is any possibility of a wedge – as you put it – between US and Germany.
Germans can reduce their dependence on Russian energy imports by fracking as well as developing nuclear energy; although probably not in any substantial manner before 2020.
Germany will stick with US, in my opinion.
About the rentier classes etc..
I think in Iran you have an excellent example of how a rentier-based economy stifles creativity and progress – at all levels of society since everyone – regardless of social class – is in one way or another dependent on the oil-income and therefore not too keen on working too hard to do anything of substance (there is always the oil money).
I do not think US is in a rentier state although certain sectors are undoubtedly in that state and wish to remain so.
Both in New Jersey and in Japan self-service gas stations are illegal. That is not an example of a rentier mentality, rather it is an attempt by the government to create and maintain jobs at low wage levels for people who can do nothing else.
I think there are entire low-skill, low-pay types of work that could be entirely eliminated through intelligent automation; imagine shopping malls entirely devoid of sales clerks – that is quite doable with current technologies available on the market.
Which begs the question of what to do with all those people who are dependent on that low wage?
Should the legislature – in any country – follow the example of the Islamic Republic of Iran and allocate a basic minimum payout to everyone in the society?
For example, US Congress can meet and set the minimum payout/income of $ 20,000 a year for every unmarried adult?
(Working full time at minimum wage in US would still leave one homeless.)
The fact is that we have too many people for the available productive jobs all over the world. In more civilized countries such as Brazil at least this unemployable army of labor is available as servants and cooks and gardeners to the Middle-class people but not in US or in Canada or Australia.
Oh, come now! For a new Canadian to scoff at diversity in the US is ridiculous. What could be more artificial than the idea of Canadian nationhood? But you are in good company. the UK has been falling apart since Easter 1916. Belgium was an idea, but a bad one. British India quickly fell to pieces. Nation states hardly exist although states abound and there is always inequality among groups, always. pl
Putin/Russia not a rational actor? Putin is the only one that is. The idiots advising Obama can’t even recall that Crimea voted by the same percentage to join Russia 23 years ago right after the breakup of the USSR. Crimea did it by referendum then, as it did last week.
What would we do about Guantanamo if the FALN overtook Cuba? You don’t think we would react?
As mentioned above in my thank you to Colonel Lang, this was a reply to questions from Madhu. Libya is on the list as one of actions that affected Putin’s strategic rational. He became fed up with the constant duplicity by the US in world affairs, especially when other important negotiation topics such as Syria and Iran are currently on the table. The straw was the diplomatically arranged Feb 21 agreement for a transitional government that was discarded by the violent overthrow. Obama should have adhered to this agreement and made the Ukrainian parliament walk back their actions. He didn’t and Russia responded to protect national interests in their sphere.
I understand that the Western Ukrainians don’t want to be under Russian influence or, in their own words, the Jewish Muscovite oligarchs. I believe many of the Ukrainians were sincere with their motivations to end the political corruption and improve their lives economically, but, as Russian history attests to, well intentioned revolutions can be hijacked.
Cookie Momma Vicky, the architect of this crisis, was a member of VP Cheney’s office and is an example of the Jacobins burrowed in the system. Her actions are having profound effect on the Administration.
It takes one small incident to spiral things out of control as our ancestors discovered a century ago when Apis, a Serbian Intelligence Officer, got Princip and his boys to do the deed. As fate would have it they missed the target only for the driver to get lost, double back and provide a second chance.
I understand. Hopefully it does not lead to armed conflict, but in a world of madness who knows.
Great Uncle Satan has a least one favorable quality.
You need to read the 87-page book called “Freedom from National Debt” by Frank N Newman, former Deputy Secretary of the US Treasury who, unlike the idiot Jake Lew, has a sterling background in finance and accounting. As Newman points out, the word “debt” when applied to federal monetary operations is an accounting artifact, an artifact of the terminology applied to double-entry accounting. When you ISSUE currency, which the US government as sole legal issuer of the currency worldwide does, the method for annotating that goes on the right side of the ledger. It’s marked as a “debt.” Whatever this “debt” is purchasing goes on the left side of the ledger under the assets column. They both net to zero. As Newman points out, the “National Debt” is a record of all currency produced since 1791 minus the currency destroyed (taxes).
So where is the $17T? In the pension funds, savings accounts, university trust funds, foreign bank accounts, and Grandma’s Savings Bonds of the private sector. To the penny. If that National Debt, also called “Debt Held By the Public” if you will check treasury.gov, were ever ‘paid back’ not one single person in this country would have a dime or dollar to their name.
Canada is 20 years ahead of the US in stem-cell research.
BTW, Canada has socialized health insurance, not socialized medicine.
Germany is decommissioning their nuclear plants as fast as they can, and building more coal plants using the Chinese Ultra Super Critical Coal technology that produces more gigawatts of power than a nuclear plant can. In addition, the latest Chinese tech reduces emissions, currently, to 20% less than the Kyoto Protocol would have required by 2020, and uses far less water because the water in this process does not have to reach the ‘critical temperature of water’ (374C).
“Perhaps some Bitcom like creature of technology eventually?”
All US currency currently, with the exception of 11% that is doled out in physical cash and coins as the citizens’ walking around money, is electronic. Has been since 1971. Not even treasury securities with their coupons are printed up anymore. Social security checks were abandoned last year; they’re 100% electronic now.
US currency is a spreadsheet item.
Upper and Lower Canada were created in 1791.
Yes. SWMBO is obsessed with the genealogy of the Canadian lines in my ancestry. My French ancestors had been in the St Lawrence Valley and in the western places in the present US and Rockies since the 1630s. I am a descendant of “les premiers” as the French call them. My Anglo Canadian ancestors arrived in SE Quebec around 1800 from New England. My wife explains that the separation of Upper and Lower Canada was occasioned by the unwillingness of the French majority members of the previous form of government’s parliament’s to cooperate with British attempts to tax them. pl
This would work if and only if a large part of the debt was not held outside of USA due to the US is/was running continuously [for at least 30 years] a negative balance of trade.
As pointed out above, destruction of the petro dollar either bankrupts the USA or creates the greatest austerity the world has known – lacking in most natural resources sans food [no phosphate fertilizer for agro business] and coal. your oil/gas is to a large extent imported there is no possibility for self sufficiency in these two resources within the 50 states.
I think you are perhaps unaware of the great chasm that exists between laboratory medicine and effective, commercially available medical drugs and procedures.
New drugs are developed with specific animal models – usually genetically modified strains – and then validated through 2 other steps in clinical trials.
These 2 steps are where the drug companies spend large sums of money; often ending in failures – either drugs are ineffective in humans or they have deadly side effects.
And what motivates all this risk-taking is the profit motive.
I personally doubt that there would be a large appetite in a democratic system for this type of expenditures: the plebs would be clamoring for more bread and more circus rather than risky undertakings.
Highlander! The 2028 Presidential election will be about this issue after it is discovered that no one in the US Federal Reserve was accountable
to anyone for anything over its history.
MRW! Agree and bits and bytes tough to regulate!
Thanks nick b!
NMS! Agree! And 58-60 dialects in China.
PL! Again set Quebec free so North Americans can have a civilized place to eat, and play!
Not to mention a lot of “debt” is held by US gov’t entities themselves (although that makes the Social Security situation a lot more peculiar than people think–the Social Security Administration is the biggest holder of US Debt, by far, due to the reforms introduced in 1980s which theoretically has made Social Security solvent forever…assuming that the USG honors its “debt” to its own retirees. All the so-called reforms of social security is trickery designed to absolve the gov’t of not honoring this debt.)
“I too believe the dollar will eventually lose its reserve currency status.”
What do you base that belief on?
US Treasury auctions of treasury securities (the majority of US Money) sell out in nanoseconds. There are always more buyers than treasury securities available. The world hungers for the safety of the US dollar. The world doesn’t pay a “Roman tax.” We float our currency, which means it isn’t fixed to another currency or metal; we are beholden to no one. All this is perfectly transparent.
The only reason why we really issue treasury securities is because of a leftover law from the gold standard days. The US federal government, by law, is not allowed to have a negative balance in its general account at the Fed (that’s the leftover from gold standard days part).
So, when Congress appropriates something or other, say five new airports for $200 billion, the US Treasury, honoring the constitutional legal duty of Congress to do this, marks its Federal Reserve general account up by $200 billion by keystroke, and orders the Federal Reserve to pay the vendors from its general account by crediting the vendor’s bank accounts. This results in a $200 billion add, then subtract, from the general account. Let’s say, to make this explanation easy, that the ‘subtract’ results in a $200 billion overdraft in the US Treasury general account.
What the US Treasury does NEXT is issue treasury securities in the amount of $200 billion to balance the increase in the money supply. This happens every month.
So the government spends first, then issues treasury securities. or, put another way, the government spends first, then–here it comes–‘borrows’ by issuing treasury securities.
But it really isn’t ‘borrowing’. The term ‘borrowing’ is an unfortunate nomenclature that derives from the double-entry accounting terminology. (What the US Treasury is doing is issuing currency.)
Every person, household, firm, foreign government or foreign bank that has more than the *federal* FDIC insurance limit of $250,000 in its savings account wants treasury securities to reduce risk. The safest risk-free financial asset in the world is US treasury securities, because they are backed by the full faith and credit of the US Government.
So, maybe some day we might not be the world’s reserve currency. Big whoop. As long as the US federal government can issue currency in its own currency to pay its own debts, who gives a damn? The Japanese Yen is not the world’s reserve currency, but it can denominate its own debts in its own currency, and it has one of the strongest currencies in the world. The bond vigilantes can’t touch Japan. Ditto Canada, Australia, and Great Britain (although David Cameron does not understand how this works so he is currently impoverishing his people the way our village idiots Obama and Jack Lew are…jeezuss, they’re stupid).
The only thing you have to worry about in the US is the ‘balanced budget’ nonsense. The moment you hear that you can count on two things: (1) the politician doesn’t have a clue what he’s talking about, and (2) say hello to our leetle friend recession.
There have been seven times in our 225-year history when the federal government budget was balanced or in surplus. Each time produced a depression. The Clinton surplus was delayed by the dot com and housing bubbles, but it happened in Sept, 2008. And guess who produced the Balanced Budget Act of 1997? None other then the odious jackass Jack Lew.
Take a look at this. Notice how the government deficits equal the private sector surpluses to the penny. Per Bloomberg, the last time a government surplus like the one that happened under Clinton appeared was 1927-1930.
Does Germany have coal reserves for these coal-burning plants or the coal for them would be imported – just like now – from Russia?
Do you know?
NMS: Despite historically bad treatment, very few American blacks ever left the country. Do you have an explanation?
I think immigration rates are the ultimate bs detectors. When people find a situation intolerable, they leave. The Great Republic has been–and still is–the world’s best people magnet. I take great pride and solace in that.
Joual (French Canadian dialect): “Eh bain-là, c’est la même chose aujourd’hui.” lol. Aren’t you also Irish, or some Celtic kin? There’s no more peppery (and dangerous) fighting type than a French Canadian/Irish or Scottish mix.
I didn’t see this Thomas post when it was a comment. I think it’s intelligent.
By majority of blood: French Canadian, Irish, Scottish Highlander (Catholic), English puritan and German with a trace of Amerindian in the mid 18th Century. pl
Matthew! They come for the freedom to eat all they want and spoil their children IMO!
Babak, I’ve worked with the field in building start-up medical companies and I think you are partially correct.
Most breakthroughs come from publicly funded research, we then build a start up company funded by venture capital to get through to phase Two trials usuallly held in Australia or the country of invention.
It is only for phase Three trials that we then go to Big Pharma in the USA, not because they have any expertise in basic research, but because they have the ability to design and fund phase Three, manage the FDA approval process manufacture under GMP and then take the drug to world markets.
As for innovation, it has no home in the USA, it appears everywhere and anywhere. What America does have second to none expertise in is commercialisation of the idea.
On that note, the militarisation of America, the hatred of muslims and obnoxious foreign policies mean that there will be fewer projects brought to American shores then there should be.
No US debt (money) is held outside the USA. By law. Period. Can’t happen, does not happen, except for the actual 11% physical cash that is created for walking around money. All foreign bank US dollar accounts are at the NYC Federal Reserve.
Let’s say that Walmart wants to buy 10 million tires from China for $5/ea. Walmart wires the $50 million to the Chinese bank in US$. The way the settlement system works is that the $50 million gets sent to the Federal Reserve (FedWire).
Now, the Federal Reserve has two types of bank accounts, just like your bank: checking and savings, but they are called something else. Let me keep checking and savings to keep it simple.
Walmart wires $50 million to the Chinese bank. It goes into the Chinese bank’s checking account at the Federal Reserve.
The Chinese bank then has three choices:
(1) Exchange the US$ into Yuan and wire it home.
(2) Leave it in checking, and earn basically zip. (Only after the 9/2008 financial crisis did the Federal Reserve offer 25 basis points–0.25%–on cash in Federal Reserve checking accounts.)
(3) Buy a US federal government CD–called a treasury security– and earn interest depending on whether it was a bill, note, or bond. (Bills mature in less than a year, notes mature 2-10 years, bonds mature 10-30 years.)
The Chinese bank chooses (3).
The Chinese bank tells the Federal Reserve to move the US$50 million in its checking account to its savings account so it can buy US$50 million in US treasury securities at auction and earn interest.
When the treasury security comes due, China tells the Federal Reserve to cash it in, and put the principal and interest in my savings account back in my checking account.
The action of going from China’s savings account to its checking account is called “Paying Off The National Debt.”
When you or I cash in our CDs at our local bank, we call it ‘cashing in our CD’. We don’t call it ‘Paying off Wells Fargo Bank’s debt’ but technically that is what WELLS FARGO, say, IS DOING, because the bank owes us that money.
Even if China were to select option (1), the money never leaves the USA. The person or outfit that the Chinese bank used to exchange Dollars for Yuan would have the US dollars. Those dollars never leave the USA. BY LAW.
BTW, the Federal Reserve checking account is called a reserve account. A Federal Reserve savings account is called a securities account.
The US government can afford to pay its retirees anything the US people designate without any debt being incurred by anyone’s children or grandchildren. There is no Social Security and Medicare crisis. Period.
What happened in 1983 was bank lobbyist Alan Greenspan instituting a user fee for everyone earning under $110G to $125Gs, hoping that they would rebel and want to dismantle Social Security, handing over their retirement cash to Wall Street. Greenspan was working for Wall Street when he did that. The people didn’t revolt, so the regressive FICA tax survived.
They’re digging the coal up domestically. Don’t know about getting the extra from West Virginia. I would research now, but need to get to a Sunday barbecue and I’m late. Everyone is mad at me, so gotta’ run.
So, centuries of saying ‘don’t piss me off’.
You are wrong about Quebec; there is nothing authentically French at all about Quebec cuisine – you probably are going to get better authentic French food in the United States.
The question is who is insane besides the Senator from Arizona. Denial is a useful tool to avoid unpleasantness and ideology brings certainty. But, headlines stating “Russian Troops mass at Border” are plain frightening. In a sense we all are replaying 1914 with Armageddon the outcome if armies roll across NATO’s borders.
Derivatives, peak oil and nuclear weapons are all in play. I am afraid the Establishment, rather than serving the public, is playing a gigantic game of craps where they are sure that they will take the pot not shot dead.
Now is about time to sit down and finlandize Ukraine.
“the hatred of Muslims” What did you mean? They hate us,or we hate them?
I live in a white bubble area with some billionaire white boys and some some of the poorest of Good Old Boys. Muslim hatred is not exactly a burning topic here, as a matter of fact it isn’t even on the scope.
While I can see the logic of your thesis. It seems to me it is based on the truth of the statement, That “yes, there is such a thing as a free lunch.”
A life time of living has taught me this isn’t true,not even for nation states.
Another small point, currently there are 5 aircraft carriers parked side by side in Norfolk, plus another 4 helicopter/harrier carriers parked next to them. This hasn’t happened in over 50 years. Normally half of these war ships would be at sea. Could it be a matter of operating costs, and no funds?
I appreciate your thoughts, I don’t discount that you could be right. I hope you continue to contribute to the discussions.
Why wait to 2028, most engaged people pretty well consider that the Fed is unaccountable today.
That many carriers in port now? That’s one of the few comforting pieces of news I’ve read all week. At least they are not steaming for the Bosporus.
The Human Genome Project paid for by We the People.
This mapping of the DNA sequencing the feds paid for has lead to substantial medical breakthroughs yes ?
MRW, Thanks for some very interesting points above! And yes, I love that Mr Andrea Mitchell’s history as a Randite and bank lobbyist is so conveniently thrown down the memory hole!
I lived forty years in Western Travis County , State of Texas , USA – and I would consider myself a middle class Good Old Boy . There is considerable wealth in the Texas Hill Country – both old & new money . What is apparent with the advent of the Tea Partiers here not only has there been an increased agitation against Washington DC – but there has been a marked increase in xenophobia – particularly against Muslims; as a long time resident here I am seeing this ‘nativist ‘ trend even in Austin , Texas proper – to include Muslim Bashing. I would suggest that you do the Google on Congressman Louie Gohmert and the Muslim menace …
I could have cited Canada for the same reason, choose US for most of the bloggers are from there.
Aside from the above, did you ever see Volume I [of III] of the Canadian Historical Atlas? It is possible that your Ancestor’s neighbours [and where they came from] in the early history of Canada, would be illustrated therein.
Thank you for the explanation of how the process described above applies to the US bonds, notes etc.
It appears I have not been clear enough in my previous note.
It is not the debt which would cause the problem, but the lack of acceptance of more garbage fiat junk to satisfy the US’s appetite for foreign goods.
It is true that some Luxury items may not be wanted from foreign sources, however, the US is in dire need of numerous natural resources which are available only offshore. IF Chine, for instance, does not accept USD, then US can not have rare earth metals from China, same applies to almost all other metal ores/refined product from Vanadium to Chrome etc. to oil and gas, etc.
The shortage of these important industrial resources would cripple the economy, on one hand and raise the prospect of extreme inflation in the prices of these goods in internal markets, on the other hand.
I am not sure what you mean by “where they came from.” My French Canadian ancestors came from Normandy, Champagne and NW France generally. My Anglo Canadian ancestors were originally from the east of England as were most English Puritan settlers in New England. We know exactly where all these people lived in Canada. pl
No and it won’t.
Diseases are too complicated to be traced in that manner; multiple genes are often involved in a single disease; genes code for multiple proteins, and the proteins have conformations that vary depending on the environment that they are in.
Human Genome Project was a Scientific Joyride at Public Expense; like the Plasma Physics Laboratory at Princeton that has been promising nuclear fusion for the last 60 years.
In your very interesting posts, you explained that the term “debt” applied to a state authority when it creates liquidity is a misnomer.
Can you explain then what it means then when one hears government paying interest on its debt?
Or when one hears – in connection with the United States – that World War II is not paid.
Thanks, it was a late response on the Off Ramp thread.
Over the years here I would occasionally post, but with the mental meltdown currently underway in DC and elsewhere, it is time to speak up and this committee of the Lucid and Honorable is a worthy place,
In today’s episode of Neo madness, their Ukrainian Policy Momma wants bring on a nuclear holocaust.
Somewhere up above I used the example of Congress appropriating five new airports for $200 billion, which did two things in my example. The subsequent payment to vendors left a negative balance in the US Treasury general account—assuming for sake of argument that the general account was empty when the Federal Reserve marked up the US Treasury’s general account after Congress appropriated the expenditure–AND it added $200 billion to the economy (money supply).
I wrote that what the US Treasury does NEXT is issue treasury securities in the amount of $200 billion to balance the increase in the money supply.
Those treasury securities are bills (mature within a year), notes (mature 2-10 years), and bonds (mature 10-30 years).
Those treasury securities pay interest, (which we sometimes hear when applied to individuals as clipping coupons, lol).
The interest payments come due every month for a dazzlingly large number of treasury securities.
I can’t remember whether it’s once a year, or several times a year, but the US Treasury adds up those anticipated interest payments on an annual or biannual or quarterly basis, and THEN issues treasury securities specifically to cover THAT amount.
You need to understand the incredible desire for US treasuries globally. There is actual competition to buy them (again, for safety reasons). So the US issuing treasury securities to pay its interest payments is something that is gobbled up.
All of this comes under the leftover gold standard rubric of “printing money” btw.
The accounting fact is that the US federal government is adding net financial assets to the US economy. It is the only entity that can because it issues its own currency, specifically by provisioning itself (military, courts, roads, education, research, telecommunications, research, etc), or ’spending’. State and local governments cannot; firms cannot; banks cannot (they create credit money, not real interest-free money); neither can households, which account for 70% of the spending in the economy.
State and local governments, firms, and households must earn income before they can spend. Technically. Or they borrow, and by this I mean, really borrow the way you and I do, which involve interest payments, the necessity of collateral, and a repayment schedule.
The privatization of so many of the functions previously supplied by the federal government since 1980 have put many of the resources and public domain of the United States into the hands of bankers, which in my view, have been to the detriment of the American people. Also, it has corrupted the private sector and what used to be industrial capitalism has descended into finance capitalism that only the 1% benefit from. That’s a whole other rant that addresses the increase in asset prices.
As for “that World War II is not paid,” I don’t know what whoever said that is talking about. There is a fascinating book called “Keep from All Thoughtful Men: How U.S. Economists Won World War II” by military historian Jim Lacey that came out in 2011. Lacey found documents misfiled in the National Archives and corrects the record of how we prepared for that war. Check out some of the testimonials on Amazon. He says it was three economists who did it. The US had gone off the gold standard domestically in 1934, which freed the US to corral American resources and labor—and pay all debts in its own currency–to produce the munitions and planes, which we sold to Britain and then used ourselves.
Frank N Newman’s 2013 book “Freedom From national Debt” explains all of this much better than I can.
there are maps in thee atlas which specify the family and the family’s source [part of England, France etc.] within early Canada [mostly the present PQ.
So if you know where your ancestors settled, you might gleam who were they neighbours. The Atlas is in 3 volumes, was approx. $100 each volume.
Norbert M Salamon,
I’m not really following you (“the lack of acceptance of more garbage fiat junk to satisfy the US’s appetite for foreign goods”).
China’s rare earths are for sale in whatever currency China wants to net save in. If China wanted to be paid in Yuan, then the USG would pay in Yuan. So would every other country on the planet who wanted to buy rare earths from China. If China wanted Euros, it would ask to be paid in Euros.
All countries that export ask for payment in the currency they want. That’s how they acquire it. The day that no country in the world wants to sell us stuff for USD is the day we stop becoming the reserve currency, because no one will want it.
And all those US dollars that we pay to other countries for their goods are sitting in their foreign reserve accounts at the NY Fed. If those foreign countries want to being that money back into their countries, they have to do what you or I do when we want foreign currency, exchange the US dollars on the open market. The USD will remain here in the account of the money changer, and the foreign currency will get wired ‘home’.
The fact that the trade deficit is so huge is ample proof that many many countries want to net save in USD.
Since exports are a cost, and imports are a benefit, we are the ones who benefit the most (the benefits assume that we are fully employed and our economy is functioning for everyone not just a few). Any country that exports its resources, either in raw form or in the form of finished products, is incurring a cost to its local resource wealth; it’s depleting them.
Is that why Greenspan diddit? I thought it was step one in what has been called Greenspan’s straight-up two-step con. Step one was supposed to be raising actual taxes from actual incomes and “putting” the money in a “trust fund” which would be use to repay the baby boomers their SS benefits with all this money that those same baby boomers prepayed into the “trust fund”.
Step two was to pretend that this trust fund was really just “surplus” money and falling debt and we could give the money to the “Bush’s Base” class as tax cuts and un-taxed-for wars as conduits for money to contractors and etc. Then the general budget government embezzlers could say that we have a debt crisis and deficit crisis and its all Social Security’s FICA tax pre-payers fault for wanting to be repaid their own money as benefits out of the trust fund. As kao_hsien_chih
said up above.
I always thought Greenspan was plotting to create a bunch of money for his Class Patrons to steal later. It never occurred to me that he was thinking his plan would encourage Americans to revolt and freely give all their money to Greenspan’s Class Patrons sooner.
We are going to buy the three volumes. More grist for her ladyship’s mill. pl
I hope that you, Sir, your wife and sister will enjoy over many many days.
Two quick things.
(1) There’s a great interview with Frances Perkins, the Labor Secretary who created social security, on the Social Security website under the historical tab. There’s a transcript, but the audio is better because the transcript is not accurate.
She tells the story of how SS came to be. She did it because the sight of mothers sleeping with their children at the base of steps around Washington was heart-breaking to her. (Also, Marriner Eccles, the first Federal Reserve chair appointed by FDR, had excoriated FDR’s govt for not creating a social/public safety net in light of the depression after we went off the gold standard. Eccles was a Republican Mormon banker who went east and became more popular than Mylie Cyrus for his advocacy of putting people back to work with the WPA and other programs, which we could do with no cost to the people once we were off the gold standard domestically.)
The Republicans were in an uproar about SS. One day Perkins went to the Chief Justice’s house for a tea party, something she never indulged in. The Chief Justice asked her how things were going. She related the Republican pushback against SS. He pulled her aside and said ‘make it a tax, however small’, and they can’t succeed at the US Supreme Court, where the fight was going.
She rushed over to FDR’s office, told him, and kept it a secret. FDR and Perkins also knew that the embattled citizens didn’t want anything for free, so they set the ‘tax’ at something like 1% (can’t remember), and that’s how it got through the Supreme Court and became law. The Chief Justice told her that the Constitution explicitly says only Congress can create a tax, and that’s how they passed SS because the S. Court couldn’t overturn what Congress did. I think the first SS payment was $0.65.
But the greater point is that the government does not need payments from the people to pay social security. Moreover, mney in the hands of senior citizens helps the GDP because they can purchase the output of the working younger generation. Social security payments will need to be much higher to meet the eventual output of the Millennials, and produce growth in the economy.
(2) As recorded at 12:20 in Part 2 of Adam Curtis’ series, The Trap, Curtis says “In January of a few days before his inauguration, two leading members of the financial world came to see Clinton in Washington. One was Alan Greenspan, the head of the Federal Reserve. The other was Clinton’s new economic advisor, Robert Rubin, the head of Goldman Sachs. What they told the president was dramatic. His political plans were impossible. He was inheriting a huge government deficit. And if he borrowed any more money to pay for his promises, interest rates would rise, people would stop borrowing and spending, and there would be an economic disaster.”
Rubin is on the video saying, “The single most critical meeting with President Clinton with respect to the economic strategy of the Clinton administration was in early January during the transition, about two weeks before the inauguration. And it was in that meeting, what we were saying to the president was that we needed a dramatic change in policy, and it has to be accomplished as much as possible by cutting spending, even though that it is very difficult politically.”
Greenspan lied through his teeth to an incoming President. He was the effing Chairman of the Board of the Federal Reserve. Had he done it once the President was inaugurated, he could have been brought up on charges. Rubin goes on to say that the US is broke, and that he and Greenspan told Clinton there was an alternative way to build a better society: he should let the market do it, essentially that the economy is superior to democracy, and preferable.
Contrast that with Greenspan in August 2011 on Meet The Press, where the phuck did tell the truth that he did not tell Clinton, a hayseed ex-state governor who didn’t know any better. (Remember states need to produce income, the federal government doesn’t. Clinton got kudos for balancing Arkansas’ budget. He had to do the exact opposite with federal government and he didn’t know it.) https://www.youtube.com/watch?v=-_N0Cwg5iN4
The financial system is a tricky thing to get a proper handle on. FWIW, I thought it might be worthwhile to try to further sharpen some of the definitions (and numbers).
Under the present monetary system, only the Fed can produce base money, that is currency in circulation plus bank reserves at the Fed (real interest-free money in your terms above). As you of course know, whenever they “purchase”an asset (be it Treasuries, mortgage-backed securities or theoretically whatever) the monetary base goes up by that amount. Equally, if existing portfolio assets mature or are sold, the monetary base goes down. Until the crisis, over the entire life of the republic this process had resulted in a monetary base of about $800 billion. Today, it’s $3.9 trillion.
The government certainly can (and does!) add financial assets to the economy whenever it deficit spends. Unless that spending is monetised by the Fed purchasing Treasuries equivalent to the deficit spending, however, I don’t think it’s quite accurate to call it a net addition. In any case, that process over the years has produced total government debt outstanding of about $17 trillion, $2.3 billion of which is held by the Fed. At the end of 2007, it was a little over $9 trillion.
The private sector is also perfectly capable of adding financial assets. Whenever a bank issues a loan (or purchases securities), money is created when the proceeds in due course find their way back into the banking system somewhere as a deposit. And unless they join the black economy as cash, they eventually do. This process over the years led to total domestic private sector credit outstanding of $36 trillion ($37 trillion at the end of 2007).
In any case, most of the “money” in everyone’s accounts is therefore the result of bank lending and purchasing of securities (including, of course, Treasuries).
“The fall of a single leaf ushers in Autumn”; Upon sighting one leaf falling & comprehending the [Time of] Autumn realm.
Mr. Stephenson is one of those blessed with noting the Winds of Change.
Might I also suggest the works of Bruce Sterling & David Gibson?
Apologies, it ought to “William Gibson.”
I must cease using words like “nation-state”, Col.
Most misleading indeed (from your point-of-view).
What synonyms would you suggest for modern states & countries?
IMO a nation-state exists when an ethnic people bound together by language, tradition and history exist almost exclusively within the borders of a state (country) that is governed by s coherent system of law. Japan is a nation-state. Korea would be a nation-state if the two halves were united. Germany is not a nation-state. Germans live in great numbers in Germany, Austria, Switzerland, Belgium (Flemings), arguably the Netherlands whether the Dutch like the idea or not. and in pockets all over central and eastern Europe. A “state”(country)is a territory with borders recognized in international law and that is governed by a system of law that has power throughout the state. It is of no consequence whether or not a “state” is ethnically uniform. The Russian Federation is a state but it is not a nation-state. pl
With your nom-de-web, I should have realized! I will look for Sterling and Gibson. Many thanks.
Babak! Some estimate federal funding behind 80% of all new ethical [legal]drugs.
The COOPERATIVE RESEARCH AND DEVELOPMENT ACT one vehicle to pave the way.
A statute little understood outside FDA!
I’m sorry, although it may seem a small point, your idea on the whys and wherefores of New Jersey not having self-service gasoline stations is incorrect. There is NO state cabal to provide low-skilled workers with jobs commensurate with their abilities. The notion is laughable; in my state, that is the absolute LAST agenda item on the “to-do” list of our politicians. Rather, they are all about provision of tax abatements for corporations so that “please, pretty please” they will set up business here.
Actually, what happens is that there are periodic efforts, instigated by some owner types to try and inflict the self-service idea on the citizens, and every time the politicians are told in no uncertain terms that we DON’T want it. We don’t want senior citizens, people with handicaps, parents with infants and fretful children strapped into their vehicles, or anybody else for that matter, to be shanghaied into providing FREE LABOR for business owners who, instead of serving their customers, want their staff to consist of one guy sitting in a glass booth. That’s the way to the crapification of yet another area of our daily lives. I don’t want to have to carry around wet wipes in my car to try and cleanse -unsuccessfully – the stink and grime of a gas pump nozzle off of my hands every time I am forced to do work for the station’s owner. I don’t want to see my fellow citizens have their pockets picked by greed-driven, cost-cutting station owners. We expect them to provide a service. Additionally, we don’t want some clod right next to us at the service plaza pumping gasoline with a lit cigarette in his mouth, we want gas jockeys who have a clue about the dangers of open fire and static charge buildup around a highly flammable liquid.
A story. I go out of my way to patronize a service station staffed by young local men. Why? Not only do they pump the gas, but they greet you, they thank you, and they will even do simple jobs like inflating tires (I usually do this myself, but it is nice to know that if I were a woman who was 9 months pregnant, that they would do it for me). They are from the community, they are employed, they are trained to be and expected to be polite, and they safely provide a vital service. What’s not to like? Now, contrast that to some dweeb sitting in a booth, providing no service, and all of the work and stink thrust at you. So the one interested in there being work at the low-skilled level…is ME, most definitely not politicos, who cravenly serve business interests, and notice the citizens only when threatened and pushed.
Here’s another too-clever-by-half idea from Modern Business Management; self-checkout at the supermarket. What I saw at a market I used to patronize was this. A worker from office management – hence, likely not unionized like the staff – manned a command post at a bank of self-checkout stations. Hapless customers tried to check out their own orders, but often something would not scan correctly, and they would have to wait for the office worker to sort it out. And the office worker, because they were not a “dedicated” employee, would often not be at the station, so the customer would have to wait. Time is money, but not for the customer, evidently . But management sure stuck it to that union by not employing an expert check-out clerk to smoothly serve the, uh, customers. Oh, yeah, those people.
Rant over, back to your regularly scheduled programming.
MRW! Agree and thanks for the Lacey book reference!
I was told by a NARA rep that the Treasury department had authorized destruction of all its records on financing WWII! Glad some survived. My question to NARA was prompted by the potential need to mobilize the Nation’s resources
in some kind of national catastrophic event!
I also recommend a book by Alan Witt on how all the great powers mobilized their industry in WWII!
With all the discussion of US currency in this thread I think some might find the following tidbit of interest.
The unofficial [off-the-books] world economy [underground?] operates largely in US dollars. Many counterfeited in the Baka Valley and N.Korea.
Then Secretary of the Treasury or Presidential Advisor Robert Rubin carried $30B in new US $100 bills to Moscow just before the Yeltsin election. The cover story was that this currency drop was to replace damaged $100 bills from within the former Soviet Union. According to my sources whom I believe NO DAMAGED BILLS were ever returned.
CORECTION! The book I recommended on industrial mobilization in WII in all the major combatants was by Alan Millard.
According to your definition, Sir, end of WWI to a large extent negated many nation states, by break up of Austria Hungary and Ottoman Empires. Similarly the after effects of “new maps” at the end of WWII created new havoc, never mind the Kosovo incident, Khrushchev and Crimea, The African Continent, various interesting events in Central America, East Timor and Goa, Palestine [clear-cut post war imperialism by anti-Semitic UK], Hong Kong and Taiwan, Singapore et al other micro states.
A different criticism applies to Mr. Cumming’s definition: capable of defending her sovereign area; this is applicable to only a very few countries: US, Russian Federation, possibly Iran – due to the cost it can exact against the world by destruction of the Persian Gulf oil production; Possibly China [against anything but nuclear attack via ICBM-s].
The cursed FRACTIONAL Money creation of private banks – caused even more trouble than the collective damage done by various central banks measures – especially noticeable after 2008 – including all the credit default swaps, securitizations, etc
By my definition neither Austria-Hungary nor the Ottoman Empire were “nation-states.” Arnold Toynbee would have called them “ecumenical empires.”
Thanks again NMS! The maps are crucial for their pretensions of meaning. And perhaps your analysis confuses ways and means.
I like PL’s use of ethnicity in the definition of nation-state or lack thereof. Hoping others will weigh in because this concept [nation-state] seems problematic for this century. BUT OF EXTREME IMPORTANCE!
“No US debt (money) is held outside the USA. By law. Period. Can’t happen, does not happen, except for the actual 11% physical cash that is created for walking around money. All foreign bank US dollar accounts are at the NYC Federal Reserve.”
I am confused, how does this account for the Eurodollar market?
Sir< I am aware of that, my reference was that both WWI and WWII's new borders cut across numerous ethnic lines, for the convenience of Yalta, Versailles etc. Hungary lost 2/3 of its historical area [excluding the Ottoman empire period] and about 35-40% of her ethnic population. This was the reason behind my observations. Similar effects overtook Poland, Germany etc. - never mind what happened in the Middle East.
Agreed, Norbert, fractional reserve banking sure does cause trouble in a fiat money environment with a generous central bank (and when aren’t they). The absence of constraints inevitably leads to gross excess; the only question is how long it takes and how bad it gets.
However, if money is specie based and banks operate without any special regulations or advantages, fractional reserve banking can actually work rather well. There are quite a few historical episodes (Scotland, Sweden, Hong Kong and so on) where free banking, as it’s called, functioned smoothly and effectively for long periods.
There has been no such thing as fractional reserve banking since we went off the gold standard. Loans create deposits in the USA, not the other way around, even ‘fractionally’.
Banks then have to maintain reserves which are a small percentage of the amount of the loan. Banks CANNOT loan out reserves. If the customer moves the loan from Bank A to Bank B, those reserves get transferred to Bank B. (If Bank A doesn’t have enough reserves to move them, they have to borrow from other banks at the Fed Funds rate or borrow form the Federal Reserve.)
One of the few places on the planet that still uses fractional reserve banking is Hong Kong, but no other modern economy does. This is a relic that has survived in someone’s imagination.
Only Congress can create base money (the high-powered money of the state) by appropriation. That’s how currency is issued. That appropriation authorizes the US Treasury to tell the Federal Reserve to mark up its general account at the Fed. In that way, you could say the Federal Reserve creates it, but the Fed cannot create it on its own because it wants to. Hell, it is not even allowed to buy US Treasury securities at auction. It can only buy them on the open market from the 12 or 20 dealers authorized to buy and sell them.
This is not bank credit money.
The amount of base money created “over the entire life of the republic” since 1791 (minus the amount destroyed called taxes) is $17 trillion-plus. It’s called The National Debt. Another way of labeling it is The National Equity, or The National Money. That $17 trillion is in the citizens’ pension and savings accounts to the penny.
Thanks, WRC. Same thing happened after in Iran before the revolution. We not only brought the $100 plates and printing press (basement of the US Embassy), we brought two pallets of paper. That’s the reason why the $100 bill was changed subsequently. The $100 plates were in the occupied US Embassy vault. 😉 Bet the students never figured that out. But maybe they did.
I don’t understand the question.
Norbert M Salamon and ingolf, read this Steve Keen’s article about how the Bank of England under the Canadian governor guy is trying to correct people’s ideas about how money is created and how it goes through the system in modern economies. Fractional banking is one of the first to go.
“The BoE’s sharp shock to monetary illusions”
Test what? pl
As I said, I was confused. Much about the Eurodollar, especially its name, is confusing. Eurodollars are US denominated holdings in foreign banks. But they are time deposits which never really leave the US. I get it now. Thanks.
Sorry to be so slow getting back to you. I hadn’t seen your reply till just now.
Here’s the St Louis Fed page with charts, data and definition of the monetary base:
If you’re interested in delving deeper, here’s a link to the latest publication from the St Louis Fed on US financial data, with definitions included right at the end. (The St Louis Fed is arguably the most active of the various Fed branches in providing research and data.)
I also hadn’t seen this comment (or the one immediately below) so, once again, apologies for the delay in replying.
Fractional reserve banking (FRB) is the norm everywhere. Precise definitions vary but in principle it simply means banks hold only a fraction of their demand deposits in the form of cash or highly liquid securities and lend out the rest. This of course creates the potential for liquidity crises if sufficient customers wish to withdraw their demand deposits on short notice. For the last hundred years or so, this risk has been largely underwritten by central banks providing a liquidity backstop.
The (largely theoretical) alternative to FRB is 100% reserve banking, which doesn’t meaningfully exist since there’s almost no demand for this level of security in a bank and such institutions had no chance of competing with FRB banks.
I’m well aware that “loans create deposits”, not just in the USA but everywhere. See my comment above: “Whenever a bank issues a loan (or purchases securities), money is created when the proceeds in due course find their way back into the banking system somewhere as a deposit.” Steve Keen’s views have also long been well known to me (including this particular article which I read when it first came out in Business Spectator). For the most part I agree with his take on these matters.
Some banking systems do still require banks to hold (usually minimal) levels of reserves, some require no reserves at all. As you say, banks can’t lend out required reserves but they can certainly lend out excess reserves, which in the US now constitute about $2.6 trillion (of which required reserves are only $77 billion).
Reserves get moved between banks’ balances at the central bank whenever net settlements occur, in other words pretty much on a daily basis. As an aside, the banking system as a whole can’t get rid of reserves (excess or otherwise); their level is entirely under the control of the central bank. Individual banks, however, can do so by making loans or purchasing other assets. Whether they succeed depends on overall flows between banks on any given day.
P.S. Am I right in assuming you singled Hong Kong out because some of its banks have retained the right to issue currency?
Thank you, I did see your response. Instead of commenting too much, I am digging around a Victorial Nuland/Dick Lugar Council on Foreign Relations policy review from 1997 about the enlargement of NATO.
Has anyone else read this?
Russia + China plan to launch circa 2022. A critical piece is a Chinese equivalent to Moody’s to rate bonds objectively, which is on track.