Satyajit Das: The End of Trust? Part II

Yves here. Das continues his discussion of the impact of the erosion of trust (see here for Part I). Here he focuses on the political impact on international dealings and national politics.

By Satyajit Das, former banker and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011) and Traders, Guns & Money

IMF or Influential Moneyed Friends…

The tension between developed and emerging countries over the control of international institutions, such as the International Monetary Fund (“IMF”) and the World Bank, highlights increasing mistrust.

America supported Europe’s candidate for the IMF Presidency (Christine Lagarde). Europe helped elect the American candidate (Jim Yong Kim) as the head of the World Bank. The US and Europe used its disproportionate voting power to achieve their desired outcome.

In his resignation letter of July 2012, Mr. Peter Doyle, a senior IMF economist, excoriated the institution. He wrote of a “European bias” arguing that Ms. Lagarde’s appointment was compromised: “Even the current incumbent is tainted, as neither her gender, integrity, or élan can make up for the fundamental illegitimacy of the selection process”.

Speaking at an IMF press conference, Brazil’s finance minister highlighted the inequality of the quotas that dictate voting power: “The calculated quota share of Luxembourg is larger than the one of Argentina or South Africa… The quota share of Belgium is larger than that of Indonesia and roughly three times that of Nigeria. And the quota of Spain, amazing as it may seem, is larger than the sum total of the quotas of all 44 sub-Saharan African countries.”

The voting imbalance is a legacy of a time when the IMF was designed to aid ailing third world or developing countries. But the IMF’s purpose has now changed. The developed world increasingly looks to the savings of the emerging nations to help solve current debt problems, such as those in Europe.

In April 2012, the IMF increased its resources by US$ 430 billion to help deal with potential financial crises. IMF officials made obligatory statements that the funds are “available for the whole IMF membership, not earmarked for any particular region”. But everyone was aware that the funds are likely to be needed to solve the persistent Euro-zone debt crisis.

Of the US$ 430 billion in additional commitments, emerging nations chipped in around US$115 billion. The US refused to contribute its required share of $70 billion, based on its jealously protected voting quotas.

China, Russia and Brazil have sought more evidence of “Euro-Zone governance” before finalising their commitment. The fact that a communist country, a formerly communist country and country which has been a recent problem child should require proof of Western Europe’s economic management credentials is ironic. There is increasing concern in emerging markets, where incomes per head are well below Western levels, about having to take on the risk of large losses to preserve the unsustainable monetary and regulatory arrangements of developed nations.

Reflecting these tensions, the BRICS (Brazil, Russia, India, China and South Africa) have proposed a vague proposal for a new development finance institution, financed by emerging nations, as an alternative to the IMF and World Bank.

Disruptive Truths…

Financial repression is increasingly accompanied by political repression. Governments have systematically refused to fully disclose the severity of the crisis or the rationale of initiatives to deal with the issues.

On April 20, 2007, speaking on US TV, Treasury Secretary Henry Paulson was upbeat, the U.S. economy was “robust” and “very healthy” and “the housing market is at or near the bottom”. Head of the US Central Bank Ben Benanke told Congress: “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though”.

The dialogue around the European debt crisis has been Orwellian. On 11 April 2011, Spanish Finance Minister Elena Salgado said: “I do not see any risk of contagion. We are totally out of this”. She was right – she was entirely out of it. In 2012, the voters voted her out of government.

Her successors have continued the policy. Her replacement as Finance Minister Luis de Guindos on 30 March 2012 stated that: “We are convinced that Spain will no longer be a problem, especially for the Spanish, but also for the European Union”. The Spanish Prime Minister Marino Rajoy attempts to maintain confidence a few days later on 12 April 2012 were confusing: “To talk about a bailout for Spain at the moment makes no sense. Spain is not going to be rescued. It’s not possible to rescue Spain. There’s no intention to, it’s not necessary and therefore it’s not going to be rescued”.

When eventually Spain required financial support, the disambiguation reached a new level. The Spanish Finance Minister stated: “What is being requested is financial assistance. It has nothing to do with a rescue”.

European government have offered interesting reasons for their actions, especially the severe austerity measures, which have impoverished the unemployed, retirees, young workers and the disadvantaged.

In September 2012, Spanish Prime Minister Rajoy stated that “reality prevented” him from keeping his electoral promises. Subsequently, in December 2012, he stated that pension cuts were “imposed by reality”. As his electoral support faded and support for his leadership fell to low levels, the Spanish Prime Minister appealed to the EU for relaxation of deficit and debt targets arguing that now apparently “reality [was] imposing” slower fiscal consolidation.

It’s Deutsche to Us….

In Germany, the suppression of debate has reached extraordinary heights, reminiscent of the best years of Soviet propaganda.

Ordinary German citizens have not been made fully aware of the risk of losses to Germany from the bailouts of other European countries by the EU. The support has been carefully structured in the form of guarantees and off-balance arrangements to avoid immediate impact on German finances.

The November 2012 round of negotiations to provide further funds to Greece was complicated by the real risk of actual losses on previous loans provided by official EU bodies and the ECB. Chancellor Angela Merkel was only able to honour her promise that Germans would not suffer any losses from the bailout by agreeing to the fiction of very low coupon long term Greek debt.

In 2013, as the need for further debt relief for Greece and potentially other bailout recipients emerged, Chancellor Merkel’s government rejected write-downs, proposing zero interest rate loans to avoid explicitly recognising losses.

Eschewing transparent debate of Germany’s policy to support bailouts, Chancellor Angela Merkel has generally avoiding speaking on the issues. In an hour-long interview on TV with a tame presenter, Dr. Merkel was able to get away with a stream of uninterrupted motherhood statements. She claimed unchallenged that there was no euro crisis but only a sovereign debt crisis. There has been no serious explanation of her policies, especially within Germany.

After the Bundestag voted to approve the European bailouts, a TV crew asked MPs some basic questions. They wanted to know how much money Germany was guaranteeing; which countries would receive money etc.

The majority of parliamentarians could not answer these simple questions correctly. Some believed that only Greece had received money – Ireland and Portugal has received bailouts. Almost none could tell the total amount of German guarantees. “A few billion, I guess?” was a typical answer. The correct answer was Euro 211 billion, the largest single sum of money a German parliament had ever committed to any cause.

During the 2013 German Federal election, debate about the European economic crisis was muted. Given the magnitude of the issue and the potential risk and cost to German taxpayers, this was surprising. The issue of a meat-free day, a proposal put forward by the Greens, received more attention than the European crisis.

The major parties seemed keen to avoid discussion of the subject, especially as it might give the Euro sceptic AFD party prominence and air time. The only public debate between Chancellor Merkel and the head of the SPD Peer Steinbruck was so devoid of substance, some commentators awarded victory to the moderator.

The German constitutional court has ruled that several decisions by Chancellor Angela Merkel’s government in relation to bailout were unconstitutional. Future actions would need to be approved by the Bundestag, the German parliament. But to avoid scrutiny, German leaders are moving key decisions into opaque EU forums, outside the purview of the electorate and parliaments.

Selling Europe by the Euro…

European political leaders have been keen to accentuate the positive, despite the facts -sluggish growth, high unemployment especially amongst the young, rising poverty, a fragile banking system, rising debt levels and political paralysis.

Write-downs of Cypriot depositor’s funds were justified on the basis that this was designed to prevent any bailout funds flowing to Russian depositors (money laundering oligarchs or organised criminals). Carsten Schneider, a SPD politician, spoke gleefully about burning “Russian black money”. The reality was that the majority of affected deposits (Euro 43 billion of the Euro 68 billion) may be from Cypriots. There are there are also around 60,000 British retirees and 40,000 Russians living in Cyprus. Euro 19 billion were from the rest of the world, believed to be primarily from Russia.

Cyprus’s problem drew unwanted attention to the vulnerability of depositors in European banks in the absence of a Europe wide deposit insurance scheme and lack of funding for recapitalisation of banks (both opposed by Germany). German Finance Minister Wolfgang Schäuble assured investors that “savings accounts in Europe are safe”. This was inconsistent with his earlier statement that deposit guarantees were “only as good as a state’s solvency”.

In 2013, the Greek Prime Minister visited China soliciting investment. His sales pitch was based on an interesting revisionist narrative. Greece was a success story – having almost been economically destroyed in 2012, it was now stable and recovering; in short, a wonderful opportunity for investors to pick up cheap investments and gain from capital appreciation that would inevitably follow from the coming economic growth.

Greek economist Yanis Varoufakis flayed the Prime Minister, issuing a point-by-point refutation of the investment case, pointing out that the state was bankrupt.

The decline in Greek interest rates from 30% to 8% was irrelevant as it cannot borrow other than from official bodies, who are now Greece’s major creditors. The recovery in the Greek stock market was of a magnitude that it had reached levels last seen in 1995.

The Greek economy was not really improving. Rather, the rate of shrinkage was slower, as it already contracted by nearly a quarter. While wages had fallen drastically, the lack of investment and lack of demand for goods and services meant economic activity is moribund.

Dr. Varoufakis pointed out the government had achieved a primary budget surplus through “blood money” – refusing to meet obligations for education, retirement, aged care and also delaying payments (including tax refunds) to suppliers and small businesses for months. He pointed out that Greece’s banks have not recognising losses and are not lending further curtailing economic activity. The banks need at least Euro 150 billion in capital, which is unavailable.

Irish Definition of Success…

European leaders have repeatedly pointed to Ireland as evidence that their policies are successful. German leaders have been particularly loquacious in their praise.

Ireland plans to pay back the funding provided by the EU, needed to rescue its banks following the collapse of its property bubble. The real reason for the funding is generally ignored. Irish taxpayers were asked to shoulder the cost of supporting the banks to effectively avoid German and other European banks suffering large losses from their exposure to the Irish banks.

The story of Irish success is also misleading. The Irish economy has shrunk dramatically, with tepid domestic growth rates of around -1.2%. The government deficit is around 7% per annum. Public debt is around 121%, up from 91% in 2010. Household debt is also high at around 200% of GDP. Housing values, which secure much of this debt, has fallen by more than 50% and around 17% of mortgages are in arrears by more than 6 months.

The number of unemployed has tripled from 107,00 in January 2008 to around 300,000 today with the number of people employed having fallen by over 12% over that period. Around 10% of the population has emigrated with net emigration running at around 30,000 annually.

Improvements in Ireland’s exports (annual exports exceed its GDP) are founded on it low tax rate, allowing global business to channel revenues through the country to lower tax liability. The annual revenue per employee at Google’s Irish operations alone is a very large Euro 4.8 million. But this does not translate into large scale employment and therefore into tax revenue.

Ireland’s low borrowing costs and restored access to financial markets to issue debt does not reflect the true state of the Irish economy. Instead, it reflects assumed EU and ECB support in case of further difficulties, in part to preserve the fiction of Irish success needed by European politicians.

To paraphrase Alexander Solzhenitsyn, for policy makers the “permanent lie [has become] the only safe form of existence”.

Disruptive Democracy…

A democracy deficit is now as much of a problem as budget and trade deficits.

In Europe, a self-serving political class and self-selecting mandarins promote their agendas, outside of the electoral process and without popular mandates.

In the first phase of the crisis, important decisions about the European debt crisis were made privately by Merkozy – the sarcastic term for the partnership of convenience between the German Chancellor and former French President Nicolas Sarkozy. After Mr. Sarkozy was dethroned, major decisions were still taken in private meetings by Homer – the new terms for German Chancellor Merkel and new French President Hollande. But with French and Germany interest increasingly divergent, Homer proved a less robust alliance than Merkozy.

Countries can find themselves arbitrarily included or excluded from crucial decisions.

Finland was extended special terms securing part of their commitments to the European bailout package – they had asked unsuccessfully, it was rumoured, for security over some Greek Islands. Subsequently, Finland asked for and received security for providing assistance to Spain. As one of few AAA rated countries remaining in the Euro-Zone, Finland’s support for the bailout was crucial enough for it to obtain preference.

In contrast, decisions on the bailout of Greece and the draconian austerity measures were dictated by the EU, with limited involvement of the Greek government. Greek Prime Minister George Papandreou made a short lived and ill-fated attempt to stage a plebiscite on austerity policies. It was dismissed by larger Euro-zone states and the EU as “disruptive”. Subsequently, the EU orchestrated the replacement of the Greek and Italian Prime Ministers with acceptable technocrats.

The party of the German anointed Prime Minister Mario Monti, previously an EU official, performed poorly in Italian election. The joke was that the Italian election was contested by a former communist, a philanderer, a comedian and an economist (Mario Monti nicknamed “Rigor Montis” by Italian comedian Beppe Grillo). The punch line read the economist finished last.

A German newspaper headline summed it neatly: “Germany loses Italian Election”. Fearing the re-emergence of financial problems, an alarmed Germany and EU urged Italy to continue its austerity program.

German Finance Minister Wolfgang Schäuble stated that Italian political leaders must “do what the country needs, namely form a stable government that continues on the successful path of reform”. EU President Jose Manuel Barroso urged Italy to resist populism: “We should be serious when we discuss economic policy and not give in to immediate political or party considerations”. These policies have reduced Italy’s GDP below its 2001 level and were rejected by over 50% of Italian voters.

As occurred in Greece after its 2011 elections, the major political parties, with the support of the EU and Germany, sought to sideline the result through a coalition between major parties, to neutralise the influence of dissident smaller but significantly supported parties.

European policymakers appear to believe that a suspension of democracy and sovereignty is the answer. They believe that the implementation by trusted technocrats of centrally determined policies will secure the future. Like the crony capitalism that Lawrence Summers criticised, the process favours excessive secrecy and avoidance of public scrutiny and debate.

Playwright Bertolt Brecht would have recognised the pattern. Watching the suppression of workers’ protests in East Berlin in 1953, he observed: “The people having lost the confidence of the government, the government finds it necessary to dissolve the people and appoint a new one”.

Voter Revolt…

The crisis has undermined the relationship between voters and elected politicians and policymakers in many countries. There has been a significant decline in the electoral support of major parties.

In the US, the rise of the Tea Party wing of the GOP reflects, amongst other things, dissatisfaction with the existing political status quo. In Europe, smaller parties like Germany’s Pirate party, France’s National Front, Greece’s Golden Dreams party and Finland’s True Finns have gained electoral support.

In Italy, populist comic Beppe Grillo emerged as a political force, winning a significant share of the vote in the March 2013 Italian election. Support for his Five Star movement represented the electorate’s rejection of both the political establishment and EU imposed austerity policies.

In the 2013 German elections, a new party – AFD- garnered significant support, despite it short history and poor organisation. It’s anti-Europe and anti-bailout stance saw it almost receive enough support to be gain parliamentary representation.

In the European endgame, ordinary Germans will have to pay three-fold for the single currency. They continue to pay for the reunification of Germany, which was only supported by France on reciprocal German support for the Euro. In the early 2000s, they paid through reductions in real wages, unemployment and labour market reforms. Now, they will have to pay for the bailouts.

Voters will discover that they have been betrayed by Germany’s pro-EU political, financial and policy elite. There will be an electoral revolt and, as in the rest of Europe, a strong challenge from radical political forces.

Ordinary people everywhere feel betrayed by the political process. The global Occupy Wall Street (“OWS”) movement and protests in Greece, Spain, Portugal, Ireland and Italy are fuelled by this breakdown in trust and rising discontent.

In Ireland which is preparing to exit its Euro 85 billion program, former Prime Minister Bertie Ahern was recently assaulted in his local pub by a man with a crutch. Business leaders of the bubble period, such as Sean Fitzpatrick, bankrupt ex-chairman of Anglo Irish Bank, rarely appear in public, fearful of reprisals.

Ordinary people also feel powerless, increasingly disengaged. Their response reflects their belief in the observation by Bernard Baruch, the influential American financier: “Those who matter don’t mind and those who mind don’t matter”.

A broken political system now complicates action to fix a broken economy and financial system.

Broken Mirrors…

A widening gap between the views and concerns of the people and the political and bureaucratic classes threatens the fragile compact at the heart of free societies. The risk of economic, financial, social, political and international breakdowns is very real.

In March 1933, John Maynard Keynes wrote: “We have reached a critical point…We can … see clearly the gulf to which our present path is leading [If governments did not take action] “we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict.” That warning is relevant today.

In seeking to resolve the financial crisis, policy makers are destroying the trust that is central to modern societies. Once fractured, this trust is not easy to re-establish.

As Friedrich Nietzsche observed: “I’m not upset that you lied to me, I’m upset that from now on I can’t believe you.” Or in the more direct and modern words of Lady Gaga: “Trust is like a mirror, you can fix it if it’s broken, but you can still see the crack in that mother fucker’s reflection.”

Print Friendly, PDF & Email

18 comments

  1. Hugh

    “In seeking to resolve the financial crisis, policy makers are destroying the trust that is central to modern societies.”

    Except for his remarks on Germans paying for the bailouts which I think are off base, this isn’t a bad summary of the euro-mess. Where Das really goes wrong is in thinking that “policy makers” are trying to resolve the financial crisis. Das talks about the elites or as he terms them the “political and bureaucratic classes” but he studiously avoids mention of the rich and wealth inequality in his discussion. So we get a lot of talk about the puppets but not the puppet masters. We get talk about “trust” but Europe’s problems are not about trust but the criminality of its rich and the elites who serve them. Das simply won’t go there. He will slam the “policymakers” but not those who own them.

    As I said, Das is completely off when he says that ordinary Germans will have to pick up the tab for the bailouts. ordinary Spaniards, Irish, Italians, and Greeks have already been picking up this tab for the last few years. And yes, ordinary Germans too. Lets just remember to whom these bailouts are going though, Europe’s 1%s. If things are ever to get better for Europe’s 99%s, these “bailouts”, i.e. upward transfers of wealth not only have to stop but be reversed. This dimension of the crisis is totally missing from Das’ analysis.

    1. Aaron Layman

      Precisely! Spoken like a true banker, because in the world high finance, fraud is only applicable to little people.

      I had an interesting discussion with a loan officer from Bank of America yesterday. I was doing an informal survey of the utility of our newest Bofa branches in Katy, West Houston. Having read about the consolidation of the industry and the great post Quinn wrote, Take It To The Bank.

      I walked into my local Bofa Branch to find one teller on duty (space for 3) and 4 cubicles, two of which were unoccupied. One had a real person actually speaking to a customer. As I left, I noticed a second loan officer who was simply taking a break because he had no customers to attend to. When I asked him about how things were going in the consolidation space, he said that ATM’s and automation weren’t going to replace real human bank staff. He actually believed this because apparently CEO Moynihan and company had assured them this would not happen. I laughed out loud. After asking him how long he had worked for Bofa (3 years), I also mentioned the whole bailout thing, and why I wouldn’t do business with Bofa. When I addressed all the fraud issues, he simply said with a straight face that they had “put those issues behind them”. What will be comical is when this idiot discovers in a few years that he was lied to and Bofa has put his employment behind them as well.

      1. Trent

        Trust has been decreasing slowly since credit replaced wage increases, and was totally lost for the majority in 2008. Besides more expensive energy and loss of jobs, failure to hold anyone accountable has destroyed the last few strings of trust that held many Americans loyalty. The next leg down will be the straw that breaks the camels back, and like that recent train in New York, the government is asleep at the wheel.

    2. from Mexico

      Das gives short shift to the mercantilism which was imposed by Germany’s lords of capital with the Hartz counter-reforms. He only mentions it in passing: “In the early 2000s, they paid through reductions in real wages, unemployment and labour market reforms.”

      But as Stephanie Kelton explains in this recent presentation to the Fields Institute, it is the Hartz counter-reforms which lie at the heart of the Eurozone’s ills:

      http://www.fields.utoronto.ca/video-archive/2013/11/221-2524

      The crucifixion of German labor was what set this wrecking ball in motion.

  2. from Mexico

    Das begins by setting this up as some sort of Chiliastic conflict between Europe/US and non-Europe/US.

    But framing the issue in this manner misses much of what is going on, because none of this bad stuff happens without santannists and neopolkos like Carlos Slim and Mexico’s current president, Enrique Peña Nieto, playing their parts. These are politically and economically powerful people willing to sell out their own country.

    One also has to take a look at what is being done to the great Spanish and Greek unwashed, or the enormous central band of American life where workers and the middle class overlap. These people are being crucified, and yet they’re members of the Europe/US brotherhood.

    1. PaulW

      Great comments! This is exactly what is happening – the political class selling out their countries. We even see it at the municipal level here in Canada with local politicians allowing big box corporate stores to move in which destroy local businesses. Been going on for 20 years now, downtowns turned into ghost towns with empty stores while business moves to the suburban malls. This has been obvious since the 1990s but never, in the discussion, does anyone question the motivation of the politicians who allow it to happen. The narrative is simply that the corporations must be allowed to come in to create local jobs. It’s all presented as inevitable – we have no choice. Ignores the fact that the majority of business done in a corporate store leaves the community. The only money that stays is what’s paid to local employees, the rest disappears into the global economy black hole.

      1. from Mexico

        Yep.

        As Leonidas K. Cheliotis asks:

        If…submission to rulers and their regimes always remains contingent upon the availability of logics that render it or make it appear legitimate, which are the logics that neoliberal elites evoke to justify and thereby sustain their authority over the people for whom they fail to cater? Surrendering the economy to financial markets is justified as a writ of fate; either negatively, as the unavoidable by-product of the ‘elusive’ forces of globalization, or positively, as the only road to individual and national prosperity in an environment of global market competition.

        http://www.academia.edu/785864/Cheliotis_L._K._2013_Neoliberal_Capitalism_and_Middle-Class_Punitiveness_Bringing_Erich_Fromms_Materialistic_Psychoanalysis_to_Penology_Punishment_and_Society_15_3_247-273

        1. cnchal

          from Mexico – thank you for that link. Pure gold!

          It took hours to read and has brought into focus my sense that we are becoming a police state. In Canada we are building a whole slew of brand spanking new prisons. I have always wondered why, and who will fill them.

          One of many gems out of Leonidas’s article.

          It is not hard to see how governing elites once more manage to draw symbolic benefits from deeply problematic features of their neoliberal socio-economic policies. Not only do they deploy the scathing rhetoric of the market to theorize and castigate the violent street criminal. In so doing, they also conflate the disadvantages their very policies have done so much to produce with a constructed succession of taints, from irresponsibility and laziness, to criminal propensity, to reduced morality. This argument may be advanced further: rather than assuming that the politico-symbolic benefit at issue is restricted to relativizing the significance and urgency of middle-class socio-economic insecurities vis-a-vis violent street crime, the discourse of violent street crime may be viewed as allowing the reconstruction of middle-class socio-economic insecurities as such, treating them as a signifier of responsible citizenship and thereby unconsciously enhancing their public acceptability. In this case, while the disadvantaged are berated for allegedly rejecting ‘responsible’ alternatives in favour of crime as the easy route out of their predicament, praise is extended to the middle classes, who equally allegedly make the hard ‘responsible’ choice of abstaining from crime despite the persistence of their own socio-economic insecurities. Among the middle classes, stubborn socio-economic insecurities may thus come to be regarded as indicators of righteousness and responsibility, both in terms of entrepreneurship and approach to the rule of law. To this extent, crime allows for expanding the meaning of success in life under neoliberalism to include reference to the legal merits of the means by which one struggles for corporeal and ontological security, opening up opportunities for finding a modicum of narcissistic satisfaction in the process of struggling even where, ironically, the ultimate desired goals remain pending. But the irony goes further still, insofar as the dichotomous discourse of responsibilization as applied to the public reflects, and ultimately serves, the interests of neoliberal rulers who thereby try to evade nothing less than responsibility for their own civic failings and misdeeds.

          When one looks at the whole picture, mistrust in our “leaders” is a rational defense.

          NSA lying and spying, an out of control US military, banks, corrupt politicians serving their owners. An endless list.

          I caught a glimps of one of Obama’s press conferences and squirmed in place as one journalist finally asked a hard question and the body language and facial expressions of the other journalists, the “White House” press corps looked like they wanted to throw a hood over the questioner and shut him up. How dare he ask a tough question! Obama glowered at him.

          It reminds me of a disfunctional family with an extreme narcissist at the head, with the victims angry at the dissenter because now they will all have to pay for getting “him” angry.

          1. fledermaus

            I like that excerpt especially: “In this case, while the disadvantaged are berated for allegedly rejecting ‘responsible’ alternatives in favour of crime as the easy route out of their predicament, praise is extended to the middle classes, who equally allegedly make the hard ‘responsible’ choice of abstaining from crime despite the persistence of their own socio-economic insecurities.”

            The thing authority can only get people to make harmful decisions so long before they stop listening to advice that never works out especially when they see others not playing by authorities rules doing as well or even better while they sink further and further down. It reminds me of a quote about Weimar in the 20s:

            “The old and unworldly had the worst of it. Many were driven to begging, many to suicide. The young and quick-witted did well. Overnight they became free, rich, and independent. It was a situation in which mental inertia and reliance on past experience were punished by starvation and death, but rapid appraisal of new situations and speed of reaction were rewarded with sudden, vast riches.”

            -Sebastian Haffner on the early 20’s Weimar economy in Defying Hitler

  3. Banger

    The crisis in trust is a good thing and is a precursor to any kind of solution to our collective problems. To put it another way, the current elites at least in the U.S., Europe and their satellites/client states, are too corrupt to preserve civil society or even the Earth system and must be overthrown. Yet, where is the opposition? Where are the brave people who are working for alternatives? There are some of these to be sure but the vast majority of the population still favors the status-quo as long as they personally are doing well enough to afford toys and entertainment.

    Isn’t it true that the degeneracy of the population’s mores and virtues go hand-in-hand with the degeneracy of the elites?

    We are headed towards an increase in complexity and dispersed power into neo-feudal units. The center cannot hold without trust. All this could make things far better or far worse–it depends on the quality of each of us.

    1. Ulysses

      I spend most of my time among common folks who are not degenerates hypnotized by cheap amusements, but hard-working, honest folks struggling to provide food, shelter, and clothing to their families. They are more than willing to help overthrow the status-quo, but only if they feel the revolution will have competent leadership, truly committed to helping the masses.

      Machiavelli explained a long time ago why the desires of the masses are nearly always morally superior to those of the elites: “if we ask what it is the nobility are after and what it is the common people are after, it will be seen that in the former there is a great desire to dominate and in the latter merely the desire not to be dominated. Consequently the latter will be more keen on liberty since their hope of usurping dominion over others will be less than in the case of the upper class. So that if the populace be made the guardians of liberty, it is reasonable to suppose that they will take more care of it, and that, since it is impossible for them to usurp power, they will not permit others to do so.”

      [Discourses on the First Decade of Livy, I,5 translated by Leslie Walker] In the original Italian Machiavelli moves in this passage from calling commoners “ignobili” to “popolari,” revealing, despite his own aristocratic origin, a real (albeit reluctant) respect for the political virtues of the masses.

      1. Banger

        In Machiavelli’s time it was certainly true what you say. I say, however, that never before in the history of the human spices have so many lived in a luxurious style that few monarchs of the past lived in. This has, in my view, corrupted the masses into living in order to maintain a ridiculous standard of living. We are all in this situation together.

        1. PaulW

          That is so very true. We do live better than most royalty lived in the past. Few appreciate this fact. I hate to think how they will react when they lose this luxury.

          Perhaps this standard of living is unsustainable. Maybe it’s inevitable that a luxury addiction ends up creating a luxury bubble – we know how all bubbles end. I even like to believe in the idea that we could have moderated our excesses and maintained a society mutually beneficial to all. Yet none of the above matters any longer because the 1%, motivated by greed for more money and power, have seen to it that things must fall apart. I think that’s what most at NC understand. This is a crime with a final result which did not necessarily have to happen. Which just leaves us to argue about how guilty or innocent the 99% are.

          1. Banger

            I’ve lived in very simple and spartan conditions in parts of my young-adulthood and fared quite well and was as happy or sad as I am now. I don’t see that our luxuries give us much in the way of happiness, in fact, I’ve lived in societies that were often more relaxed even if they were, by our standards, extremely poor.

  4. TarheelDem

    When financial trust (credit) collapses because of fraudulent dealings, collective overextension, or a mechanism that functions to counterfeit money divorced from the provision of goods and services to consumers and the creation of plant and equipment, business that relies on credit cannot continue until those trust relationships are sorted out on a person-to-person basis instead of an institutional basis.

    This crisis is global. It goes to central banks and the trust that central bankers have with each other and then all the way down to consumers.

    The historical pattern is that people conducting transactions must continue to conduct them, must find a way of accommodating the need for money and credit, and eventually invent a new system even if it is based on something as crazy as bills of exchange on New Orleans-to-Liverpool shipments of cotton. Then as long as the cotton ships and the cloth is profitable people can trade those bills of exchange with third parties. That is where the invention occurs. What is it that third parties (banks), fourth parties (reserve banks), and fifth parties (global clearinghouses of transactions) will trust to resolve transactions?

    Formal political paralysis and delay just make it more likely that the new system will come from outside the old system and that the old system will reluctantly begin to trust the new system or will be transformed so as to accommodate the new system.

  5. susan the other

    The best Das in a long time. Thinking about what Hugh said above. Let us imagine a future for the elites since they have spent so many decades imagining ours. They can move with most of their money into enclaves protected by their own armies and only deal with each other. Let them eat cake. They will be the new poor. The state, that’s us, can take over the economy simply by showing up to work for what we need on a daily basis. Sort of like taking over the means of production. And distribution. But since modern production is against life itself these days, against everything that breathes, we might want to abandon it altogether. The important thing will be to isolate the things that got us here in the first place. Keep them beyond the pale.

  6. Chauncey Gardiner

    Despite a very long legacy of deeply damaging policies for the vast majority of the population, these people and their enablers in politics, economics, finance, law and media retain their stranglehold on the reins of power.

    The Whys, Whats, Wheres, and Whens are fairly self evident. The Hows not so much. “How are they (repeatedly) accomplishing this?” is a question that I feel needs to be asked and asked often.

Comments are closed.