Randy Wray: Why We’re Screwed

By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City. Cross posted from Economonitor

As the Global Financial Crisis rumbles along in its fifth year, we read the latest revelations of bankster fraud, the LIBOR scandal. This follows the muni bond fixing scam detailed a couple of weeks ago, as well as the J.P. Morgan trading fiasco and the Corzine-MF Global collapse and any number of other scandals in recent months. In every case it was traders run amuck, fixing “markets” to make an easy buck at someone’s expense. In times like these, I always recall Robert Sherrill’s 1990 statement about the S&L crisis that “thievery is what unregulated capitalism is all about.”

After 1990 we removed what was left of financial regulations following the flurry of deregulation of the early 1980s that had freed the thrifts so that they could self-destruct. And we are shocked, SHOCKED!, that thieves took over the financial system.

Nay, they took over the whole economy and the political system lock, stock, and barrel. They didn’t just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen. They screwed workers out of their jobs, they screwed homeowners out of their houses, they screwed retirees out of their pensions, and they screwed municipalities out of their revenues and assets.

Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.

And since they’ve bought the politicians, the policy-makers, and the courts, no one will stop it. Few will even discuss it, since most university administrations have similarly been bought off—in many cases, the universities are even headed by corporate “leaders”–and their professors are on Wall Street’s payrolls.

We’re screwed.

Bill Black joined our department in 2006. At UMKC (and the Levy Institute) we had long been discussing and analyzing the GFC that we knew was going to hit, using the approaches of Hyman Minsky and Wynne Godley. Bill insisted we were overlooking the most important factor, fraud. To be more specific, Bill called it control fraud, where top corporate management runs an institution as a weapon to loot shareholders and customers to the benefit of top management. Think Bob Rubin, Hank Paulson, Bernie Madoff, Jamie Dimon and Jon Corzine. Long before, I had come across Bill’s name when I wrote about the S&L scandal, and I had listed fraud as the second most important cause of that crisis. While I was open to his argument back in 2006, I could never have conceived of the scope of Wall Street’s depravity. It is all about fraud. As I’ve said, this crisis is like Shrek’s Onion, with fraud in every layer. There is, quite simply, no part of the financial system that is not riddled with fraud.

The fraud cannot be reduced much less eliminated. First, there are no regulators to stop it, and no prosecutors to punish it. But, far more importantly, fraud is the business model. Further, even if a financial institution tried to buck the trend it would fail. As Bill says, fraud is always the most profitable game in town. So Gresham’s Law dynamics ensure that fraud is the only game in town.

As Sherrill said, without regulation, capitalism is thievery. We stopped regulating the financial system, so thieves took over.

A century ago Veblen analyzed religion as the quintessential capitalist undertaking. It sells an inherently ephemeral product that cannt be quality tested. Most of the value of that product exists only in the minds of the purchasers, and most of that value cannot be realized until death. Dissatisfied customers cannot return the purchased wares to the undertakers who sold them—there is no explicit money back guarantee and in any event, most of the dissatisfied have already been undertaken. The value of the undertaker’s institution is similarly ephemeral, mostly determined by “goodwill”. Aside from a fancy building, very little in the way of productive facilities is actually required by the religious undertaker.

But modern finance has replaced religion as the supreme capitalistic undertaking. Again, it has no need for production facilities—a fancy building, a few Bloomberg screens, greasy snake-oil salesmen, and some rapacious traders is all that is required to separate widows and orphans from their lifesavings and homes. Religious institutions only want 10%; Wall Street currently gets 20% of all the nation’s output (and 40% of profits), but won’t stop until it gets everything.

There is rarely any recourse for dissatisfied customers of financial institutions. Few customers understand what it is they are buying from Wall Street’s undertakers. The product sold is infinitely more complicated than the Theory of the Trinity advanced by Theophilus of Antioch in 170 A.D., let alone the Temple Garments (often called Magic Underwear by nonbelievers) marketed today. That makes it so easy to screw customers and to hide fraud behind complex instruments and deceptive accounting.

A handful of thieves running a modern Wall Street firm can easily run up $2 trillion in ephemeral assets whose worth is mostly determined by whatever value the thieves assign to them.

And that is just the start. They also place tens of trillions of dollars of bets on derivatives whose value is purely “notional”. The thieves get paid when something goes wrong—the death of a homeowner, worker, firm, or country triggers payments on Death Settlements, Peasant Insurance, or Credit Default Swaps. To ensure that death comes sooner rather than later, the undertaker works with the likes of John Paulson to handpick the most sickly households, firms and governments to stand behind the derivative bets.

And the value of the Wall Street undertaker’s firm is almost wholly determined by euphemistically named “goodwill”—as if there is any good will in betting on death.

With these undertakers running the show, it is no wonder that we are buried under mountains of crushing debt—underwater mortgages, home equity loans, credit card debt, student loans, healthcare debts, and auto-related finance. Simply listing the kinds of debts we owe makes it clear how far along the path of financialization we have come: everything is financialized as Wall Street has its hand in every pot.

Thirty years ago we could still write of a dichotomy– industry versus finance—and categorize GE and GM as industrial firms, with Goldman Sachs as a financial firm. Those days are gone, with GM requiring a bail-out because of its financial misdealings (auto production was just a sideline business used to burden households with debt owed to GMAC, the main business line), and Goldman Sachs buying up all the grain silos to run up food prices in a speculative bubble. Obamacare simply fortifies the Vampire Squid’s control of the healthcare industry as it inserts its strangling tentacles into every facet of life.

Food? Financialized. Energy? Financialized. Healthcare? Financialized. Homes? Financialized. Government? Financialized. Death? Financialized. There no longer is a separation of the FIRE (finance, insurance, and real estate) and the nonFIRE sectors of the economy. It is all FIRE.

Everything is complexly financed. In the old days a municipal government would sell a twenty year fixed rate bond to finance a sewage system project. Now they hire Goldman to create complex interest rate swaps (or even more complex constant maturity swaps, swaptions, and snowballs) in which they issue a variable rate municipal bond and promise to pay the Squid a fixed rate while the Squid pays them a floating rate linked to LIBOR—which is rigged by the Squid to ensure the municipality gets screwed. Oh, and the municipal government pays upfront fees to Goldman for the sheer joy of getting screwed by Wall Street’s finest.

The top four US Banks hold $171 Trillion worth of derivative deals like this. Derivatives are really just bets by Wall Street that we will get screwed—it is all “insurance” that pays off when we fail. Everything is insured—by them against us.

What is healthcare “insurance”, really? You turn over your salary to Wall Street in the hope that should you need healthcare, they will allow your “service provider” to provide it. But when you need the service, Wall Street will decide whether it can be provided.

Oh, and Wall Street’s undertakers have also placed a bet that you will die sooner than you expect, so it wins twice by denying the coverage.

Finally, US real estate—the RE of the FIRE–underlies the whole kit and caboodle. That is the real story behind the GFC: given President Clinton’s budget surpluses and the simultaneous explosion of private finance, there simply was not enough safe federal government debt to collateralize all the risky debt issued by financial institutions to one another back in the mid 1990s. Wall Street needed another source of collateral.

You see, all the top financial institutions are dens of thieves, and thieves know better than to trust one another. So lending to fellow thieves has to be collateralized by safe financial assets—which is the traditional role played by Treasuries. But there were not enough of those to go around so Wall Street securitized home mortgages that were sliced and diced to get tranches that were supposedly as safe as Uncle Sam’s bonds. And there were not enough quality mortgages, so Wall Street foisted mortgages and home equity loans onto riskier borrowers to create more product.

Never content, in order to suck more profit out of mortgages, Wall Street created “affordability” products—mortgages with high fees and exploding interest rates—that it knew would go bad. Even that was not enough, so the Squids created derivatives of the securities (collateralized debt obligations—CDOs) and then derivatives squared and cubed—and then we were off and running straight toward the GFC.

Wall Street bet your house would burn, then lit a firebomb in the basement.

Mortgages that were designed to go bad would go bad. CDOs that were designed to fail would fail.

Suddenly there was no collateral behind the loans Wall Street’s thieves had made to one another. Each Wall Street thief looked in the mirror and realized everything he was holding was crap, because he knew all of his own debt was crap.

Hello Uncle Sam, Uncle Timmy, and Uncle Ben, we’ve got a problem. Can you spare $29 Trillion to bail us out?

And that is why we are screwed.

I see two scenarios playing out. In the first, we allow Wall Street to carry on its merry way, as the foreclosure crisis continues and Wall Street steals all homes, packaging them into bundles to be sold for pennies on the dollar to hedge funds. All wealth will be redistributed to the top 1% who will become modern day feudal lords with the other 99% living at their pleasure on huge feudal estates.

You can imagine for yourselves just what you’re going to have to do to pleasure the lords.

This will take years, maybe even a decade or more, but it is the long march Wall Street has formulated for us. To be sure, “formulated” should not be misinterpreted as intention. No one sat down and planned the creation of Western European feudalism when Rome collapsed. To be sure, the modern day feudal lords on Wall Street certainly conspire—to rig LIBOR and muni bond markets, for example—and each one individually wants to take as much as possible from customers and creditors and stockholders. But they are not planning and conspiring for the restoration of feudalism. Still, that is the default scenario—the outcome that will emerge in the absence of action.

In the second, the 99% occupy, shut down, and obliterate Wall Street. Honestly, I have no idea how that can happen. I am waiting for suggestions.

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  1. John S

    I disagree with the assertion that “Capitalism without regulation is theivery.” The primary problem is moral hazard which was brought about by government involving itself in finance in the first place. If the government did not bail out the banks, AIG and Fannie and Freddie, but instead followed standard bankruptcy rules, sticking it to the bondholders, the 1% would have suffered mightily (along with the rest of us). However, we would probably be on a course to rebuilding out of the carnage (which was brought about by GOVERNMENT REGULATION in the first place. So, eliminate public loan guarantees and deposit guarantees and you remove corruption and normalize the size and involvement of finance in capitalism.

    1. YankeeFrank

      There is a difference between bailing out crooks and providing a solidly regulated basis for financial transactions — the former does not necessarily follow from the latter. To pretend we do not need strongly regulated markets, and strong walls between the different types of banking and finance (commercial, consumer savings and loans, and investment banking) is to erase hundreds of years of misery caused by criminal banksters prior to the modern era. Banking without strong barriers and regulation is a nightmare of criminality, theft and economic depression. We did quite well from the 1930s to the 1970s. It was once the walls started being torn down that the crises started, and the thieves took over. So please don’t pretend that its all government’s fault. Without government intervention in finance the modern era, and the middle class, would never have existed at all.

      1. F. Beard

        We did quite well from the 1930s to the 1970s. YankeeFrank

        If one was “credit-worthy” which often meant not non-white.

        What part of ‘”loans create deposits” = counterfeiting’ don’t people get?

          1. F. Beard

            Blah, blah, blah…

            Common stock as (private) money is an ethical means to accommodate the need for dynamic money supplies. Thus no thieving credit system is necessary.

            Try again. Your Luddite charge fails.

          2. F. Beard

            Pardon me, roger, I assumed that was your blog. My apologies.

            It’s Mr. Norman who’s clueless on what I advocate hence his “Luddite” charge.

      2. TitleZ

        I agree with John S that moral hazard is at the core of the rotten heart of finance, to steal a headline from The Economist. Think about this. When too big to fail financial institutions have an implicit backstop from the federal government, American taxpayers are subsidizing the destruction of their own communities. A key example is San Bernardino, CA, which recently filed for bankrtuptcy. I understand that roughly 50% of the residants’ mortgages are underwater due to a crushing wave of foreclosures. The situation is so dire that the City is considering taking mortgages from banks by Eminent Domain for Christ’s sake! I see this problem spreading as long as unemployment is high. When you have socialism for finance but capitalism for everyone else, only one side of a financial transaction is expected to be accountable. Borrowers and investors tend to get screwed. Property rights of all kinds have been violated in this toxic atmosphere. Confidence will never return to markets if this charade is allowed to continue. That is moral hazard. It is time for the financial universe to be held accountable just like everyone else. Regulated capitalism? We need capitalism in finance before we can get to the regulation part.

    2. YankeeFrank

      Oh, and you can disagree that capitalism without regulation is thievery, but if you read any financial history you would see this assertion is quite true, and that you are incorrect. If you want the shorter version, watch a film titled “Wisconsin Death Trip” and see what “capitalism” was in 1800s middle America.

    3. foppe

      This wasn’t brought about by “the government”, but by individuals with exactly the same mindset as those working at the banks, who decided to use the tools at their disposal to enrich themselves and their like-minded friends.
      The rise of crony capitalism therefore closely tracks the rise of the notion that “there is no such thing as the public interest”: while it is certainly true that there is no one idea that all citizens of a nation will converge upon, the primary reason this ‘insight’ is/was pushed to the forefront was because those people wanted to undermine the idea that it is healthy to pursue such a thing. And they’ve succeeded “wonderfully” in doing so.

      1. Gary

        BINGO. Even classical liberal ideals are now labeled “commie” “socialist” “pinko”, etc. Conservatism now rejects the entire original foundation of America as illegitimate hippie nonsense, and subversive.

        And it WAS subversive back then. It involved overthrowing the King of the world, and kicking out his “Crown Corporations”.

    4. H. Alexander Ivey

      Markets exist because there are governments; no government, no market as Yves said about Iraq a few years ago. You need both, both doing their proper roles. “no regulation” means no government which means there is no check on business and no check on anything is cancerous.

      1. Heretic

        Actually, I would argue that markets always exist. In weak or fractured governments, the market is small, and the currency of trade is often money, goods, or the threat of violence from individual participants. Where governments are strong, and corrupt, transactions are settled via money, or the guns of state sanctioned Parties(Russia), or extraction via a corrupt legal system (USA).

        1. Nathanael

          Markets do not always exist. Markets are based, fundamentally, on a certain level of trust. Money is based even more on trust.

          If there is sufficiently little trust, markets become impossible. First, people revert to trusting their kin group only and fighting wars with everyone else.

          This is an extreme situation since people usually have *some* degree of trust necessary to make *some* trades.

          1. Heretic

            Perhaps our ideas only differ in how we express them.
            When I say markets, I mean any place where people can gather (either in person or even through electronic proxy) and engage in some sort of exchange for goods and services, ( either exchange goods directly, negotiate future obligations, or exchange payments and contracts electronically).

            I fully agree, all markets (at the village level or on Wallstreet) require a degree of trust to operate among the direct players in the market. But if the situation deteriorates, such that people only trust their kin, not only will markets not exist, but the society is ripe for civil war.

    5. reprobate

      Second time in 2 days someone runnnig right wing tropes, and not well at that, who looks a newbie has shown up first in the thread. You sure this site, or certain types of posts, aren’t being targeted?

      1. don

        don’t feed the trolls….but that doesn’t work on sites like this as there is always at least one person that HAS to be right.

      2. Fiver


        Why would anyone familiar with NC and its readership give any thought at all to one or more entirely unremarkable comments appearing in “first” position, middle, or last? Difficult to see the “threat” given NC has Mike Shedlock’s site linked on its blogroll – anyone who has read Shedlock knows he supports a view of Government not unlike that of John S. (note: I read MS on occasion despite his lunatic political views and poor political judgment re real world events).

        Given the article by Wray, while notably too late by decades, is largely about how Government has been completely captured, with little hope for electoral reversal; or given the sad fact that it was crucially the arrogance of “liberals” of the “Golden Age” of post-War Boomdom whose faith in the permanence of their horse-traded political “victories” and supreme love of their own sweet “personal growth” first and foremost that ceded the political field to utter crud long years ago; or given the obvious fact that the corporate State, now entirely the creature of evil, has become the foremost force for violence and corruption in the world today; or….

        I’d focus a little more on the “What the F are we really going to do to get out of this nightmare” and a little less on what “threat” is posed by someone expressing a readily ignored view.

    6. patricia

      Took all of ten minutes to read article, and clock in spiel. You betcha.
      Wonder how long he had to wait til post appeared.
      Fly guy on the wall.

    7. steelhead23

      John S says: “eliminate public loan guarantees and deposit guarantees and you remove corruption”

      Yes, and you would also eliminate any and all confidence in the marketplace itself, hoarding, and financial collapse. You believe in a myth. To be sure, governmental regulation tends toward failure. As ethical limits erode, the intensity of enforcement declines. So yes, you have a point. However, regulation can work if punishments are sufficiently severe to demonstrate to both regulators and the regulated that we mean business, and if the consequences of enforcement are evenhanded and apolitical. Not easy standards to maintain, but your belief that they cannot be obtained is, when magnified a millionfold, undermining the institutions needed to do the job. Even if we socialized finance (that is, eliminated the profit motive) we would still have to regulate lest someone corrupt the system and find a way to profit at other’s expense.

    8. nonclassical

      .John S..more “blame government” lunacy from those who can’t follow the $$$$…2001, 19% of U.S. economy was dominated by “financial services” (paper debt), but by 2007, that number was 41%. (Kevin Phillips-Nixon economist-editorialist)

      Also, “derivatives” which are undeniably the cause of economic disaster (read Yves’ book) and are controlled 95% by 6 U.S. “investment banks”=”financial sector”, valued under $2 trillion, 2001, but by 2007, $600 trillion (Robert Johnson, designated Senate Banking Committee)

      which will go ignored, as comment is really about agenda rather than truth…

    9. Jack

      This is just another angle for someone to become another deregulation cool aid drinker. Even the crooks, when they’ve been swindled by their own kind, come running to mommy a.k.a. the government for redress. The free market is no less utopian than Soviet communism, because it lacks and is, in fact, antithetical to democracy, or the will of the majority.

    10. MRW

      The carnage was “brought about by GOVERNMENT REGULATION in the first place”

      Are you out of your mind? Have you been awake since 1980? Or does the concept of cause and effect elude your frame of reference.

    11. bdy

      Naive faith in markets will take you all the way to the poor house.

      GOVERNMENT REGUALTION had little to do with the carnage, except wherein it was lifted or compromised by regulatory capture.

    12. econ

      The US federal and state governments are owned by the capitalist oligarchy. Since there will be voting come November you all will be subject to ad campaigns financed by the numerous billionaires who support those up for election and you will see truth as befits you. 99% of the ads are LIES!
      Do not expect Romney to not be honest once he becomes Prez.

    13. KFritz

      A LTH suggestion: when a scungil like John S top comments, wait for a few non-reply comments and shuffle the miscreant down the list. Readers can still see the dreck, but the thread isn’t misdirected. Cheers.

    14. Gary

      Warren Mosler put it very simply and curtly. He said something to the effect of “the back end is not the place to impose market discipline”.

      I would explain it another way. If ALL your local hospitals or power plants were taken over by a band of crooks and stealth-looted, the sane solution would not be to wait until the looting revealed itself to daylight, and then shut down the institutions to “punish” the executives.

      They had already done the looting anyhow. They could afford to leave.

      That non-starter solution leaves the city with no hospitals or no electricity, punishing the victims again.

      Mosler also pointed out that people attempted to do banking without sovereign govt backing and regulation for 1000s of years, it does not work. It DIDN’T work, to the degree it was tried here.

      During the touted wonderful “free banking” heyday of State-chartered banks, there was even more fraud and failure, where customers lost part or all of their deposits. Extreme leveragine on minimal capital reserves. Banks in one locale did not trust bank notes from another locale, so these were steeply discounted.

      Frequent bank runs. Mad rush. By then, it was too late. Gresham’s Dynamic then too.

      Dysfunctional system, non-system. Myth vs Reality.

      Bill Still’s “Secrets of Oz” is inaccurate on many points, vs MMT. However, as I recall, there’s some worthwhile parts on the Morgan gang intentionally causing Gold-standard driven austerity and collapse, so they could seize real property, farms. This is where the farmer’s angry Populist Movement arose, in destitution and devastation.

      The Fed was SUPPOSED TO FIX THAT, by being a central bank controlled by representative Govt, the classical republican democracy we idealize. Now many on the Right are actually in revolt against the genuine ideals of classical Liberalism, of Jefferson, etc. because those are “socialism” today.

      1. different clue

        Actually, wasn’t the Fed supposed to preVENT fixing that under cover of preTENding to fix that? Isn’t that why a pack of very rich financialists hurriedly wrote up the Fed legislation? to head off genuine National Bank legislation being pressed for in non-upper-class society?

    15. House Carl

      It seems to be that markets are just another arena of human behavior. And without regulations, just like in every other arena of human behavior of consequence, markets become a den of theives.

      Just like if extortion and murder weren’t outlawed then the mafia would run things, unregulated markets leave those with the most leverage to do as they like. And that is exactly what has happened, and continues to happen. The problem isn’t that the gubmint is regulating too much, the problem is that the gubmint is asleep at the wheel and not regulatign even where they should be.

  2. wryzee

    While history does repeat itself, unique eras xan be differentiated by their unintended consequences. I think there are circa 2012 simply too many people – specifically modern, non-tribal people – to make any kind of explicit feudalism viable. In fact, one of the 1%’s key components in maintaining feudal-like power is our silent complicity, which since 2008 has been more like a ruckus, and their silent consolidation.

    So, there’s a third option which is that this fraud is taken down not through an explicit counter action but merely by its own unsustainability. Of course, that means that society will continue to be of the shock and awe variety, someting Occupy should focus on reducing.

    I enjoyed this piece very much, thanks.

    1. Sufferin' Succotash

      As a nitpicky history teacher I have problems with the feudalism analogy. Feudalism–assuming we’re talking about the medieval European version–necessarily involved mutual obligations. I don’t see the present-day FIRE industry honoring any obligations(protection, land tenure)to the “serfs”. Quite the contrary. Feudalism was also characterized by political fragmentation, something which our current financial overlords don’t want when it fails to suit their interests. As George F. Will put it so eloquently a few years back, “capitalism is a government project”, and the Master Thieves need strong central institutions (friendly courts, compliant central banks, police & military establishments etc..)rather than weak ones.
      Some tag other than feudalism is needed. Jack London may have gotten it right just over a century ago in his novel(a must-read, BTW)”The Iron Heel”: Oligarchy.

        1. nonclassical

          …and was used-taught in 70’s-80’s Poly-Sci classes…

          along with the incredible (at the time) concept that by 2000, U.S. economy would be dominated by under 100 corporations=monopoly…no anti-trust law in sight…

          1. Tao Jonesing

            Well, thank you, nonclassical, for telling me something I had not known.

            I guess that validates my suggestion that we use that term?

            Or was it your intention to demonstrate that I was unaware of the fact that I had independently developed the term, along with many others? If that’s all you wanted to do, mission accomplished. Give yourself a pat on the back.

      1. Ed

        You are correct. “Feudalism” has become kind of a shorthand on the left for a system where power is concentrated in the hands of a small elite. What is emerging really has little to do with the historical economy and system of government in medieval Europe. We are really seeing straightforward oligarchy, and there are more signs that the early-mid twentieth century dictatorships are a better model as to where this is heading.

        1. Nathanael

          I’ve made the same point that feudalism involved obligations from the elite to the people lower down.

          But I still think it’s the right analogy. Why? Because often the lords DIDN’T uphold their side of the bargain in the feudal system.

          So, we could compare the “social contract” corporations of the 1950s to functional feudalism, and the current corporations to dysfunctional feudalism.

          When the lords don’t uphold their side of the bargain, eventually they start being murdered and their bodies desecrated, and people cheer.

          1. LeonovaBalletRusse

            In Medieval Feudalism, the Monarch+Court (.01%) had to appease the Nobility/Aristocracy and the Clergy (.99%) for the 1% Elite FIX on Rents, while the 99% serfs provided the labor and the fruits of the labor.

            The Global .01% Nobility “top-out-of-sight” Rentiers of our “Corporate Feudal System” allow Extraction Capitalist “Bankers” and Political Henchmen of their .99% Agency to keep some of the Feudal spoils; and the Middle Class join the “Working Class” in serfdom (as Free People of Color were kicked down into the same serf pool that former slaves inhabited, after the Civil War).

            Maybe what we have is a hybrid: “Fascist Feudalism.”

          2. Gary

            It took me a while to grasp, but Michael Hudson’s young discovery that financial wealth in a capitalist economy is more based on Land (rents) than on Industry … goes into an explanation that sees all this Ne0-Fudalism as the same idea of feudal Land-Lords, and unproductive income, but indirectly via the financial system and debt peonage.

            Once they “own” the Commons from bankrupt municipalities, they can put any price they want on clean water, energy, etc.

        2. Fiver


          Agree that “feudalism” has become the quick’n easy popular descriptor used by many on the “left”, and also some on the right. In my view, the fact that such a fraught analogy is put forward needs explanation, and the obvious candidate to me reflects a form of denial – far easier to frame all of this as something outside North American experience, some alien “takeover” from the dim past rather than a reversion to the system that dominated Western development most of the last 2 centuries, i.e., a State which serves corporations/finaciers/inherited rich without apology with minimalist concern for the travails of mere people. Only the total insanity of WII total war and the prospect of nuclear oblivion (early Cold War – note how easily we good people became immersed in the endless “good life” even with that Grim Reaper and its minions of war on watch) temporarily put the beast on a tether.

          The “right” has always been correct about 1 thing – it really is a broad and dangerous moral/ethical breakdown that has taken place, not some sudden invasion by the Lords of Mars. Unfortunately, they have been as clueless as too many on the official “left” when it comes to what vital moral and ethical bonds broke down and why.

    2. Nathanael

      Explicit feudalism? Corporations do basically that. You swear fealty to your boss, who holds right of “life and death” over you, and in exchange… well, in exchange your boss is supposed to guarantee you something, right? Failure to provide that side of the deal is actually dismantling the feudal social contract….

      1. LeonovaBalletRusse

        N, sounds so. Then what we have is the Colonial Slave System:

        “THE MIND OF THE MASTER CLASS: History and Faith in the Southern Slaveholders’ Worldview” by Fox-Genovese and Genovese;

        rapidly turning into this:

        “IMPERIAL RECKONING: The Untold Story of Britain’s Gulag in Kenya” by Caroline Elkins.

    1. mafer

      Jjajaja… A Globescan poll of two weeks ago which showed that 58% of Americans believe that rich people deserve their wealth. The kicker: it was up 1 point over the same 2008 poll…

  3. foppe

    Finally, US real estate—the RE of the FIRE–underlies the whole kit and caboodle. That is the real story behind the GFC: given President Clinton’s budget surpluses and the simultaneous explosion of private finance, there simply was not enough safe federal government debt to collateralize all the risky debt issued by financial institutions to one another back in the mid 1990s.

    Ah, yes. Had missed that one.

    1. Yves Smith Post author

      He’s not right on that, and I didn’t want to nitpick.

      You don’t “collateralize risky debt”. You need collateral for OTC derivatives positions, which exploded starting in the mid 1990s. The shoot to the moon growth of derivatives was the cause of the shortage.

      1. foppe

        Thanks, I didn’t quite follow his argument about the link between running a surplus and OTC derivative growth. Anyway, what interested me most about that statement was the first part, namely his suggestion that there is a connection between the relative dearth of AAA-rated assets available in the mid-1990s (in those western countries that were running budget surpluses at the time, such as the US and NL), and the choice by institutional investors to start buying (more) ‘alternative’ AAA-rated products.’

        Back in the 1990s pension funds here in the Netherlands were having big problems to grow because interest rates were so low*, at which point they were told to go invest in the (dot-com) stock market; Wray’s suggestion seemed to me interesting insofar as he was pointing out that the surpluses that the Dutch govt was running at the time didn’t help, supporting the argument that governments (especially in societies in which pension funds and the like need safe investment opportunities to be able to grow at a sufficient rate) should not try to run surpluses, but instead spend it in useful ways (such as by reversing the de-subsidization of education etc. etc.).

        * Could this have been because they and like funds were already so big? If s/d curves are meaningful at all, it seems to me that high savings relative to the amount needed for the amount of growth going on should mean low borrowing rates for investors; but maybe there are legal reasons as to why that money can’t be used in that way, though even then it seems reasonable to assume that this would create indirect downward pressure on borrowing rates.

        1. Rcoutme

          One of the points that Wray might make to the Netherlands dilemma is that it is no longer a fiat issuer of currency. This is a mistake. Since they no longer have control over their currency, they are more similar to a U.S. state than to its federal government. That means that they should NOT run deficits (since they can not monetize them as a last resort).

        1. john c. halasz

          Umm…they were “AAA”. (Mezzanine CDOs were a way of passing the buck on lower rated tranches of MBS and other securitization structures, by repeating the same structured securitization process that originated with crappy mortgage or other loans, thus burying, but intensifying the chain of embedded leverage, until the accumulated financial fragility blew. It wasn’t a Ponzi scheme, narrowly construed, but an open air Ponzi market, in Minsky’s sense. But hoocodanode?).

        2. Yves Smith Post author

          No, his terminology is hopelessly confused and I am pretty sure on this he does not know what he is talking about (as in his muddled writing reflects muddled understanding). While Wray is great on money, he’s not a banking/markets guy.

          The collateral is the CDO. The loan against that is the repo.

          Treasuries have NOTHING TO DO WITH THAT TRANSACTION. Treasuries were the initial collateral for repo.

          You ALSO need collateral for derivatives positions. That originally was only Treasuries. Then they started to use AAA instruments of other types, first agency securities.

  4. indio007

    I’ve never understood why people think profit is a good thing. Profit is the amount you ripped someone off.
    When a company makes a net profit of 5 billion dollars , that is the amount they over charged. How many companies out there have net profits over 1 billion? Way too many. It’s a fallacy that you must make a profit to stay in business. You only have to make PAR VALUE (after expense) to say in business. Maybe a little bit of profit as a buffer for hard times but not what we have to day . Which is pervasive unjust enrichment caused by unconscionable bargains.

    1. polistra

      Profit isn’t the problem. Profit is a good motivator in a non-fraudulent business. When you are making real refrigerators or cooking real food, profit is automatically limited by the need to keep good employees and keep happy customers. Excess money goes first into better products or better wages.

      Fraudulent businesses don’t use profit as their goal variable. They use share value, which is determined by the emotions of traders. (Same with LIBOR.)

      These modern counterfeiters have no automatic feedback loops. They don’t need employees, they don’t need customers. As long as they can manipulate pure math and testosterone, they can keep the money rolling in.

    2. J Sterling

      Profit is the rent the company’s owners (shareholders) charge for the use of their things. “Things” in this case is the value of the company, be it the book value, that is the value of every building, desk and chair on the company’s books, or the market value, that is what a buyer would pay for the company if you sold it.

      Just as it’s possible for a rent to be unfairly high, it’s possible for a profit to be unfairly high, especially if the profit is based on a market value which is itself based on the profit made by a minority group of privileged asset owners. They charge you an unfairly “fair” rent based on having you over a barrel.

      But a totally profit-free company would be like a rent-free furnished house. If you owned a furnished house, you wouldn’t normally offer to let a stranger live in it without charging them a rent, would you? Rent-free housing and non-profit companies tend to be an act of charity.

      1. th

        I don’t think so, because profit is calculated as what remains after you subtract the cost of salaries and business expenses. If I run an apartment complex, and I am charging rent that recovers more than the cost of the mortage payments during that time, the upkeep, maintenance/repairs, my own salary and any staff salary, anything left over that is the profit, which I agree with the above poster means I am overcharging. If I were donating my time and supplies for free that would be charity.

        1. john c. halasz

          Supposedly, profits are a rough measure of the productive surpluses being generated and serve as a key allocation and coordination mechanism for optimizing productive investment and thus economic output, by tendentially equalizing the rate-of-profit across sectors and firms. But given the massive mal-investment that has occurred and the huge underlying disequilbria that the “market” was equilibriating, this, the first most basic classic theorem of capitalist economics, looks increasingly dubious. The tricky question becomes what is a profit and what is an economic rent. But to really answer that question might take you beyond the horizons of corporate capitalism.

        2. J Sterling

          You say you “run” an apartment complex, and you pay yourself your “own salary”, but you don’t say who owns the complex, who paid for it to exist. If it was you, and you are paying yourself only the salary you would get from the labor of being a janitor, why did you even bother building or buying the complex? Why not just be the janitor of someone else’s complex, and enjoy the money you would have sunk into owning one of your own?

    3. LeonovaBalletRusse

      i, America was doomed when we were re-positioned as fools, for wanting to make a living instead of a killing. People content with making a living were proud to carry no debt, or debt they were sure to repay. Then came the putsch for credit for “consuming” — when solvent families and businesses were made to feel like fools for paying cash. There was a huge propaganda campaign to effect this radical change of attitude in Americans. It was a sucker play that only got worse.

  5. Mary Bess

    Oh, and if we shut down the police department, crime will disappear. OK, at least that portion perpetrated by the police.

  6. nowhereman

    Remember this when your local politician and Faux News talking head tells you it’s the greedy public servant and retired school teacher’s fault.

  7. OMF

    I like the liberal and entirely correct usage of the word “thievery” in this article. We need more of this sort of plain, honest langague when speaking about the banks.

    In the second, the 99% occupy, shut down, and obliterate Wall Street. Honestly, I have no idea how that can happen. I am waiting for suggestions.

    My suggestion is to forget about the occupy movement. It is a giant waste of time. The tactics of the Occupy movement involve sitting outside the banks and asking them to stop pretty please. How can they be surprised when the bankers kick sand in their faces?

    You want a suggestion: Perform a comprehensive investigation and exposes of individual cases of fraud.

    Select the most massive and blanant of frauds by the very highest of crooks. Gather evidence, conduct interviews, keep notes. Conclusively prove illegal behaviour, line by line. When you have amassed enough evidence, publish the results across a wide media spectrum.

    I’m not talking about your three page summaries of “stuff that happened”. I’m talking about individual cases. Name name and fuck the libel laws. Go after these fuckers. You have all the power of the internet and very little excuses at this stage.

    Or you could just sit around on the sidewalk and hold meeting about proper toilet paper ettitquite. Your decision.

    1. Rcoutme

      You could try reading DeepCapture to understand the real crimes being committed. The owner of the site (also owner of Overstock.com now O.com) has been trying to reveal the seedy business practices of the financial industry for quite some time. He has done exactly as you suggested (including the evidence and naming names). He has tried to advertise the results of the research. So…one must ask, why is his site not on everyone’s mind?

      1. LeonovaBalletRusse

        R, likewise, has anyone heard any news lately about the suit filed by the attorney at law for the Louisiana Clerks of Court? Blackout of real news.

    1. rob

      I liked this article.Can we nitpick actualities and subtleties.I’m sure when you ask people in that industry ,they would catagorically deny it…..But that is the problem.There is too much deference to insiders.We can’t really prosecute criminals… when laws are sufficiently vague,or don’t even address current innovative financial products….The power players who are allowed to create these things and call them products/money… are the same insider class that writes,interprets and judges the laws.Those in the know have been educated to not see these problems….From the outside the system is as rotten as the author would have you believe.Our society has seperated itself from the reality of nature.people would find it very difficult to live without the technological supports we have grown accustomed to.Whenever we have a big blackout,storm or other natural disaster,we see how fast things come apart.And how little we really have.The eventuality of neo-feudalism isn’t that far fetched.the police state exists to put us all in jeopardy of the rich taking over…all they need now is a pre-text and no other way out.The populations aren’t sustainable.We are at the mercy of the corporate elite.They know that. And they can’t fathom we could/would do anything about it.What is good about the occupy movement is it gets more people thinking.Like any real movement,the first hurdle is to infiltrate into the minds of the population.People are in the process of absorbing the idea they are being lied to.the first waves have hit the shore,but the real force is yet to come.This assimilation of people’s attitudes is necessary to prevent people’s natural reaction to deny their culpability in emotionally supporting the abusive paradigm the mareteers have foisted upon us….Or I mean taught us in school…

  8. joebhed

    I can never understand the failure of the quasi-progressive MMTists to miss the first, essential foundation of the financialization of our modern economy, that of the money system itself.

    WHY would you not look at the basic building block of financial corruption, that of having all of our money created as a debt by private bankers who operate the entire system on the basis of return-on-investment.

    Wait, that might be OK.
    But they didn”t MAKE any investment – they conjured up the money they lend through the tremendous, privileged power of mcreation – a right of the people’s government delegated to private bankers.

    If anyone thinks this is not the source of corrupt power, upon which is built all financialization, then they’re not in the world of the real crossroads of privileged money and corrupt power.

    If you’re going to make a change. Start here.
    For the Money System Common.

    1. Tim

      The original post and all the comments talk about what money does. This is the only comment that talks about what money is and that is the place to start in order to change what it does. The easiest way to cloud a fundametally wrong concept is to forever focus on what the concept does. Never allow focus on what it is; that is the key to the solution.

      The money system was designed long ago to accomplish exactly what it is doing: Serving a narrow special interest group by the power it conveys to those who define what it is.

      We did not define what freedom does. We defined what it is then let it do what it does best. We must define what new money is. All money is now debt money created by a loan. It must become real money where debt is a money application not the foundation of what the operating system is.

      When the total finite universe of money is uniquely serialized digital one dollar bills existing on a central computer associated with a current owning financial entity and money transactions occur when the identity of the current owner of each digital dollar changes to a new owner along with associated information then we will know exactly what money is and exactly what it is doing. Public money subject to public authority with certain rights and conditions to know what money does as well as privacy rights for that information not to be known. This is the new “Freedom” that we have to figure out.

      It is our money. We are the public control authority of the operating system. While the paying/receiving of money would be granular at the serialized digital dollar level, that is transparent to the user but the basis for conversion to real money and new system structure and function. The end user of money would see little change in what money does for them, except that what money does would be substantially less fraudulent because it is defined to be a different thing.

      That is the concept of a new money system created by information engineering and object oriented methodology that will free us once again. In order to convert from debt to real money, every dollar that pays off debt does not go out of existence but becomes a real uniquely serialized digital dollar with a value of one that exists forever in the new system that can be used for anything, including a loan.

      We currently Occupy money. Money is currently a thing that can only be fundamentally occupied by virtue of the design of what it is. Like beer. We want to Own money (public money) and make temporary occupation of money owned by others (mostly the majority) merely one of the applications of real money.

      1. john c. halasz

        All money, whatever its exact medium or form, is just an empty cipher, a semiotic instance, which represents economic value, without being that elusive “thing” itself. All money is by its “nature” as money is just an IOU, commanded labor, as Adam Smith put it. But if you want to eliminate debt, you thereby want to eliminate credit, which is just the flip side of the same coin. So maybe you should be able to answer this basic question: what are the functional purposes that a system of credit is supposed to serve? Because if you misdiagnose the problem, your prognosis and suggested remedy are likely to be of little avail.

        1. F. Beard

          All money is by its “nature” as money is just an IOU, … john c. halasz

          Not necessarily. Deficit spending by a monetary sovereign (without borrowing, which Bill Mitchell calls “corporate welfare”) creates debt-free money assuming that no subsequent budget surpluses occur.

          As for private money forms, common stock is normally non-redeemable, so where is the debt?

          The mistake we make with private money is that it is distinct from equity. Thus private money becomes a looting mechanism instead of a “sharing” mechanism.

          1. john c. halasz

            If a government monetizes its deficit, it is still issuing IOUs in exchange for real resources, which, in turn, will be exchanged for other resources by the citizenry. And equity is not a form of money, but a financial asset, i.e. a claim on future cash-flows from production. But if we did use equity shares as money, then we’d be paying for current production with claims on future production, which is, in fact, not all that different from what debt/credit currently does. (Though I don’t understand why equity is “irredeemable”, since equities can always be sold off for money, ( as opposed to underlying fixed investment being illiquid, since it can only be realized through sale of output).

            But once again claiming that economic problems are due to the “nature” of money and “true” money would somehow cure all ills is just fetishism, which misdiagnoses the problem, which actually stems from the structure of production and claims on production, when the latter are regarded merely as means to profit rather than “profits” being a means to the chosen ends of investment and production.

          2. F. Beard

            If a government monetizes its deficit, it is still issuing IOUs john c. halasz

            The “IOU” is “We, the government, agree to accept this fiat back for taxes should you need to pay them.” But if a monetary sovereign alway runs deficits or at least never runs surpluses and sometimes runs deficits then debt-free fiat will accumulate in the economy.

            in exchange for real resources, which, in turn, will be exchanged for other resources by the citizenry. john c. halasz

            Another very important reason why people would voluntarily accept fiat for real goods and services is that the counterfeiting cartel, the banking system, can be forced (via legal tender laws for private debt) to accept it for the payment of debt.

            And equity is not a form of money, but a financial asset, i.e. a claim on future cash-flows from production. john c. halasz

            But dividends are dumb since they disperse capital from a common stock company when the purpose of a CSC is to consolidate capital for economies of scale. Instead, the common stock itself can be used as money and all profits accrue in the quantity and value of the shares.

            (Though I don’t understand why equity is “irredeemable”, since equities can always be sold off for money, john c. halasz

            Yes, but that merely changes ownership of the underlying assets; it does not disperse them and in the process often destroy them. Example: 1/2 of a dead horse is worth far less than a single live horse jointly owned.

            which misdiagnoses the problem, which actually stems from the structure of production and claims on production, when the latter are regarded merely as means to profit rather than “profits” being a means to the chosen ends of investment and production. john c. halasz

            Common stock as money is not only a claim on production (at a negotiable price as conventional money is) but also a “share” in the power and wealth of the issuing company. Without the counterfeiting cartel to borrow from then it is far more likely that large businesses would have to “share” far more wealth and power with their workers and consumers in general.

          3. joebhed

            Sorry FBeard

            This is to john H at 4:58.
            Sorry I Can’t figure the comment string.

            “”If a government monetizes its deficit, it is still issuing IOUs in exchange for real resources, which, in turn, will be exchanged for other resources by the citizenry.””
            If a government by design and declaration issues new money to pay for goods and services that it receives, it is not issuing an IOU for anything.
            Paying for something with REAL, NEW money creates no obligation on the party making that payment.
            Please show how any IOU is created.
            From whom; to whom is anything owed.

            One of the quasi-criminal aspects of private debt-based money creation is the lack of any permanence to money.
            Only when loans are made is money created, and upon repayment the capital is destroyed.

            Monetization of deficits by new money creation, again by design and declaration so as to increase the supply of money permanently for national commerce, is a debt-free at issuance execution of the government’s money-creation powers.
            More importantly, that new money so crated will ALWAYS be in existence without any debt being associated with its issuance and its existence.

            Simply look at the GREENBACKs for the proof.
            They were issued debt-free by the government and were the only of the various forms of money that remained in existence for a hundred years and nobody ever paid a nickel for it.
            You need a new definition of an IOU in order to shoehorn debt-free public money creation, like GREENBACKS, into a status as a debt.

            As for your vacuous cry of fetishism regarding the problematic nature of the money system, I suggest you read a copy of the 1939 Program for Monetary Reform – authored by Irving Fisher (Yale), Paul Douglas (Chicago), Frank Graham (Princeton) and others, and publicly supported by over 400 economists.

            It’s the model for the Kucinich reform Bill H.R. 2990

            For the Money System Common.

          4. Calgacus

            Halasz, of course, is right. Though I dislike the “empty cipher” & “monetizing deficit” locutions. The value of the nominal, the financial, is that it is realer than the real. For the umpteenth time, fiat money is in every sense debt. Disagreeing is a bizarre, unworkable & unjustifiable redefinition of the word “debt”.

            Joe:You need a new definition of an IOU in order to shoehorn debt-free public money creation, like GREENBACKS, into a status as a debt. Exactly wrong. You need a new, incoherent, weird definition of IOU, of debt, that nobody uses in real life, that is beyond human ken, to exclude GREENBACKS.

            Bill Mitchell of course considers what F Beard or Joe call debt-free money or debt-free fiat, greenbacks to be an IOU, that is to say, debt. His very bad habit of usually calling bonds “debt” but not currency – making it superficially similar to the real mistake of those who fetishize (to use Halasz’s word) the oxymoronic “debt-free money” is a terrible & misleading word usage that violently contradicts the structure of his theory. Wray on the other hand, never sows this confusion. There is nothing to MMT or Functional Finance, or genuine Keynesian or Institutional monetary economics, but carefully and consistently thinking of money as what it is – a relationship between two economic agents, debt, not a thing.

            The debt-free money fetish is dangerous, and attracts many MMT fans because it wrongly considers a relationship as a thing, which has some mystical, magical “ontological” difference from private credit, bank money. Seems simpler & easier at first – but avoiding a little bit of thought at the outset makes everything infinitely more complicated & confusing in the end, for no reason at all.

            F Beard: If common stock is to behave as money, it has to be predictably redeemable for something. You have to be able to get food with it. In short it has to be debt. Otherwise who in his right mind would ever want it? Yes, thinking about it is interesting, but thinking that there is a magical “true money system” which will fix everything is silly. We already have that system, in gross structure.

        2. Tim

          All money used as a medium of exchange today is a functional result of finance in a private money banking system. Finance is credit. A loan/debt relationship in a fractional based system. That is what money is. An IOU. Financing more things with loans puts more money in the system.

          In a real 100% money system where money is a thing, a virtually real, indestructable static object digital record thing with each unit having a unique identity in a finite controlled universe then finance becomes a function of money.

          The former system was created by finaciers.

          The later system will be created by the vast majority of the people who are users of money in various applications beyond finance have become victims of finance and will put an end to the abuse.

          Finance should merely be one of the applications of a money system not the creator of it, owner of it.

          Debt money is the tail wagging the dog.

        3. joebhed

          I for one would hope that the “what-is-money” declarers do better than provide Adam Smith as a source, I’m sure I value your opinion and your construct more highly.
          What if Adam Smith said nothing about it.

          The problem with the severely limited view of money from its denominated identity should be clear.
          That identity came from somewhere.
          From the law that determined the identity.
          From the laws of a nation sovereign in money.

          Therefore the creation of the legal, national SYSTEM of money from which money emerges with ANY identity and ANY function is the foundation for answering what money is.

          Today, in our DEBT-BASED money system, ALL money is debt.
          But it is not according to the denominated accounting identity of a debit or a credit that it is debt.
          It would have a credit or debit identity were it issued as a permanently non-debt media.
          It is because we live under the system where all money is created as a debt that all money is a debt.

          In seeking the solution to the debt crisis, we overlook the debt-based money system at our peril.
          In seeking the solution to the debt-based crisis, we should first look at what the proper role of money should be in a modern monetary economy, and then see how to get there.

          As always I suggest a quick read of Dr. Frederick Soddy’s “The Role of Money”.
          It is available free on the net.

    2. Susan the other

      If we take down Wall Street and the big financializing, Non-investment Banksters we will take back control of our money. Interesting we got a side of Chomsky today which goes really well with what Randall Wray is saying. Chomsky’s rundown of the Magna Carta being a two-part document, one Charter for Liberties and One Charter of the Forest. Because the Forest was the source of all wealth then. And Chomsky was bringing home the point about protecting the commons.

      1. Tim

        Noam Chomsky! A guy that studies what language is, knows what it does too as a fuction of what it essentially is. What if banksters owned the alphabet and the dictionary?

        Money is a social media existing in the Information Engineering problem domain.

        The same as the alphabet. Fundamentally a arbitrary medium of exchange we agree on to communicate.


    3. They didn't leave me a choice

      Uh, aren’t MMT’ers /precisely/ the crowd that /does/ criticise the money-as-debt (theft) paradigm? If you want real culpability for covering the bankster scums asses, go for the neoclassicals and “new keynesians” (neoclassicals by another name). Or have I missed something?

      1. Calgacus

        Yes, you missed something. The heart of MMT is that money is debt, always. The bad thing is that a corrupt government allows banksters to (1) create their own debts at will, by keystrokes, by printing banknotes. But anybody can do this & (2) back these debts by putting the government behind them. That’s what makes banks special & (3) Doesn’t regulate the enormous power given banks by (2).

        Basically, banks & the financial sector are employees of the Bureau of Engraving & Printing, who get to steal US Federal Reserve notes – as long as they put them back later, with a little vig to themselves, a little vig to the Bureau. The net number of banknotes they can steal is proportional to how many they have already stolen. (Capital requirements) That’s how it works if everything is done honestly. :-)

        With a dishonest system, unregulated but government-backed banking, like today’s, they are just allowed to steal as much as they can, and if they can’t put back enough – and it takes hard work, deserving of princely remuneration to malinvest that badly. Then, no matter – smiling Uncle Sam will print some more of his cool hard cash to make up the difference & save his bankster buddies. The value of what the banksters peculate by their quants’ “financial innovations” – which are older than the pyramids – is enforced by Uncle Sam’s unsmiling face – taxation of the non-bankster 99%.

    4. Gary

      Warren Mosler, most of his focus on MMT is about Govt money (Fed, Tsy) and how that operates, and ergo how that SHOULD work. Do Banks “conjure up” money? Banks create “debt obligations” (assets) coupled with “bank deposits” (liabilities).

      Mosler’s explanation is that this IS normal banking. But Steven Keen has another angle. Mosler He also states that the financial sector has never produced anything of value in his entire financial life, and that it’s more trouble than it’s worth. He’s apparently talking about himself, to an extent.

      Steve Keen’s focus is on private sector credit money, i.e. banking, and the huge debt overhead on consumers/business which they owe to banks. Bad debt should be wiped out, not propped up. Minsky’s ideas of historical time economics leading to Ponzi Finance, not the neo-classical wack where the only time in consideration is T+1, T+2, as if historical trends don’t exist, and as if credit bubbles can’t happen.

      So that’s the OTHER side of the MMT stuff.
      Keen answered questions for an AMI interviewer about why financial reform is what is needed, not monetary reform focused on base money issuance.

      Michael Hudson, similar to Keen in some respects, esp repudiation of housing debt and some consumer debt, wiping out much, since people can’t pay it all off, but HOW we don’t pay it off can be more painful or less, greater or lesser injustice, greater or lesser collapse. He’s a monetary historian more than pure MMT which is more about how the Fed creates virtual money. Cites many past economists, incl Smith, but his fave was Veblen, a social “political economy” critic. Veblen does not seem to be a “math” guy.

      William Black, regulator and “cop on the beat”.

      Many others. I’m a babe in the woods, but I’m slowly assimilating different authors’ viewpoints. No econ education here, for better or worse.

  9. grunk

    Publish lists of names. Bankers, traders, politicians on the take from the financial criminals.

    Publish the names of their kids and where they go to school. Publish the license plate numbers of their cars. Publish their home addresses.

    1. rob

      I don’t think you can leave it at “who are the few criminals”.There are probably few people doing something that is specifically enumerated as illegal.semantics and equivocation and causistry… tricks of language.these are very real aspects of law.If you say you are not doing x,just because you seemingly did x,it was a byproduct of doing yz.a trader can just say,i was responding to trends…and as long as congress doesn’t know how to write a law with teeth…it will not stop.
      This is a culture issue.A group think problem….look at examples of like minded power…like the council on foreign relations…the lists for the last 90 years,that incorporate all aspects of gov’t,law,business,media,academia,etc.. in a floating group of indivuals bestowed with athoratative power to collectively shape our society..gave us what we have now..who’s responsible?any of them… all of them.without even going down the conspiracy road…it is more of like minded individuals with a certain mindset,find their way to a certain end.look at the federalist societies influence on our legal system.look at the roundtablers of britian or the royal institute of international affairs…these groups of people have power.And none of it a conspiracy,becuse the definition of a conspiracy is a group of people setting out to do an illegality… they are just shaping the world from the pinnicles of power. They hold most of the levers of power,most of the time…. nothing illegal about that….We need to see our society deeper.look at the british class system,the loose way money buys education and access to power the regenerates money and power…

    2. nonclassical

      and then follow them to meetings with their bought and sold government receptors of “campaign contribution”..snap lots of pictures-suggested years ago by Amy Goodman…(you get to visit a lot of nice restaurants)

  10. Austin F

    I share Randall’s pessimism. The odds appear insurmountable – a captured political and judicial system, militarized law enforcement, the subordination of the media and the ideological system in general, a public relations industry dedicated to ensuring public passivity. It looks watertight. However, I suspect they felt fairly complancent in 1789 Versailles. Within a year the system had burnt to the ground. Revolutions are as common as brass throughout history, and the best laid plans of mice and men…..

    1. lambert strether

      The walls of the movie set look seamless and impermeable.

      Until somebody pokes a hole in them. And then they’re not.

      There is a reason, incidentally, why it’s important to grow food and know those who do. You’ve removed the base of your personal Maslow’s hierarchy from the FIRE economy. So, in a pinch… And the pinch will come….

      1. Capo Regime

        Interesting though that I am finding a lot of heirloom seeds hard to find these days.

        I wonder if the positive thinking crowd is still doing their thing. the whole mind cure and postive thinking thing is a uniquely american thing. Would not be surprised if there is a lot of postive thinking schemers out there exploiting the dispair and encouraging us to develop our porsonal brand and entrepreneurial talents–its all about your attitude you see and what you attract. If you think you are screwed you will be, think positive and positive things will come….tell ya american society has many levels of cruelty.

        1. different clue

          Here is a catalog of seeds for sale even to NON members of the Seed Savers Exchange which is a huge civil-society collection of heirloom seeds.

          Here is the name of a strange little seed company which sells seeds for many ornamental/medicinal/etc. seeds . . . with a small section of heirloom and other non-hybrid seeds at the end. http://www.jlhudsonseeds.net/Catalog.htm

          There are many other small and tiny such companies which take some effort to find.

    2. Kim M

      All true. There are so few lost voices decrying the rape of society by the Plutocrats. A financial purge of the 1930 style has to happen which will finally galvanise the masses and we can break the Bank-Political model which has a large chunk of the world in its grip. If we dont get the financial purge in a few years then the purge that will eventually happen in a generation or less will be in blood with the good parts of a democracy going out with the corrupted portions.

      Romney represents the worst aspects of America’s moral failures.Such a shame that one of his less funded peers who really wanted to do something to shake up the system did not get a chance

  11. David Habakkuk

    “A century ago Veblen analyzed religion as the quintessential capitalist undertaking. It sells an inherently ephemeral product that cannt be quality tested. Most of the value of that product exists only in the minds of the purchasers, and most of that value cannot be realized until death.”

    It is a mark of the parochialism of economics that Randall Wray should simply recycle Veblen. One might have thought that a contemporary economist would have some minimal awareness of the vast sociological and anthropological literature on the roles religion has played in human societies. Perhaps he could start off by reading the late great Roy Rappaport’s study of Ritual and Religion in the Making of Humanity.

    And this is of particularly relevance to Barclays. It was, in its origins, a Quaker company. By virtue of their religion, Quakers were excluded from professions such as law – and their own pacifism barred them from the armed forces. At the same time, their – generally justified – reputation for probity and sobriety meant that people had very good grounds to trust them with their money.

    Certainly, the bonfire of regulations on financial services in Britain and the United States and Britain has been an unmitigated disaster. But the disintegration of ethical standards in Wall Street and the City is not simply a matter of the lack of penal sanctions. It is also to do with cultural change – a subject which economists are, by virtue of their professional formation, generally very ill-equipped to study.

    1. jake chase

      You could do a lot worse than recycle Veblen, who remains the only American economist who ever consistently told the truth about how our economy really works. I recommend the Theory of Business Enterprise, the great antidote to business school bushwa.

      1. David Habakkuk

        I am not disputing the greatness of Veblen, any more than I would that of numerous great intellectuals of the French Enlightenment. However, a tradition deriving from the Enlightenment was inclined to see religion as simply 1. providing bad answers to questions now answered better by science, and 2. a means used by elites to bamboozle people into accepting their own enslavement.

        My point is simply that this school of interpretation does not do justice to the complex role of religion in social life — and that the history of Barclays actually illustrates the point.

        There is an interesting discussion of the cultural aspects of the Barclays story by the FT’s John Plender, which brings out the fact that a good deal of the old Quaker ethos survived until recently. It also brings the complexities and ambiguities of the change.

        (See http://www.ft.com/cms/s/0/5d9b913a-c74f-11e1-8865-00144feabdc0.html#axzz21SBxqe3L )

        If economists want to understand how institutions and markets work — and both institutions and markets vary enormously, a point largely ignored in economic theory — they need a better understanding of culture. And commonly, a better understanding of culture involves a better understanding of religion.

        1. Nathanael

          The European thinkers knew mostly about Christianity. And they looked at the religious *beliefs*. And to that extent they were right: the beliefs were exactly that: wrong explanations for things science explained better, and schemes for manipulating and controlling people.

          The more useful parts of religion are generally the rituals and social actitivies. Anyone who actually “believes in” their religion is in trouble, compared to someone who performs the rituals but doesn’t “believe”.

          I realize this is a rather radical position.

          1. JerseyJeffersonian

            The Confucians emphasized a theory of society modeled upon an extrapolation by analogy from basic familial relationships/obligations to the roles of authority and deference in the larger society (microcosm to mesocosm). And beyond this was a correspondance of the governmental to the cosmic, wherein the societal authorities needed to conform themselves to the Will of Heaven. This relationship was made explicit through the proper performance of the rites, that proper performance embracing not merely the enactment of the prescribed external forms, but also the cultivation of the interior understanding and attitude. This was not a personal relationship with some God outside of the universe, but a conformity and participation in a cosmic order (mesocosm to macrocosm).

            Unfortunately for our civilization, our religiosity and societal organization is premised upon the horribly dysfunctional Semitic tribalism that underlies the Abrahamic religions, the universalist impulses of the more mystically-inclined having generally been harried from the understanding of the believers in favor of the elite-serving authoritarianism implicit in the fundamental worldview.

          2. nonclassical

            ..thanks for that JJ, on Confucians…I’m working on Taoist, Eunuch and Confucian contrasts within Mings, and your summation is quite relevant…

            In my case, Taoism is a 40+ year study…

      2. different clue

        Was Veblen talking about the whole real economy? In its biophysical ecological sense and setting? Or was he just talking about the behavior of the bussiness classes?

        I can think of a few more-than-just-economists who tried discussing and describing the biophysical ecological economy. The Englishman Frederick Soddy tried it with his book Wealth, Virtual Wealth and Debt: The Solution of the Economic Paradox. Soddy won a Nobel Prize for Chemistry which showed some real-world real-knowledge on his part.

        The American Charles Walters Jr. wrote several books either on monetized raw materials economics and/or American economic history. The only two titles I can remember are Raw Materials Economics and Unforgiven: The American Economic System SOLD For War And Debt.
        Why should anyone pay attention to Charles Walters? What “real world” knowledge could he ever have had about anything? Well . . . he was the founder and editor and then editor emeritus of the farm-focused paper Acres USA and author of respected books on various aspects of the real-world-branch of knowledge referred to as “agriculture”.

        And in our own time we have Herman Daly and other “ecological economists” who are trying to develop a practical theory of steady-state zero-growth economics by which society might avoid violent extinction in the coming shared future of permanent non-renewable-resource depletion.

        1. different clue

          ( By the way, if I ever get to meet Noam Chomsky . . . not that I will ever get to meet Noam Chomsky, but if I did . . . . I would like to ask him if he ever heard the name Charles Walters Jr. Also, I wonder if Noam Chomsky ever heard the quote “before there can be a revolution, there first has to be a revolution between the ears”. And by the way, does Noam Chomsky know who Butch Swaim was?)

      3. Gary

        THANK YOU. There’s so many here who know much more than I know, second-hand. I shall study more Veblen.

  12. El Snarko

    Three shouts from the Cheap seats from Dayton, Ohio, from a c ommunity development/neighborhood activist perspective. One, regarding regulation, even NASCAR, Indy cars and I believe formula I have regulated speed through airfoil specs ect. Regs work ! Two, the ownership society is passing away, BUT maybe never truely existed. All through the 80’s & 90’s I witnessed people making not all that much more tha I, living in two-three times the house. They never actually owned anything, and when the collapse came it was worth only what the system woudl bear so….much less. However, from what I hear accross all age brackets except the 20’s, is that the push back against living in a rental world will be huge. Overt renting will be despised by the 40+ crowd and will be a political issue in the next presidential election, I think. This will be caused by destruction of pride of place, community and patterns of forced migration, especially among the educated highly paid techies, who are not insiders.

    Finally, I was at a presentation on the ACA Saturday, and a host of middle class 40 plusers, only slightly left of center, went completely ballistic when the nature of what the doc presenter called “Wall Street Health Care” was run down. The best part was when I pro Bush, “get the WMD’s” retired DOD engineer stood up and ranted about the insureance industry’s inefficent overhead v Medicaid.

    Humans learn, often despite ourselves. There is hope. Here is my question to your readers,Yves: It seems many of you lot deal closely with these bad actors. When are YOU going to stop? In your answers lies the problem…..

    1. lambert strether

      ACA is? Canine? Correctional? Chiropractic?

      * * *

      You mean ObamaCare actually reinforces the power of the health insurance companies? Say it’s not so! Say it’s not so!

  13. The Gizmo51

    Try to imagine for a moment what it would be like if the republinos take the presidency, 60 seat majority in the senate and a strong majority in the house. No more social security, no more medicare, vouchers for about $100 a month to cover all your health needs including prescriptions, no more teachers, police, or firefighters, in the public sector. Plenty in the private sector if you can afford to pay them. No more minimum wage. My very first job while I was in high school, I started at $.90 an hour (about 1960), that will be the new minimum wage of today. The military will be on steroids bombing Iran, Syria, Iraq, and Afghanistan, with boots on the ground in all four countries. The more you make the more you keep and the lower your federal income tax rate if they keep the IRS. They may eliminate the IRS and you must pay a federal sales tax of roughly 15% on everything you buy including food. No more welfare checks, no more unemployment checks, and no more food stamps. The only abortions performed will be in one of two places: In a private hospital with the best doctors and medical staff and equipment available for the rich with money as no object or in the back ally with a coat hanger performed by a stranger for free. This is just the tip of the iceberg, it will get worse as time goes on. The best jobs for the 99% will be limo driver, butler, maid, gardener, pool keeper, horse groomer, and auto mechanic IF you can find any work at all.

    1. toxymoron

      I thought most of your Republican nightmare is already alive and kicking with Obama in the White House. No need to wait until election time.

    2. They didn't leave me a choice

      So, Obummers america, just a tad worse? Doesn’t sound that bad.

    3. LeonovaBalletRusse

      TG51, yes, this is what it’s coming to if there is no mass revolt. And even then

      Oh, well. So glad I’m not thirty with kids.

    4. different clue

      Now on the other hand, imagine a President Romney facing a DemParty Majority Senate. Its easy if you try. It would give the DemParty Majority Party Senators a chance to show what they really stand for. All everyone has to do to achieve it is to vote for Romney and vote for Democratic Senators.

      We already know that if we re-elect Obama we will lose our Social Security. Obama has made the destruction of Social Security his Nixon-goes-to-China “must achieve” goal for Term Two, and the DemSenators will co-conspire with him to destroy Social Security. They made that clear when they voted for the so-called “payroll tax holiday” to begin the defunding process against Social Security. But if Romney is elected President, the DemSenators MIGHT not want a Republican to get the credit for destroying Social Security when that credit is supposed to go to their fellow Democrat Obama. I know that is a weak and slender reed of hope, but that is why I will be voting for Romney here in Michigan as my effort to preVENT Obama from getting reelected.

      1. Gary

        Mosler also called to kill the payroll tax, but discussions on his blog clarified that the “useful fiction” of funding SS via taxation, though a crock, was a necessary crock to make it look like “savings”, not free welfare for old people.

        In other words, financially SS tax is not needed, anyhow. But cutting SS payroll tax has political implications due to ignorance about MMT reality.

        1. different clue

          I don’t understand MMT. But I do understand one thing.
          Money is not wealth. Would you rather go scuba diving with a tank full of compressed air or a tank full of diamonds?
          Money is not wealth.

    1. LeonovaBalletRusse

      DC, thanks for mind blowing link. Everyone should see it. This is why William K. Black is eminently qualified to be Special Prosecutor today.

    2. Gary

      THANKS, Savings and Loan Crisis.
      Rob discusses not only structural changes but I think in one talk he gets into Mob and CIA looting the S&Ls for funding terror groups, etc.

  14. Capo Regime

    Really great piece. Keep it up NC–an invaluable service. May not change the world but give a few of us reasssurance we are not alone. Few in number but not alone….

  15. bailey

    THE unmentioned problem is the HUGE role the FED plays in buying off the only people who could put an end to it – the upper middle class. I recall Ben Bernanke being quoted as saying, it didn’t matter why the stock market went up, but we need it to go up. So, the FED prints money, hands it to our money center banks who leverage it greatly & invest it in the markets. It’s no secret why the FED stopped tracking M3 and it’s no secret that the stock market’s enormous rise since 2008 tracks the increased money printed by the FED and it’s no secret that the 14% under the top 1% of wealthy in this country own a huge percentage of the stock the top 1% doesn’t.
    In short, The culprits are buying off those they fear the most.

    1. nonclassical

      ..the FED:

      “The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out. Ben Bernanke(pictured to the left), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning: http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

      What was revealed in the audit was startling: $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious — the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

      To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

      In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.”

      1. psychohistorian

        Is there now any doubt in the minds of folks about the scope of control of the global inherited rich in our world?

        Its too bad that they are poised to continue controlling our world into the expected future…..enough of us aren’t laughing.

  16. jsmith

    Although the author seems to have a handle on things, let’s more accurately revise his bolded point:

    Capitalism – whether regulated or not – is thievery as it inevitably involves the exploitation of someone to some degree no matter how many rules are in place.

    Once again, mankind is facing yet another crisis of capitalism as Marx predicted yet those most affected sit around and act as if no one could have seen it coming – again.

    The author is generally correct in his conclusions but it’s more than just Wall Street needing to be obliterated – it’s the entire economic philosophy which – along with the financial fraud – leads to resource depletion, global warming, over-consumption, environmental degredation and a host of other problems that are not intrinsically attributable to Wall Street but CAN be laid at the feet of capitalism.

    How to obliterate Wall Street/capitalism?

    Well, why not start promulgating a philosophical framework that has at its very heart a clear understanding of how we have yet again arrived at yet another critical juncture?

    Start educating people about Marx again so that at least people can begin to see that this time is not ANY different from the crises of eras past and that the “flaws” of the system are features and not bugs.

    1. Warren Celli

      The very first line in this article is wrong;

      “As the Global Financial Crisis rumbles along in its fifth year, we read the latest revelations of bankster fraud, the LIBOR scandal.”

      I immediately thought to myself; here comes another Vanilla Greed for Profit lament, and that’s pretty much what this article is. Poor me, life was pretty good as long as I was getting my crumb supply, but now all of a sudden, in the last five years, financialization is effing everything up. Come on. Get a grip!

      The Global ‘Financial’ Crisis; is in its FIFTIETH plus year, and it is not limited to ‘finance’. It is a MORALITY crisis that affects all sectors of society, and, contrary to the authors close, it is also a very intentional and well planned incrementally orchestrated process. He is also grossly wrong about there being an “industry versus finance” dichotomy thirty years ago. Thirty years ago, if you were sharp enough to see it, there was no dichotomy, GE, GM, and GS were working in unison to shape the culture into its present divisive meme of ‘Greed and Evil are Good’.

      The shift that has taken place, in the past fifty plus years, has been from the old fashioned Vanilla Greed for Profit (the disease of Evilism) into the newer more Pernicious Greed for Destruction (Evilism mutating into the more pernicious disease of Xtrevilism).

      Yes, we are screwed, and if you truly want a suggestion to get unscrewed you first have to recognize the reality of our Forced Complicity Crimeunism and that morality is at the heart of it. Voting is immoral, shun it while you still have the chance.

      And yes, the <1% have and control it all, but there is also degree of complicty in each and every one of us in that '99 %'. Further, some of us are more immoral in our daily actions than others. Some of us have been more infected than others by the sociopathic disease of Xtrevilism. It is time to discusss and build a morality of occupation scale, and also shun, along with the corrupt voting process, those who do the most damage — those who are most complicit with the <1% and aid and abet them the most — those who take more than a fair share and contribute most to our condition of oppression. High on the list would be the cops and troops who provide the oppressive muscle and the jack boot heel, and, the 'brains' behind them; the sell out media, politicians, hollywood, etc. Conversely we should revere those who are still healthy and engage in pursuits that are socially beneficial.

      Shun the killers, head bangers and bomb builders and revere those who add real positive value to society.

      Deception is the strongest political force on the planet.

  17. 2little2late

    Wall Street’s simply a flash mob, only instead of hoodies they’re wearing $4K suits. The pilfering is exactly the same, save for the fact the hoodies get 5 years for Twinkies when caught. The suits get more Bollinger.

  18. readerOfTeaLeaves

    Great post.
    It’s still surprising to see that the politicians appear to be losing their own legitimacy, and thus their claims on power and their own cushy pensions and salaries, because they can’t rein in traders and finance.

  19. John Regan

    Here’s the suggestion:



    If you want to discuss it more, email me.

    But briefly, it seems to me that the jubilee idea not only puts an end to the financial torture, but it also restores our sense of self government if it is done by a constitutional amendment. The two are very closely related at bottom.

    1. Grizziz

      The Jubilee could begin if a coordinated and massive attempt of passive non-payment of mortgages, credit card, and insurance premiums were withheld from the FIRE. No flow, no go!

      1. John Regan

        Actually, I think the “Occupy” movement is the best chance in the near term that a jubilee through a constitutional amendment might actually receive meaningful attention.

        I hope it happens. I really do. It’s the only way out, IMO.

          1. John Regan

            I take it you’re only half serious, but the serious truth is that the amendment is necessary both because of the contracts clause and section 4 of the 14th amendment.

            Both of which should be repealed by the jubilee amendment.

            In any case, a groundswell from the populace would have to occur. The overlords will never move in that direction. In fact they are moving in the opposite direction.

    2. Gary

      Yes, prominent non-mainstream economists have discussed the “unthinkable”, debt jubilee.

      No, Govt does NOT control the money supply. This is the crux of Steve Keen’s famous argument with Kruman, and that of Mike Norman on Bernanke’s QE, and Warren Mosler and others. Banks don’t need “reserves” to create loans, so reducing “reserves” or increasing “reserve ratios” does not “cool” the economy, and the opposite tack, purchasing T-bonds from banks to increase “reserve balances” does not spur increased lending.

      (When the Fed purchases JUNK “toxic waste” securities from banks at essentially “full face value” or some other fictitious estimate, yes, THAT shores up these banks’ capital base and makes them temporarily healthy again, until other securities go “toxic”, like when more mortgages cascade into failure, like when existing no-pays are eventually evicted and banks have to declare the losses, and only those securities actually HELD by banks not those sold to pension funds, and including the banks going out and buying more high-profit toxic debt in some other form than housing.)

      A Govt debt in a sovereign currency managed by a central bank is internal accounting, not what we normally think of as debt. That can ALWAYS be repaid. But our Wingnuts are acting like the non-problem is the crisis, and the real crisis affecting millions is non-existent.

      I think The Fed could purchase all the notional $700 Trillion of derivatives held by all the scoundrels and say “Reset”, and not cause “hyperinflation” but they can’t seem to tell them STOP DOING IT!!

  20. Max424

    What’s really interesting from a purely intellectual point of view: the unstoppable, neo-liberal onslaught that is crushing the life out of all things, is surprisingly not the leading candidate to utterly destroy America, or the nations of Europe, or the global economy, or for that matter, more esoteric things, like the human species and the –already– rapidly disintegrating Animal Kingdom.

    No, the leading candidates to put an end to it all would be, of course, peak oil and global warming.

    PO & GW. The two are like the titanium fists of a superhuman boxer. Peak oil is the left hand, the irritating and omnipresent jab hand, the hand that continually drills you about the right socket, the one that turns your peeper into a slit, making you blind on that side, making you ever more susceptible to the killer hook that you can no longer see forming below.

    Global warming is the right hand, the power hand, the hand that contains the lethal combination.

    You’ve studied it. Are preparing for it. The Tyson Combo –the signature move Iron Mike used to knock out dozens of opponents. Right to the body, right to the head. Short right hook shatters the lower left cage, body sags in response, chin drops with it the kill zone, an unimpeded same-side uppercut comes roaring up from the deck, separating noodle from brain stem.

    Endless hours of film. Reverse, stop, repeat. Bodies flail. Bodies topple. Frame by frame, the historical evidence mounts, do not enter the ring, or you too shall be killed.

    But you convince yourself otherwise. You say to yourself, even though this fight hath no bells nor limits, I am indefatigable, and I will evade the jab with nimble toe work … ad infinitum. And you say to yourself, even though a bone crunching shot should break all my ribs, I shall not allow my chin to drop … helpless into the kill zone.

    And so you enter the ring, and on faith alone you stand.

    Note: Randy, personally, I think we’re more than screwed. In fact, after several thousand hours of critical study, I’ve come to the inescapable conclusion that we are many, many factors beyond totally fucked.

    1. MrColdWaterOfRealityMan


      I think the more near-term sources of fuckedness are economic. In our culture, monetary dysfunction can substitute nicely for real physical dysfunction. If everyone is too broke to make pumping oil profitable, for example, we may as well have hit the physical peak. The sudden breakdown of the world’s “just-in-time” interdependent supply chain system will look exactly the same.

      1. Max424

        To keep my long winded metaphor running, it’s all working hand in hand.

        Maybe it’s more like Ultimate Fighting. Let’s add Big Finance to our killer’s skill set –give our titanium fisted, superhuman opponent the ability kick and wrestle and perform sneaky, match ending small circle jiu-jitsu moves.

        Yup, you could be right, short term. Long term, of course, global warming is going fry us. There is no escape.

        But mid-term, short term, long term, all term, peak oil is always there, putting the squeeze on, making it impossible for the Exponential Growth Model to function.

        The EGM has stopped. The pie is now shrinking. That’s the reality. And if a few thieves are stealing most of that shrinking pie, well, the math doesn’t add up for the rest.

        Note: While I was babbling, I forgot to mention what a great piece this was. Pull out Michael Hudson’s essay from a couple of days ago, and you’ve got you’re classic bookends.

  21. Borsabil

    Yes one giant conspiracy by the evil criminal banksters to destroy the economies of otherwise vibrant European social welfare Utopias.

    Not that there aren’t crooks in Armani suits committing fraud and paying off politicians, of course there are, but it’s not the cause, and throwing them all in jail won’t magically restore the good old days, whenever that was?

    We live in nations where every few years a snout counting exercise is performed to select which group of politicians will lead us. Being selected to that role carries enormous status and benefit, amongst other things riding in your own large jet for free, everyone kissing your ass, bossing people around and bombing anyone you dislike etc etc etc. So it goes without saying that politicians are well motivated to win the approval of the masses, and experience suggests the easiest and most assured way of achieving that is to promise lots and lots and lots of free stuff. The current. POTUS would be a poster child for this sort of thing.

    Unfortunately there is no such thing as a free anything, Newtonian physics demonstrated that a while ago, but why let small inconveniences like the basic laws of the universe get in the way? So go out and borrow, encourage consumer credit growth, ponzi schemes, housing bubbles, derivatives and deficits. All ways to get stuff for free, only ultimately the universe demands a balance, for every debit a credit and so here we are at this fine pass. So really if you think about it, it’s Gods fault, he’s probably having a good chuckle at the mo, typical Repulican.

    1. John Owl

      Brilliant! Thank you Borsabil for providing a reality check. Of course we are all screwed, of course the 1% are greedy & immoral, but our funk is also very much our own fault. Remember when we learned that “the masses are asses”? It’s true. We are collectively too easily misled to be lead.

  22. Schofield

    The notion that there’s no such thing as “a public interest” is the fantasy of thoughtless and selfish individuals. Nature always codes for “public interest” or balance, even genetically, that’s why we have morality and blush. Our morality evolved during the thousands of years we lived as hunter-gatherers when we developed an Egalitarian Code for survival purposes that we still live by. The Code is fragile and needs continuous reinforcment. It works on the basis that we’ll submit to hierarchical leadership provided that you don’t try to use the power accompanying that leadership to dominate and abuse us. If you do we’ll counter-dominant you. The good news is that Wall Street ultimately can’t buy this Code.

    1. Jessica

      You make a good point that something deep in human culture, possibly even hard-wired into the wetware, is beyond the reach of the current elite.
      On the other hand, the strong sense I got from David Graber’s “Debt: The First 5,000 Years” is that social institutions, such as debt, can arise that make that code function in the exact opposite of the way it was intended, even when the results are clearly horrifying to most of those involved.
      I think that has a lot to do with why the crisis continues to metastasize without very much resistance so far.

      1. John Regan

        Yes, Jessica, I’m going to have to get a copy of the Graber book.

        The insight that morality isn’t summed up with “pay your debts” is important. And stressing that too much can be destructive.

        Sexual promiscuity raises moral questions for many people; but harsh puritanism can be very destructive as well.

        That’s the idea, anyway.

    2. Warren Celli

      “The notion that there’s no such thing as “a public interest” is the fantasy of thoughtless and selfish individuals. Nature always codes for “public interest” or balance, even genetically, that’s why we have morality and blush. Our morality evolved during the thousands of years we lived as hunter-gatherers when we developed an Egalitarian Code for survival purposes that we still live by. The Code is fragile and needs continuous reinforcment. It works on the basis that we’ll submit to hierarchical leadership provided that you don’t try to use the power accompanying that leadership to dominate and abuse us. If you do we’ll counter-dominant you. The good news is that Wall Street ultimately can’t buy this Code.”

      Perceptive comment. But it is not submitting to a hiearchy that makes it work, it is striving for a levelocracy that makes it work — striving for fairness. Hiearchy represents the corruption of the levelocracy (the strived for ideal corrupted by deception) and it is why the morality — the code of conduct — needs continuous vigilance. The bad news is that Wall Street — the aberrant diseased sociopathic elite — own the means, an incredibly powerful media voice, to change the code in real time.

      The good news is that you do not have to listen to them and when you shun them you take away their power.

      Avoid sorrow, don’t borrow!
      Avoid rage, disengage!
      Strive for a levelocracy!

      Deception is the strongest political force on the planet.

  23. steelhead23

    I have just heard that the global elite have at least $27 trillion in assets hidden in tax shelters (like Switzerland, Bahamas, etc.). Thieves all. And yet, there is a very good chance that the free people of the U.S. will elect one of them as their president. For some reason, folks who believe that government is their enemy, are anxious to make that fear a reality. This is NOT amusing.

    1. Capo Regime

      Do you really think it makes a difference whether its a Republican or Democrat? Yes republicans bad democrats good? What pray tell have the democrats done for the “people”. Oh yes, Obama espeically when he had both houses of congress in the D line for two years was a real Elliot Ness–I forgot about that whole episode. Wait–it did not happen. Somehow republican evil has taken over Obama and the Democrats via some stealth hypnosis.

      1. steelhead23

        Agreed. However, politics is not necessarily a dichotomous tree. There are other alternatives.

  24. MrColdWaterOfRealityMan

    In the long run, this is a self solving problem. Entertaining examples include France, the Magna Carta and a fellow named Lenin. All of the aforementioned examples occurred when enough of the populace became uncomfortable. It will happen that way again when the financial/energy systems of the planet can’t give people enough cheap food, entertainment and psychotropics to maintain pacification.

    The most likely near-term cause of such discomfort is economic. The most likely long-term cause is energy resource depletion. The former will be more rapid; the latter, more devastating. The Mayan collapse didn’t wipe out the Mayans, just the elite priesthood and government. The same will eventually happen to most countries worldwide.

    1. Capo Regime

      Great point. Its “social orders” which collapse. Curious thing is how it will turn out–like the Russian case or even China post cultural revolution–poliitical hacks becoming “business men”. Must say, it would be quite the treat seeing some of our “leaders” picking lettuce or working a temp job at a warehouse.. Nancy Pelosi working the register at CVS, or Mitt Romney running a laundromat would be something to see….

  25. avg John

    Pick your poison. Greedy, thieving global bankers or corrupt, inept government regulators and bureaucrats. Power in this country is too centralized, too removed from the people. I think it all must fall apart before the 1 %, with their globalist agenda and bought and paid for political lackies, lose their tight grip on the reigns of power, and the rest of us can begin to pick up the pieces and put things back in order.

  26. Jessica

    Two Theories on the Origin of the Crisis
    Theory 1: Perhaps a system that induces technological changes as rapidly as capitalism does is inherently unstable when run by an unconscious society. By unconscious, I mean that there is neither any awareness nor a social force that operates for the benefit of the society as a whole. There are only fragments of the society, some of which lay claim to represent the entire society, but actually primarily work for and think in terms of themselves.
    The basic notion of electoral democracy is that competition among these fragments will somehow produce an outcome over time that closely enough represents the interests of society as a whole.
    Theory 2: Sometime around the 1960s, the economy needed to shift to centering in knowledge-production, not thing production. The rules for thing production don’t work correctly for knowledge production, so at a level deeper than we see, things ground to a halt.
    Under both theories, the current crisis is an opportunistic infection, not the actual problem. Because I keep on coming back to the same question: Yes, they all function as sociopathic thieves. But why were they able to take over?

    1. F. Beard

      But why were they able to take over? Jessica

      Honest usury alone dangerously concentrates wealth which is why periodic debt Jubilees were ordained. But credit creation is even worse since it adds theft to usury for the benefit of the so-called “credit-worthy” and the government backed credit creation cartel.

    2. Nathanael

      Veblen explains in _Theory of the Leisure Class_, translating into modern language, that sociopathic thieves have a natural advantage at the accumulation of power. (Mostly because other people aren’t *expecting* to be dealing with sociopathic thieves, I would say.)

      The only way to stop them from eventually taking over is to identify them, catch them, and ban them from society. The government stopped doing that in the mid-1980s and now it seems like they can’t be removed without “vigilante” efforts or a revolution.

    3. Nathanael

      Your two theories are better positioned to explain why we are not dealing with global warming when we ought to.

      You are right that the bankers’ crisis is an opportunistic infection on an already sick organism.

      Veblen makes it clear that they are opportunists who seize an opportunity when they see it; the question of what caused the opportunity is an interesting one.

      1. Jessica

        If the cause of the opportunity was more or less random, we just need to undo the opportunity and clean up the mess.
        However, if the cause of the opportunity runs deeper, then until we can find it and deal with it, the best we will be able to do is repeat a cycle in which we re-create the same evil opportunity every time enough years have passed for us to forget what happened the time before.
        “Deal with it” might not mean fix. It may be that the deep cause is not a flaw, but arrested development. If so, the deep solution will be a maturing, not a fixing or eliminating.

    4. rob

      who took over?It’s always been them.There has been no switchover to knowledge production.What do we know?ever increasingly obvious is the answer…. not much.
      lenin didn’t take over anything,he just moved into the masters house for a while.for as long as human history has been recorded, a priest class used whatever worked,religion,hereditary rule,debt,force,chaos….the new boss is the same as the old boss…the cover of blown cover.

  27. lambert strether

    Got some propaganda from 2016 dark horse Elizabeth Warren:

    Today, the Consumer Financial Protection Bureau is working on easier-to-understand mortgages, credit cards and student loans. It’s protecting groups targeted for some of the worst financial products, including seniors, active-duty military, vets, and students. It’s giving families a consumer complaint center to help when they get ripped off. And it’s monitoring the big banks and holding those that break the law accountable.

    These bandaids are so incommensurate to the scale of the real FIRE sector problems that Warren’s either delusional or a sociopath like the rest of ’em.

    1. Jessica

      Based on nothing other than my intuition, I think the behavior of someone like Warren, who seems like she is actually sincere, needs sociological categories to explain, not just psychological ones.
      For example, perhaps thinking of the 1% like a guru and its nearest and dearest management-“creative” class facilitators as a cult would explain her behavior.
      (To be more precise, the loyalty is not to the 1% but to an overall system whose former successes leave a residual loyalty/trust that the 1% take advantage of.)
      Sabai dii mai, kah?

      1. JTFaraday

        I think there is a whole “liberal” professional class whose entire careers have been to recommend minor, meliorative public policy measures that are merely small adjustments to the extant system.

        With the crisis, it has been more fully revealed that the system has actually undergone a radical transformation.

        Some of these people, including Warren, have been in the position of continuing to make policy recommendations, but the meliorative policy recommendations that they can think about and traffic in have been rendered near-pointless due to the transformation.

        And, the story is that she had to fight to do even that much–so, point blank– the woman is simply not thinking things through at this point. She’s well intentioned maybe, but she’s still fighting the last war.

        Easier to understand mortgages might have helped before the housing bubble, but now we have a former governor and senator and Obama campaign organizer to the 1% stealing from accounts outright. Who would have thought this in 2000?

        They just junked the work– and the intellectual and policy paradigm(s)– of most of a whole generation. At this point, we’re mostly just keeping tabs on the snakes as they slither out of the sewer.

        1. JTFaraday

          Other than Bill Black. But that’s part of the point. Even he’s shocked that nothing is being done to remedy it.

        2. Jessica

          “Some of these people, including Warren, have been in the position of continuing to make policy recommendations, but the meliorative policy recommendations that they can think about and traffic in have been rendered near-pointless due to the transformation.”

          Yes and on top of that, the capacity for genuine transformative changes has also been mislaid somewhere. It is not as though there was any obvious route for Warren or anyone else of the 10% (top servants of the 1%) to go with real changes. In the 1930s, there were communism, fascism, and in some places anarchism and a dynamic labor movement.
          (Obviously the communists and fascists did monumentally evil deeds, but in the 1930s, that was not obvious, so they seemed like possible locations for exploring real change.)

    2. Annette

      “Bandaids are so incommensurate” – yes. “That Warren’s either delusional or a sociopath” – no! she’s someone who is actually trying in the small way possible to her which is all any of us can do.

      If CFPB helps some people, it will be because she tried.

      Obama — Obama DIDN’T try and wouldn’t appoint Warren. But Warren DID try and that should be recognized. You’ve gotta watch what people actually do.

      1. Capo Regime

        A always believing and hoping some public figure will save us. Somehow I do not think a law school professor (at harvard no less) who shall we say claimed to have been native american to advance her career will be the great hope for America. Reminiscent of that law teacher from Chicago who was so well intentioned and articulate. Nope, if actual leaders do emerge they will likely not be from the halls of harvard law. True independent thinkers do not pop up in harvard law and run as democratic candidates in mass. Have more pixie dust please…

      2. JTFaraday

        See my comment above. I think it is more amenable to your desire to continue to believe that Jill Stein – Elizabeth Warren – Hillary Clinton (okay, maybe not Hillary Clinton) are still good, well intentioned people.

        1. LeonovaBalletRusse

          JTF, wishful thinking, right. In reality, to be in politics, you MUST be one of “Them” (the .99% Agency for the .01%). They are Blood Brothers. It’s “bred in the bone.”

    3. F. Beard

      Agree. Warren seems to think that if the banks spell out how they’re going to screw you then it is ethical. But what other choice do people have but to deal with the counterfeiting cartel?

    4. Dan B

      I’ve heard her speak at a small gathering in someone’s home. I think she’s delusional. As George Carlin quipped, “The American Dream; you’ve got to be asleep to believe it.”

  28. Susan the other

    The eco-solution: lots of low productivity jobs of high social value. Banksters can’t financialize “low productivity.”

    1. rob

      the banksters can financialize low productivity.As would have taken effect under the failed cafta deal.Allowing any type of “service”/labor/on-site technical aspect of a job to allow a low-cost workforce to be brought in from lower wage areas,to higher wage areas.. to perform any actual task(presently considered something that can’t be outsourced)under control of major employer driving domestic labor force to work for nothing.still a wage slave.. racing to the bottom…

  29. Nathanael

    Step one: market strike. Anyone who can legally avoid interacting with the criminals in the 1% does so.

    Step two: civil disobedience. Anyone who can practically and illegally avoid dealing with the criminals in the 1% does so, forcing the criminals in the 1% to hire thugs in order to enforce their bogus and criminally gained “property rights”. This is stuff like foreclosure defense and squatting.

    Step three: keep doing the above and organizing until the criminals in the 1% can’t hire enough thugs to stop you from succesfully holding on to your houses — because too many of the people they would hire are on your side.

    Step four: New political party. If step three succeeded, the new political party should have majority support within 5 years.

    Step five: if it gets locked out of elections through fraud and disenfranchisement, *that* is when the revolution happens.

    Sounds slow? It is, but it will probably all happen within the next 20 years, barring elites who “See the light” earlier.

    The real question is what happens *after* the revolution. That’s usually when things go horribly wrong.

    1. F. Beard

      The real question is what happens *after* the revolution. Nathanael

      Yep, that’s the problem. Envy and revenge are not an improvement over legal greed.

      1. Nathanael

        Well, sometimes they’re an improvement; I think it depends on the situation. But we’re comparing two really bad states when we compare “envy and revenge” to “legalized greed”. We would like to get something much better than either.

        But what I was thinking was actually, after a revolution is a *really* great opportunity for a *different* collection of fraudulent thugs to seize power as absolute dictators, in the chaos. This has happened, historically, so many times I can’t count them. The French Revolution is one of the more famous examples.

        1. Jessica

          A grossly simplified theory of revolutions:
          Societies compete on how much resources and people they can coordinate. Coordination can be coercion or cooperation.
          A revolution at first increases the cooperation and decreases the coercion. However, if the cooperation increases less than the coercion decreases, the total coordination decreases. This makes the society vulnerable to rivals. Then either coercion is restored by the revolution (Stalin, Napoleon) or the revolution is crushed and coercion is restored by the counter-revolutionaries (Franco, Hitler, Pinochet).
          According to this theory, the trick is how massively cooperation can be increased in the initial phase.

          Applied theory: Right now, the 1st world societies are systematically undervaluing knowledge and cooperation. This creates an opportunity for “arbitrage” by a revolution.

    2. F. Beard

      How about everyone quit paying off all debt all at once? A national debt payment strike? Then wouldn’t the creditors themselves scream for a universal bailout?

    3. LeonovaBalletRusse

      N, it seems that the .01% will always be able to hire enough thugs to control the people, given today’s technology in the hands of the .01%.

  30. mac

    Again we find folks educated beyond their ability to understand. Indeed there have been and are currently folks on Wall street, in banks down the street and probably in the local mechanics shop you go to who are crooks have no morals and are really bad folks.
    We have elected folks who will do about anything to garner financial support and they have passed bad law.
    But these facts do not make the act of making a profit evil. If that were true then the farmer who reaps a harvest beyond his needs and valued beyond the money and effort he put in is evil.
    Profit becomes evil or bad when it is dishonestly or in a non moral way gained
    at the dishonest expense of others.
    I suggest we send this person back to elementary school and stop him from wrecking minds.

    1. F. Beard

      Profit becomes evil or bad when it is dishonestly or in a non moral way gained at the dishonest expense of others. mac

      In the Bible, profit is good but profit taking is bad. That rules out dividends and usury (usury is allowed from foreigners though; do the bankers consider the rest of us foreigners?). And counterfeiting is a no-no too which rules out credit creation.

      We’ll either learn to do capitalism ethically or it will be replaced by something else till that too fails.

      1. Nathanael

        “do the bankers consider the rest of us foreigners?”

        Yes. Socially speaking, this is absoutely clear from all the anecdotes from inside the banks. They think of non-bankers as “outsiders”, people to be fleeced.

        This is not true of every bank, of course, but it’s true of the Megabanks which are causing all the trouble.

  31. F. Beard

    Honestly, I have no idea how that can happen. I am waiting for suggestions. L Randall Wray

    1) Ban any further counterfeiting by the banks – so-called “credit creation.” This would be massively deflationary by itself as existing credit debt (97% of the money supply?) is repaid with no new credit debt to replace it. Honest lending (100% reserve?) would still be allowed of course.

    2) Send new fiat to every adult citizen metered to just replace the credit debt paid off in 1). Continue till ALL private credit debt is paid off.

    Since the total money supply (reserves + credit debt) would remain constant then neither price deflation nor price inflation should be expected.

    As for the National Debt, Bill Mitchell calls that “corporate welfare” and you have pointed out that the thieves on Wall Street depend on it so let’s abolish it by paying it off with new fiat too as it comes due and never borrowing again. All deficits to henceforth be funded with new fiat too.

    And once credit debt has been replaced with new reserves (10-15 years if done without significant price inflation risk?) so that our money supply is 100% fiat then let’s deprive the banks of those reserves too by abolishing deposit insurance (the lender of last resort having been abolished earlier by the ban on credit creation) and by letting monetarily sovereign governments themselves provide free (up to normal household limits) risk-free fiat storage and transaction services that make NO LOANS.

    But some say that credit creation is necessary for the economy but what might really be necessary is private money creation therefore the use of common stock as an ethical private money form should be encouraged.

    1. Capo Regime

      Good points. Yet there is no reason why we are exempt from patterns of human history. Alternatives you list or thousands of others may well be deployed now, over the next 10 years or 200 years. After this episode it is entirely likely for things to suck for a long time and not just for an election season but for generations. Things can well be bad for centuries.

      1. F. Beard

        Thing were looking very bleak for the Jews in the time of Jeremiah. Only Jerusalem (and one other city?) had not fallen to the Babylonians. In desperation, to appease God, the king of Judah solemnly released all illegally held Hebrew debt slaves. It worked! The Babylonians heard of a threat from the Egyptians and withdrew from the city!

        But alas, the Jews reneged on their pledge and re-enslaved those they had just released. The Lord was not amused: Jeremiah 34:6-22.

    2. rob

      Again, The most realistic exit scenerio has been proposed by dennis kucinich.the need act,HR2990… adresses the concerns of these many perils. This is a shot to take.It doesn’t do anything to inhibit the creative dynamic of capitalism,and its profit motive drivers.It doesn’t put out of business anyone but financial service hucksters and their carney games.It enables this country to be the first to create a democratic form of money.One that is bound by the prudence of our republic…So ,yes we need to get our house in order… and there are a list of things that need reform… but AFTER we get control of the money system.

  32. Sufferin' Succotash

    I can’t see what the term “neofeudalism” is supposed to suggest other than we’re reverting to a social and economic system that existed 1000 years ago. Given that the social and economic systems of 1000 years ago were based on largely subsistence-level agriculture any connection with today’s setup seems pretty tenuous, to say the least.
    There is another term coined a little over a century ago which seems far more appropriate: Organized Capitalism.
    See Rudolf Hilferding…http://www.marxists.org/archive/hilferding/1910/finkap/index.htm

  33. rotter

    “Magic underwear” is a mormon thing (so im told) Mormonism being a strange and uniquely american invention (magic underwear and all)..having noth.ing to do with “Theophilus of Antioch in 170 AD” or any Orthodox, Traditional form of Christianity … Try to remeber that Ignnorance is wal greatest weapon..and the only way a bunch of “20 something traders” could take over the world.

  34. JEHR

    Mr. Wray is one angry gentleman! I could feel his great rage at the corruption that Wall Street has perpetrated on the citizenry of the world. We should all share such choler, exasperation, passion, indignation and fury.

    Someone has to start: where is our Gandi, our MLK or any leader who will begin non-violent street demonstrations like Occupy or La Classe?

    It is all going to end in a bad way no matter whether we have demonstrations or not.

    1. Capo Regime

      Paraphrasing Hoffer true vibrant movements don’t need a leader–spokesperson perhaps or a symbol. This is however the U.S. and so protests not a big part of our wiring anymore. As Phil Pinkinton noted there is the fantasy of protest or a road warrior scenario instead it will be sitting at home in your underwear eatinb cheerios wondering how the lights will be kept on. Getting edgy as the prozac scripts are out and well maybe engage in some shoplifting or other ways to get by. Its not glorious, rather depressing and horrible actually. Though some people seem to think deliverance will come from Elizabeth Warren or Jill Stein. There is always the power of postive thinking.

  35. Hugh

    “thieves took over the financial system. Nay, they took over the whole economy and the political system lock, stock, and barrel.”

    At long last, Wray has come to the realization that we live in a kleptocracy. Kleptocracy is not fraud and criminality in the system, even the massive criminality that Bill Black describes. It is the system as criminal enterprise. Even a massively fraudulent system can be reformed if the foundations are solid, but the system as criminal enterprise can only be overthrown and replaced.

    I have been writing about kleptocracy for some time now. It is the dominant economic paradigm worldwide. It is a class phenomenon: the kleptocratic 1% and the elites looting and waging class war against the 99%s of the world. It is about extreme wealth inequality, the consequences of which we can see in eroding infrastructure, poor schools, spotty, overpriced healthcare, a destroyed housing market, universities as debt factories, the trashing of pensions and unions, attacks on Medicare, Medicaid, and Social Security, an increasingly authoritarian government and a thoroughly corrupt political class. It is about the deaths of tens of thousands, perhaps hundreds of thousands who do not have access to healthcare or whose healthcare coverage is poor. It is about 28.7 million disemployed, millions of families who have lost their homes, tens of millions who have seen their lives destroyed, and hundreds of millions whose lives have been damaged through the theft and looting of a few.

    Once a kleptocracy has taken root in a society the only way to remove it is through what I like to refer to as a good old-fashioned American Revolution. For this, we need to build a mass movement, made up of and addressing the concerns of all Americans. Its program should be both simple and clear: Punish the criminals, the looters, and provide the building blocks for a decent fulfilled life to all Americans: a good job that pays a living wage, good housing, education, healthcare, and retirements.

    Unlike the MMT practitioners, I take a resource approach to economics. People’s eyes glaze over if you talk money and finance. Talk MMT to them and they will freak out, not because MMT is wrong in what it has to say about money but that its ideas, and the ways MMTers tend to couch them, are so alien to their received notions of money and how it operates. Discuss resources and how they should be equitably distributed throughout society, on the other hand, is something that most people understand and will support.

    The popular movement which I speak of to be effective must produce its own candidates and create its own party. It should not make alliances or compromise with the established parties. All its candidates must subscribe fully to the program outlined above. There can be no picking and choosing and no conditions. We have seen how all this has played out in the recent past and all it has led to is failure and further betrayal.

    So if Randy Wray wants to know what’s to be done, it is rather simple. We need to talk, educate, and organize. The analysis of kleptocracy has already been done. The plan, organizing a mass movement is out there and the program described above is known. If Randy Wray would like to help, he can start using his position to get the message out to a broader audience.

    1. joebhed

      Nobelist Frederick Soddy, after studying the problems of a non-distributive economy saw it was the money system that was determining the mal-distribution of the nation’s wealth.
      Upon a lengthy study of the money system, he came to the broadest possible conclusion as to why it was so.
      Opining in great clarity on the nation’s monetary system , he stated:
      “It’s not a system, it’s a confidence trick.”

      That was like 90 years ago.
      And it has remained so ever since.
      Any hope for real change must come through reform of the money system.
      Plain and simple.

  36. Thomas

    Homo Sapien – the most curious and unfortunate genetic mutation ever. Humans unchecked will destroy this entire planet. I’m looking towards the sky for God or at least a superior alien being to save us from ourselves!

    1. F. Beard

      It’s mostly only inexpensive fiat that is needed though the gold standard folks are eager to eliminate that escape route.

  37. Glen

    “We’re screwed.”

    Well, duh. We have a choice, a couple of Jamie Diamons or Rush Limbaughs and a world of slaves or a productive world.

    What works for you?

  38. freedomny

    “But they are not planning and conspiring for the restoration of feudalism. Still, that is the default scenario—the outcome that will emerge in the absence of action.”

    This is the biggest and most worisome question I ask….is it intentional? If only unconsciously?

  39. Schofield

    As I say “The Egalitarian Code” is fragile and the reinforcement often doesn’t happen because we fail to understand how the technology we fashion shapes us. The domestication of animal and plant life and particularly the invention of debt/money is only now, thousands of years later, starting to be thoroughly understood for the disbenefits as well as the benefits within the over-arching natural law of “The Code.” One other point. Hierarchical leadership when used with good intent or in accordance with the spirit of “The Code” should not be disparaged. Some individuals have unusual or above average skills in discerning the best solutions for our survival problems and human beings prefer to copy ideas that appear to work rather than continuously reinvent the wheel. It is more productive.

  40. F Libertarians!

    “I am waiting for suggestions.”

    Only a general strike to shut down the economy would, but too many are too scared, ignorant, indifferent, and self-absorbed to do that. Therefore, I agree. We are all screwed! See you all in Asia!

  41. Benedict@Large

    I’ve been thinking of late how to talk to ordinary folks about bank regulation. You know, what is it, in words they can understand. It seems to me that nigh on 100% of it, at least that part of their regulations that deal explicitly with finance, have to do with capital valuation. Now that doesn’t help much, because what is capital and what is valuation? Some stuff the banks claim is over-regulated, as far as anyone on the outside can tell.

    But I came up with this. Everyone knows what collateral is. You don’t get to put your teepee up as collateral for your home improvement loan. But this is exactly what bankers mean when they say they are over-regulated. They’re saying that the government won’t let them use their teepees as collateral.

    I think most people would understand that.

  42. SH

    I disagree with this statement.

    “We settled the question about dissolution of the Dollar Union back in the days of the Civil War. So, no matter how much the crazies in Alaska or Texas might fantasize about it, there is a near zero probability that President Obama will have to face the dilemma ably handled by President Abe Lincoln.”


    I disagree with the word “ably”. I don’t think 600,000 deaths should be characterized as “ably” handled.

    Not too classy.

  43. Fiver

    Wray at times appears to have finally noticed the salient feature of pandemic, officially sanctioned crime in this long crisis even though he starts off with the “amok traders” decoy – not bites here for that one.

    From my perch, Wray’s brand of MMT-er’s abstract money’s circulation/currency features from the multi-faceted political/organizational roles money has occupied throughout capitalist (and almost all other) history. These rather crucially include its officially sanctioned role as “store” of wealth as in an accounting, weighting or measure of wealth, i.e., accumulated claims affording the opportunity/right to direct human resources with a very broadly shared presumption that the size of the pile confers commensurate relative heirarchical privilege. That this is very deeply imbedded socially perhaps accounts for the strange form of admiration afforded by so many “progressives” for the likes of Soros, Gates, Jobs, BuffHead, all manner of grotesquely overpaid rock/movie/sports/media “stars” big and small, wealthy professional providers of “services”, and so on. With MMT, money remains the official scorekeeper of the “worth” of any individual’s work at any level, and a merciless arbiter of “in-ness” or “out-ness” in the ever-narrowing-on-ascent circles of capitalist power.

    Money stored or deployed identifies the “successful” and annoints them with commensurate ability, responsibility, even reputation, deserved or not, the first claim to “leadership” in a capitalist system . It has proven to be and remains partially true, which explains a portion of capitalism’s own “success” to date, at least if the popularized, Darwinian notion of “success” applies. But MMT ignores another fundamental feature of money in capitalism, and that is that it must always expand, must grow, must always get bigger, must always obligate larger and larger amounts of future human activity, ever-narrowing choices, though it is as clear as anything under this sun that this feature has now become suicidal.

  44. Discounts

    I’m extremely impressed along with your writing abilities and also with the structure to your weblog. Is that this a paid subject matter or did you modify it yourself? Anyway keep up the nice quality writing, it’s uncommon to see a nice weblog like this one today..

  45. Calgacus

    But they are not planning and conspiring for the restoration of feudalism. Just saw this. Professor Wray is a paragon. But to answer his question, one thing to do is to realize, with Lily Tomlin, that reality always outstrips one’s cynicism.

    There certainly are plans & conspiracies for just that, and they have progressed very quickly. That the particular titles of nobility & means of achieving it have changed somewhat, that the old names are a mite passé, doesn’t change the reality that the names were & are pasted on.

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