Mark Ames: Why Finance Is Too Important to Leave to Larry Summers

Yves here. Mark Ames wrote this post for our fundraiser six years ago. We’ve turned into a fundraiser staple, since as long as Larry Summers is with us, this is a classic worth reading regularly.

Think of it as our analogue to Christmas perennials like The Grinch That Stole Christmas or It’s a Wonderful Life. But not to worry, Ames being Ames and NC being NC, this is the antithesis of sappy. (Mark, you are on notice that if by some miraculous bit of good fortune, Summers retreats from the public sphere, we’ll need you to provide an updated slant on elite venality).

And in the spirit of Christmas come a couple months early, we hope you’ll leave something nice in our stocking, um, Tip Jar! We are raising our donor target to 1350 (Lambert has yet to update our thermometer) to help us reach our final financial target for original reporting.

By Mark Ames, author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine who writes regularly at Pando.

If you’ve been reading Naked Capitalism for any period of time without giving back in donations—and most of us have been hooked from the time we discovered Yves Smith’s powerful, sharp voice and brilliant mind—then you you’ve been getting away with murder. Naked Capitalism is that rare blog that makes you smarter. Smarter about a lot of things, but primarily about Yves’ area of expertise, finance.

By a quirk of historical bad luck, the American Left has gone two generations without understanding finance, or even caring to understand. It was the hippies who decided half a century ago that finance was beneath them, so they happily ceded the entire field—finance, business, economics, money—otherwise known as “political power”—to the other side. Walking away from the finance struggle was like that hitchhiker handing the gun back to the Manson Family. There’s a great line from Charles Portis’s anti-hippie novel, “Dog of the South” that captures the Boomers’ self-righteous disdain for “figures”:

He would always say—boast, the way those people do—that he had no head for figures and couldn’t do things with his hands, slyly suggesting the presence of finer qualities.

That part about the hands—that would refer to the hippies’ other great failure, turning their backs on Labor, because Labor didn’t groove with the Hippies’ Culture War. So the Left finds itself, fifty years later, dealing with the consequences of all those years of ruinous neglect of finance and labor—the consequences being powerlessness and political impotence.

That’s why Yves Smith is so important to anyone who cares about politics and the bad direction this country is taking. In 2008, the Left suddenly discovered that although it could bray with the best of ‘em about how bad foreign wars are, and how wrong racism and sexism an homophobia are, it was caught completely and shamefully by surprise by the financial collapse of 2008. The ignorance was paralyzing, politically and intellectually. Even the lexicon was alien. Unless of course you were one of the early followers of Yves Smith’s blog.

It wasn’t always this way.

Back in the 1930s, the Left was firmly grounded in economics, money and finance; back then, the Left and Labor were practically one. With a foundation in finance and economics, the Left understood labor and political power and ideology and organization much better than the Left today, which at best can parry back the idiotic malice-flak that the Right specializes in spraying us with. We’re only just learning how politically stunted and ignorant we are, how much time and knowledge we’ve lost, and how much catching up we have to do.

Which is why Yves Smith’s Naked Capitalism is one of the 99%’s most valuable asset in the long struggle ahead: She is both analyst and educator, with a rare literary talent (especially for finance). One thing that’s protected the financial oligarchy is the turgid horrible prose that they camouflage their toxic ideas and concepts in. Yves is one of the rare few who can make reading finance as emotionally charged as it needs to be.

Naked Capitalism is our online university in finance and politics and ideology. Whereas other online universities are set up to turn millions of gullible youths into debt-shackled Wall Street feeding cows, Naked Capitalism is the opposite: Completely free, consistently brilliant, vital, and necessary, making us smarter, teaching us how we might one day overthrow the financial oligarchy. One other difference between Naked Capitalism and online university swindles: (Stanley Kaplan cough-cough!) Your donations won’t end up paying Ezra Klein’s salary.

Which brings me back to my whole “Shame on you!” point I was trying to make earlier. When it comes to fundraising, nothing works like shaming. That’s how those late-night commercials work: You’re sitting there in your nice comfortable home, and then suddenly there’s this three-legged dog hobbling into its cage, with big wet eyes, and then some bearded pedophile comes on and says, “Poor Rusty has endured more abuse and pain than you can ever imagine, and tomorrow, he will be gassed to death in a slow, horrible poison death chamber. And you—look at you, sitting there with your Chunky Monkey and your central heating, what kind of sick bastard are you? Get your goddamn Visa Mastercard out and send money to Rusty, or else his death is on your head. I hope you sleep well at night.”

Now I know that this sort of appeal wouldn’t work on the Naked Capitalism crowd—too many economists here, and as everyone knows, you can’t appeal to economists’ hearts because, well, see under “Larry Summers World Bank Memo”… I can imagine Larry watching that late night commercial with the three-legged dog, powering a 2-liter bottle of Diet Coke and devouring a bag of Kettle Salt & Vinegar potato chips, calculating the productive worth of the three-legged dog, unmoved by the sentimental appeal. Larry grabs a dictaphone: “Item: How to end dog-gassings? Solution: Ship all three-legged stray dogs to sub-Saharan Africa. Africans won’t even notice. Dogs saved. Private capital freed up. Problem solved.”

So some of you have no hearts, and some of us have no shame. But we all do understand how vital Naked Capitalism has been in educating us. I’m sure that the other side knows how dangerous a site like this is, because as we become more educated and more political, we become more and more of a threat.

The oligarchy has spent decades on a project to “defund the Left,” and they’ve succeeded in ways we’re only just now grasping. “Defunding the Left” doesn’t mean denying funds to the rotten Democratic Party; it means defunding everything that threatens the 1%’s hold on wealth and power.

One of their greatest successes, whether by design or not, has been the gutting of journalism, shrinking it down to a manageable size where its integrity can be drowned in a bathtub. It’s nearly impossible to make a living as a journalist these days; and with the economics of the journalism business still in free-fall like the Soviet refrigerator industry in the 1990s, media outlets are even less inclined to challenge power, journalists are less inclined to rock the boat than ever, and everyone is more inclined to corruption (see: Washington Post, Atlantic Monthly). A ProPublica study in May put it in numbers: In 1980, the ratio of PR flaks to journalists was roughly 1:3. In 2008, there were 3 PR flaks for every 1 journalist. And that was before the 2008 shit hit the journalism fan.

This is what an oligarchy looks like. I saw the exact same dynamic in Russia under Yeltsin: When he took power in 1991, Russia had the most fearless and most ideologically diverse journalism culture of any I’ve ever seen, a lo-fi, hi-octane version of American journalism in the 1970s. But as soon as Yeltsin created a class of oligarchs to ensure his election victory in 1996, the oligarchs snapped up all the free media outlets, and forced out anyone who challenged power, one by one. By the time Putin came to power, all the great Russian journalists that I and Taibbi knew had abandoned the profession for PR or political whoring. It was the oligarchy that killed Russian journalism; Putin merely mopped up a few remaining pockets of resistance.

The only way to prevent that from happening to is to support the best of what we have left. Working for free sucks. It can’t hold, and it won’t.

There are multiple ways to give. The first is here on the blog, the Tip Jar, which takes you to PayPal. There you can use a debit card, a credit card or a PayPal account (the charge will be in the name of Aurora Advisors).

You can also send a check (or multiple post dated checks) in the name of Aurora Advisors Incorporated to

Aurora Advisors Incorporated
903 Park Avenue, 8th Floor
New York, NY 10075

Please also send an e-mail to with the headline “Check is in the mail” (and just the $ en route in the message) to have your contribution included in the total number of donations.

So donate now to Naked Capitalism. If you can’t afford much, give what you can. If you can afford more, give more. If you can give a lot, give a lot. Whether you can contribute $5 or $5,000, it will pay for itself, I guarantee you. This isn’t just giving, it’s a statement that you are want a different debate, a different society, and a different culture.

Who knows, maybe we’ll win; maybe we’ll even figure out a way to seal Larry Summers in a kind of space barge, and fire him off into deep space, to orbit Uranus for eternity. Yves? Could it be financed?

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  1. California Bob

    “One of their greatest successes, whether by design or not, has been the gutting of journalism, shrinking it down to a manageable size where its integrity can be drowned in a bathtub.”

    Prescient. The ‘Fake News’ propaganda is the coup de gras.

    1. dao

      Back when they had to manually typeset newspapers, the news was intelligent and every word was carefully chosen. Now we have idiots with ipads belting out 3 paragraph “news” stories for the mainstream news outlets. Spell checking and grammar checking software still hasn’t caught up with the stupidity of modern day “journalists”.

      I rarely, if ever, watch video news as I have always preferred to read the news. I’m stunned every time I watch a modern news video as I remember what television news used to be like 30-40 years ago. A “news” story I watched last week on about the Russian hacking was like something out of Orwell’s 1984. It was as if they were addressing a class of first graders and carefully spoon feeding a narrative. It was revolting.

      1. Kuhio Kane

        You’re a pluncker. You think CNN is video news. Catch Michael Hudson on YouTube to name of just one of the greatest economists of today.

          1. JustAnObserver

            I think he means “plonker”. Originally a UKism.

            dope, idiot, moron, wally, pillock, dunderhead, dimwit

            e.g You are such a plonker, Rodney.

  2. Sound of the Suburbs

    There is too much money to be made by letting people understand finance.

    We need to realise just how bad it is.

    Monetary theory has been regressing since 1856, when someone worked out how the system really worked.

    Credit creation theory -> fractional reserve theory -> financial intermediation theory

    “A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner

    “…banks make their profits by taking in deposits and lending the funds out at a higher rate of interest” Paul Krugman, 2015.

    A 21st century Nobel prize-winning economist, who doesn’t know what banks do and he’s using financial intermediation theory, which is the worst of the three.

    Milton Freidman actually knew the secret of a stable, successful economy and tried to achieve the steadily rising money supply with “Monetarism”.

    He didn’t know how the monetary system worked and thought Central Bank reserves controlled bank lending with the “fractional reserve” theory of money. As everyone went along with it, one can only assume that no one in the UK, at the highest levels, understood how the monetary system worked.

    That’s how bad it is.

    When you understand how the system works with the credit creation theory of money, financial stability becomes easy.

    Richard Werner explains in 15 mins. pretty much all you need to know for financial stability.

    Financial stability isn’t actually difficult.

    1. Sound of the Suburbs

      If Milton Freidman had known how to get his monetarism working with credit guidance, 2008 would never have happened.

      M3 is going exponential before 2008, a credit bubble is underway (debt = money)

      Would they have repealed Glass-Steagall if they knew what it really did?
      It separated the money creation side of banking from the investment side.

      All the financial instability of the era hasn’t gone to waste, meet the new experts.

      Steve Keen – Minsky moments and affects of debt on the economy

      Richard Werner – Money and debt, bank credit and how it must be allocated for economic success, studying Japan around 1989

      Richard Koo – After the Minsky Moment, studied 1929, Japan 1989 and 2008.

      Richard Koo – “Surviving in the Intellectually Bankrupt Monetary Policy Environment”

      We need to get to grips with this and fast; he knows why inflation isn’t picking up.

    2. Sound of the Suburbs

      The knowledge of money, debt and banks does go through highs and lows.

      Today the mainstream is in a trough with financial intermediation theory.

      There has been so much financial instability in this era of financial liberalisation people outside the mainstream have had plenty of material to work with.

      The 1920s was another era where they really needed to get to grips with what had happened and the understanding of money, debt and banks reached a high point before slipping away again.

      “Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.

      Irving Fisher looked into his mistakes and in the 1930s comes up with a theory of debt deflation.

      Hyman Minsky carried on with his work and came up with the “Financial instability Hypothesis” in 1974. Steve Keen carried on with their work and spotted 2008 coming in 2005, by looking here:

      1. Sound of the Suburbs

        “The 1920s was another era where they really needed to get to grips with what had happened and the understanding of money, debt and banks reached a high point before slipping away again.”

        That should have been the 1930s

    3. todde

      When I was a kid my grandfather said that a farmer in the early 1900’s knew more about monetary theory then an MBA today, because his livelihood depended on it. We were farmer-bankers back in the day.

      My dad used to tell me how you approved a loan before a credit score was invented. You went out to the guys friends, neighbors and associates and tried to ascertain if the guy would pay you back or not.

      So for a farmer, who had to get a loan every year, it mattered greatly what the community thought of him as a person.

  3. a different chris

    I am all for 90% of the above but… where did the hippie punching come in?

    Saying hippies turned their backs on Labor… I was a child, so I would need to see some documentation of post-war Labor leaders reaching out to hippies, accepting the hippies view of women*, and especially blacks. We (cultural we, again I was little) forget how powerful labor was, I don’t believe that just because the Beatles were popular then 20year longhairs had their choice of taking over the AFL-CIO (or not).

    Less importantly, but — hippies were pretty good with their hands, you ever try to keep a Microbus running? Or any VW… :p

    Now I’m strongly “employment is the #1 goal”… identity politics turns my stomach. But that doesn’t mean no longer addressing our un-level playing field, I just am sure that getting people jobs is always the biggest step towards equalization. Hey, everybody hates the boss — it’s a great ice breaker! There is a Culture War and it cannot be ignored. My problem, which *does* jive with the above, is that jobs somehow got forgotten along the way. All armies travel on their stomach, make sure people can leave the rally and go get paid the next day.

    *ok the woman thing was far from cut-and-dried, it was arguably an “I’ll give you enough freedom so that I can abuse you and you wind up blaming yourself” thing, but look at what white-guy Labor thought about women and pick your poison.

    1. Vatch

      You’re right — the hippy punching is uncalled for. It’s easy to criticize the hippies, because they did some silly things. But I think it was the people in organized labor who rejected the hippies, and not the other way around. The “hardhats” were known for their support for Richard Nixon, and there was plenty of racism and sexism in the labor movement too. Not everyone, of course, but a lot of them.

    2. RickM

      I didn’t take it as hippie punching, at all. I was only 12 years old during the Summer of Love, but I do remember Julius Hoffman and the Chicago 7/8 Trial a bit later. Abbie Hoffman and Jerry Rubin on the TV. Still, it is a fact that during my college years in the 1970s most of the so-called Left had long since begun its retreat into identity politics, of all kinds, and left money and power to the Right, completely, in search of self-actualization or some similar nonsense that came straight out of the Port Huron Statement. Whatever it was, it wasn’t to be dirtied with money or labor solidarity. I took up with the remnant that was DSOC (use the wiki) and later became the DSA, which now seems to be into the identity thing pretty heavily, to use the old vernacular. When I attended DSOC events in the late 1970s, Michael Harrington was indeed the star, but we had UAW, ACTWU, IAM, and AFSCME leaders, organizers, and members in leadership and discussion leader roles. Irving Howe and Robert Lekachman were there. James Farmer, formerly of CORE, was at one of our meetings in West Virginia, of all places. Whatever happened, we lost our nerve, along with our minds. Maybe we can recover. Maybe not. But if we do, NC will be a large part of the text.

      1. Barry Fay

        During the 70s I found that the DQUT had to a large extent replaced the XLEU although they actually only turned out to be splinter group breaking off from the CPPE. Had other groups like the EWWW and the PCCP been allowed to enter into negotiations with the overriding PPII things would most certainly come out differently. Just saying…..

    3. skippy

      The drama is “traditional” labours back bone was – family orientated – wrt a fare share of productivity from skilled trades e.g. it was not counterculture. Hippies were not skilled nor traditional in the sociaoeconomic – political sense at the time as a group.

    4. Yves Smith Post author

      Ames happens to be correct. He knows the ugly details of who has done what on the so-called left in great detail, from both the political and intellectual sphere, since the birth of the labor movement onward. I was reading about political economy in the early 1970s, which heavily included work of the 1960s. I can tell you the left had no interest in finance whatsoever and shockingly little in macroeconomics. They ceded that ground to technocrats.

      You are out of line in attacking him, particularly since I can virtually guarantee his leftist credentials are more solid than yours, and even moe so because you offer no justification whatsoever for your position.

      The fact that something offends your tender sensibilities is not even remotely sufficient grounds for a comment like yours.

      1. pslebow

        Certainly there is truth to the notion that the “love generation” dropped the ball. But the slurs were just another form of stereotyping and bashing that has no place in the current movement. He could have put things a different way and demonstrated he had a sense of nuance and understood the forces operating on the youth of that period. Instead he lumped together and blamed an entire counter-culture because it just felt cathartic. Damn hippies, (damn bra-burning women, damn intellectuals, damn welfare queens…hop onboard Mark ) So “old-school”.

      2. justin synnestvedt

        Yves, I’ve counted on NC for several years to understand Modern Money and its applications to progressive policies and fiscal decisions. But when you appealed to Mark Ames in your fundraiser, I sent an article suggesting he was not a good representative of your position. It wasn’t answered, which surprised and disappointed me. I just came across another article to the same effect, regarding Matt Taibbi’s association with Ames. I think you might find it useful.
        Yours truly,
        Justin S

    5. Rojo

      Coming of age in the era of left-wing punk rock (The Clash, Gang of Four, etc..) my cohort was always disdainful of hippies as self-righteous, self-indulgent Trustafarians. Yeah, that’s a broad brush. But history has shown that these McGovern-ite types went on to comfortable academic lives or uninspiring Third-Way political careers or tech fart-huffing.

      But even the true left, the left of Counterpunch, etc….(which I read daily) isn’t free of blame either. I’m all for the full-on assault of American Empire — its part and parcel of the immiseration of us in the Mother Country — but it’s stolen a lot of the oxygen. I loved Oliver Stone’s Hidden History, but it’s almost solely focused on foreign affairs, in a way that only a Park Avenue guy could.

      It’s damn hard to muster up some give-a-damn about the Palestinians when you’re one busted transmission away from the street.

      Give Billy-Jeff credit for one thing: it really is the economy, stupid.

      1. Rojo

        And I’ll add that this is why Bernie’s campaign came out of nowhere. Even though Sanders is a self-professed Socialist, he’s never generated a lot of excitement on the left. He was seen as just another hack Northeastern liberal democrat because of his foreign policy positions — which weren’t great, I admit.

        But offered — in Lambert’s favorite phrasing — concrete material benefits. It was like it suddenly dawned on voters that they could vote for someone who could elevate their standing and security.

        Ah, yeah.

  4. hman

    There weren’t a lot of “poor” hippies, and everyone I knew at the time was very good at economics:
    A 3 finger bag for 20, split into 3 dimes etc etc..
    There were the usual street people looking to get by, a few semi-anarchists and a generally pot, acid, mescalito, peyote induced laid off attitude.. The music was great and still is.. Having served in nam in 66-7,
    the political anger at the deceit was justifiable..
    Guns and butter, then Miller and Blumenthal to grease the skids, then 12-14% inflation..
    Friedman had it right, Volcker tried, but the pain..
    As to the press: The shrinking of the traditional and not so traditional press into a few hands has led to a concentration that lends itself perfectly to the “fake news”..
    Forget the 3 legged dog, if 100 people gave the c16 to a homeless person he’d be well fed for the day..

    1. John Wright

      Note that Jerry Rubin did embrace capitalism (and finance) as he aged, which probably occurred with many other hippies.

      “In the 1980s, he embarked on a debating tour with Abbie Hoffman titled “Yippie versus Yuppie.” Rubin’s argument in the debates was that activism was hard work and that the abuse of drugs, sex, and private property had made the counterculture “a scary society in itself.” He maintained that “wealth creation is the real American revolution. What we need is an infusion of capital into the depressed areas of our country.” A later political cartoon portrayed Rubin as half-guerrilla and half-businessman.”

      I suspect many of the 1960’s hippies evolved “financially” to survive and are now indistinguishable from their non-hippie cohorts with respect to financial sophistication.

  5. hman

    powered by a quad cuban espresso i will carry on:
    I voted trump.. Not because I despised hillary as a mean spirited thieving crook, but by his saying he would “drain the swamp”.. I am sick of the swamp people.. Recent press hysteria about a few idiots taking private planes and consequently getting chastised or fired is fine.. However that’s the tip of an iceberg.. Pelosi commutes in a g5.. They’re pretty much all guilty of abusing the taxpayer, and not by pennies either..
    Try the Acela, very expensive compared to regular train.. Check out who’s riding first on that, almost all gov’t officials , accountants and lawyers putting it on someone else’s bill..
    I fired a major accounting firm in the 90’s when I was boarding a flight to europe in the back and my accountant was flying first on my tab..
    Time and motion study on the train dictates over $600 per hour to justify the few minutes saved.. If you’re paying your officials over $600 p/h you’re getting robbed.. First class hotels, fine dining and great wines.. Gotta have a limo for everything..
    A quick memo to all private plane operators ( u.s. gov’t ain’t paying )
    Did larry summers ever have a real job ?
    anyway, have a sparkling day..

      1. JCC

        I didn’t vote Trump, but smearing feces all over the swamp, although not a solution, seems like a much better solution than voting for Clinton and continuing business as usual in feeding the swamp.

        I think we can all agree that the choices we had were, to put it very mildly, very bad this time around. I personally sympathize with those who voted for Trump and were hoping that he would make good on at least one of his promises to the 95%, only to find out that he had no intention of making good on any of them.

        Personally, although the Clinton Administration was bad, and the Bush Administration was worse, I finally learned the lesson that the final choice/race of both the Dems and Repubs is generally a liar and no choice at all when I voted for Obama in 2008.

        1. pslebow

          You are assuming voting for Clinton=”continuing business as usual”. I believe Bernie made a big enough impact that Clinton would have had a much more difficult time with him snapping at her heels. What Trump has done is back a dump truck of manure into our “living rooms” – will take quite awhile to clean up the mess and lives are being ruined in the process.

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