Should We Care Who Wins?

In this final countdown, the election ads and analyses will soon end. Candidates carping about their opponents' characters and policies induce headaches. Few of us believe either Obama or McCain will lead us to the promised land. Both major political parties are captives of the financial elite: McCain with people like Phil Gramm and Obama with Robert Rubin. Wall Street finance and the investors they represent gave us this mess of runaway liquidity and debt all the while siphoning off wealth for their own control. A common operation of investment banks is the 2/20 rule: 2% annual fees for money under management and 20% of profits. With derivatives and credit default swaps, deals are packaged and sold so if they later go bust the original financiers are in the clear counting their money on their multimillion dollar yachts off the shore of their multimillion dollar Long Island estates. And this bailout, by design, offers nothing for debtors or even the productive (real) economy. Goldman Sachs at the Treasury (Paulson) and Goldman Sachs at the Fed (Bernanke) will join with Goldman Sachs' (and current Citi chair) Rubin at Obama's right hand, and they will screw us all (or at least 90% of us).

When corporations found it difficult to make money through production first they moved factories from the unionized north (rust belt) to the non-union south, then to Mexico and Central America, then Taiwan and South Korea and to Indonesia and China and now even Vietnam. But with the growth of technology-based production and automation, not even low-wage countries were enough. Capital accumulation became so severe that new ways to make a buck had to be found and innovative financial engineering was born. Actually, this stuff is not new, except for the CDS and the complexity and splitting of the underlying "assets" if we can call them such. Consider this from Alfred Marshall's 1923 Money, Credit and Commerce (which used to be required reading for budding economists):

Of course, bills of exchange could do most of the work without the aid of any formal avenues of credit. But their scope was limited; and there remained a great opening for any paper currency issued by people known in each neighborhood; and which every one would accept in payment, at all events for small sums; not so much because he was certain of the permanent solvency of the issuer, as because he felt sure of quickly passing it on to his neighbors. A rich harvest was often reaped by those who could start as dealers in loans by making them chiefly in the form of their own notes or promises to pay; and by using the loans themselves as a means of getting these notes into circulation. This state of things has some striking results: it led many to think that credit is capital. They saw that whoever could put his own notes into circulation got command of capital, which he could use in his own business or lend to others; and they did not see that he was in effect turning to his own use part of the expensive machinery of trade, which had been provided by the public expense by the national metallic currency, by political security and social credit. They did not observe that while making that machinery more efficient, he made it also more likely to break down; and that, while he reaped for himself the chief benefit from this increase in its efficiency, the chief evils from its increased instability fell upon others.

This certainly describes much of today's finance. In a sophisticated economy (and this has been our world for at least a century) money isn't the cash in your pocket or the gold in your strongbox but your share in the right to control currency and capital. When your check gets paid you lose part of your command over money and transfer it to your creditor. And debts, which used to mean a bill to be paid but now ongoing payments, ie, a revenue stream, are considered assets. To repeat one of Marshall's lines: This state of things has some striking results: it led many to think that credit is capital; or another, which presaged the derivatives mess: ...he felt sure of quickly passing it on to his neighbors; or another, which has already begun: the chief evils from its increased instability fell upon others. While I like a 'tec novel as much as anyone the truth is that burglary and armed robbery are passe. Today you do it with paper and digital bits and you can do a lot of it legally, since laws are passed by and for the wealthy.

But bankers don't even trust each other these days; that's why the bailout isn't leading to more lending but to use for acquisitions, which led Joe Nocera in the NY Times to write that he felt he had been sold a bill of goods. Depressions are eras of accumulation crisis where markets are totally saturated (these days it means consumers are tapped out and maxed out on their credit cards) so assets deflate, businesses go bankrupt and the really wealthy increase their power through buying up cheapened assets for pennies on the dollar. Not everyone is broke: Warren Buffet and Bill Gates certainly aren't. Debts must be liquidated and assets destroyed so that a cycle can begin anew with the rich richer and everyone else indebted through the national debt. They, the powers that be, have decided to unite the best of capitalism -- it's a free world and we're all free to starve if we have no money -- with the best of feudalism -- we owe our payments to our masters just because they "own" everything.

The future shakeout will be nasty and long and people will want to fight back, even before they have acquired a workable interpretive framework, and this is where the drive for growing executive power and militarization come in. Why do you think the armed forces have spent years and billions developing weapons and measures for crowd control? Ya think it can't happen here? This is what it looks and feels like when it's happening. Don't expect a guy with a funny mustache and an amphetamine addiction. This time it might turn out to be a really "nice" really smart minority guy.