the american financial oligarchy - Tilted Forum Project Discussion Community

roachboy · 05-11-2009, 07:16 AM

this link takes you to an article from this month's atlantic written by a former chief economist of the imf

The Quiet Coup - The Atlantic (May 2009)

here are snippets of some of the main points---but the article is worth the time to read through, as it presents a rather disturbing picture of the american situation that is quite out of phase with how that situation is presented to us....

argument (set-up)--the american situation at the moment is not different from any number of other financial crises that the imf has had to address in "emerging economies" except at the level of scale....

Quote:

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

a finer point placed on the claim:

Quote:

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

how this "quiet coup" happened--opening paragraphs of the main argument in this respect:

Quote:

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.

what this enabled, in bullet point form:

Quote:

From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:

• insistence on free movement of capital across borders;

• the repeal of Depression-era regulations separating commercial and investment banking;

• a congressional ban on the regulation of credit-default swaps;

• major increases in the amount of leverage allowed to investment banks;

• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;

• an international agreement to allow banks to measure their own riskiness;

• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.

The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.

the article is more damning than these bullets would indicate...

what do you make of johnson's piece?
do you think it accurate? personally i think it is close in part because it points to the role of an entire ideology, willingly parroted by the political order and it's servants in the press, in enabling a disastrous political shift to take place that is only now cracking at the seams enough that it becomes visible as such. this is not to say that there's anything particularly Mysterious about this--but it DOES point to the extent to which we live in an authoritarian media/culture context, a top-down affair in which citizens are reduced to consumers and are encouraged to accept whatever they are told they want to accept and not think beyond that.

folk say this sort of thing can't happen in the magical shangri-la that is america.

but you think that way in part because it already has happened. these mythologies are a form of diversion.

if johnson is right, what do you think should be done?
if johnson is right, does it effect your view of what the obama administration has been doing?

blktour · 07-29-2009, 10:32 AM

Well if you look at who is in the white house now, you can see that this article holds water.

they are all wall street people.

They are basically taking our money and using it for overseas investments, or whatever and being alot riskier than normal since they can get bailed out by US.

what we need to do is stop this by stopping "life long politicians". or give a 4 year cap and then they cant be reelected.

find a way to stop lobbyists.

bills can only be about 20 pages long. or something that LIMITS govt.

if a president makes a promise, and then breaks it. they are gone.

I dont really know since there are so much things that the govt has in place to make it VERY hard to change anything that will dismantle the core of them.

---------- Post added at 10:32 AM ---------- Previous post was at 10:32 AM ----------

MonicaCo · 07-30-2009, 03:48 AM

Stopping lobbyists would be great and although I would love to see that I hardly think that this will ever happen.

Schwan · 08-13-2009, 12:34 PM

roachboy - I think you're missing what he's saying. For you, it's a social thing, with the elites cheating on the lower classes, the media, etc. Johnson is looking at internal reasons for the recession. Personally, I think that the social aspect, however important for, well, people, is really secondary to the causes. And while the whole thing might have started internally, what the economists have somewhat missed is the degree in which the U.S. economy is a part of a larger system.

If you've read Asimov's Foundation, you'll see where I'm going with this. We're seeing the end of a crisis - an end of something that was brewing for the last 15 years. He mentions Korea and Malaysia, but there also was Japan and numerous other countries that should've set the red light flashing years ago, but our tools we use to analyze these things are not sufficient for a system this complicated.

And all these names come up, but I've got a feeling people overinterpret just how important single people can really be in something as immense as this. It's always easier to talk about single people, because it;s the water cooler thing - it;s just someting we do - but in the end it really doesn't matter. The media and elites cheating on the public thing? That's just a zit of the whole thing - insignificant, something to keep y'all busy.

blktour · 08-18-2009, 12:14 PM

so what else could it possibly be? I mean if it what we are thinking is just a secondary cause as you put it.

what is the "main" cause?

in your mind..

roachboy · 08-18-2009, 12:40 PM

huh. so what you're apparently saying is that an article written by a former chief economist of the imf that appeared in an american magazine (atlantic) in the context of a discussion (albeit shortlived) about revamping the imf, bringing it back into some kind of alignment with it's bretton woods functions (largely abandoned through the "transformations" of the late 70s-early 80s into an instrument of neoliberal colonialism) that talks about the not terribly startling fact that the united states is dominanted by a financial oligarchy...that all this is wrong, trivia somehow...you know, actual class fractions that engage in material actions that impact upon the distribution of financial resources in the united states....and that had i read issac asimov, i'd know that?

maybe i am misunderstanding something.
help me out here.

Charlatan · 08-18-2009, 03:57 PM

The chickens have come home to roost...

Willravel · 08-18-2009, 04:48 PM

A few thoughts:

Quote:

The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man).

The financial sector created little to no real wealth in the past 25 years. Only someone buying the illogical economic axioms of the Reagonites could possibly suggest otherwise. What the financial sector had was theoretical wealth which is confused (as is often the case) for real wealth. Theoretical wealth is only as real as the people are willing to accept that it is. For me, it's nothing but bullshit; IOUs and maybes. It's directly linked to the "cultural capital" that the article later mentions, the bullshit economics that we're spoon fed about the market, banks, and investment.

The second we realize that this isn't real wealth and treat it for the hypothetical money it is, it loses its power.

Quote:

Wall Street’s seductive power extended even (or especially) to finance and economics professors, historically confined to the cramped offices of universities and the pursuit of Nobel Prizes.

Hallelujah! Finally someone is willing to admit that academia has long since been infiltrated by Wall Street. I felt like such an idiot in college asking my professor why a person was almost always required to go into debt in order to afford things like a home and a vehicle, where my grandparents (who were of the WWII generation) bought theirs outright, or why it is that we choose to determine value including hypothetical worth instead of what can be counted in hand today.

Quote:

The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.

...until when and if they become healthy again, yes. *rolls up sleeves* Fantastic, let's do it.
...
Oh, right, the government is full of cowards and fools. The second someone in real power has a light bulb go off and he or she suggests temporary nationalization of banks, the right will scream nationalization (if we're lucky, they'll just scream... in all honesty, there would probably be domestic terrorist attacks), and the centrists would run and hide under a rock.

This was a great article, Roach, but I feel like having the answers doesn't mean anything because those who can reach power have to sell out to the interests responsible for this mess and find that it's not in their political interest to do what anyone with two brain cells sees as the right thing. It's an exercise in futility, and Canada is looking better and better every day.

roachboy · 08-23-2009, 09:10 AM

this question of the value of knowing that there is an oligarchy, that it is centered in particular sectors, involves particular institutions and folk within them, who make particular choices in particular contexts based on particular calculations is not small, if only insofar as it helps make sense of much broader phenomena. that this information is coming from a former chief economist of the imf is not without it's own interest, first to the extent that he wrote the piece at all, and second as an indicator that this situation--the american financial oligarchy---is transparent. that is, you are not reading a piece by some trotskyite written on the basis of a collaging together of economic data and elements taken from marx---this is a view of the united states from the belly of the beast as it were. none of this seems to me futile or trivial.

it also gives a partial basis at least for perspectives on other phenomena--the magnitude of political powerlessness in america for example, the degree to which we live largely in some narcotized state, accepting as if inevitable and unstoppable the consequences of particular choices made by particular actors in particular contexts.
so it provides a way into thinking what contemporary forms of ideology are, what they look like, what they do.

it also provides a good indication of the extent to which what the obama administration has been doing addresses little in the way of fundamental problems.
too often in the reactionary media context we operate inside of, it is easy to find oneself drifting into a near-acceptance of the right's idiotic way of framing obama as some leftist. he's nothing of the kind. think about the outcomes to this point of the triage operations performed at the end of the bush period, which boxed in obama early on in the context of a quite deep crisis. the outcomes have been an increased concentration of financial power and no discernible change in the business as usual. there are indicators that consequences of the ongoing reality of the--um---transition in american capitalism away from a logic of empire and into something less coherent (such that the irrationalities of the present models of social, economic and political activity are being manifest through, say, massive sustained unemployment, which is already generating a second wave of mortgage problems, which is going to hit the same sector again, but in a more serious manner)...

so i don't think this a useless article, nor do i see reading it an exercise in futility.
it's better to know than not to know, even if all that knowing lets you do is make a more accurate map of collapse or transformation (depending on how things are played).

07-29-2009, 10:32 AM	#2 (permalink)
blktour Psycho Location: Anchorage, AK	Well if you look at who is in the white house now, you can see that this article holds water. they are all wall street people. They are basically taking our money and using it for overseas investments, or whatever and being alot riskier than normal since they can get bailed out by US. what we need to do is stop this by stopping "life long politicians". or give a 4 year cap and then they cant be reelected. find a way to stop lobbyists. bills can only be about 20 pages long. or something that LIMITS govt. if a president makes a promise, and then breaks it. they are gone. I dont really know since there are so much things that the govt has in place to make it VERY hard to change anything that will dismantle the core of them. ---------- Post added at 10:32 AM ---------- Previous post was at 10:32 AM ---------- Last edited by blktour; 07-29-2009 at 10:37 AM..

08-18-2009, 12:40 PM	#6 (permalink)
roachboy Super Moderator Location: essex ma	huh. so what you're apparently saying is that an article written by a former chief economist of the imf that appeared in an american magazine (atlantic) in the context of a discussion (albeit shortlived) about revamping the imf, bringing it back into some kind of alignment with it's bretton woods functions (largely abandoned through the "transformations" of the late 70s-early 80s into an instrument of neoliberal colonialism) that talks about the not terribly startling fact that the united states is dominanted by a financial oligarchy...that all this is wrong, trivia somehow...you know, actual class fractions that engage in material actions that impact upon the distribution of financial resources in the united states....and that had i read issac asimov, i'd know that? maybe i am misunderstanding something. help me out here. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

08-18-2009, 03:57 PM	#7 (permalink)
Charlatan Getting it. Super Moderator Location: Lion City	The chickens have come home to roost... __________________ "My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars." - Old Man Luedecke

08-23-2009, 09:10 AM	#9 (permalink)
roachboy Super Moderator Location: essex ma	this question of the value of knowing that there is an oligarchy, that it is centered in particular sectors, involves particular institutions and folk within them, who make particular choices in particular contexts based on particular calculations is not small, if only insofar as it helps make sense of much broader phenomena. that this information is coming from a former chief economist of the imf is not without it's own interest, first to the extent that he wrote the piece at all, and second as an indicator that this situation--the american financial oligarchy---is transparent. that is, you are not reading a piece by some trotskyite written on the basis of a collaging together of economic data and elements taken from marx---this is a view of the united states from the belly of the beast as it were. none of this seems to me futile or trivial. it also gives a partial basis at least for perspectives on other phenomena--the magnitude of political powerlessness in america for example, the degree to which we live largely in some narcotized state, accepting as if inevitable and unstoppable the consequences of particular choices made by particular actors in particular contexts. so it provides a way into thinking what contemporary forms of ideology are, what they look like, what they do. it also provides a good indication of the extent to which what the obama administration has been doing addresses little in the way of fundamental problems. too often in the reactionary media context we operate inside of, it is easy to find oneself drifting into a near-acceptance of the right's idiotic way of framing obama as some leftist. he's nothing of the kind. think about the outcomes to this point of the triage operations performed at the end of the bush period, which boxed in obama early on in the context of a quite deep crisis. the outcomes have been an increased concentration of financial power and no discernible change in the business as usual. there are indicators that consequences of the ongoing reality of the--um---transition in american capitalism away from a logic of empire and into something less coherent (such that the irrationalities of the present models of social, economic and political activity are being manifest through, say, massive sustained unemployment, which is already generating a second wave of mortgage problems, which is going to hit the same sector again, but in a more serious manner)... so i don't think this a useless article, nor do i see reading it an exercise in futility. it's better to know than not to know, even if all that knowing lets you do is make a more accurate map of collapse or transformation (depending on how things are played). __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

07-30-2009, 03:48 AM	#3 (permalink)
MonicaCo Upright	Stopping lobbyists would be great and although I would love to see that I hardly think that this will ever happen.

08-13-2009, 12:34 PM	#4 (permalink)
Schwan A boy and his dog Location: EU!	roachboy - I think you're missing what he's saying. For you, it's a social thing, with the elites cheating on the lower classes, the media, etc. Johnson is looking at internal reasons for the recession. Personally, I think that the social aspect, however important for, well, people, is really secondary to the causes. And while the whole thing might have started internally, what the economists have somewhat missed is the degree in which the U.S. economy is a part of a larger system. If you've read Asimov's Foundation, you'll see where I'm going with this. We're seeing the end of a crisis - an end of something that was brewing for the last 15 years. He mentions Korea and Malaysia, but there also was Japan and numerous other countries that should've set the red light flashing years ago, but our tools we use to analyze these things are not sufficient for a system this complicated. And all these names come up, but I've got a feeling people overinterpret just how important single people can really be in something as immense as this. It's always easier to talk about single people, because it;s the water cooler thing - it;s just someting we do - but in the end it really doesn't matter. The media and elites cheating on the public thing? That's just a zit of the whole thing - insignificant, something to keep y'all busy.

08-18-2009, 12:14 PM	#5 (permalink)
blktour Psycho Location: Anchorage, AK	so what else could it possibly be? I mean if it what we are thinking is just a secondary cause as you put it. what is the "main" cause? in your mind..