In my previous piece, Progressive Tea Partying under the Debt Ceiling commenter captjjyossarian and missling expressed curiosity over economist Michael Hudson’s position on the upcoming vote on raising the debt ceiling.

Many presumed that going here meant that I am a right wing deficit hawk because for so many thinking the same thoughts as those well known to have cooties puts oneself at risk of cooties. Far from it, I am a Keynesian and Hudson is a major influence on my understanding of finance due to his razor critical analysis. But there is not going to be any Keyensian fiscal intervention, only Quantitative Easing on the monetary side.

Given that our primary policy tool is not available it is time to consider other options.

Here is a transcript of a deficit hawk video featuring a clip from Obama economic advisor Austan Goolsbee and a live action response from Michael Hudson. Embedding of the youtube.com video wasn’t happening for me. Again, consider the content of the principals, Goolsbee and Hudson, more so than the source, some bizarre deficit hawk channel, she only speaks one line and Hudson changes the subject to what he wants to talk about.

3:05: Goolsbee: If we hit the debt celing, that’s essentially defaulting on our obligations which is totally unprecedented in american history the impact on
the economy would be catastrophic.

Host: How catastrophic would it be in your opinion?

3:25: Hudson: It would be like stepping on a piece of gum and having to get it off your shoe.

Adam Smith said in “The Wealth of Nations” that no government has ever repaid its debt and you can say that today, nothing has changed. It would be a zero problem. People who talk like that are trying to frighten you. And when a politician tries to frighten you, you can think of “what is it that he wants me to do?” How am I being manipulated? This is pure ignorance. And its obvious that if Mr. Goolsbee knew anything about money and credit, he’d wouldn’t have anything to do with the University of Chicago to begin with.

[I love that last line. See: Chicago School of Economics:
Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid 1970s, when it turned to new classical macroeconomics heavily based on the assumption of rational expectations. Chicago economists applied rational expectations to other areas in economics like finance, which produced the influential efficient market hypothesis.]

Here’s Lawrence O’Donnell going off like a loyal partisan hack that he is about how the sky will fall if Congress does not raise the debt ceiling.

[I can't help but see Allison Janney as Trish in Todd Solodnz "Life During Wartime."]

“The Republicans are being irresponsible!” Claim the Democrats. But what I think we’ve going on here is the Democrats defending a very irresponsible financial system that is consigning Americans to poverty in record numbers while accusing the Republicans of irresponsibly not conforming to that irresponsible orthodoxy.

I’m of the mind that the decline of the reserve currency status of the USD would also suffer were the supply of US debt constrained and dollars began to build up around he world and drive up the value of their currencies. But that is not necessarily a bad thing. The economic armaments that the ability to issue an infinite amount of dollar debt entails are well worth disposing of. Clearly the global south would be much better off without the US commanding their economies through dollar power.

The only ones who would be worse off would be Americans. Our ability to command inexpensive materials from the global south as a matter of right would vanish. We’d need to pay for imports based on the value of our exports, and that would mean more expensive imports.

Such a move needn’t threaten domestic social programs as they are bought and paid for with domestic dollars. And it would automatically rule out keeping the constellation of almost 1000 military bases not to mention bailing out the banks–the economy, even if social security and medicare were abolished, simply couldn’t handle that load. The military and financial behemoths can only be supported by the US government that has the appearance of a bottomless wallet.

There will be no Keynesian solution for the mid term and there does not appear that there is anything that Americans are willing to do to change that. So it is time to look to other options. I’m one to play political jiu-jitsu with my opponents, when they overreach and overpromise, encourage them on further and then call the question on them.

Not only with the debt, but now with health care. The Republicans want to repeal The Health Insurers and Big Pharma Corporate Welfare Act of 2010. The Democrats should call the Republicans bluff, support repealing the unpopular Individual Mandate, and leave the Health Insurers holding the bag for no ban on preexisting conditions and other progressive aspects of the bill which the insurers would only provide if they were guaranteed customers. Of course the Democrats will do nothing of the kind, they’ll continue to act as responsible stewards of irresponsible systems in the face of Republican’s who irresponsibly don’t adhere to the irresponsible orthodoxy that it is a good thing for government to guarantee customers to a sector through tax penalty.

Our only choice now is to unite with those on the right calling for not raising the debt ceiling as a way of cutting off the flow of free public wealth to the banksters that are sucking our society dry and condemning so many of us to poverty.

In March, the United States Government will max out its national credit card and in order for the Treasury to borrow more money, Congress will be required to raise the debt ceiling. This is red meat for the incoming Tea Party Republicans, who ran against running up debt that will saddle our children, grandchildren and their kids, dogs, chickens and cats with unspeakable horrors.

In order to protect the progeny from a lifetime of service to the debt, the Tea Partiers are threatening to block this otherwise routine bill. Those who pass for responsible adults in both political parties are eyeing the insurgents nervously because they know that the dollar only exists in the form that we know it because it is valued by a continuous demand for dollar denominated debt issued by the United States Government and backed by its full faith and credit. Full faith and credit in this instance means ongoing tax revenues from us all, no matter how high they might go, no matter what those borrowed dollars might get spent on. Anyone who has traveled internationally knows that the dollar is a very special currency. It is not just our internal means of exchange, but is an economic universal solvent for all other currencies in a way that few others are.

The ability to print dollars backed by debt instruments is what allows the United States to finance the military enterprise consisting of almost 1,000 foreign bases, two and a half active military conflicts, and to provide a significant backstop to cover banksters’ gambling losses on the Wall Street casino.

No objective observers ever claimed that the populist anger stoked by billionaire financing of the various Tea Party operations was rational. Who can forget those “Keep your government hands off of my Social Security” signs held up by wheezing obese white seniors on Medicare financed oxygen tanks and scooters?

When that wild irrationality harmonizes with progressive radical goals, as in stopped clocks tell accurate time twice a day, then it is time for progressives to unite with the Tea Party on this issue and demand that the Congress refuse to raise the debt ceiling. Unlike the Tea Party, progressives should demand this because it will cut off the cash flow that threatens to condemn American workers to a lifetime of declining incomes in service of the Wall Street and military sectors so that the elites can continue to maintain the global south in low wage peonage and squalor.

The debt dollar is an economic armament created by keystrokes of bankers. These armaments are used to power a military that the United States’ economy otherwise could not afford.  But those dollar weapons are also used in economic conflict. With the dollar universally accepted as valuable and the United States Government able to generate dollars at will through issuing debt, the dollar is used as the primary tool of United States economic domination over countries for various reasons.

We know that the military has been used to condemn hundreds of millions to lives of squalor amidst plenty as brutal dictators have acquiesced to the exportation of raw materials to the United States as bargain basement prices.  We also know that asymmetrical (terrorist) attacks are often responses to that brutality which fuels the vicious military cycle known as the “War on Terror.”   But the dollar has likewise been used to allow the United States to import more, less expensive goods not based on the value of our own product and exports, rather on the artificial valuation of our funny printed paper.

The dollars that the Treasury creates through floating debt are expensive dollars not just because of the interest paid to bond holders. When the government issues debt, when the Federal Reserve fabricates dollars out of thin air, they do not sell those dollars directly to investors or to in the case of the Fed to the Treasury. No, they sell those dollars at a discount to the “Primary Dealers,” the massive investment banks such as Goldman Sachs, Citigroup and JP Morgan, to name a few. These Primary Dealers turn around and sell those bonds for a premium to the final purchasers, taking a little off the top of a shitload.

When the United States Government can no longer foist that funny paper off on the rest of the world, either because of an evaporation of confidence in its value or because of a statutory limit on how much it can borrow, then the global south will be free from dollar economic hegemony and from the military intimidation and brutality that those dollars create out of thin air.

The artificially and high standard of living in the United States is unsustainable and must fall back to earth, because sustaining it based on subjugating the global south to unspeakable conditions is unconscionable.  Global southerners, not to mention the emerging industrialized nations of Brazil, Russia, India and China are having no more of it. The end of the debt dollar means the end of dollar dominance of the global economy and the sprawling imperial military in service of the kind of un-American foreign policy revealed by Wikileaks, resulting in a load taken off of the back of the two billion poorest earthlings and American taxpayers alike.

That will leave us to fight the domestic economic fight where we contest the allocation of domestic dollars against the elites, those that are neither valued by that which we produce, not by speculators’ bets. There is much more political latitude in allocating how domestic dollars are deployed, with prices being determined by domestic supply and demand. The best path towards delivering on progressive values will be stripping the dollar of its global power so that it can serve our needs at home first.

Freed from the double duty of domestic currency and debt instigated global imperial universal economic solvent, the New Dollars can be made to work the will of the best interests of Americans rather than global investors. This means that wholly domestic programs like Social Security and Medicare, perhaps single payer health care, will become eminently feasible as they are in nations whose currencies are not based on the global reserve currency.

It is time for progressives and radicals to move in for the kill, for us to put our money, as it were, where our mouths are, to take advantage of the suicide pact that the Tea Partiers’ contradictions have invited, to leverage their power to achieve our ends. Yes, this is going to hurt going in, but after a while, you get used to it and it begins to feel good.

As the American empire transitions from the role of unitary superpower it has held since the demise of the Soviet Union, American elites strive to maintain the appearances of political, economic and military dominance—full spectrum–upon which such status is predicated.  But as the second shoe finally drops signifying the end of the Cold War era, the reluctance of Americans to challenge the consolidation of power by the Imperial elite now underway stands in stark contrast to the willingness of many elsewhere to put themselves on the line to resist such a dismal outcome that bodes tremendous consequences far from American shores.

Into the gap provided by a complacent domestic populace created by shifting of investment from education to cultural propaganda which has effectively bred us into Lippman’s “bewildered herd” falls an emerging equivalent of an International Solidarity Movement for the Liberation (or at least Neutralization) of the American Empire.  That which this nation of timid couch potatoes cannot do for ourselves is being done for us by others and I applaud them.

Empires succeed so long as their prerogatives are perceived to be inviolable economically, militarily and politically.  George W. Bush’s greatest crime against the American consensus as deemed by liberals had been his diminishing of US prestige on all three fronts.  Obama’s continuing along Bush’s trajectory has not changed this, yet liberals remain silent.  A significant consequence of the Wikileaks project read as part of a solidarity movement is to delegitimize the US as a counterparty, as a trusted partner, in all dealings economic, military and political.   This demolition of credibility on the three pillars of international legitimacy portends the death of a thousand cuts to the base of Empire and should be cheered and encouraged from the comfort of our couches and broadband connections.  Click “like.”

Economically, the US has officially abandoned its domestic economic project in favor of the juiced up financial and military sectors.  But the rest of the world offers scant comfort for the excesses of both.   The key lesson from the meltdown in the Eurozone is that the safety net works and that casino capitalism does not.  France and Germany are weathering the storm better than Portugal, Italy, Ireland, Greece and Spain (PIIGS) within the Euro context due to this.    The price for populations resident in states which have been unfortunate enough to have failed to learn the lesson of the danger of casting one’s national lot with Austrian and Chicago school economics and continue to put the state as inviolable guarantor of private sector debt will be a long term of hard labor within what appears to be the Euro equivalent of an IMF austerity dungeon.

The US is beholden to the laissez-faire economic sharia approach of market worship, and can expect to find itself at the short end of the recovery stick once the stronger Euro economies and the rising industrialized powers (Brazil, Russia, India and China) make more attractive investment targets than the fading greenback.    Brazil and China have already agreed to conduct bilateral trade most notably in a sizable volume of petroleum in their own currencies, abandoning the dollar as global means of exchange.  The role of non-dollar denominated petroleum trade as relates to the primacy of the dollar cannot be underestimated.

The decline in the ability of US finance elites to create universally valuable and accepted dollars on their keyboards essentially at will and to deploy those dollars around the world where needed in volumes that dwarf and overpower all else presages a decline in the ability of the US to enforce its will militarily.  The future viability of American tax receipts as collateral for dollar sovereign debt must be measured against the downward trajectory of both wages and tax policy.  Declining wages and tax retrenchment spell a limited tax revenue stream and limits the economic bulk and heft backing the dollar.  The only means of economic support for military spending equivalent of the rest of the world combined is this dollar extortion racket.

In addition to the abandonment of the dollar by Russia and China in bilateral trade, Germany and France are the apparent responsible adults in the global industrialized economy room that realize that US style casino capitalism as modeled by Goldman Sachs algo whizzes is neither a viable nor sustainable approach for governments with economic interests that extend beyond saturating the elites in greater wealth.  Pressure exerted by Germany’s Christian Democratic Union’s Angela Merkel, hardly a socialist, to force senior bondholders on Eurozone member state sovereign debt to take significant  haircuts on European bail out, underscore the divergence in economic policy between the sober states on the continent and the “Four Loko” chugging American and to a lesser extent British economic gangsters.  Even the PIIGS have quit the sauce and have ceased efforts to dig themselves in deeper into the pit of denial of causality.  The same cannot be said of the American economic Taliban.

The Germans have retained their quality manufacturing sector and realize that allowing hypertrophy on the part of the finance sector means that manufacturing, which delivers 8% return on capital invested, will never be able to compete with the 30-40% ROI that finance offers.  European consensus seems to be gelling around the notion that finance must be relegated to the role of lubricant for capitalism lest it become capitalism itself and destroy productive enterprise.  Americans have learned no such lesson, and it is less likely that Europeans will partner with American finance capital under these circumstances.  If Wikileaks survives to the point where the Bank of America memos are released next month, the consequences on trust for the US finance sector could be damning.

If it turns out that the Treasury and Federal Reserve have been gaming European bonds as a distraction to shift attention away from their inability to deal with structural time bombs ticking within the US economy, then we can count on a further diminishing of US credibility as an economic partner.

Politically, many Americans were under the impression that President George W. Bush was the “worstest president ever” as far as America’s global appearance as “The Most Peace Loving of Nations” went.  But Obama’s continuation of objectionable Bush policies almost without exception and their fundamental similarity to earlier administrations demonstrates that these policies are the property of the permanent state rather than any politically temporary head of government.    The Wikileaks cables clearly demonstrate that the most toxic form of American exceptionalism permeates the diplomatic corps.  The State Department is revealed as little more than vicious Chihuahua nipping at the heels of the peripheral provinces of Empire in the service of elite interests.

The coercion of continued military projects by the US Imperial elite is what is driving the hijacking of the decayed Republic by the Empire.  The dollar economic system is engineered to subsidize it while preparing the ground for operations by brutally subjugating theatres of operation.  The political operation is tasked with creating plausible scenarios for continued military profit making.  And the profits from the military are plowed back into the finance and political operations.  American capital is on strike except when it comes to financing electoral shifts to their favor and investing in creating instability and profiting off of the corpses they pile up in bulk.

Consider the $3 billion portion of annual US contribution to Israel that is made public.  The Israeli occupation of and holocaust against Palestine takes center stage in ensuring the continued resistance to US operations in the southwest Asian oil patch.  The nature of US dominance on that region as prison nations to provide inexpensive petroleum also instigates resistance.  The sheer volume of ongoing engagements due to the ostensibly bat shit crazy actions of Israel burdens the US with hundreds of times that amount of money in military costs.  Those policies are not bat shit crazy for all when those public investments pay off wildly as massive profits for military contractors. Those profits in turn get reinvested into shifting elections to maintain those policies and income streams.

Wikileaks’ release of Iraq documents exposes the glorious incompetence of the muscle bound US military in achieving its primary goals.  But disclosing these secret documents should not be needed.  The US military was incapable of defending its headquarters in the US capital.  The US military has been incapable of using allegedly superior technological prowess to defeat ragtag militias from cultures that are just “emerging” into the early 20th century in Iraq, Afghanistan and Pakistan.  The most powerful military in the world backed with the most powerful intelligence community in the world has been unable to locate bin Laden after more than a decade of effort.  If there ever was an emperor that had no suit of armor, this one is it.

Americans know the futility of speaking the truth to power, as power already knows the truth.  The service that Wikileaks is providing the world is different because Wikileaks is speaking the truth in detail about how US power says it operates, how it says it lies and demonstrates just how unreliable US power is as a partner to those with whom US power does business.

Speaking the truth about how power is unreliable to those which power requires trust from in order to continue exercising power is the Achilles heel of power.  The disclosure of crimes and a party’s unreliability is taken much more seriously than the underlying litany of crimes or record of deception.

Just as the US Empire has declared Usama bin Laden to be Public Enemy Number One, it now would elevate Julian Assange to join him in that pantheon.  But Assange is more effective than bin Laden in showcasing that bin Laden is small potatoes when compared to the ongoing criminal gang that compromise the elites of the US Empire.   Just as Bush II squandered the wellspring of goodwill globally directed at Americans post-9/11, the State Department cables reveal that the US has long since abandoned any semblance of credibility in its actions on the global stage.

The sum total of corpses piled up by the Imperial finance, political and military operation since it came of age after WWII, including dead Americans, diminishes the number of Americans killed by bin Laden or anyone else resisting imperial imperatives.  The convergence of these elites has proven that the main terror threat to Americans resides in the Northern Virginia suburbs and Southwestern Connecticut and commutes to work in Washington DC and Manhattan.

Bin Laden had identified the correct targets but used the wrong weapons.  Assange has corrected for bin Laden’s operational error and has deployed a far more effective weapon of choice, one that we must all hope will be more effective.

Edit: removed superfluous “finally” in paragraph 1.

Edit: cleaned up language in paragraph “Speaking the truth”

Twelve voices were shouting in anger, and they were all alike. No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

Source: George Orwell, Animal Farm

Off Topic, but cool.

Cooper’s Hawk and Anna’s Hummingbird

(click on the pic to go to flickr.com to see the notes if the Anna’s is not apparent)

People enjoyed another photo I posted last week of a Cooper’s Hawk clinching a pigeon in its talons while squirting out some guano. This one was taken moments ago of a Cooper’s Hawk probably drying off after a rainstorm on our neighbor’s back deck in San Francisco’s soggy Mission District. One of our local Anna’s Hummingbirds decided to check out the incursion into its territory, buzzing the oblivious hawk for a moment.

The hawks are welcome because being in the middle of a city, the rodent problem is intense, the cats can’t handle it all with so many vines offering safe passage, and my prized stupice tomato crop is pilfered less by rodents when there are raptors around.

Here are some older, summertime photos of Anna’s Hummingbirds feeding in my garden:

Anna’s Hummingbird

Anna’s Hummingbird 2

What’s amazing is when 3 of these tiny animals decided they’re going to contest terrain, going at each other with 500′ dive bombs at 70mph in multiple cycles.

There has been talk of the Democrats using Coakley’s loss in Massachusetts as an excuse to turn the conversation to jobs.

But there are only three ways within the realm of the Democrats to propose to create jobs ( do not agree with all of the logic behind them myself ), three ways which do not remain unexplored, but which have not yet been able to make much of a dent in structural unemployment:

1. Monetary policy, low interest rates make capital inexpensive, allow corporations to borrow and create jobs.

2. Fiscal policy – taxation, low taxes leave corporations more resources with which to create jobs, investors more resources to invest.

3. Fiscal policy – debt financed demand stimulus, borrow money to create public sector financed jobs (in either public or private sector) to generate wage driven demand, priming the pump for an economic recovery, old school Keynesianism.

1 and 2 are essentially tapped out, interest and corporate tax rates are at or near historic lows.

3 was tried, half watered down with 2 and seems to have slowed down the rate of deterioration.

If the Democrats are going to play deficit hawk over everything but the military then we’re not going to be seeing the kind of muscle required confront the scale of the problem in real time.

Without deficit spending or confiscatory laws, there is nowhere within their context to go. They should be careful in shifting the focus to jobs, because it appears that they’ve got about as much spine for that fight as they did for health care.

Olbermann and Stewart

Rarity in American politics: Jon Stewart calls Keith Olbermann on going over the top, personalizing his politics:

To Olbermann’s credit, he does apologize to Jon Stewart after Stewart’s masterful comedic send up of Olbermann.

So often male politicians believe their manhood is reflected in their politics and will not back down no matter what, will run the project into the ground rather than "lose face."

Obama is on health care where Olbermann was with the over the top, ad hominem reportage that had grown tiresome. A little over the top, devaluing his own currency daily, previously unable to yield to the obvious–nobody likes this anymore. One was able to admit it, course correct and hopefully move forward better informed.

The other seems driven to run the entire operation off of a cliff.