Friday, August 28, 2009

"Business as Usual": Legitimizing the Illegitimate

A key goal of the status quo is to label illegitimate looting and fraud as "business as usual."

NOTE: My apologies to all email correspondents: I have been overwhelmed this week and thus while I have read every email I have been unable to respond to all. Your patience is greatly appreciated.

One of the key goals of the status quo's propaganda is to convince the target audience that fraud, deception, obfuscation and looting have always been "business as usual" and thus protests are specious. The key technique employed to accomplish this goal is to derealize U.S. history, depriving the target audience (the U.S. citizenry) of any context that does not support the soothing contention that "everybody has always cheated, there's nothing new under the sun, politicians have always been crooks," etc.

Any history which suggests that the present era of fraud, debauchery of credit, State over-reach and Plutocratic excess is unprecedented or parallels moments in U.S. history which were immediately followed by financial collapse, strife and war is dismissed or expunged from the mass media.

This derealization of history has several moving parts:

1. Emphasize the present unceasingly and ignore the past as irrelevant. The "news cycle" shortens into soundbites and video snippets, eliminating any moment of relative calm for analysis or context. This could be termed induced amnesia.

2. A frenzy of images and emotional content that confuse and numb the audience via sensory and verbal overload.

3. Delegitimize skeptical inquiry and demands for transparency by dismissing our era's ubiquitous fraud and over-reach as merely typical behavior that has always been present in U.S. history.

This approach is effective because there is a kernel of truth in every admonishment that greed in inherent in human nature. But this appeal to greed as normal (if not "good") masks the reality that previous eras of American history were characterized by robust negative feedbacks which acted to limit financial fraud, deception and embezzlement.

4. Decontextualize scale. If the rentier-financial Elite pillaged $10 million in a previous period of unlimited financial looting and debauchery of credit (to grab a number from the air), then claim today's looting of hundreds of billions of dollars--adjusted for inflation, a sum a 100-fold larger than the past sum--is "no different than the past, it's just business as usual."

The goal is to mask the truth that today's over-reach and embezzlement is very different as it is two orders of magnitude greater and has reached its larcenous claws past the usual "den of thieves" on Wall Street into the heart of middle class wealth, housing/real estate and retirement savings.

This technique also effectively masks the very different scale of the U.S. military and its global reach. Prior to World War II, the U.S. military quickly shrank back to its prewar modest scale after the cessation of hostilities. The U.S. Navy was significant enough to defend sealanes for commerce and enforce the Monroe Doctrine (domination of Central America and the Caribbean) but other navies were larger. The Great White Fleet (14 ships) of 1908 which sailed around the world in a display of American seapower depended on friendly ports of call to refuel; now the U.S. maintains global fleets homeported in its own bases around the world.

Once again, the fact that the U.S. possessed a Navy and Army in 1908 can be used to mask the scale of the present military: "what's the big deal, we've always had a Navy," which sounds exactly like "What's the big deal, banks have always been greedy," etc.--all language designed to distract us from the realization that today's financial fraud and embezzlement and today's American Empire are unprecedented in their scale and reach.

5. Decontextualize history. By downplaying comparisons with legitimately prosperous eras in U.S. history, propaganda masks key differences between the past and present. Thus when banks were tightly regulated after the fraud and debauchery of the 1920s (and subsequent crash of 1929), financial profits were a modest slice of total U.S. corporate profits. In the past decade of deregulated "financial innovation," financial sector profits have ballooned up to completely dominate private-sector earnings, now constituting some 40% of all corporate profits.

In the same manner, the fact that inequality has leaped since the early 1970s has been derealized to protect those reaping the benefits from any comparisons with the past which might call into question their justifications.

6. Confuse the taxonomy of profit and wealth generation. This can also be termed "purposefully confusing apples with oranges." Thus the neutral word "profit" is used to describe the legitmate profits earned by innovative enterprises such as Apple which earns money by providing goods and services that provide greater value than competitive devices, and illegitimate profits reaped by deceptive, fraudulent mortgage-mill lenders who sold "toxic" mortgages to borrowers who were clearly unqualified--at least by standards that were universally considered sound prior to the rise of "financial innovations" in the past decade.

Despite the visible difference in type and category of these "earnings," the mainstream financial media (a key arm of the propaganda/marketing machine) compares the numbers as if they deserve the same categorization in the taxonomy of profit and wealth generation. Yet one is clearly illegitimate as it cannot function without deception, fraud, embezzlment, distortion, misrepresentation, excessive risk-taking, malfeasance and collusion. And indeed, once questions were raised and standards modestly tightened, these firms vanished overnight.

The other key goal of Plutocratic and State propaganda is to legitimize the illegitimate. Consider, for example, complex derivatives. Although these financial instruments are presented as "risk management tools" akin to futures contracts and options (which have been in place for hundreds of years), they are mere simulacra of these time-tested risk-management tools.

Where a futures contract or option has simple, transparent features--the contract gives the owner the right to buy shares of stocks or a specified commodities--a complex derivative is designed to be obscure and opaque, offering a facsimile of risk management that actually masks inordinate hidden risk.

Such instruments might include currency swaps and credit default swaps which only those originating the derivative truly understand. This purposeful complexity provided a rationalization for the derivatives to remain unpriced, unlike options and futures contracts which are "marked to market" every trading day on transparent exchanges. Masking their true value, complex derivatives are marked not to market but to fantasy: whatever the holder claims the value to be.

Since no one outside the underwriter can assess the value, the underwriter enters a "game the system" collusion with a ratings firm which then issues a AAA "safe investment" rating on the risky derivative.

And since there is no market to set the value, such instruments can be claimed as assets even as they approach zero valuation.

By any measure, such instruments are not legitimate risk-management tools; they are purposefully fraudulent from inception and by design, and immensely profitable to the underwriting firm. Thus it is no surprise that some $600 trillion in notational value derivatives have been written and are floating around the global financial system, carrying illusory valuations and endemic risk.

The net result is immense profits for the insiders perpetrating the fraud and the eventual undermining of legitimate credit and risk-assessment and management systems.

Legitimizing the illegitimate necessarily ends up delegitimizing the authentic foundation that the illegitimacy preyed upon. Claiming financial fraud is legitimate delegitimizes capitalism, the U.S. financial system and the U.S. as a nation. It's as if a serial adulterer announced that now that his wife is having an affair then his own adultery is thus legitimized. But this justification fools no one; the adulterer has delegitimized his own fraudulent, debauched marriage and himself.

That is precisely the situation of the U.S. financial sector and Empire, which has employed legimate military forces in illegimate "pre-emptory" wars and other uses of force which are purposefully kept as State secrets lest the American citizenry question their legitimacy and necessity.

This process of legitimizing the illegimite and thus delegitimizing what was once trustworthy and authentic can be seen in all the mechanisms and structures described in this analysis, financial, intellectual and political. It is a pattern which is repeated again and again in the substitution of simulacrum for authentic systems and the masking of this substitution with delusions, deceptions and misrepresentations actively promoted and disseminated by a sophisticated mass media marketing/propaganda machine.

Here are examples of "business as usual" which were not "business as usual" a relatively short time ago:

-- Advertising medications directly to consumers was banned until only a few years ago. Pharmaceutical firms could advertise only to doctors in professional journals.

-- Investment banks were not allowed to perform commercial banking until 1999.

-- Banks' profits flowed from conventional lending and constituted a relatively modest percentage of overall corporate earnings until the last decade when they became the dominant profit-center, reaping fully 40% of U.S. corporate profits.

-- The Armed Forces and other government agencies did not engage in pre-emptive wars, coups and foreign entanglements that George Washington warned against until relatively recently in U.S. history (post World War II).

All of these fundamental changes have been legitimized and sold as "business as usual" via propaganda and induced amnesia.

This is a new section from Survival+: Structuring Prosperity for Yourself and the Nation. I am working desperately to complete the revised ebook by September.


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