Tuesday, October 17, 2017

Fraud, Exploitation and Collusion: America's Pharmaceutical Industry

The rot within manifested by the pharmaceutical industry almost defies description.
The theme this week is The Rot Within.
America's Pharmaceutical industry takes pride of place in this week's theme of The Rot Within, as the industry has raised fraud, exploitation and collusion to systemic perfection.
What other industry can routinely kill hundreds of thousands of Americans and suffer no blowback? Only recently has the toll of needless deaths from the opioid pandemic finally roused a comatose corporate media and bought-and-paid-for, see-no-evil Congress to wonder if maybe there should be some limits placed on Big Pharma and its drug distributors.
What other industry can raise prices any time it wants because, well, it can?Longtime correspondent/physician J.F. recently submitted a chart of medication price increases (below)--nothing special, nothing out of the ordinary, just the usual because we can price increases.
What other industry has such complete control over the federal government?Dr. J.F. reminded me that the law enacting Medicare Part D prescription drug coverage specifically prohibits the U.S. government from negotiating lower prices on the immense volume of medications it purchases through Medicare (not to mention the Medicaid and Veterans Administration programs).
J.F. also submitted this investigative report from CNN, The little red pill being pushed on the elderly.
Here's the money-shot:
"The combination of two generic drugs that makes up Nuedexta -- a cough suppressant and heart medication -- was once available from specialty pharmacists willing to combine the ingredients for less than $1 a pill, according to a US Senate report on rising prescription drug prices. Now the FDA-approved medication costs as much as $12.60 a pill."
If this isn't fraud, exploitation and collusion, then what is it? Please don't say "good old free-market capitalism," because competition is nowhere in sight.
The pharmaceutical industry is a crony-capitalist cartel that buys whatever political influence it requires to maintain its power and profits. Isn't it obvious? Or have we become so distracted and drugged that we no longer care?
Ho-hum, just another 20 times the rate of inflation increase in medication prices by Big Pharma: nothing to see here, folks, just move along and take your meds....
We're number one! -- in drug-induced deaths per million residents: isn't it amazing that this raises no eyebrows at all in our "leadership" or the citizenry?
Can we be honest for a change, and just admit that profits are way more important in our status quo than a couple hundred thousand deaths in America's permanent underclass?
The rot within manifested by the pharmaceutical industry almost defies description. That we tolerate this as business as usual (BAU) shows that ours is a society and economy afflicted with the sickness unto death.
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Monday, October 16, 2017

The United States of Weinstein: Complicity, Greed and Corruption Is the Status Quo

If integrity means more than any of these baubles, then prepare to fail.
The theme this week is The Rot Within.
The sordid story of Harvey Weinstein is being presented as an aberration. It is not an aberration; it is merely a high-profile example of how the status quo functions in the USA, a.k.a. The United States of Weinstein, in which complicity, greed and corruption reign supreme in every sector and in every nook and cranny of power.
The dirty secret of America's status quo is that power and wealth are both extremely concentrated, which means there are gatekeepers who must be bribed, sated or serviced if you want to claw your way up the wealth-power pyramid. Mr. Weinstein's alleged conduct and payoffs of those he exploited is par for the course in the corridors of power in the USA.
As a gatekeeper in Hollywood, Mr. W. could make or break careers with absurd ease.
Gatekeepers are the key functionaries in a rentier economy in which the few at the top skim the wealth of the many. Want to play in the big leagues of Hollywood, Washington D.C., the Pentagon, or the various HQs of Global Corporate America? You have to pay the Gatekeepers what they demand.
It might be the casting couch or a slice of the profits, or a vote in committee, but the price of admission will always include complicity--silence about the crimes committed and the endemic corruption, and a sacrifice of moral standards. This is the minimal price of "success" in the elite circles of wealth and power in America.
If you doubt this, dig deep into any concentration of power in America and see what you find. Outsiders won't find anyone willing to talk, of course; that's how complicity works.
The overheated engine of complicity is greed. Hollywood kept quiet about Mr. Weinstein because insiders and wannabes alike hoped to score a plum role in Mr. W.'s next hitmaking production, or secure a couple of points of the gross. (1 point = 1%.)
This is the evil fruit of a system that ruthlessly concentrates power and wealth, not just in Hollywood and Washington D.C. but in the judiciary, in higher education, in Big Pharma, the National Security State, Corporate America and yes, the Deep State, which is comprised not of the bureaucratic functionaries (sorry to pop your balloon) of the state but those one level above the gatekeepers.
Every American has a simple but profound choice. Either place your integrity above all else, and refuse to climb the putrid pyramid of wealth and power, or succumb to greed and become complicit in an empire of greed, complicity and corruption.
If "success" means a fat salary, points of gross, invitations to A-list parties, access to the inner circle, being the right-hand boy/girl of someone powerful, a seat on the private jet, etc., then you will be required to service the gatekeepers and sacrifice whatever integrity you once possessed.
If integrity means more than any of these baubles, then prepare to fail. You won't clamber up the putrid pyramid, you won't get past the gatekeepers, and you won't be invited to join the elite skimming the nation's wealth for its own gratification and greed.
But you will still have yourself, your pride, and your integrity.
It's not an easy choice. Choose wisely. As Orwell observed about a totalitarian oligarchy, some are more equal than others. But the sacrifices required to become more equal than than the bottom 99.5% are irrevocable--you will have to sacrifice everything but your greed, your appetite for corruption and your willingness to hide the truth from the outside world.
True success lies outside the empire of greed, complicity and corruption.



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Sunday, October 15, 2017

The Fading Scent of the American Dream

The theme this week is The Rot Within.
It's been 10 years since I devoted a week to the theme of The Rot Within(September 17, 2007). Back in 2007, I listed 16 systemic sources of rot in our society, politics and economy; none have been fixed. Instead, the gaping holes have been filled with Play-Do and hastily painted to create the illusion of shiny solidity.
We live in a simulacrum society in which the fading scent of the American Dream is more a collective memory kept alive for political purposes than a reality. Even more disturbing, the difference between a phantom prosperity (or in homage to the Blade Runner film series, shall we say a replicant prosperity?) and real prosperity has been blurred by layers of simulated signals of prosperity and subtexts that are carefully designed to harken back to a long-gone authentic prosperity.
This is the reality: the American Dream is now reserved for the top 0.5%, with some phantom shreds falling to the top 5% who are tasked with generating a credible illusion of prosperity for the bottom 95%. While questions about who is a replicant and who is real become increasingly difficult to answer in the films, the question about who still has access to the American Dream is starkly answered by this disturbing chart:
If you talk to young people struggling to make ends meet and raise children, and read articles about retirees who can't afford to retire, you can't help but detect the fading scent of a prosperity that has steadily been lost to stagnation, under-reported inflation and soaring inequality, a substitution of illusion for reality bolstered by the systemic corruption of authentic measures of prosperity and well-being.
In other words, the American-Dream idea that life should get easier and more prosperous as the natural course of progress is still embedded in our collective memory, even though the collective reality has changed: for the bottom 95%, life is typically getting harder and less prosperous as the cost of living rises, wages are stagnant and the demands on workers increase.
Meanwhile, the asset bubbles inflated by central banks have enriched the top 10% of households, which own over 75% of all assets and take home over 50% of all household income.
"While most Americans are unprepared for retirement, rich older people are doing better than ever. Among people older than 65, the wealthiest 20 percent own virtually all of the nation’s $25 trillion in retirement accounts, according to the Economic Policy Institute."
Household wealth follows a power-law distribution, i.e. the vast majority is held by the top few households: the top .1% own roughly 25% of all US household wealth, the top 1% around 40%, and so on. So the households between 80% and and 95% own a very modest percentage of what the top 96%-99% own.
The power-law distribution of wealth is visible in this chart:
Statistically, average per capita (per person) income and per capita share of GDP have risen substantially over the past the past 30 years. By these measures, everyone is considerably better off. Yet how many households are measurably better off in terms of free time, savings, disposable income, retirement accounts, financial security, reduction in debt loads, etc.?
These two charts tell the real story of our economy: median household income (using the Consumer Price Index measure of inflation, which grossly under-estimates real inflation, as I explained in About Those "Hedonic Adjustments" to Inflation: Ignoring the Systemic Decline in Quality, Utility, Durability and Service) has gone nowhere since 2000. If income were adjusted by real inflation, the chart would show a 20% decline in purchasing power for all but the top 5%:
This chart of household assets/corporate equities reveals the source of the phantom wealth propping up our simulacrum prosperity:
And please don't claim corporate profits are soaring, so the valuations are justified. If you examine the Federal Reserve's Z1 report, you'll find that corporate profits are unchanged since 2014--no growth at all.
Clearly, our political-financial system and the policies of central banks have combined to concentrate wealth and income in the top of the wealth/income pyramid: those who own the assets that have bubbled higher are booking luxury cruises, while those who don't own much of bubbling-ever-higher assets are working at tourist spots visited by the cruise ships.
The average person knows the scent of the American Dream is fading, and many have lost hope of what was once taken for granted: home ownership, increasing income, and an easier life as household income and wealth slowly but surely increased with time.
But the collective memory of the American Dream remains; people feel they should be able to take a vacation, should be able to buy a starter home, should be free of constant worry about paying the bills, and so on. With this collective memory still in place (and constantly kept alive by advertising), people naturally start feeling a pervasive sense of betrayal: the system implicitly promised everyone who worked a lifetime security and increasing prosperity.
Official claims of prosperity are out of alignment with reality, and so expectations are out of alignment with reality. As I have often noted, this creates a highly combustible and dangerous dynamic, as the emotions of betrayal and despair are volatile.
In other words, if 90% of the work force expects to be poor their entire lives, has no thought of ever owning a house, anticipates scraping by in their senior years, etc., then their expectations are aligned with the realities of a hierarchical power-law economy and social structure. Low expectations are difficult to dash.
But when 90% of the work force has expectations for an American Dream based on memories of those expectations being met, the widening gap between expectations and reality unleashes a politically combustible realization that prosperity is now concentrated in the hands of the top 5%. A sense of injustice and betrayal arise, along with a sense that something has gone profoundly wrong with the society and the economy.
This dynamic has yet to fully play out, but it will. Whatever you think of Trump, his election isn't the problem; it's merely a symptom of much deeper forces that will sweep our corrupt and rotten-to-the-core status quo into the dustbin of history.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Friday, October 13, 2017

The Endgame of Financialization: Stealth Nationalization

This is the new model of nationalization: central banks control the valuation of private-sector assets without actually having to own them lock, stock and barrel.
As you no doubt know, central banks don't actually print money and toss it out of helicopters; they create a digital liability and use this new currency to buy assets such as bonds and stocks. Central banks have found that they can take control of the stock and bond markets by buying up as much as these markets as is necessary to force price and yield to do the central banks' bidding.
Central Banks Have Purchased $2 Trillion In Assets In 2017. This increases their combined asset purchases above $15 trillion. A trillion here, a trillion there, and pretty soon you're talking real money--especially if you add in assets purchased by sovereign wealth funds, dark pools acting on behalf of monetary authorities, etc.
Gordon Long and I discuss this stealth nationalization in our latest video program, The Results of Financialization: "Nationalization" (35 min):
In the old model of nationalization, governments expropriated/seized privately owned assets lock, stock and barrel. When a central state nationalized an enterprise, it took total ownership of the asset.
In today's globalized financial world, such crude expropriation is avoided for two reasons:
1. The entire point of the dominant neoliberal / neofeudal /neocolonial model is to maintain private ownership as a means of transferring the wealth to the New Aristocracy, i.e. the financier class. Government ownership certainly conveys benefits to the some are more equal than others functionaries atop the state's wealth-power pyramid, but it doesn't transfer the assets' income streams to private hands.
2. It sends the wrong message: central banks want private investors to do their bidding, i.e. to go along with the transfer of wealth and income from the many to the few (the New Aristocracy). Maintaining the system of private ownership enables the central banks to control the markets for these assets at the modest cost of a few handfuls of the loot being distributed to the small-fry owners of IRAs, 401K retirement accounts, etc.
In other words, what central banks want is not outright ownership, which is costly and troublesome; what central banks want is to control the markets on the cheap, with leveraged buying. In effect, central banks have been able to manage assets worth $150 trillion with a mere $15 trillion in well-timed (and loudly announced) asset purchases.
This is the new model of nationalization: central banks control the valuation of private-sector assets without actually having to own them lock, stock and barrel. Being the buyer of last resort--the Plunge Protection Team that buys every dip in whatever size is needed to stabilize valuations and then reverse the downturn into yet another rally to new highs--has worked for nine long years.
This success has bred a complacent faith in the central bank cargo-cult that there is no limit to central bank control of yields, valuations and market sentiment.
But as I've described here many times, financialization is a box canyon. Once you start down the path to the Dark Side of phantom wealth created by commoditized debt and leverage (i.e. financialization), there's no turning back to the real world.
The central bank aircraft is flying into a canyon with walls 2,000 feet high at an altitude of 300 feet. Everything seems to be going splendidly until the central bank aircraft rounds a bend in the canyon and discovers the canyon ends in a rock face 2,000 high.
In a desperate attempt to escape the box canyon, central banks will ramp up their assets purchases of bonds to keep yields near zero, and of stocks to keep the bubble valuations high enough to support all the debt and leverage that's been piled on the underlying collateral of the stock market: non-phantom net earnings.
Needless to say, attempting to control global markets via the issuance of trillions in new currency and using that currency to buy huge chunks of the stock and bond markets is an unprecedented experiment.
To continue the box canyon analogy: central bankers and their cargo-cult faithful are confident central banks are flying an F-18 with afterburners on max; climbing 1,700 feet in a near-vertical ascent should be no problem.
Those of us outside the cargo cult see the central bankers flying a Wright Flyer: innovative in its time, but inadequate to the task of controlling private-sector markets via stealth nationalization.


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Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Thursday, October 12, 2017

Are You Better Off Than You Were 17 Years Ago?

We tend to measure what's easily measured (and supports the status quo) and ignore what isn't easily measured (and calls the status quo into question).
If we use gross domestic product (GDP) as a broad measure of prosperity, we are 160% better off than we were in 1980 and 35% better off than we were in 2000. Other common metrics such as per capita (per person) income and total household wealth reflect similarly hefty gains.
But are we really 35% better off than we were 17 years ago, or 160% better off than we were 37 years ago? Or do these statistics mask a pervasive erosion in our well-being? As I explained in my book Why Our Status Quo Failed and Is Beyond Reformwe optimize what we measure, meaning that once a metric and benchmark have been selected as meaningful, we strive to manage that metric to get the desired result.
Optimizing what we measure has all sorts of perverse consequences. If we define "winning the war" by counting dead bodies, then the dead bodies pile up like cordwood. If we define "health" as low cholesterol levels, then we pass statins out like candy. If test scores define "a good education," then we teach to the tests.
We tend to measure what's easily measured (and supports the status quo) and ignore what isn't easily measured (and calls the status quo into question). So we measure GDP, household wealth, median incomes, longevity, the number of students graduating with college diplomas, and so on, because all of these metrics are straightforward.
We don't measure well-being, our sense of security, our faith in a better future (i.e. hope), experiential knowledge that's relevant to adapting to fast-changing circumstances, the social cohesion of our communities and similar difficult-to-quantify relationships.
Relationships, well-being and internal states of awareness are not units of measurement. While GDP has soared since 1980, many people feel that life has become much worse, not much better: many people feel less financially secure, more pressured at work, more stressed by not-enough-time-in-the-day, less healthy and less wealthy, regardless of their dollar-denominated "wealth."
Many people recall that a single paycheck could support an entire household in 1980, something that is no longer true for all but the most highly paid workers who also live in locales with a modest cost of living.
As noted in yesterday's postAbout Those "Hedonic Adjustments" to Inflation: Ignoring the Systemic Decline in Quality, Utility, Durability and Service, the quality of our products and services has declined dramatically, even as prices continue marching higher.
Meanwhile, inequality and officially protected privilege has soared, as I outline in my book Inequality and the Collapse of Privilege.
The gulf between these two narratives--the ever-higher financial statistics, and our unsettling sense that we're less secure, less healthy and less wealthy--is widening. I think the Grand Canyon is an accurate metaphor here: the mainstream media parrots glowing official statistics on the distant side of the canyon, while on the lived-in-world side, well-being continues decaying.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
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