Thursday, October 19, 2017

Which Rotten Fruit Falls First?

I predict the current investigations will widen and take a variety of twists and turns that surprise all those anticipating a tidy, narrowly focused denouement.
The theme this week is The Rot Within.
To those of us who understand the entire status quo is rotten and corrupt to its core, the confidence of each ideological camp that their side will emerge unscathed by investigation is a source of amusement. The fake-progressives (fake because these so-called "progressives" support Imperial over-reach and a status quo whose only possible output is soaring wealth and income inequality) are confident that a "smoking gun" of corruption will deliver their most fervent dream, the impeachment of President Trump, while Trump supporters are equally confident there is no "smoking gun."
One camp is confident that the wily Clintons and their army of enablers, from former FBI Director Comey on down, will finally be brought to long-evaded justice for their various perfections of corruption and collusion: pay to play, and so on.
Clinton supporters are equally confident that there is no "smoking gun" that will bring down the House of Clinton, and by proxy, the organs of the Democratic Party.
The implicit historical model each camp is anticipating is of course Watergate, which unfolded with a dramatic inevitability that in retrospect almost seems scripted: a minor burglary led to the hubris of cover-up which led to the destruction of the Nixon presidency.
Often overlooked in this history is the key roles played by insider informants (such as Deep Throat) and the wider political demands for greater transparency the scandal triggered. The Church Committee ended up investigating the illegal campaigns of the FBI and CIA against the anti-war and civil rights movements (COINTELPRO etc.), and a small dent was made in the federal government's decades-long reliance on official secrecy to cover up official corruption, collusion, malfeasance, lies, etc.-- the ugly underbelly of agencies protecting the Empire from any inconvenient leaks of truth.
I submit that Watergate will not be the template for the multiple investigations being pursued in the present. It seems highly likely to me that who and what gets taken down by the investigations is much less predictable than in the Watergate template, which distilled down to an escalating campaign of cover-ups and stonewalling which simply compounded the crimes previously committed.
I submit that the investigations launched with an implicit intent of bringing down selected targets may well end up destroying people and institutions that weren't in the crosshairs. The reason why this seems so likely is that the entire status quo is corrupt: the fraud, pay-to-play, lies and collusion are institutionalized and system-wide, and once some investigation drills a hole in the dam of secrecy and collusion, the hole may quickly widen as the fetid gush of hidden truths pours out.
In other words, when the entire status quo is corrupt and hiding its collusion, gathering evidence to nail one target inevitably tugs loose other threads, threads that the original investigators reckoned could be safely left untouched.
It doesn't work that way, folks. Insiders end up releasing more than investigators bargained for, and all it takes is one insider and one journalist who isn't beholden to a colluding-insider corporate boss to widen the hole in the dam into a veritable flood.
Longtime readers know I have long made the case that the Deep State has fractured into competing camps. For example:
Public investigations are one field where this conflict plays out, but unfortunately for the players, it's a game that's easier to start than to control.
For this reason, I predict the current investigations will widen and take a variety of twists and turns that surprise all those anticipating a tidy, narrowly focused denouement. Which of the many rotten fruits will fall first? How many will fall by the time the investigations have burned through a corrupt status quo that's exquisitely vulnerable to a single lightning strike? Only one lightning strike is needed to ignite the combustible corruption and trigger a conflagration tha quickly escapes the handlers' control.
If you want a recent example of this dynamic, consider Harvey Weinstein, a mere brush fire that may well spread further and faster than the handlers expect.
For more on the systemic nature of corruption in our status quo, please check out my books:
Correspondent Rudy C. kindly noted that the GDP chart I displayed yesterday was misleading as it did not adjust for population growth. This chart is of GDP per capita, which shows GDP per person rather than as an aggregate total. Thank you, Rudy, for the correction.



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Wednesday, October 18, 2017

GDP Is Bogus: Here's Why

Here's a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation.
The theme this week is The Rot Within.
The rot eating away at our society and economy is typically papered over with bogus statistics that "prove" everything's getting better every day in every way. The prime "proof" of rising prosperity is the Gross Domestic Product (GDP), which never fails to loft higher, with the rare excepts being Spots of Bother (recessions) that never last more than a quarter or two.
Longtime correspondent Dave P. of Market Daily Briefing recently summarized the key flaw in GDP: GDP doesn't reflect changes in the balance sheet, i.e. debt.
So if we borrow money to pay people to dig holes and then fill them with the excavated dirt, GDP rises to general applause. The debt we took on to fund the make-work isn't accounted for at all.
Here's Dave's explanation:
Once I learned about accounting, I figured out why the GDP metric wasn't sufficient. What is missing?
The balance sheet.
Hurricanes are a direct hit to your nation's balance sheet. The national income statement goes up because of increased spending to replace lost assets, but the "equity" part of the national balance sheet ends up taking a hit in direct proportion to the damage that occurred. Even if you rebuild everything just the way it was, your assets remain the same, while your liabilities have increased.
We know this because we use the balance sheet equation: equity = assets - liabilities. Equity is another word for wealth.
Before hurricane:
wealth = (house + car) - (home debt + car debt)
After hurricane, you rebuild your house, and buy a new car, using borrowed money:
wealth = (house + car) - (2 x home debt + 2 x car debt)
Wealth (equity) has declined by the sum (home debt + car debt)
So when you see pictures of a hurricane strike, you can now look through all that devastation and see the impact on the balance sheet. National equity (wealth) just dropped by the amount of damage inflicted by the hurricane. Whether it is ever rebuilt doesn't actually matter; that equity is just gone. Destruction is always a downside for equity - even if there is a temporary positive impact on the income statement.
Isn't it interesting that the mainstream economists, who don't use banks, debt, or money in their models, largely ignore balance sheets and instead just looks at the income statement alone? Its almost as if the entire education system was organized so that people paid no attention to banks, debt, and money. Who do you think might benefit from our flock of PhD economists ignoring the extremely profitable debt-elephant in the room, and its purveyors, the banks?
Thank you, Dave, for an explanation we never see in the mainstream. And here's a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation:




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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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