"National Security:" A Global Police State-Within-a-State

The Global War on Terrorism (GWOT) has spawned a national security "state-within-a-state" with essentially unlimited funding and support of America's political machine. This National Security State has infected domestic policing and courts; it is both ubiquitous and completely unaccountable.

The Democrats and Republicans have enthusiastically joined hands to create a global police/national security state-within-a-state of unimaginable reach and power. Frequent contributor Michael Goodfellow sent me this investigative report, which I consider one of the most important of the decade: Top Secret America: A hidden world, growing beyond control (Washington Post).

Let's go back briefly to September 1, 2001, before the 9/11 attack. The national security "assets" of the nation had all the information needed to stop the attack. The various agencies did not stop the attack because there was essentially zero coordination and data-sharing between the CIA, NSA and FBI.

This was laid out in the PBS program The Spy Factory.

Now the national security "assets" have metastasized into a gargantuan national security state-within-a-state--and the exact same problem not only exists, it has become even more intracable.

Now that the national security state (NSS) has become much larger and even more unwieldy, coordination, collaboration and data-sharing have been rendered essentially impossible. This report makes that absolutely clear.

Rather than fix the problem of coordinating our national security assets, the Federal government and its leaders have amplified the problem. At the same time, they have created a monster which is beyond the control of elected officials or the citizenry, a secretive state-within-a-state which protects itself behind the inpenetrable shield of "national security" and "need to know."

The national security state is the ultimate protected fiefdom. Cutting one dollar of funding would be instantly characterized as "weakening our fight against global terrorism," as would any limits on the NSS's powers.

This is in effect a new arm of the "military-industrial complex" which dwarfs the power of the traditional military-industrial complex: "defense" contractors and the revolving door between the DoD (Department of Defense) and these Pentagon-dependent industrial corporations.

GWOT is the perfect defense for a state-within-a-state that is insatiable and beyond accountability. Even simple inquiries are quickly dismissed as "dangerous"--as if global terrorists would glean some useful information from knowing just how many hundreds of billions of dollars are being spent tracking them.

What's essential to our "fight"? It's a secret, so don't ask--just give us the money and don't try to limit our reach: we'll accuse you of being unpatriotic and "supporting the terrorists."

Just as "healthcare reform" wasn't about healthcare at all--it was all about securing an ever-larger share of the national income for the cartels which control sickcare in the U.S.--the global war on terror isn't about countering terrorism at all. It's about establishing overlapping bureaucratic fiefdoms with unlimited budgets and unlimited powers to mask their actions and their failures.

Despite spending hundreds of billions on "fighting terrorism," the last attempted terrorist attack in the U.S. was not foiled by this vast global machinery but by the alert passenger sitting next to the bomber.

What we have is a Keystones Cops tragi-comedy in which incompetence is rewarded with unlimited budgets and zero oversight and accountability. Since we couldn't integrate the reams of data we were collecting in 2001, then we expand that data stream a hundred-fold while hardening the bureaucratic silos around each feudal territory.

There is another pernicious feature of the global war on terror which benefits an ever-expanding national security state: we have to wire the entire world to root out terrorists. Terrorists can be anywhere, so we have to track every account, every message, every phone call, every email, and then mine it for meaning.

The scope and scale of this enterprise truly beggars imagination, but the U.S. national security state has long practice in global reach. To keep track of Soviet "boomers" (submarines armed with strategic nuclear missiles), the U.S. effectively wired the entire world's oceans for sound.

For more on this, please watch Submarines, Secrets and Spies.

There is something appealingly grandiose about such technical ambition--but there is something qualitatively different about this new expansion of the national security state: tracking Soviet submarines did not impinge on the rights of U.S. citizens, or indeed, the rights of citizens of other nations. Tracking every phone conversation and email in the world is not like tracking subs.

Publicly, the national security state agencies complain about being hamstrung by domestic civil liberties, and they express caution about tracking potential terror suspects in the U.S. I suppose we should be thankful for small favors, but a case can be made that domestic civil liberties have been degraded in the rush to track terrorists anywhere, anytime. Outside the U.S., of course, there are no restraints, no audits, and no accountability. The Empire can strike back at its own discretion.

If we reckon there are perhaps 8,000 real terrorists in the entire world, then the U.S. now fields 100 Federal employees for each terrorist. There are some 850,000 Americans with top secret clearance, which gives us a small taste of the size of the state-within-a-state.

It would be comical if it wasn't so insane: we have 850,000 people chasing 8,000 people, and the 850,000 people are generating so much data that we can't possibly make any sense of it, much less integrate it into anything remotely useful.

In the report Top Secret America: A hidden world, growing beyond control, one top bureaucrat said that just getting all his email on one computer was a major victory.

This is a project doomed to fail; it cannot stop terrorism because it can't even integrate its information into useful knowledge. The attempts being made to force integration of the fiefdoms are also comically wrongheaded; all they do is add yet another layer of bureaucracy on top of incompetent, protected fiefdoms whose only goal is expansion and protection from inquiry and audit.

The Department of Homeland Security now boats a payroll of hundreds of thousands; are we safer as a result? We are told "yes, but don't ask how; it's a secret."

This could be a story by Kakfa, except it is global. An impregnable state-within-a-state with an untouchable task--"protect us from terrorism"--and an unlimited scope-- go and do whatever it takes--is effectively beyond the control of the elected state. Don't ask, because you don't need to know. The book listing secret DoD (Department of Defense) projects is hundreds of pages long; you don't need to know what they're doing, because they're fighting global terrorism. Now go away, we're handling it.

The state of fear and paranoia which feeds a heavy-handed government has poisoned our entire culture and society. Two of my favorite bloggers, Chris Sullins and Tommy K. (by happenstance, both U.S. Army veterans), recently described how this plays out in our everyday life.

Tommy is an accomplished dumpster-diver, and thus he recognized the import of what's happening in New York City: apparently a man (and his mother) were fined $4000 and had their car impounded by the city as a result of picking up an air conditioning unit off the street that was destined for the dump.

The city's reasoning is that the city collects $300,000 a year from the sale of recycled refuse. $300K in a city budget in the mega-billions? Who's kidding who? Once again we find ourselves in a Kafka story, only it's real.

Chris Sullins found that the simple act of selling used DVDs now requires fingerprinting and registration.

Meanwhile, the FBI and local law enforcement have the resources and leisure to raid small farms and private food clubs seeking out miscreants who make cheese from raw milk.Thank goodness the GWOT is going so well that we can run those dangerous raw-milk users to ground.

If no matter who we elect, nothing really changes, how is this "democracy" any different from a feudal state? If you have to get fingerprinted to sell a used DVD, how is this different from a police state? If any nonviolent domestic protest or resistance can be labeled "domestic terrorism" and the uncompliant citizens essentially stripped of their civil rights by judicial legerdemain, then how is this different from a police state?

If a gargantuan national security state exists, untouchable, unaccountable, ever-expanding and inherently incompetent, within our supposedly accountable Central State, then how is the U.S. any different from a global Empire which operates without any domestic control or limits?

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Action List for the Newly Unemployed

As employment continues declining, newly unemployed people will have to adapt to the unwanted change in circumstance.

I consider it highly likely that another leg down in employment is getting underway. As the Federal stimulus peters out and the Central State's ability to borrow $1.5 - 2 trillion a year to fund the status quo begins pushing up against the financial equivalent of the speed of light (as you approach c, it takes much more energy to increase velocity), then jobs which were only recently considered secure will be lost and the people who held them will be unemployed.

The $787 billion stimulus package, "cash for clunkers," the credit for new home buyers, the $1.2 trillion in mortgages the Federal Reserve purchased--all of these programs stabilized employment at around 131 million jobs. Now that these programs have ended or been reduced, employment is set to undergo a a new decline which could be characterized as a "phase shift."

Wealthy Reduce Buying in a Blow to the Recovery:

But the Top 5 percent in income earners — those households earning $210,000 or more — account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data. According to Gallup, spending by upper-income consumers — defined as those earning $90,000 or more — surged to an average of $145 a day in May, up 33 percent from a year earlier.

Then in June, that daily average slid to $119. "I think a lot of that feeling that the worst was over has sort of abated," said Dennis J. Jacobe, Gallup’s chief economist.

The top 20% are starting to "get it": it's going to get worse from here on, not better. Many of these High Caste technocrats are the very people who were confident that their position in the world was secure, and the Great Recession was for the lower 80%. But that is not necessarily the case, and this same group of highly paid workers also tend to over-estimate their ability to get a job of equal pay, perks and security. That denial of "the new normal" will be the undoing of many.

Examples of jobs lost in this next wave of contraction include local government employees, employees of enterprises which fold or shrink in response to losses, and jobs lost to offshoring and attrition.

The vast majority of new jobs created in the past two years have been temporary or contract/free-lance positions without guaranteed hours or benefits. This is "the new normal."

As people who reckoned their job was relatively secure discover it isn't, a new cadre of shell-shocked unemployed will have to deal with unemployment and poor prospects for permanent employment. Here is a basic, common-sense list of actions to consider should your household income fall drastically for any reason. It is based on the concepts I laid out in Survival+.

1. Cut expenses immediately. Middle-class households seem especially prone to thinking they can weather a radical drop in income without any real change in lifestyle until a new job appears. Some even resort to pulling money out of IRAs and retirement accounts (and paying penalties to do so) to maintain the lifestyle to which they have grown accustomed.

The better strategy is to perform immediate triage on the household budget and eliminate all extraneous spending. Cut expenses in every way: unplug zombie appliances and chargers, stop buying snacks and convenience food, stop going to high-priced yuppie markets, borrow films from your library rather then rent them, etc.

Write the budget down and track your actual expenses monthly. Reward yourself with a small treat if you stay within the new budget.

2. Look at your biggest expenses and reduce them to your "new normal" income by whatever means are necessary. Typically, the biggest expenses are housing, healthcare and perhaps education.

There is abundant evidence that when it comes to unsustainable mortgages, The wealthy strategically default as a business decision. If a mortgage is completely out of line with the household's reduced income, then the wealthy may have the right idea: it's just business. Anyone considering defaulting on debt should of course do what the wealthy do and consult experienced, licensed real estate and tax attorneys before making any decisions.

Some people have found that renting out rooms in their house allows them to align their income with their mortgage costs. Either expenses must be cut or income increased, or both. Hoping to find a high-paying job in the near future is not a strategy, it is just a form of denial.

Many people we know who have seen their small business income suffer have already cancelled their health insurance--$1,000+ a month is a lot of money. There may be professional organizations which offer cheaper catastrophic-type insurance to members; those seeking to slash their health insurance costs will have to look around for creative ways to do so.

3. Keep productive. All work has dignity. Base your pride in being productive, not on your position or title. It is very easy to fall into feeling lousy about oneself when unemployed, and the best way to counteract that natural diminishment is to stay productive. Find an organization who needs your energy and skills; yes it is "working for free" but you get value for your efforts: you keep your skills sharp and maybe add new ones, you have self-worth by contributing to a worthy organization, and you network with others in ways which might lead to some paying work.

One value we have lost in the U.S. is the inherent value and dignity of all work. Too many people feel that all sorts of work is "beneath them." No wonder, perhaps, given that our popular culture worships at the altar of narcissism, self-glorification, indulgence and victimhood.

I personally consider picking up trash around my neighborhood a highly valuable form of unpaid labor. There is nothing lowly about work performed with care, attention and impeccability.

4. Work to establish multiple sources of household income. If there are potentially employable members of the household earning nothing, then get them out there making some sort of income, even if it is informal, sporadic and low-paying. Something is better than nothing.

5. Think like an employer. The attitude built up by 60 years of prosperity is generally "give me a job and I'll do good work." That was no hindrance in decades of rising employment but now there is a new reality: a thousand other people will also do good work when given a job.

The key word here is "given." If you think like an employer, then you realize that doing good work is the minimum baseline. You have to provide additional value that gives the employer/supervisor some hope that you will bring a much-needed spark to the enterprise. That could be a cheery, generous nature; it could be a can-do attitude of wanting to learn new things. It could be a willingess to be flexible in hours worked.

This is not a suggestion to work for free for an enterprise which pays others to do similar work. But even in this recessionary environment, all too many people expect to work according to their own requirements rather than the needs of the enterprise. This difference in baseline assumptions is most visible between native-born Americans and recent "green card" immigrants, who typically will do whatever it takes to get ahead.

6. Beware the illusion of incremental change. Sustained effort brings results, but within this common-sense approach is a pernicious trap I call The Seductive Illusion of Incremental Change (May 13, 2008). Picking the "low hanging fruit" produces significant improvements, and with that the illusion is formed: if we just keep doing what we've been doing, little by little the problem will be chipped away to zero.

For example, in the first round of household budget cuts, it's not too difficult to pare away a few hundred dollars (travel, eating out, unlimited texting phone plans, etc.). That initial success can lead to a false confidence that such cuts can be continued to the point that income and expenses are actually aligned.

But incremental change often starts yielding diminishing returns. Are the changes being made fundamental, or are they essentially tweaks to a system heading toward collapse?

Weight loss is an example many of us can relate to. A pound of human fat contains 3,500 calories. To lose a pound of fat you need to burn 3,500 calories in excess of what you eat. To lose five pounds, you must burn 17,500 calories more than you eat. If you ramp up your exercise program and burn 500 more calories a day, then in 35 days you will lose the five pounds. Alternatively, you can cut 250 calories from your intake and expend 250 calories in additional exercise.

This sort of sustained effort will produce fundamental results, but anything less will not. Just sending out 10 resumes a week may not produce any job offers, and cutting marginal expenses rather than making the deep cuts needed to re-align income and expenses will only set aside the day of reckoning.

7. Preserve capital. Pulling money out of savings, IRAs and 401Ks to maintain a giant mortgage or an unsustainable lifestyle is unwise; that savings might be needed down the road for a really important emergency such as getting a knee replacement (paid in cash).

Given the likelihood that the stock market will eventually reflect the weakness of the real economy, then keeping IRAs and 401K capital in cash rather than stock mutual funds is a form of capital preservation.

8. Become fluid and flexible. Someone to whom various kinds of work is "beneath them" is like the person who has no interest in learning new skills; their inflexibility dooms them by reducing their adaptability. The living branch bends in the wind, the dead branch snaps off.

9. Accept the new reality. If someone offers you four hours of work, take it. It might lead to something else, and if not, at least you made a few bucks. Clinging to past paradigms is a dead-end.

10. Get healthy, stay healthy. Losing status, income, security, etc. are wounds to self-worth and the soul. Increased stress and anxiety are not healthy. Exercise and productive work/learning are important ways to reduce stress and build a positive response to unwanted change. Walk a quarter mile; when that's easy, walk a half-mile. When that's easy, walk a mile, and so on. Seek respite and renewal in Nature.

Your body is a temple; don't feed it crap.

11. Think entrepreneurally. The basics of entrepreneurism are simple: seek out unfilled needs, or offer a service/product which offers customers faster, better, cheaper. Identify what you like doing even if it's unpaid (at first) and pursue that line.

If you don't want to slog your way into the ranks of Corporate America or work for somebody else (possibly a tyrant/sociopath), then create your own job by making customers/clients your boss.

12. Create value before asking for something in return. One of the key values in Survival+is reciprocity. If you want ten people to help you find some paying work, then you need to offer them something of value that is meaningful to them. The world does not owe any of us a living.

13. Add some beauty to your world. Our culture glorifies ugliness, aggressiveness, self-centeredness and psychoses of power. Planting some flowers that can be viewed by passerby, keeping your block trash-free, creating some art or craft, repainting a fence with bright colors--anything which adds vibrancy, color and creativity to a small corner of the world is a blow against degradation, aggressiveness, ugliness, squalor and surrender.

14. Become politically active. There are larger forces at work behind the media facades and facsimiles. Our society focuses on self-help rather than on the darker forces of Empire, Power Elites, etc. In other words, the Powers That Be support a politics of experience in which we each blame ourselves for our inability to find paying work, etc. rather than seek out the financial and political roots of our common crisis.

The Power Elites and its Mainstream Media work tirelessly to depoliticize our understanding of the world around us. They present us with a false political choice (Republican or Democrat, as if it really makes a difference to the running of the Global Empire or the concentrated power and wealth of cartels and Financial Elites), religious rabble-rousing and plentiful "entertainment" distractions-- anything to suppress or marginalize our understanding of just how distorted our economy and society have become.

Derangement is normalized though a relentless barrage of imagery, "news" and commentary which cements a depoliticized politics of experience: if you can't find work, it's your personal failings that are the "problem." It's all the Demopublicans or Republicrats fault, these reforms have "fixed" the system, etc.

Ask cui bono--to whose benefit?--of everything.

15. If there is no work in your area due to declining wealth, move to a place where wealth is still being created. Moving is both frightening and exciting; it's always been one path out of poverty into new opportunity.

16. Failure is how we learn; embrace it. One reason Silicon Valley continues to spin out innovation is that failure is not just grimly accepted but celebrated. You haven't really "earned your stripes" if you haven't had a start-up go under or equivalent (your company coming within an inch of going under qualifies). Natural selection is all about constant innovation and failure.

Bonus point:

17. Do more of what's working and less of what's not.

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Will the Stock Market Crash Before the Mid-Term Elections?

If history is any guide, the U.S. stock market will continue falling right into the November elections, decimating any Democratic argument that their party has energized the economy. Given this potential for an electoral drubbing, we can expect massive intervention to prop up the market.

Will the stock market tank heading into the 2010 mid-term election? History suggests yes, but my contrarian sense has some doubts.

Correspondent/analyst B.C. recently posted a chart on his excellent weblog Imperial Economics which shows that historically, stocks decline in the second year of presidential terms:

A second chart maps the Nikkei stock index from its 1989 bubble top, the Great Depression-era S&P 500, the NASDAQ dot-com bubble and pop, and the Shanghai stock index's 2007 peak and decline. Once again, this chart suggests that the 2010 election will occur in a stock market trough:

The black line is the NASDAQ, which peaked in early 2000 (around month 115) and hit bottom in March 2009 about nine years later (around month 225). It topped out in late April 2010 and has been sliding since. If it tracks the other historical indices shown, it will decline for another 36 months (mid-2013).

I have annotated the following chart of the great Bear Market of 1966-1982 to show the presidential elections and the mid-term elections. Rather strikingly, the stock market reached peaks around each presidential election and fell to lows around each mid-term election:

None of this is carved in stone, of course, but it is an interesting correlation to consider.

Meanwhile, the U.S. economy is tanking. B.C. kindly offered up this chart of the ECRI's WLI growth rate, which is dropping to recession levels.

This is the backdrop for either a mini-crash or a full-blown crash of the stock market--something which occurred with alarming regularity in the last Great Bear Market, and even earlier Bear markets, around mid-term elections.

On the other hand, the Obama Administration and the Democratic Congress have faithfully carried Wall Street and the "too big to fail" money-center banks' water since taking office in 2009. Treasury Secretary Geithner, Federal Reserve Chairman Ben Bernanke, Wall Street and the big banks have gotten everything they wanted, with only modest window-dressing of "reforms" for public consumption.

While the Democratic lackeys did the heavy work, the Republican toadies were content to run interference for the bankers, proclaiming their resistance to any reform which would place a burden on business as usual. (Not to Repub obstructors: exactly what were the consequences to the U.S. economy of the financial deregulation you lauded so warmly over the past decade? It crashed.)

Just as gasoline prices magically subside right before elections--at least they did during elections when Republicans held the White House and the majority in Congress-- I have to wonder: what's the point of being able to print hundreds of billions of dollars if you don't goose the stock market to help out your political lackeys in their hour of need?

Don't the Democrats deserve some small consideration from the Fed, the Treasury and Wall Street for providing them everything they wanted in a difficult political environment? Does the Fed really care if the Republicrats or Demopublicans are in the majority? Perhaps they prefer some form of stalemate, as this leads to a comfortable deadlock in which no meaningful regulatory legislation gets passed.

As it stands, the Democrats face a potential wipeout in November. If the stock market crashes in July, August and September, that would seal a Democratic defeat of potentially epic proportions. If I were in the Fed (or Treasury), and my compliant political lackeys were facing an electoral defeat of epic proportions, then I might conclude that a crashing stock market might be a wee bit more disruptive than would be good for the status quo.

Look how bearish and choppy the market looks now. If there was ever a market issuing a high, keening plea for massive intervention to stave off a collapse, it's this one:

This is one ugly chart.

About the only bullish technical here is a mildly positive divergence in MACD, which is trending higher even as price declined to new lows. But divergences can continue for quite some time, and that one factor is not much of a bulwark against the tide of bearish technicals.

If I were in the Power Elite tasked with saving the Democrats from a complete rout in the November elections, I would choose to intervene right here, during the low-volume days of summer when intervention has more bang for the buck. I would also choose to intervene right here for technical reasons; if the market is allowed to notch a lower low and break the 1,000 level, then that would very likely trigger a cascade of selling that would be tough to stop.

A much better strategy would be to flood the market with futures buying to drive it up to a marginally higher high--that is, above 1,100. Technically, that would break the downtrend line and create the illusion (if nothing else) of a new uptrend.

Right now would be the perfect time to jab a big fat needle in the market because sentiment is almost universally bearish. Hobby Bears are piling in, grinning with delight at the prospect of such an "easy" trade (piece of cake profits, just go all in short!), while weak long hands are folding their cards and selling.

Nothing would stun this market more than a nice little 50-point rally in the SPX that forced overly-confident shorts to cover. Countering a massive wave of selling is almost impossible, but if the Powers That Be can nip this decline in the bud, so to speak, and force Bears to cover their shorts, then a more orderly decline can be arranged after the election.

Is it really too much to imagine Geithner et al. getting private calls from the White House along the lines of, "Guys, we could really use a hand here with the stock market." After all, propping up the market as a proxy for the U.S. economy has been the strategy all along, and the worst time for the strategy to collapse in a heap is right before the mid-term elections.

The key target, if it were my job to engineer a rally that would last longer than a few days, would be the 1,110-1,130 level of the SPX. Juicing the market above those levels would cause all but the hardiest Bears to cover, and it would trigger gigantic waves of black-box buying as the key levels of resistance would be broken.

If you could print unlimited sums and intervene at will in the market via proxies, how hard would it be to engineer a 50-point rally in the SPX in low-volume July? If you waited until the market fell to new lows, it would be too late and the momentum would gather on the downside. SPX 1,040 to 1,060 is the Rubicon; now is the moment to call in the legions and defend the market with everything you have.

We know intervention is a reality, and we know these key technical levels are in danger of being breached. Put those facts in an election context which is looming as a disaster for the party in power and you get a scenario which should give overly enthused Bears pause.

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Some Thoughts on Fear, Empire and "New" Pragmatism

"New" pragmatic ideas are rooted in "old" ideas which have been abandoned, usually to increase private gain and Central State power (the two are inextricably bound). We fear change because we fear the burdens of non-Imperial freedom.

In yesterday's entry, I asked if we cling so tightly to failed ideologies and ideas because we fear losing the perquisites of global Empire and the Savior State.Perhaps the best single book written on the deep human desire to escape the heavy burdens of personal freedom, liberty and difficult trade-offs is Escape from Freedom by Eric Fromm.

Written after World War II, the book explains the attraction of the Nazi Party and other fascist/totalitarian parties/regimes.

In effect, deep-down we all want to be told what to do, and to be part of a cause or movement which is greater than ourselves. This could be the Armed Forces, an organized religion, a political party, a global corporation, a Central State or one of its many fiefdoms.

One of Fromm's key points is how burdensome and worrisome it is to be self-reliant and free. As someone who has been self-employed for 29 of my 40 years of work, I have felt the gnawing worry, the doubt and the pain of making one's own decisions and suffering the consequences of failure and/or miscalculation. I have felt the draw to be part of something larger which makes my decisions for me and offers me a security I can never have as an isolated individual facing an endless parade of lonely decisions and trade-offs.

It is much easier to accept an organized religion's orthodoxy than to read the holy books yourself and reach your own understanding. It is much easier to accept the ideology of a political party than to remain independent and non-ideological. It is much easier to work for a State/government/corporation than scratch out a living on one's own. It is much easier to join a group than to organize one. It is much easier to accept the role of victim than to take responsibility.

It is much easier to comply than to resist. It is much easier to take orders than to formulate one's own strategy. It is much easier to avoid accountability than to be accountable. It is much easier to take short-cuts and game the system than to achieve mastery.

This is how fascism--both cartel-corporate and state varieties, which are of course always bound in partnership--takes hold and captures the citizenry's allegiance. It's easier than insecurity and liberty. We are all drawn to the group and the group's approval, for we are intrinsically insecure and fearful of indecision.

Correspondent Robert Z. pointed out that

"from a historical perspective very little human activity is radically innovative. Instead, we build on ideas a little bit at a time. Technology has sped up the process radically, but once we have fed, clothed and sheltered ourselves and built transportation and communication systems, how much more innovation is really left? To wit, it took a few centuries to move out of the Dark Ages. It took about 115 years to go from wired telephones to wireless telephones. But it only took Microsoft about 25 years to evolve from DOS to Windows 7. (Editor's note: as the bumper sticker had it: Windows '95 = Mac '85.)

With most of our basic material needs satisfied (for the wealthy, anyway), what has happened is that we have evolved into a society where we do things because we can - not because these actions are practical or sensible or pass a cost benefit analysis. How else does one explain hooking up dying 90-year-olds to ventilator machines for a week or so before they die? The benefit is to the owner of the machine, who collects $10-20K a day from Medicare for the effort. How else does one explain trillion$ in government bailouts for banksters and bupkis for Main Street? The answer of course is that the wealthy and powerful control the government, lock stock and barrel.

If we take this one step further, we might conclude that what we need is not so much "new ideas" but "old ideas" which have been abandoned or marginalized by private and State interests seeking to solidify and increase their power and share of the national income. One example of such an "old" organizing principle I discuss inSurvival+ is the kumiai community group that developed in plantation Hawaii among Japanese-American immigrants.

In general, the larger the structure, the more centralized and concentrated its control structure, and the farther away it will be from citizen influence and accountability.

Thus the Pentagon, Medicare, global corporations, etc., are in effect unaccountable.

At the opposite end of the spectrum, the local clinic, sheriff's department or Main Street business depend on the local citizens' financial and political support, and thus they are more accountable than power structures run from Washington D.C., London or Beijing.

Correspondent Zeus Y. offered this assessment of my question about fear:

Do we cling so tightly to these ideologically appealing, quasi-religious failed ideas because we fear not having any replacement ideas? Or do we cling to these failed ideas because we fear the decline of the Power Elites and the Empire? Or are we suffering from a grand failure of imagination, as I have suggested here before? Questioning "Progress" and the Poverty of our Imagination (June 11, 2010) .

Points one and three are related (and point two is a product of fatally identifying our well-being with the interests of our oppressors, i.e. Dow Jones = "our economic health"). Our fear of not having replacement ideas (and not knowing how they may work in advance) is cutting off our imagination. Without the fear and with a dose of analysis and creativity, many of the innovative ideas are really pretty obvious. They just require a kind of dynamic work and thinking ethic that most people are not prepared to make at this point (at least until they are forced into it, which is coming soon).

We need to have some guideposts in place about what CANNOT work and what CAN. The "cannot" is taken care of by rigorous observation and effort over mere convenient and lazy wish. The "can" is taken care of by creativity, initiative, and perhaps most importantly a new ethic for living which sees challenge as desirable, spontaneous communal commitment and innovation as fun and fulfilling, and social well-being as the point of individual effort rather than personal aggrandizement.

Thank you, Robert and Zeus, for these insightful comments. We have become dependent on the cheap abundance provided by global Empire and dollar hegemony: cheap and abundant food, cheap and abundant energy and the pleasures of being the marketplace for cheap, abundant goods from everywhere else.

When sacrifice, trade-offs and accountability are anathema, then so too is liberty.

Here is yesterday's entry up in case you missed it:

Oversupply of Old Failed Ideas, Undersupply of New Pragmatic Ideas

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Oversupply of Old Failed Ideas, Undersupply of New Pragmatic Ideas

We suffer from a massive oversupply of tired old ideas which have long outworn their utility, and a dearth of new pragmatic ideas founded on the present and near-term future.

In terms of supply and demand, we face a complete oversupply of tired old ideas which have failed for fundamental reasons, and a strong unmet demand for new pragmatic ideas based on the present realities.

At the risk of stating the "obvious" which is not at all obvious in the current politics of experience: if any of these tired old ideas retained any utility, they would have already worked.

if Keynesian or neo-Keynesian stimulus via Central State/Savior State borrowing and spending was the solution to the Great Recession, it would have worked by now. Instead, the private economy continues to shrink. The Keynesian Project and idea is a failure.Look at personal income, minus government transfers:

Many will argue that we need another couple years of the same borrow and spend to create private demand, but this is fundamentally flawed. Private demand is intrinsically hobbled by two factors:

1. The bottom 80% of consumers are over-indebted and have little assets or surplus income to leverage into more consumption. Please see The Root of the Housing Bubble Remains Unchanged (May 27, 2010) and The Stock Market As Propaganda (March 10, 2010) for more on these topics.

2. The 75% of U.S. households who are above the poverty line already own everything anyone could possibly need for a wonderful, fulfilled lifestyle. That is the dirty little secret not just of the Keynesian Idea but of post-industrial Neoliberal Global Capitalism.

I devote a considerable amount of the Survival+ critique to the entire notion that "demand" for more stuff and services is actually as endless, beneficial and fulfilling as the relentless media-marketing machine would have us believe. The causal connection between ever-rising consumption and individual happiness is actually weak to non-existent; beyond a rather modest level (clean water, warm place to sleep, sufficient calories to eat, etc.) then the factors which leverage human happiness and fulfillment are relationships (friends, etc.) and meaningful work.

So the explicit premise of the entire Keynesian Project--that private demand for more consumption is the foundation of "prosperity," and thus all we need to do is lavish enough money on consumers to spark their insatiable appetite for more, more, more of anything and everything--is doubly bankrupt: there are limits on private "organic" demand (i.e. demand which isn't created by giving everyone $3,000 to buy a new car, etc.) both financially (most American households have too much debt and not enough surplus income and/or assets to justifiy more borrowing and splurging) and intrinsically: another thousand songs on your iPod, another pair of shoes, another session at the nail salon--none of it actually adds much to human fulfillment or happiness.

Beyond a modest level, consumption is the classic example of diminishing returns: you keep spending more but enjoying it less. At the end, ennui, alienation and exhaustion replace enjoyment. An addictive cycle of consumption, dissatisfaction and a derangement devoid of self-awareness takes hold.

Indeed, it can be argued that our entire economy of consumption is more a systemic cultivation of addiction than a system based on fulfilling human needs and "the pursuit of happiness."

So many proponents of the Keynesian Idea refer back to the 1930s as the testing field for their "solution" of fiscal and quantitative stimulus (easing of interest rates and availabililty of credit).

Yet so many fundamental factors in the present were not factors in the 1930s. To name but a few: global wage arbitrage was not much of a factor, and it certainly is a key determinant of U.S. household income now. If the U.S. fails to create real products and services with a high market value in the global market, then U.S. wages will trend to the wage levels in lower-value producers.

You can borrow and spend all you want, but if incomes are declining for structural reasons, along with assets deflating from credit bubbles, then you are shoveling sand to hold back the tide. Rising debt loads require rising incomes. Without rising incomes, rising debt leads to insolvency. That is "obvious," yet it is not something Keynesians can admit, lest their entire Project be revealed as intrinsically flawed.

In the 1930s, the Federal government and the household held very modest levels of debt. Thus a borrow-and-spend frenzy to fund a global war (World War II) was possible because the borrowing began from a very low basis.

Before the 1929 stock market crash, Federal regulation of the financial industry was light to non-existent. Thus a move as simple as guaranteeing savings deposits in banks (the FDIC) had enormous leverage because it filled a void.

If additional regulation would have fixed the U.S. economy at a fundamental level, it would have already done so. It hasn't, and the reason is marginal returns. In the 1930s, tens of thousands of people were put to productive work for very modest sums of money, even when adjusted for inflation.

Now, politically influential unions and private contractors would kill off any large-scale work projects, demanding instead that repairing roads, etc. go to private corporations seeking hefty profits and union labor which costs $100,000 or more per worker.

This is how we reach the absurdity that the Federal Stimulus package has "saved" (supposedly) thousands of jobs at an average cost of $323,000 per job.

That's the consequence of increasingly marginal returns.

The Keynesian Idea worked well from a basis of near-zero government debt and public spending which was so modest in cost that every dollar was highly leveraged. Now consider these stories about the stimulus spending promoted so tirelessly and religiously by Keynesians: Stimulus Checkup - 100 Ridiculous Projects Funded by the American Recovery Act and Obama creates 640,329 jobs at a cost of $323,739.83 per job (both by Mish).

So in an economy with 131 million jobs and 150 million workers, then a $787 billion Keynesian stimulus project has created or saved less than .5% of the nation's jobs. That is a horrendously marginal return.

Lastly: the Keynesian Idea has failed because the Central State has taken over such a large share of developed nations' incomes and GDP. The U.S. government has borrowed and spent trillions of dollars in so-called "prosperity" supporting a global empire and various forms of crony capitalism/cartels, monopoly capital and protected State fiefdoms (prison guard unions, sick-care cartels, "defense" contractors, etc.) The amount of leverage offered by another trillion dollars or so for a State which spends $3.5 trillion is marginal.

If "quantitative easing" was indeed the solution for what ails the U.S. economy and its parasitic, supremely politically powerful financial industry, then it would have already worked.

If lowering the taxes of the top 1% of households and dropping the tax rates on speculative income while leaving the rates on productive income quite high would have actually created widespread prosperity via the "trickle down" theory, then it would have done so already. It hasn't, so that scheme so dear to the hearts and pocketbooks of Republicrats has failed, completely and utterly. Income disparity has leaped and while the productive high-income earners pay most of the taxes, the unproductive financial parasites reaping speculative gains via gaming the system and fraud pay a mere 15% on their $600 million per year "earnings."

Top Ten Highest Paid Hedge Fund Managers (2007)

The level of propaganda is so pervasive that few citizens seem to grasp how the two parties are indistinguishable at the level of global Empire and neoliberal Monopoly Capitalism. "Healthcare" may or may not be a "right," but the "healthcare reform" was about one thing and one thing only, and it wasn't healthcare for a nation of afflicted, addicted, media-marketing-addled "consumers": it was about retaining and extending the sick-care cartel's share of the national income.

The global Empire has run for decade after decade on the premise that "it's not a very good war, but it's the only one we got." Democrats and Republicans alike have started and extended war after war in service of commercial, political and military Empire with largely unseen "soft" and "hard" power assets.

Now that most Chinese youth think Kentucky Fried Chicken is Chinese, the Empire has already won the commanding heights via "soft power" and dollar hegemony. There is no need for a war when the Colonel has already occupied hearts, minds and pocketbooks.

The idea that either of the Plutocracy's two political flavors will ever conceive of, much less enact, meaningful restrictions on the American Empire or its cartels, has failed. If either party had any "big ideas" that weren't just facsimilies of reform to divert and distract attention from the ever-increasing wealth and power of a small Elite served by a well-paid High Caste army of technocrats, then they would have done so. Thay haven't, so that idea has failed.

The demographic realities of a shrinking workforce and rising cadre of retirees dooms the entire Social Welfare State idea. The conceit of the Social Welfare State--that the State can provide retirement and healthcare for 40% of its citizenry by heavily taxing the 40% who are working in taxpaying jobs (as opposed to the cash/no-tax economy) will be proven false. Proponents keep claiming that minor tweaking of parameters will make this idea work: extend retirement age by a few years, increase the tax a few points, etc.

But what they don't factor in is the End of Work: End of Work, End of Affluence I: Cascading Job Losses (December 8, 2008) .

The truth is that minus credit bubbles and expential expansions of credit to fuel consumption frenzies/addictions, the post-industrial U.S. economy has no need for 130 million (highly paid) workers. Just as we don't need any more houses (we have 19 million vacant ones) or malls or office towers, we also have no real work for people to do in these vacant malls and offices.

As I have often noted, Twitter has about 250 employees, Facebook has about 1,200. Social media may be fun but it isn't going to generate millions of jobs.

The entire Idea of a global Empire based on dollar hegemony feeding an endlessly expanding economy of consumption, extravagance and excess is bankrupt.

Here is one of the best summaries of the real U.S. economy and political structure, exerpted from the excellent John Mauldin's newletter of 5/6/10:

The greatest systemic risk, therefore, is not an economic concept but a political one. (emphasis added-CHS) Systemic risk emerges when it appears that the political and legal protections given to economic actors, and particularly to members of the economic elite, have been used to subvert the intent of the system. In other words, the crisis occurs when it appears that the economic elite used the law's allocation of risk to enrich themselves in ways that undermined the wealth of the nation. Put another way, the crisis occurs when it appears that the financial elite used the politico-legal structure to enrich themselves through systematically imprudent behavior while those engaged in prudent behavior were harmed, with the political elite apparently taking no action to protect the victims.

Now we are at the heart of the matter, and the reason why I wrote Survival+. A political-financial system reaches its terminal stages by investing more and more to extract increasingly marginal returns.

By basing Survival+ on the simple query, cui bono--to whose benefit?-- I am attempting to describe a dynamic which I consider ontological, that is, inherent to all human social structures: as the system's foundations crumble via increasingly marginal returns, the system/Empire's Power Elites face a stark choice: either institute real reforms which reduce the Elite and its constituencies' share of the Imperial income, or launch a marketing/propaganda drive to create the illusion of reform.

In this terminal stage, the Power Elites erect one facade and facsimile of reform after another, each one heralded as the "fix" the nation-state or Empire so desperately needs to return to "the good old days" of seemingly unlimited power and prosperity. All are shams, carefully designed and marketed simulacra of actual change.

These monumental efforts at creating the illusion of reform have an immediate payoff: the Power Elites remain solidly in power, and their share of the nation's income and wealth actually increases as the majority of citizens sink deeper into various stages of poverty.

Eventually, of course, the system comes apart at the seams, because facades, illusions and sham reforms have not actually fixed any of the marginal returns or fundamental problems eroding the system/Empire. Eventually the State/Empire collapses.

Do we cling so tightly to these ideologically appealing, quasi-religious failed ideas because we fear not having any replacement ideas? Or do we cling to these failed ideas because we fear the decline of the Power Elites and the Empire? Or are we suffering from a grand failure of imagination, as I have suggested here before? Questioning "Progress" and the Poverty of our Imagination (June 11, 2010) .

I hope it is the latter.

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If you would like to post a comment where others can read it, please go toDailyJava.net, (registering only takes a moment), select Of Two Minds-Charles Smith, and then go to The daily topic. To see other readers recent comments, go to New Posts.

Order Survival+: Structuring Prosperity for Yourself and the Nation and/or Survival+ The Primer from your local bookseller or from amazon.com or in ebook and Kindle formats.A 20% discount is available from the publisher.

Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle

Thank you, Timothy S. ($50), for your wondrously generous donation to the site -- I am greatly honored by your support and readership.

Thank you, Andy V. ($10), for your much-appreciated generous contribution to the site -- I am greatly honored by your support and readership.

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