Showing posts with label plutocrats. Show all posts
Showing posts with label plutocrats. Show all posts

Monday, 5 July 2021

Virtues, Vices, and Values

A Charter of Values?

 In 2013, when the Parti Québécois government was proposing a “Charte des valeurs”  I reacted, on this blog, with "outrage, shame, embarrassment, anger, frustration, fear."  Admittedly, by the time the  Coalition Avenir Québec introduced its  "Bill 21: An Act respecting the laicity of the State," a watered-down version of similar legislation, my reactions had mellowed.  (See The "We" Vote in Quebec.) Nonetheless, I remain distinctly uncomfortable whenever I hear a politician invoking "values" and, still worse, "our shared values."  We might expect the expression "our shared values" to be followed by a list of said values but it almost never is.  Upon hearing "our shared values," the white supremacist and the advocate of Black Lives Matter might both breathe a sigh of relief thinking "finally, one of us"--which explains politicians' love of this empty expression.

The Common Objects of a People's Love

In his inauguration speech, Joe Biden offered this list: "Opportunity. Security. Liberty. Dignity. Respect. Honor. And, yes, the truth."  But he didn't call them values.  Citing Saint Augustine, he referred to them as "the common objects" which define a multitude as a people, and this particular list as what defines Americans.  However, as some critics have pointed out, what Augustine was suggesting wasn't necessarily values or virtues.  

“If one should say, 'a people is the association of a multitude of rational beings united by a common agreement on the objects of their love,’ then it follows that to observe the character of a people we must examine the objects of its love.” — St. Augustine, City of God 19.24

The objects of a people's love could equally well be venal, could be vices.  The USA may be the "land of opportunity," whose "military-industrial complex" ensures its security, and whose constitution guarantees its citizens the liberty to have guns but not necessarily abortions or to use the girls' washroom if your birth certificate says you're a boy, but I've never thought of dignity, respect, honor (except for the spelling) and truth as being distinctly American. 

Deadly Sins and Heavenly Virtues

The more I have reflected on this topic, the less certain I've felt about what counts as a value.  In the Judeo-Christian tradition, the vices or "deadly sins" are clear:  pride, greed, wrath, envy, lust, gluttony and sloth.  The "heavenly virtues"--prudence, justice, temperance, courage, faith, hope, and charity--are more ambiguous. We might like to imagine that virtues and vices are absolutes, but it seems obvious that the difference between them is one of degree.  Moderate degrees of the vices seem desirable, while exaggerations of the virtues are equally undesirable.

Values and Valour

Invariably, we imagine our values are virtues and, conversely, we are likely to imagine that other people's values seem like vices.  In truth, few of us ever have to discover what our values truly are or if we have any.  The word "values" shares its underlying root with "valour"; that is, not just worth but strength and courage.  Our values are the principles that we have the strength and courage to maintain under stress and to act upon.  Still, even the most valourous among us can find themselves in a conflict of values, a no-win, double-bind situation which is the defining characteristic of tragedy.  (See The Double-bind Theory of Tragedy and Madness.)

Obedience to Authority:  Virtue or Vice?

Anomie, the absence of values, has long been the claimed condition of privileged, modern societies.  I am mindful of social psychologist Stanley Milgram's infamous Yale "Obedience to Authority" experiments which revealed that 65% of the test subjects would torture a victim to death using electric shock simply because someone who appeared to be in authority told them to.  Obedience is, of course, the most taught and enforced value in education.

What Are Your Values?

The webpage What Are Your Values? provides a list of 150 potential values, including obedience.  Looking at this list and every other list I have considered, I come away wondering:  are these really values?  The webpage offers a soft definition of values as "the things you believe are important." Sex and money don't make anyone's list of values, but I've met a few people who seem to think they are important.

The Central Bank:  God or the Devil?

I was drawn to Mark Carney's Value(s), in the first place, because of the title and because he was Governor of the Bank of Canada and Governor of the Bank of England.  To conspiracy theorists like my friend Henry Makow and members of the Zeitgeist Movement (not to mention bitcoin fans and fanatics), central banks are the spawns of Satan.  Against this foil, it was striking to read Carney's passionate prescriptions and earnest defense of central banks and a "sound dollar."  His sententious, Polyanna proposals for a better world are occasionally ponderous and left me wondering: would fat cats on Wall Street and in the Federal Reserve give two seconds of consideration to what he is recommending?

What's Good for General Bullmoose . . .

In Values, Carney comes across as a nice guy determined to be nice to everyone, even  Jamie Dimon, CEO of JP Morgan Chase and a member of the New York Federal Reserve Board.  However, in Plutocrats, Chrystia Freeland reports on the animosity between Carney and Dimon which exploded at a meeting of the IMF and the World Bank in Washington in 2011.  Freeland points out:

The battle between Carney and Dimon gets at a bigger and more contentious issue [than taxes and profits]:  Are the interests of the state and its big businesses synonymous?  If not, who decides? And if they do clash, does the state have the right--and the might--to curb specific businesses for the collective good?

As Freeland records, Dimon widely promulgated his position that the kinds of global banking regulations Carney was proposing were "anti-American." The Carney speeches Freeland quotes show that the genesis of Value(s):  Building a Better World for All is at least a decade old.  Carney himself traces its origins to his childhood in Canada.

Can values drive value?

Carney argues that:

Values and value are related but distinct. In the most general terms, values represent the principles or standards of behaviour; they are judgements of what is important in life. Examples include integrity, fairness, kindness, excellence, sustainability, passion and reason. Value is the regard that something is held to deserve – the importance, worth or usefulness of something. Both value and values are judgements. And therein lies the rub.

"Therein lies the rub" indeed.  Can we separate values and value, the dancer and the dance?  Or, on the other hand, are they in complete contradiction to one another?  Witness the paradox of The Antiques Roadshow.  An expert explains the values embued in an artifact, but the climax of every episode is the revelation of the dollar value of the object, which is based on the current market and only a tertiary result of beauty or craftsmanship, history or sentiment.

The fiat global reserve currency:  where's the trust, integrity and transparency?

Carney claims that the value of "fiat money is grounded in the values of trust, integrity and transparency." The US greenback, the fiat (non-gold/commodity-based) money that really counts because it is the "global reserve currency" and about which Carney has remarkably little to say, as we have seen, is backed by the threat of military intervention.  (See Petrodollar Warfare.)  Moreover, in recent years, as Kishore Mahbubani (Has China Won?) decries and Josh Rogin  (Chaos under Heaven) lauds, the US has been weaponizing the dollar. (See Analysing the Discourse on the USA-China Cold War.)  The US Federal Reserve was born in secrecy and, to this day, most people don't realize, as Carney confirms, that 80% of the money in the world is created by private banks.  (See The Truth About Money.)

How Many "values" are there?

Carney's orbit of values expands centrifugally to include, in his final chapters: "solidarity – fairness – responsibility – resilience – sustainability – dynamism, and – humility." Once again, I find myself questioning which, if any, of these stand as values.  Values are the principles we are prepared to uphold in the most challenging of times.  Logically, values spring from ethics.  The word "ethics" comes from "ethos," behaviour over time, often translated as "character," and contrasts with "pathos," the emotions of the moment.  In the end, I conclude "values" is a misnomer.  There is only one value: justice.  Those things we call "values" are details:  customs, habits, rituals, and allegories.  Justice must be based on ethics, and Kant's much-maligned "categorical imperative"--laws are moral if you accept them being applied to you--imperfect as it is, is as good an option as we have available to us.

Tuesday, 19 December 2017

How Is Money Created?

Money isn't just pixel dust! 

In an earlier post I described money as “pixel dust.” I was being cute—way too cute! Sometimes an analogy can hide much more than it reveals. Money is not created by Tinker Bell, though I did feel a bit smug upon realizing that the writers of the Zeitgeist film series repeated my observation that when you take out a bank loan you create that debt out of nothing.

Banks have the right to create money, but they need your help

The bank does not have the money it is lending you. Stop and think about that for a moment, because it is the answer to the question “how is money created?” As more and more people struggle to understand bitcoin, the fact that money is just a way of recording debt is starting to sink in. When I googled the question “how is money created?” I was surprised by the number of sites covering the question—the number of people who knew the answer. I found myself asking, as I often do, how could I not know this? Shouldn’t every ten-year-old know the answer to this question?  Every time you take out a loan for a house or a car or an education, or buy a cheeseburger with a credit card, you create money--those pixels on a computer screen somewhere that are the reason you work and save and struggle.

The Federal Reserve gives banks the right to create money

In the USA the Treasury prints the money, but the amount of printed money is less than three percent of the total money supply in the system. Actually no-one really knows how much digital debt (i.e. money) there is floating around on the internet and in the intranet systems of all the banks and financial institutions in the world. We know, as I pointed out in my earlier post, there are 1.35 trillion US dollars in circulation (i.e., paper money), but the US debt is 18 trillion dollars. The unregulated derivatives market (the one that caused the crash of 2008) is believed to be worth between 710 trillion and 1.2 quadrillion dollars. To answer the question how much US money exists in the world today (remember money is just a measurement of debt), you need to add up all these numbers: 1.35 trillion plus 18 trillion plus (to be conservative) 710 trillion.  In total, a conservative estimate is that there are  729.35 trillion US dollars in circulation right now. How was all this money created?

The rules for creating money

There is an exchange of paper but, basically, the US Treasury gives it to the Federal Reserve. The Federal Reserve then distributes the money to 12 Reserve Banks across the country which in turn pass the money onto private banks. So how does so much money get produced?  We've been here before: leverage.  It's all about the leverage ratio.  

This graphic (above), which I found online, does a nice job of showing how the money flows in what is known as the "fractal reserve banking" system.  "Fractal" (aka "fractional") means that the banks get a fraction of the amount that they are allowed to lend out, so it really boils down to leverage. Descriptions of the "fractal system" make it sound as if the amount of leverage in the system is quite modest, but as Blinder (who you might remember was a VP in the Federal Reserve) points out, in After the Music Stopped, financial institutions figured out ways to create synthetic leverage ratios of up to 40%.  Let me remind you of what a 40% leverage ratio means.  A 4% leverage ratio means a bank with $1 can lend out $25,  a 40% leverage ratio means that a bank with $1 can lend out $250--250 times more than it actually has.

What is the US Federal Reserve? 

The Federal Reserve is the moolah machine, the institution that creates money and runs the monetary system.  It is the model for and has tentacles into just about every central bank in every country in the world.  The cynical, conspiratorial answer to the question is that the Fed is a bunch of bankers, a cabal of the CEOs from the biggest banks and financial institutions in the world. According to the Zeitgeist movement, all the ways that we might imagine the world is being run--politics, religion, economics--are distractions, cover-ups, window dressing.  The only real power is the monetary system which remains hidden behind the activities of governments, religions, and all movement of goods and services.  If you ask why the USA is constantly at war with someone or something, the Zeitgeist answer is that nothing feeds the monetary system better, profiting and empowering those closest to the system, than warfare. Even conservatives acknowledge that money is the life-blood of the economic system, and nothing pumps more spending, borrowing and debt (i.e., money) into the system than a war.

graphic of Federal Reserve System

Who owns the Federal Reserve?

This may seem like a strange, dumb, childlike question, but I as I have attempted to get a handle on how the system works, I understand perfectly how we end up at this question.  The pervasive suspicion that the Fed is owned and run by self-serving financial titans is hard to dismiss.  In her book Plutocrats, Chrystia Freeland notes a study on the incomes of Harvard University graduates showing a "split between bankers and everyone else, with financiers earning 195 percent more than their classmates." Harvard grads aspiring to become part of the 1% of the 1% have figured out that being connected to the monetary system is the way to do it. Certainly Jamie Dimon, a card-carrying member of the .1%, CEO of Morgan Chase, the largest bank in the USA, being a member of the board of the New York Federal Reserve has got to have the average wage-earner wondering "what the fuck! how is that possible?"

The official answer is that the Federal Reserve is “a blend of public and private characteristics.” Historically the network of "reserve banks" was created in 1910 at a meeting of private bankers on Jekyll Island (yes, it's a real place; I played golf there once in the 60s).  The idea that the entire monetary system would be run by unsupervised private bankers was unacceptable to Democrats; consequently, it was eventually agreed that the Chair of the Federal Reserve and the seven members of the Board would be chosen by the President of the USA and ratified by Congress. They all inevitably have strong connections to the world of banking and finance. As you work your way through the layers of administration, through the lip service and platitudes, the Federal Reserve does seem to be more and more a system run by banks for banks—despite repeated claims that the objective of the system is “to promote the effective operation of the U.S. economy and, more generally, the public interest.”

There are three kinds of answer to the question "Who owns the Federal Reserve?"

  1. The historical, conspiracy-inclined answer is that the Federal Reserve is owned by eight families:

  1. The official answer is “The Federal Reserve System is not 'owned' by anyone. Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest.”

  1. The third answer, on the other hand, is “The Fed is privately owned. Its shareholders are private banks.”

Whatever answer you accept, it seems clear that the much mocked concept of "trickle-down economics" is beside the point. We live, without much question, in a trickle-down monetary system.

Thursday, 23 March 2017

Saint Mathew Pray for Us! Bank Deregulation Is Back!

Shock and awe and bank deregulation

Amid the boom and flash of the spectacular political theatre going on right now, you may not have noticed the announcements in a single utterance on television or in columns in the back pages of your local newspaper—“banks need to start lending money again,” (Trump on CNN), “President Donald Trump promised a meeting of community bankers to strip away some Dodd-Frank financial regulations” (B3 Globe and Mail 10 March 2017) and White House fires Preet Bharara “the high-profile Manhattan prosecutor known for his pursuit of public corruption and Wall Street crime” (A18 Globe and Mail 11 March 2017)—bank deregulation is back! “Bank deregulation” was the precursor to the financial collapse of 2008 causing banks and financial institutions to go bankrupt, individuals to lose homes, jobs and pensions, and triggering the government bailouts of the banks costing taxpayers what is now estimated to be a trillion dollars.  (Historically the British and Americans defined “billion” and “trillion” differently, but these days the American definition seems to prevail.  In the American system, a “billion” is a thousand million and a “trillion” is a thousand billion. Here is a more visual and visceral sense of how much a trillion is.)   The “Dodd-Frank regulations,” about to be "stripped away," were the rules put in place to prevent the collapse of 2008 from happening again.

Saint Mathew, the patron saint of bankers and accountants

Saint Mathew was an apostle of that Jesus the Anointed (who was voted “God” by the Council of Nicaea in 325).  Mathew is the alleged evangelical author of the first gospel of the New Testament  (although his name was not attributed to the text until after he was long gone, and oddly, in the gospel, he refers to himself in the third person--but then again so do I sometimes), and the patron saint of bankers and tax collectors (these days we might suggest that he choose a side), of accountants and money in general  He has a lot to answer for.  Even though I have graduated from agnosticism to atheism since beginning this blog, I’m recommending prayer in this case, because there really don’t seem to be any other options.  Bank deregulation isn’t just on the agenda, it seems a foregone conclusion.  

Bank regulation, bank-robbery deregulation; tomato, tomaato

I have to confess that I broke my pedagogical rule of Do No Harm Part II: Avoid Irony in my last post on bank robbery, but the point I wanted to make is that the next time you hear someone talking about “deregulating banks,” you can substitute “deregulating bank robbery”  and discover that the arguments, the logic and justifications turn out to be the same. So what?  We may be living in a global oligarchy these days with wealth dictating government policy and the law, but perhaps there is some measure of solace in being able to say, “I know you are going to screw us because you have that power, but forget being smug and self-righteous because we know what you’re doing.”

Step one of being un-fooled is to understand what the expression “bank deregulation” means.  Here are three words that you need to know in order to know what "bank deregulation" is all about: "derivatives," "leverage," and "rent-seeking."

  • Derivatives.  I may have talked “derivatives” to death in my earlier post, but basically what you need to understand is that “derivative” means that banks and financial institutions can “bet” on the stock and bond markets.  “Bet” is the important word here.  As described in The Big Short (both book and film), these “derivatives” are not investments in companies or products or services, they are simply companies and individuals betting that a stock will go up or down without actually investing in the company they are betting on or against.  Finance people make “derivatives” sound reasonable by describing them as “insurance”; as in you buy an insurance policy on your house to protect yourself against the possibility that it might burn down.  However, a derivative is more like buying an insurance policy on your cigar-smoking, alcoholic neighbour’s house in the hopes that his house will burn down—so why not buy him a bottle of vodka and a box of cigars for Christmas, his birthday, etc?  In the film version of The Big Short derivatives are shown as being like following your neighbour to the casino and when he bets two dollars on the roulette table, you bet 10,000 dollars with someone else that he is going to lose his two dollars, and someone else bets 100,000 dollars that you are going to lose your 10,000—that’s the derivatives market.  The derivatives market is estimated to be between between 710 trillion and 1.2 quadrillion US dollars.  (see "The Size of the Derivatives Bubble").  Just to put those numbers in perspective once again the total GDP of the USA is 17 trillion.

  • Leverage. How are these crazy numbers possible?  How is it possible that so much money—40 to 70 times the total wealth of the USA, 700 to 1000 times the amount of US paper currency which actually exists in circulation—is being gambled?  The answer is “leverage” (that’s chapter six in The Art of the Deal, the book which Trump’s ghost writer, who wrote the book, called “a tissue of lies”).  “Leverage” is what “bank deregulation” is all about.  If a bank has assets worth one million dollars, the average person might imagine that a bank can therefore lend out to clients up to one million dollars.  Under current US banking regulations the leverage ratio is 4%, which translates as a ratio of 1 to 25.  In other words, if the bank has 1 million dollars, they can lend 25 million dollars.  That’s right; for your mortgage or your car or your kid’s education, they can lend you 24 million dollars that they don’t have—but you, of course, must repay in money that you actually have.  (By the way, the mortgage that you owe to the bank is considered one of the bank's assets.  If you owe the bank $200,000, by regulation the bank is considered to have that money within its assets.)  The current "leverage ratio" (1 to 25) is the key regulation that banks find too onerous, limiting and difficult to comply with.  They want to change the leverage ratio so they can lend you even more money that they don’t have.
  • Rent-seeking.  This is the concept that we really need to watch out for.  The idea has been around since the 1970s, and is being much discussed in financial circles.  I found out about it reading Christia Freeland's Plutocrats:  The Rise of the New Super-Rich and the Fall of Everyone Else.  You might imagine that with all this money floating around it should be easy to cure cancer, end world hunger and poverty, offer everyone daycare and free education from kindergarten to PhD, but as the operations of rent-seeking become more obvious, it is becoming apparent that all this fabulous wealth doesn't actually produce anything, and it isn't the result of anything being produced.  Monumental wealth is being produced simply through the manipulation of government regulations, in particular the laws govern finance and banking. "Money" has become like Tinkerbell's pixie dust, not tied to anything of value, but available to the super rich to sprinkle on politicians, and for politicians to sprinkle back in greater measure on the super rich by adjusting the regulations for banking and finance to their whims and favour.  The disappearing middle class can look back on "trickle-down economics" and crumbs from the big table as "the good old days" because pixie dust may float in cosmic clouds above  but the .1% are exceptional at keeping it afloat and have little motivation to let it fall on the rest of us.

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