Vox Popoli

Nor is it a reflection of the free market. Nicolas Kristof correctly hammers the corporate pirate crew:

But one of our broad national problems is rising inequality, and it is exacerbated by corporate executives helping themselves to shareholders’ cash. Three decades ago, C.E.O.’s typically earned 30 to 40 times the income of ordinary workers. Last year, C.E.O.’s of large public companies averaged 344 times the average pay of workers…. “Compare the massive destruction of wealth for shareholders to what he gets at the end of the day,” said Lucian Bebchuk, the director of the corporate governance program at Harvard Law School. A central flaw of governance is that boards of directors frequently are ornamental and provide negligible oversight….

These Brobdingnagian paychecks are partly the result of taxpayer subsidies. A study released a few weeks ago by the Institute for Policy Studies in Washington found five major elements in the tax code that encourage overpaying executives. These cost taxpayers more than $20 billion a year.

Absurdly high CEO pay, which we have recently seen has absolutely nothing to do with actual corporate performance and may in fact be a reasonable predictor of future disaster, isn’t comparable to stratosphereic athletic salaries. In the case of the athlete, the well-compensated individual is responsible for creating much of the value. In the case of the CEO, they are usually skimming off the value.

Those who have never sat on a corporate board or had much contact with the executive class don’t realize that the executive class is largely parasitical; they are the remoras on the capitalist shark. Their power is the result of government interference in the free markets, which among other things forces families to sell their capital assets due to the inheritance tax and causes firms seeking investment to work with a very small number of favored Wall Street entitities if they wish to find funding. And, of course, one can’t hope to find funding without first installing a properly “professional” executive team and corporate board….

The executive class is not, for the most part, capitalist, it can be more accurately understood as a sort of pirates union that is loosely allied in common cause against the capitalists who actually own the companies that they are systematically pillaging under the guise of “managing” them. Until this distinction between executives and owners is properly understood by the American people, the irresponsible rape-and-pillage will continue to the detriment of the shareholders, the employees, the economy and even the government.

Marty Peretz of the New Republic actually thinks that it’s deregulation that caused the current financial crisis, rather than the Federal Reserve suppressing interest rates and the obvious moral hazard of the Fannie/Freddie structure. But then, he also thinks Ronald Reagan deregulated the airlines:

[T]he fault goes back to Bill Clinton who took up the call of deregulation and ran with it. Like with everything he did he did not look back. No, that’s a bit unfair. It goes back to Ronald Reagan who (not single-handedly but with the boy geniuses at his side) destroyed the airline industry in America.

If you happened to read my column last week, then you would know that it was President Carter who signed the Airline Deregulation Act of 1978. But, you know, it’s so easy to mistake the executive act of firing air traffic controllers with a legislative act passed by the House and Senate… if you’re a journalist.

Biden and the Democrats are operating on a fundamentally false principle:

The Republican party and some of the blogs and others on the far right, are trying very hard to paint a picture of this man, they’re trying the best as they can to mischaracterize who he is and what he stands for. All this stuff about how different Barack Obama is, they’re not just used to somebody really smart. They’re just not used to somebody who’s really well educated. They just don’t know quite how to handle it. Cause if he’s as smart as Barack is he must not be from my neighborhood.

And they wonder why they’re losing. As I noted yesterday, the entire Democratic Party’s campaign is foundering in part because they don’t understand a basic fact. Barack Obama simply is not very smart. He’s an affirmative action candidate, he can’t speak off the cuff, and if his test scores are ever released, it will almost surely be shown that he’s not only less intelligent than Bill Clinton and Al Gore, he’s less intelligent than John McCain, John Kerry, and George Bush. Quite possibly Sarah Palin too.

Obama doesn’t turn average Americans off because he’s black or because he’s too smart. He turns them off because he’s a fraud. Obama’s aloofness, which is easily mistaken for snobbishness, quite likely stems from a basic fear of being exposed for being far less than he pretends to be. I mean, how many spectacularly dumb moves does the guy have to make, how many incredibly stupid things does he have to say, before people begin to realize that he isn’t even as smart as the average politician?

Someone who is truly intelligent doesn’t duck debates or townhall face-offs with an old man like McCain. If Obama was anywhere nearly as bright as he pretends, he’d eagerly embrace the chance to make McCain look half-senile in front of a national audience. His fear of his mask being removed could be hidden when he had a big lead and a tactical defense for not debating, but now that he’s trailing a bit, his unwillingness tends to strongly support the suspicions that have been aroused by his attempt to conceal his intellectual history.

AL wants to know if the current economic crisis was engineered:

I’m not normally one for conspiracy theories, but expansion of a socialist government usually involves nationalizing major industries, right? But it wouldn’t fit the American model of socialism to do it by fiat. Instead, it would be done Hollywood style: Run a monetary policy that causes the industry to go off the cliff so that Super Fed can “save” it by nationalizing the biggest players.

Is this plausible, or am I going too heavy on the sauce?

No, this is merely the result of the long, ongoing shift from a free market capitalist model, in which the private owners bear the risks and rewards of business ownership to a managed market corporatist one where the elite owners and managerial reap the rewards while transferring any losses to the taxpayers. This naturally has the effect of creating a strip-mine mentality, wherein the elite must make hay while the sun is shining. As anyone versed in Keynesian economics knows very well, the model isn’t a sustainable one but it is justified by those who benefit from it because in the long run everyone is dead. Unfortunately for today’s Americans, the long run is arriving at last. As Spengler has repeatedly pointed out, this crisis no surprise and anyone who understands the demographic basis of American finance knew it would happen sooner or later. The babyboomers were always bound to break the system, that they should so richly merit the concomitant suffering from its collapse is merely the icing on the cake.

These bail-outs – and there will be more – are not intended to be long-term fixes nor is the transference of corporate ownership to the American people the long-term goal, they are instead the equivalent of propping up artificial lighting so that the hay can be harvested as long as possible. The inevitable collapse will be delayed until the harvesters can safely head for the exits. What comes next is unknown. History suggests a conventional strong-man dictatorship in one ideological form or another but it would appear that the structure of the North American Union is intended to prevent that from happening.

The reason AIG, Fannie, and Freddie were bailed-out while Lehman was not is because the Lehman failure would not end the harvesting. Merril Lynch wouldn’t have been bailed out either, even if it hadn’t been purchased for quarters on the dollar. But the three other failures might have brought about the end game due to the nature of the investments they were supporting. Don’t worry, it will happen soon enough, although not tomorrow, next month, or even next year. The market forces take time, especially when powerful organizations are desperately trying to stave them off, but they always win in the end.

Miss McArdle is entirely correct in the body of her post on correctly apportioning blame for the recent financial debacles. But as for that title, well, I’m confident it’s just a typo. She’s not generally the too-clever-by-half sort. But I laughed, I did:

Obama goes for the jungular

Obama is seeking to blame the current crisis on the Bush Administration

The blame for the problematic state of the economy lies squarely with the Federal Reserve. It should be abolished and the money power returned to the several States; if it is not, the nation will go bankrupt and be broken by forces much stronger than mere partisan politics. The Bush administration can quite reasonably be blamed, however, for granting the taxpayer guarantee to Fannie and Freddie debt, as well as for its literally criminal decision to keep those massive liabilities off the Federal books.

I am truly enjoying the Obama campaign. Between the “lipstick on a pig” experiment in self-immolation and the recent decision by the Great Speechifier to carry his teleprompter around like a childhood blankie, it just keeps getting better every day. I’m won’t say I share the despair of his Democratic devotees, but I am starting to think I might just feel a little bereft without him in the headlines after the first week in November. He’s such a natural unintentional comedian.

The usually deliberate John Scalzi is beginning to show some signs of electoral stress himself:

It’s entirely possible that McCain campaign will benefit from a critical mass of people — and not just dyed-in-the-wool, will-vote-Satan-into-office-if-he-wears-a-flag-pin Republicans — who have been primed by years of intentional and structural undermining of the legitimacy of fact, to accept bald-faced lying as just another tactic; people, in other words, who know that they are being lied to, know the lies are being repeated in the face of factual evidence, and know the campaign knows it is lying and plans to continue to do so all the way to the White House… and see that sort of stance as admirable. Can you blame McCain for taking advantage of this dynamic? Well, quite obviously, you can, and should. It’s one thing to imagine one’s self a “maverick” for speaking truth to power; it’s quite another thing to be a “maverick” by deciding to lie one’s way into power. However, it’s also amply clear that many who should blame him, or would be outraged by Obama lying in such a transparent and recurrent fashion, won’t.

Setting aside the amusing notion that any Democrat other than Walter Mondale has ever told anything even remotely approaching the truth about their governing intentions, in my opinion Mr. Scalzi is too close to his favored candidate and it’s shredding his ability to analyze the election properly. McCain’s campaign is lying, as politicians do, but the lies are minor and they mostly involve exaggerations of the facts. If McCain were to tell whoppers – such as posing as a champion of ending illegal immigration or free speech – he’d suffer badly. He’s keeping it within the rules of the game.

Barack Obama, on the other hand, is lying about who he is and he has been lying about who he is from the very beginning, even in his own autobiography. The man is obnoxious, a near-complete fraud, and many people sense that and dislike him; he can tell the absolute truth for the rest of the campaign and it will make no difference at all. The fact that his campaign is run by strategists who think they’re still running in a Democratic primary hasn’t helped him.

Does this mean the electorate is stupid? Of course it does, most people are idiots. Most people at Whatever are idiots too, functionally if not literally. I mean, those who are still in denial about Liberal Media Bias may as well sign up for the Flat Earth Society and the Holocaust Deniers League while they’re at it.

I understand why Democrats are furious to the point of hysteria. They absolutely should win this election in a landslide and if they had nominated Hillary, they would have. But they didn’t. Instead they unwisely nominated a smooth self-promoter who is so hopelessly amateurish that he can’t even attack a Republican president presiding over the worst financial meltdown in the country’s history. Obama fans had better get used to the notion that he’s going to lose, since he’s probably going to lose worse than people thought McCain would a month ago. Remember, those who say he’s still a winner are the same folks who said Palin was a terrible choice by McCain that would blow up in Republican faces.

But Democrats should be consoled by the fact that it doesn’t matter who wins since Bernanke is going to be calling the shots anyhow. The economic meltdown will continue, Republicans will bear the blame, and Hillary can ascend the Cherry Blossom Throne four years later than scheduled, just in time to reap the rewards of a economic bounce-back.

Brooke from Rachel’s blog requires assistance of the sort that the Ilk are generally well-qualified to give. Anyone live near her and willing? Cookies are promised!

RW Donn said: For those of you who DON’T own guns . . . WHY?!!?!?!?!!!?????

Brooke Says: Because I have never had anyone to take me out shooting, as I consider having a gun to be much like a car – you should have someone show you what to do. So if anyone in Phoenix who is a gun owner would like to take me to the range and show me some basics, dinner is most definitely on me, and I’ll assuredly throw in some cookies or something.

You know, I’ll be just a little disappointed if someone lives near her and Nate and Jac don’t have to ride out there and do it themselves.

If this wasn’t going to eventually cause so many decent people so much pain, I’d be tempted to uncork some champagne this morning. Wall Street’s wrinkled whores are finally dying of their financial STDs.

Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.

The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, dwarves WorldCom Inc.’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990.

This isn’t a failure of free market capitalism. It’s precisely the opposite, it’s the failure of government-controlled faux market capitalism. The lesson, as always, is that debt is a lethal, fast-moving, corporate cancer. Leverage lets you make money fast, and it will finish you off even faster when – not if – you make a bad bet.

Rod Dreher is attempting to understand the significance of the mortgage guarantees and the incipient Lehman bankruptcy:

Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.

I have no idea what this means. Ye who do — Pyrrho, I’m looking at you — please explain what we have to look forward to.

This means that most, if not all, private equity in America will be destroyed, on average. If you own your house without a mortgage, you’ll be fine, you just won’t be as paper-wealthy as before. If you have a mortgage that is more than 50 percent of the current “value” of your house, you will probably find yourself underwater and will become a likely candidate for foreclosure. I was having drinks with Passport last night and the numbers he mentioned are truly incredible; even with the small decline in housing prices thus far, around 10 percent of mortgages are already underwater.

The logical conclusion is that all of the gains that came from an increase in housing “wealth” over the last 10-20 years will be eliminated. Those businesses that depended on leveraging that “wealth” will also fail. When the Fed finally gives up trying to literally paper over the gap by printing money – a bizarre idea of the disease somehow providing the cure – it will begin to raise interest rates which should eventually get to 20 percent or more. This will be good for those few who are productive and/or liquid, and very difficult for those who need to borrow. Basically, it will either be akin to the 70’s or the 30’s, and the latter is probably more likely now since the Fed and the Bush administration have significantly exacerbated what was already an obvious problem five years ago.

Games, books, and other stay-at-home products which have a low $/hr rate should do relatively well, travel, restaurant and luxury businesses will go under, as they are already doing in the UK. Crime and religion will see significant growth, skirts will get longer, and sadly, this likely means the end of the booty short. [A moment of silence, please….] There will be more war, more government restrictions on liberty, and eventually a Hispanic-led secessionist movement in the American southwest as immigration is first restricted and the expulsions finally begin. The crisis will simmer until it boils over in 10-15 years when the babyboomers can no longer work and they react in their customary political and totally self-obsessed manner. In the end, the proposed solution will be the North American Union and a transnational currency to replace the defunct dollar.

Basically, it’s now time to quit spending lots of money, to seek out secondary and tertiary streams of income and to pay close attention to the financial strength of your bank. Wealth preservation, not growth, is now the key. Here’s a vivid chart from Lombard Street Research which shows that the post-FNMA guarantee US public debt situation is so bad, it’s already approaching the famously dysfunctional Italian levels. And remember, it’s only going to get worse with each new guarantee, bailout, entitlement program, and interest rate increase.