Tag Archives: Lenin

President Obama has his Modern Day Rasputin in Timothy Geithner

The year was 1917. Embroiled in WWI, Russia was now facing food, fuel, and housing shortages as well as inflation as sons of the middle class were lost on the battle field. Money had lost most of its value. The wealthy had begun to hoard food supplies. Class struggle emerged between the wealthy and the working classes. Strikes and public protests including violent encounters between protesters and authorities increased.

On February 23rd, the women of the city of Petrograd staged a demonstration for bread and peace. The next day, their husbands joined them as a spontaneous demonstration turned violent when the police were no longer able to control the crowds of several hundred thousand protesters.

Russia’s leader, Tsar Nicholas, ordered his troops to quell the crowd but as bullets fired, the troops disbanded and 80,000 crossed lines to join the protesters. As the weeks progressed, a weak provisional government was formed by the banking class, industrialists, land owners, and capitalists who promised democracy and an end to the war. When they did not deliver on their promises in the few months of restless anticipation, Lenin returned to Russia promising bread, land, and a withdrawal of troops, took control of the Bolsheviks and organized a revolutionary coup that swept the Bolsheviks to power.

How could Tsar Nicholas have let Russia that had been ruled by imperialist tsars for the past 300 years, erupt into protest and civil war in 1917 to end forever the rule of Tsars? The answer seemed to foreshadow the edge of the abyss on which America finds itself today. Toward the end of WWI, The ruling capitalist class was intent on continuing its hold of wealth, autocracy, and land ownership. Yet the war strained the imperialist system’s ability to provide the working class a way to feed themselves or to provide fuel to heat their homes. Soldiers meanwhile were kept in battle without provisions to sustain them. Wanting land ownership as a solution, workers struck.

In 1915, two years prior to the collapse of the ruling elite, Tsar Nicholas was influenced by his counsel, Gregory Rasputin, to leave governance to his wife, Tsarina Alexandra, and to go to the war front to take command of his troops. Tsarina Alexandra, Nicholas’s wife, was a strong believer in autocracy and had resisted reform in the years leading up to the war. She now kept at her side, a sinister advisor, Gregory Rasputin, who had acquired through his mystical and hypnotic prowess, complete control of the hysterical Empress.

Through his influence in appointments of ministers, and meetings with hundreds of political patrons on a daily basis, Rasputin kept the tsarist system intact while the middle class suffered immensely. At the height of his influence, the middle class even believed that Rasputin was conspiring with foreign powers to bring down Russia during the war. Rasputin did manage to embezzle massive government funds and divert money to elite of Russia. His influence led to a bitter divide within all classes of the Russian society. The communist opposition led by Lenin claimed that Rasputin turned the Russian Tsar into a wimp.

Ultimately, but too late, the elites of Russia recognized that as a public figure, Rasputin was a detriment to their continued power and they conspired to murder Rasputin to try to stop the tide of middle class resentment. In the end, after Rasputin was murdered, the middle class was spurred to join the communist revolution, and the Tsar’s family was assassinated.

In 2007, the Obama Administration has its own Rasputin in the public figure of Timothy Geithner. His influence over the President has allowed Mr. Geithner to pander to America’s banking class in trade for trashing President Obama’s financial credibility with the American middle class. Yet somehow, President Obama seems hypnotized by this man who refuses to wield his power to save the American economy.

At the pinnacle of the banking class elites’ concentration of wealth in 2007, Mr. Geithner was the President and Chief Executive of the Federal Reserve Bank of New York. As the credit crisis erupted, Mr. Geithner influenced Treasury Secretary Henry Paulson and Ben Bernanke, chairman of the Federal Reserve, to save Bear Stearns, American International Group and Citigroup. Interestingly, as part of the deal, he gave Goldman Sachs, of which treasury Secretary Henry Paulson had just been CEO, a $30 billion interest free loan.

At his confirmation hearing, it was revealed that Geithner allegedly accidently evaded $34 thousand in taxes when his tax software misinterpreted his income. Similarly to Rasputin, Mr. Geithner entered the court of the Obama administration with illicit interpretations of his character.

After taking office in 2009, like Rasputin, Geithner became a trusted advisor to the Obama administration and its chief architect in stabilizing the banking system. Under his influence, Citigroup and the Bank of America were salvaged with billions in no strings attached aid. Mr. Geithner fought David Axelrod who had wanted tougher conditions imposed on Geithner’s former comrade banking institutions.

In March 2009, Geithner announced his rescue plan to buy toxic assets and to provide banks with capital, which eventually became widely unpopular, although it was credited with stopping a banking panic that could have created widespread banking defaults. Some claim that Geithner disparaged the administration when AIG paid out $165 million in bonuses to its employees. Wall Street responded to Geithner’s vague plan by plummeting five percent upon its announcement.

Meanwhile, Suskind’s book, “Confidence Men”, indicates that Geithner stalled when President Obama asked him to prepare a plan to wind down Citibank, similarly to how banks were dismantled in the 1930s. If allegations are true, it would seem that Geithner undermined the President’s authority and protected “too big to fail” bank comrades as an overriding strategy.
As the banking elites returned to financial stability, Mr. Geithner became one of President Obama’s most trusted advisors. Similarly to Rasputin, Geithner’s influence grew as other senior advisors with whom he had clashed left the administration.

In 2010, Geithner argued briefly for the elimination of the tax cut for the rich, only to settle for an extension of benefits for the long term unemployed, results which neither increased employment nor improved the deficit, both of which would have supported the middle class. In the same time period, he lauded over a $2 trillion stimulus and quantitative easing plan that attempted to fix the investments of America’s elite even as the world’s credit imploded to ten times the amount of QE and swallowed it whole.

In January 2011, Mr. Geithner asked the Chinese government to stop doing what it had successfully done for thirty years that is to stop managing its economy through currency controls and tariffs. Knowing that China would not bend is will to his words, he also asked China to do what was in its best interest and that of America’s elite, to raise the value of its currency.

Doing so ultimately would harm the American middle class further. Certainly, it would make some American goods more competitive but those goods would be more than offset by the loss of America’s purchasing power. China’s internal demand for commodities and their own finished goods would increase the cost of goods to the American middle class without a material increase in American jobs. However, the move would stabilize investments made by the banking class in China’s factories. Interestingly, Geithner’s father was on the board of the National Committee on U.S.-China Relations.

On June 22nd, 2011, Treasury Secretary Geithner told the House Small Business Committee that the Obama administration believed taxes on small business must increase so the administration would not have to “shrink the overall size of government programs.” In a government that borrows 43 cents for every dollar that it spends and that has been growing at seven percent per year without fail, that spends more on our military than all other governments on earth combined, and that spends twice that of any other nation on healthcare per person, whose social net is borrowed, and whose retirement programs are quickly facing insolvency, Mr. Geithner’s solution was to tax the middle class small businesses so that they have even less to hire the 30 million underemployed in our country.

On January 6th, 2011, Mr. Geithner began the spectacle of the debt ceiling with a letter to Congress. As the politics played out in front of the world, Mr. Geithner made the announcement that the government would shut down on August 2nd, 2011, leading to the now infamous brinkmanship politics over the debt ceiling. Without a cogent solution going forward proposed by the administration or agreed to by Congress, Geithner watched America suffer its first credit rating downgrade ever on August 5th.

Now we hear that Mr.Geithner intends to spend more of the Middle Class’s money to prop up the banks of Europe in conjunction with the IMF and the European Central Bank. Geithner allegedly envisions that U.S. financial commitment will be open ended. The EU plan is similar to that used by the U.S. during the financial meltdown of 2008, unlimited lending to prevent the sovereign default of insolvent EU Banks. Mr. Geithner returned from Europe stating that he “scared the crap” out of the EU’s leaders. Understandably, expanding the EU’s lending with support from the U.S. would protect more of the West’s bankers at the expense of the American middle class. However, where does the patience of America’s middle class end?

The middle class of Russia’s patience ended when they could not find employment. Their patience ended as their soldiers were left unattended on the battlefield. Their patience ended when the heating oil for their homes was no longer available. Their patience ended when they no longer could buy bread as their money hyper-inflated. How much more money printing will be required for America’s money to hyper-inflate?

Rasputin controlled Russia’s domestic economy as the Tsar and Tsarina bent to his will to keep extreme capitalism in place even as it collapsed Russia’s middle class. Rasputin was expended too late to save Russia’s capitalists. Mr. Geithner seems bent on filling Rasputin’s modern day shoes.

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Will China’s Breed of Capitalism Survive Mankind’s Corruptibility?

Before, considering a post describing potential cures for modern capitalism, I should begin by describing my observation of its current state. Before I begin, let me start by saying that human nature is at once both fair minded and selfish. Many Americans including myself believe we are given unalienable rights by God and we support all who seek to protect these God given rights from being trampled by anyone. Yet within this context, most individuals seek personal pursuit of happiness above the interests of others. This is the nature of man.

The founders of our constitution understood man’s nature when they created our republic. They constructed a government that would allow each faction to pursue its self interests while being kept in check by other factions, other parties, other branches of government and by the votes of constituents. Adam Smith, credited as the father of American Capitalism, knew also that the nature of man must be kept in check by a fully functioning competitive market. In his infamous book, “The Wealth of Nations”, Smith cautioned against businesses forming a cabal, or monopolies, in which they would conspire against a nation’s people. Given a limited government and a small business environment, both containing checks and balances against man’s corruptible nature, American capitalism became an economic powerhouse.

Even with man’s flawed desires, capitalism has proven over the centuries to best align the motives of men with the goals of the nation-state and, in practice, provided a more productive economic system than twentieth century Marxists, Leninists, Stalinists, or Maoists that espoused proletariat dictatorship purported by Marxist disciples. However, while capitalism’s progression has proven thus far to outperform other forms of human productivity including the centralizing dictates of communism, its historic results should not be ignorantly interpreted as having proved capitalism’s infallibility. We in the West have tended, as the victors of economic ideology, to let the warnings of capitalism’s market failures or global excesses expounded by Marx and others go unheeded as if they were without basis. Yet in the 21st century, we are witnessing Marx’s warnings played out in our markets.

Marx concluded that feudalism, in which the agrarian worker was tied to the feudal land and lord, gave way to capitalism that freed the worker from the bonds of feudalism to sell his labor into a commodity market governed by the capitalist. He believed that capitalism was only the second of four phases, and that its phase would end when workers, tiring of the concentration of wealth of capitalism, rose up with the help of the socialist state to regain power. He believed that ultimately the state would corrupt, concentrating power in the few political elite, and that this would give rise to communism in which workers equally shared labor without the limitations of state boundaries.

Yet, having lived before the preeminence of international banking, both Marx and Adam Smith viewed capitalism not as the free flow of currency across international borders, but as the growing influence of machinery and its owners in the economy. While capitalism did emerge as the dominant mode of production, what eventually occurred was the increasing symbiotic relationship between capitalists and socialist nation-states, in which nation-states protected the growth of capitalists and fed off the taxation of these newly prosperous entities. This symbiotic relationship fed ever increasing boom-bust cycles that led to 20th century financial capitalism, to a divergence of the partnership between capitalists and nation-states, and, finally, to the emergence of Asian capitalistic mercantilism and the rise of China as the master of this newest form of economic power.

From 1853, the year of the world’s first commercial oil wells, through the beginning of America’s long depression of 1871, commercially developed combustion engines super-charged America’s participation in the western world’s industrial revolution. During these two decades, America’s agrarian population decreased from 77 percent to 44 percent as millions were freed from a rural life to sell their labor to the growing class of capitalists. As Marx had predicted, capital concentrated in the hands of a few creating a real estate bubble-bust cycle not unlike that of 2008 precipitating the Long Depression of 1871, with subsequent capitalist bubbles forming in approximately 20 year waves from the Long Depression of 1871 to the Depression of 1893, followed by the Recession of 1907, and the Great Depression of 1929.

Each capitalist wave garnered increased productivity leading to higher wages and displaced workers, increased innovation leading to new worker opportunities, and greater concentration of wealth amongst capitalists. The uneven development between innovation and productivity led to pockets of unemployment, unions, social unrest and European socialism. It also exponentially increased capitalist productive capacity that led to late nineteenth century international competition for new consumers and eventually to World War I in a futile, tragic, military attempt to sort out winners.

In 1890, seeking protection from European competition, American capitalists urged Congress to pass the McKinley Tariff Act, which imposed 50% tariffs on imports and lead to a depression in 1893. Following severe labor strikes in 1894, the next decade became a battle between hundreds of capitalist American trusts that formed under the protection of tariffs to gain virtual monopolies on all manners of American industries, and the beginnings of American socialism formed to protect workers and consumers from monopolistic power of the trusts.

At the turn of the 20th century, the financial panic in 1907 and subsequent lengthy market contraction was thought by many to have been contrived by international bankers as the means to create a new American financial dynasty, built around a Federal Reserve that could create money to “provide liquidity to mitigate market corrections”. Formed in 1913, America’s central banking system, the Federal Reserve, enabled America’s newest form of financial capitalism to emerge. America now had the makings of her three great 20th century capitalist rivals.

The first of these rivals was America’s socialist nation-state. By 1930, only 21 percent of Americans remained on the farm. Coming out of the Great Depression, our Federal government became increasingly socialist, adding to its socialist policies in the 1960’s with the Great Society and turning more so with the Elections of George Bush and Barack Obama and the enactment of their agendas.

The second rival was the emergence of globalist multinational corporate Industrial-states. After enduring two world wars and the Great Depression, America’s capitalists finally emerged, compensating for an increasingly socialist state by crossing geographical boundaries to reduce America’s regulatory grasp, to expand capacity unfettered by the symbiotic reliance on the nation-state, and to gain access to low cost labor and untapped markets.

The third rival was International banking. Restructured through the depression, given world status through Bretton Woods, and severed from the bondage of the gold standard from an earlier era, banking was now free to size up each individual, company and nation as to the value of their future capitalist production. Banks could then provide money from thin air to indenture these individuals and entities, earning interest from the sizing up of credit, creation of money, and transfer of financial capital to nations and their businesses that would most likely provide the greatest returns.

As the 20th century progressed the EurAmerican nation-states became increasingly impotent, as financial capitalism assisted the expansion of physical capitalism across international boundaries. The concept of capitalism as the physical means to produce real value was replaced by an abstract goal of accumulating financial capital through the manipulation of physical capital and the production of goods and services.

This newest form of capitalism, unencumbered by the mortal limitations of physical capitalism, gave way to the excessive bubbles of the late 20th and early 21st centuries. Rich with the financial capital afforded them through relatively new central banking systems and relaxed capital formation policies, banks emerged as the purveyor of financial capital to fund emerging nations. Yet unhappy with even the limitations of this newfound financial power, they created financial capital that benefited purely from the manipulation of other financial capital, building one capital formation upon the other. It was this new financial capital system that created the greatest of all capitalist bubbles, the credit default swap bubble, which eventually cracked in 2008.

The Asian nation-states were not encumbered by the laissez Faire checks and balances of the EurAmerican systems. The eastern cultures provided a much closer knit relationship between government, banking, and business that had the potential to create a more competitive economic system if they could overcome the very corruptible nature of mankind that caused America to limit this potential in the first place. Japan tried unsuccessfully to rise but was thwarted by her banking policies. Then the ASEAN nations created a boom-bust cycle during their attempted rise by the unintentional effects of excessive capital formation.

Finally China emerged with a strategy that promised to learn from the dictates of the various factions of feudalism, mercantilism, capitalism, socialism, and communism that had come before. China would put forth a new brand of capitalism, the capitalist-mercantilism model as a means to transfer wealth in preparation for a new phase of her Marxist system. Believing that perhaps Marx was right that the world would have to naturally progress through capitalism and socialism and not be forced through it by the likes of Russia or even its own preceding governance, China first embraced capitalistic special economic zones as engines of growth.

Yet, instead of allowing the divergence of capitalism and statism that occurred in EurAmerica, China enforced a blend of new capitalism and mercantilism of old to grow her nation-state. Instead of adopting the West’s view of property rights regarding intellectual capital, China traded access to her market for access to the West’s innovations and trade secrets. Instead of adopting the West’s concepts of currency valuation to balance trade, China instead turned the West’s newest concept of financial capital on its head, maintaining a contrived lower purchasing power of her currency to create a trade imbalance that mined the West of its financial capital in exchange for cheaply priced goods.

At the right time, when holding Western financial capital was a greater risk than allowing Western interest rates to increase by cashing out her holdings, China began to unwind her positions of the West’s financial capital. China is exercising her understanding that capitalism is the gathering of the means of production and not the transitory collection of financial units of accountability of future production from indentured persons, companies and countries.

Will China inevitably suffer a downturn in her meteoric hegemonic rise? Did America suffer through several great wars including her own civil war, multiple depressions, innumerable recessions, the struggle of slavery and suffrage amongst other strife on her journey? The answer to both questions is of course yes. However, the more important question is how will China fare through this upset in her quest? If America’s founders were right about the corruptibility of mankind, then no race, civilization, or nation-state is immune from that corruption. The test during her upcoming downturn will be whether or not China’s new hybrid of capitalistic and statist governance is up to that task.

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