Through the power of the twitter, I was recently reminded of a blog post by Sam Harris of a few years ago.  It’s titled How to Lose Readers (Without Even Trying).  Harris wrote it in response to the reaction to a previous post of his, How Rich is Too Rich?, in which he had had the audacity to muse about the efficacy and morality of raising taxes on the rich.

He was a bit stunned.  Keep in mind that Harris has spoken and written about a myriad of controversial topics, including religion, torture, free will, and profiling at air ports.  His writing has elicited so much controversy in fact, that he’s dedicated a page to it: Response to Controversy.  And it’s the response to his ideas on taxation that  left his swimming upstream though a tide of outage

Do you have too many readers of your books and articles? Want to reduce traffic on your blog? It turns out, there is a foolproof way to alienate many of your fans, quickly and at almost no cost.

It took me years to discover this publishing secret, but I’ll pass it along to you for free:

Simply write an article suggesting that taxes should be raised on billionaires

You can declare the world’s religions to be cesspools of confusion and bigotry, you can argue that all drugs should be made legal and that free will is an illusion. You can even write in defense of torture. But I assure you that nothing will rile and winnow your audience like the suggestion that billionaires should contribute more of their wealth to the good of society.

If there is another example that illustrates, as clearly and depressingly, the enormous success of free market fundamentalism in penetrating and lodging into the popular consciousness than this passage, then I haven’t come across it.  How the propaganda has been so successful I wish I could say, but clearly the theology that’s been most successful in the US over the past 40 years isn’t the theology of Christ, or New Age mysticism, but the theology of the billionaire and invisible hand of the perfect market that has bestowed upon him his well deserved wealth.

Harris identifies one of the high priestesses behind this theology and take her, very satisfyingly, to task:

It is difficult to ignore the responsibility that Ayn Rand bears for all of this. I often get emails from people who insist that Rand was a genius—and one who has been unfairly neglected by writers like myself. I also get emails from people who have been “washed in the blood of the Lamb,” or otherwise saved by the “living Christ,” who have decided to pray for my soul. It is hard for me to say which of these sentiments I find less compelling.

As someone who has written and spoken at length about how we might develop a truly “objective” morality, I am often told by followers of Rand that their beloved guru accomplished this task long ago. The result was Objectivism—a view that makes a religious fetish of selfishness and disposes of altruism and compassion as character flaws. If nothing else, this approach to ethics was a triumph of marketing, as Objectivism is basically autism rebranded. And Rand’s attempt to make literature out of this awful philosophy produced some commensurately terrible writing. Even in high school, I found that my copies of The Fountainhead and Atlas Shrugged simply would not open.

“Autism rebranded” is a great, succinct way of putting it.  Cutting the core, Harris has a great diagnosis of the fundamental problem with these ideas:

And lurking at the bottom of this morass one finds flagrantly irrational ideas about the human condition. Many of my critics pretend that they have been entirely self-made. They seem to feel responsible for their intellectual gifts, for their freedom from injury and disease, and for the fact that they were born at a specific moment in history. Many appear to have absolutely no awareness of how lucky one must be to succeed at anything in life, no matter how hard one works. One must be lucky to be able to work. One must be lucky to be intelligent, to not have cerebral palsy, or to not have been bankrupted in middle age by the mortal illness of a spouse.

This should be obvious given a few moments of self-reflection, that is apparently isn’t speaks to the power of the propaganda.  Whether this power comes from the ability of the propagandist or flaws within us, I don’t know.  But, given the quality of Rand’s writing, I tend to lean towards the latter.

At the end of this interesting Guardian piece on privatization in the UK is a good crystallization of an argument I’ve made, or tried to, in a few blog posts:

Markets are in the end man-made devices for utilitarian purposes, not a force of nature that we should not try to resist.

Most of us in the West like to think we’ve moved far beyond the atavistic proclivity of seeing spirits, or agency, in the moon, stars, and wind.  But if you listen closely, and without deference, to what you hear from economists and pundits, you’ll soon realize we haven’t come as far as we might think.  You’ll find we’ve traded shamans for economists, and it’s the markets that are the spirits in need of appeasement.

And only the economists know the spells.  Take this passage from Satyajit Das’ Traders Guns & Money discussing former chairman of the Fed Alan Greenspan’s elocutionary powers:

Greenspan’s regular congressional testimony attracted financial analysts, journalists and linguists in equal numbers.  An industry in interpreting Greenspan’s prognostications has developed.  Without a hint of self-parody, Greenspan himself provided guidance to interpreting his pronouncements.  ‘I know you believe you understand what you think I said, but I am not sure you realize that what you heard is not what I meant’ the Maestro once offered as explanation.  He further clarified his position with unusual directness: ‘If I have made myself clear then you have misunderstood me.’

Does that sound more like a scientist trying to explain and elucidate, or a shaman befuddling with large arm movements, attempting to keep his place at court?

And it’s only the power that we give to the magic juju of our modern shaman that can explain why the last sentence of the Guardian piece isn’t maddeningly, heart-breakingly obvious to, and accepted by everyone:

If [markets] end up serving the interests of only a tiny minority, as is increasingly the case, we have the right – and indeed the duty – to regulate them in the interest of greater social good.


I’ve never had any particular interest in the arcana of parliamentary procedure.  Any sentence containing the word ‘cloture’ is guaranteed to make my eyes gloss over, and what the hell is President pro tempore supposed to mean anyway?  Of all the books that exist in the world, Robert’s Rules of Order might literally be last on my reading list.  Even despite some fairly recent evidence to the contrary, I’ve taken for granted that the gears of government will grind on, even if slowly.  That there is something in the mechanics of the process of governing that will prevent it from going off the rails.  Sort of like how you take for granted that your engine will start whenever you turn the key.  Until it doesn’t.

And on October 1st, the beginning of the fiscal year, the Federal government, or at least a lot of it, shut down.  So it seems I’ve lost the luxury of taking a base operational state of the US Federal Government for granted.  Was that luxury ever justified?  Forget the why for a moment, how does something like this happen?  Did a slight majority or minority in one half of one branch of government just shut the whole thing down?  How is that possible?

Well, as I said, I’ve been complacent and disinterested in matters of governance and legislation so I have no idea.  Perhaps our most august journalistic institutions can help.  This New York Times piece from September 30, Government Shuts Down in Budget Impasse looks like a good place to start.

What looks clear is that the dispute involves funding for the Affordable Care Act, or Obamacare, with the House passing a bill that will defund or otherwise delay enactment of Obamacare, and the Senate refusing those measures.

In the hours leading up to the deadline, House Republican leaders won approval, in a vote of 228 to 201, of a new plan to tie further government spending to a one-year delay in a requirement that individuals buy health insurance.

So a chamber of the Senate can do that, delay the enactment of a law though the budget process?  Apparently so.  But the bill the Democratically controlled Senate wants to pass is clean, i.e. no “funny stuff”, as Lebowski’s nihilists might put it.

Earlier Monday, the Senate voted 54 to 46 along party lines to kill the previous House plan immediately after ending a weekend break. Senators then sent the House a bill to finance the government through Nov. 15 without policy prescriptions.

But House leaders would have none of it, again demanding a significant hit to the health law as a price for keeping the government open.

But why are there ever ‘policy prescriptions’ in funding bills at all?  Is that a new thing?  Some historical context would be helpful.

Maybe the Washington Post can help, let’s start with the hopefully titled So far on Capitol Hill, no end in sight over shutdown.  From early in the piece:

The GOP decision to attach the language to defund or delay the Affordable Care Act to the stalled spending resolution was a tactical one pushed by conservatives, who think that the spending bills represent their moment of greatest leverage with President Obama.

Well I suppose that makes some sense, the GOP doesn’t like the ACA and, since it is now law, and since they only control one house of Congress they can’t repeal it, so mangling it during the budget process would be the only option…I guess.  But I still wonder about precedent, and appropriateness.

After nearly three years of jumping from fiscal crisis to fiscal crisis, Democrats want to establish a different order. They would like to make temporary funding bills, such as the one the Senate passed last week to keep the government funded, and regular increases to the debt ceiling perfunctory matters that are routinely approved without bringing Washington to the brink of disaster each time.

And that makes sense…or at least more sense than re-fighting legislative battles all over again during the budget process.  And fighting them to an impasse that incapacitates the federal government.  This all still seems muddled and messy.  But then, that could be because it is muddled and messy.  But as far as a way through, this is towards the end of the piece:

Despite the heated talk about gutting the health-care law, Republicans have been quietly trying to coalesce around a set of goals that could win support from Democrats in a bipartisan pact that would resolve the annual spending bills and increase the debt ceiling. In exchange for lifting the debt ceiling, the possibilities floated include smaller cuts to the health law, including repeal of a tax on medical devices that funds a portion of the law but is unpopular even among many Democrats. Additionally, Republicans might push for a repeal of a medical advisory board that conservative critics have called a “death panel.”

Most likely, Republicans want to focus on reforms to entitlements, including a change in how the inflation index is measured for adjustments to Social Security benefits, and some other tweaks to mandatory spending. If those were adopted, Republican advisers said, it would pave the way for relief from the automatic cuts imposed by the 2011 Budget Control Act.

All of this could be accompanied by vague language calling for the tax-writing committees in Congress to engage in a rewrite of the tax code.

It’s good to have goals, hopefully realistic goals.  I don’t know what that last paragraph is supposed to mean though…would the language have to vague for some reason?  Is this just meant to suggest that accomplishing all that is discussed could potentially be easy, not requiring specifically worded legislation?  Still muddled.

And still searching for some historical context, I found the Washington Post WonkBlog.  Like with geek, I’m generally a bit suspicious of those who self apply “wonk”, but sure enough there is a post with exactly the historical context I was looking for.  The piece lives up to its title, listing all the previous government shutdowns, why they happened, and how they ended.  Or at least, all the shutdowns since ” the modern congressional budgeting process took effect in 1976″, though just what the modern congressional budgeting process is is not explained.

The upshot to me is that mixing of policy prescriptions with funding bills is not new and unprecedented.  It’s brought the federal government to loggerheads a number of times in the past 40 years, whether over abortion, Contras, or nuclear powered aircraft carriers.  So it does seem like a systemic problem.

The same WonkBlog author, Dylan Matthews, explores that in another post titled The shutdown is the Constitution’s fault.  Stating early on where the fault of the shutdown lies:

If you’re a congressional process nerd, you’ll blame a budget process that has stopped working, if it ever did work, and which asks Congress to take far more actions every year than it can be expected to take in its currently hyper-polarized state.

That may be fair as far as it goes, but it does let the legislators, the actual people who have responsibilities and make decisions that they should be held accountable for, off the hook.

Ultimately, the wonk and presumed congressional process nerd, blames James Madison.

Madison is also wrong about how best to safeguard democracy in a diverse republic. The thesis of Federalist 51 is that elections alone are insufficient to guard against the possibility that a government will encroach upon the rights of citizens, either by a majority faction oppressing others or through all-out tyranny. “A dependence on the people is, no doubt, the primary control on the government,” Madison writes, “but experience has taught mankind the necessity of auxiliary precautions.”

It’s unclear exactly what Madison was so wrong about, apparently the need for “auxiliary precautions” in addition to elections to guard against tyranny.  And it’s not explicit what those unnecessary “auxiliary precautions” are, but since the piece goes on to talk about systems in New Zealand, Norway, and Israel that all have unicameral parliaments whose leader serves as the executive, presumably those precautions are the checks and balances to be had between separate executive and legislative branches.  My speculation seems to be borne out a few paragraphs later:

But it’s not just that Madison’s system is unnecessary. It’s potentially dangerous. Scholars of comparative politics have shown that presidential systems with a separation of executive and legislative functions, like America’s, are considerably more likely to collapse into dictatorship than are parliamentary systems where the executive and legislative branches are merged. That’s because there are competing branches of government able to claim democratic legitimacy and steer the ship of state at the same time — and when they disagree profoundly, there’s no real mechanism for resolving the dispute.

That’s a bit scary.  But, circling back to the previous article on past shut downs, that list started in 1976 when the modern congressional budgeting process (whatever that is) took effect.  Couldn’t that be the problem, the budgeting process and not necessary the whole separation of the executive and legislative?  Rather than re-writing the constitution, couldn’t the budgeting process be fixed?

I mean, at least the federal government would be funded, wouldn’t it?  Though it does seem we have a tough row to hoe with the apparent lack of feeling that Americans, despite serious ideological differences, are involved in a common project.  Maybe it’s rose colored glasses, maybe things have always been this way, but the parties do appear to be extremely polarized, and only getting more so.  This paragraph is worth contemplating:

It’s important to be very clear about what’s scary here. It’s not any one instance of disagreement or brinksmanship. It’s the emergence of the sustained, structural problems that have harmed other countries with similar presidential systems. To believe that the U.S. won’t eventually face terrible consequences from the mixture of polarized parties in a presidential system is to believe that the clear trends in our political system will, for reasons that are currently unclear, reverse themselves. That would be nice, but as they say, hope is not a plan. And the problems of our politics have something of a built-in defense mechanism against meddlesome voters trying to impose sanity on the system.

The piece ends with:

That’s James Madison’s fault. It’s the Constitution’s fault. If you’re mad that American democracy has gotten to this point, don’t just blame Boehner or Obama or Ted Cruz. Don’t hate the players. Hate the game — and think about how to change the rulebook.

I’m pretty sure you can hate both.

Forget it, Jake…it’s Chinatown

-Chinatown (1974) dir. Roman Polanski

When, in a moment of quiet contemplation, you look back on your life, at the decisions and vagaries that have brought you to where you are today, does that final line from Chinatown ever pop into your head?  It does mine.  The resigned, laconic advice seems wise when you consider the insuperable nature of the entrenched corruption and evil Jake is facing.  It’s advice that times like these make very tempting to take.

It’s been five years since the Lehman Brothers collapse, five years since the global financial melt down.  It’s been five years of economic stagnation and anemic job growth.  But sas anything of significance changed?  Have there been lessons learned and people brought to account?  Well it sure doesn’t look like it.

Take this interview with William Black, a former bank regulator and current law and economics professor.  The interview focuses on the contrast between the lack of prosecutions following the most recent financial crisis and what happened after the Savings and Load debacle of the 80’s and early 90’s.  The entire interview is wide ranging and worth a read, but I’ll excerpt some of the more depressing bits:

And what people don’t understand about the criminal justice system is there are roughly a million people employed in it — and of course, millions incarcerated in it. But of the million employees, 2,300 do elite white-collar investigations. And of those 2,300, you have to contrast that to the number of industries in the United States, which is over 1,300. Notice I didn’t say ‘corporations,’ I said ‘industries.’

So a couple of things should be obvious. First, the FBI agents will not have expertise in the industry. And second, they can’t patrol the beat. They have to wait until a criminal referral comes in, and won’t come from the bank itself. Banks don’t make criminal referrals against their CEOs.

It could episodically come from whistleblowers, but against an epidemic of fraud that can never work. It has to come overwhelmingly from the regulators. So when the regulators ceased making criminal referrals — which had nothing to do with an end of crime, obviously; it just had to do with a refusal to be involved in the prosecutorial effort anymore — they doomed us to a disaster where we would not succeed.

So here we get a sense of how the deck is stacked against any sort of robust law enforcement efforts, not only against the big players, but the little fish as well.  A few beats later Black says this:

Because of changes in executive compensation, it’s very uncommon for people to blow the whistle in the modern era. What people often don’t understand is that executive compensation bonuses go down very low in the food chain. And so if I’m a boss and I see a crime being committed, it isn’t just that I risk losing my bonus, it’s that Fred and Mary who report to me — Fred with three kids about to go to college and Mary with a kid that has severe problems — they’ll lose their bonuses as well. And so it’s not even my greed — it’s my altruism that gets in the way.

I might interpret how low in the food chain executive compensation goes as something akin to Mob “dirtying up” or just flat out bribery, but I suppose using altruism to shield top executives from whistle blowers does have a certain dark poetry to it, even if I don’t necessarily buy it.  And then, for the cheery on top, Black’s opinion of what we can expect going forward:

The failure to prosecute under any theory of economics and any theory of criminality means that the next crisis is far more likely, and that it’s going to be far larger, because this accounting control fraud recipe is a sure thing that guarantees that you will be made wealthy immediately as the controlling officers, and there will be no risk — zero. Not a single elite banker who caused this crisis is in prison, period. So you have absolutely maximized what we call a “criminogenic environment,” and a key element of that, as you say, is that we have taken moral hazard — the fraud dimension — and maximized it.

Sleep tight.  Also a good segue (I was certain that word was spelled ‘segway’) for another another heart warming piece over at the Institute for New Economic Thinking titled “The Next Financial Crisis” by Eric J. Weiner.  Again the whole piece is worth a read, but here are a few excerpts:

By the time the real crisis hit and Lehman and Bear Stearns imploded, the Dow was below 10,000. The S&P 500 index was down almost 30%. The market was waiting for more bad news.

But that was five years ago. Surely in the intervening half a decade we’ve made the necessary changes to create safer financial markets that aren’t as susceptible to damaging excess and are insulated enough that they can’t crush the overall economy?

In a word, no. Indeed, there have been practically no structural changes in our financial system at all. The systemic risks of another bubble booming and busting remain as acute as they were five years ago. All that’s different, for now, are the surrounding economic conditions.

The real problem, however, is that we haven’t responded to the lessons of five years ago by making substantive changes. Banks that were deemed “too big to fail” by the federal government during the crisis — Bank of America, Citigroup and JPMorgan Chase — remain, well, too big to fail. Wall Street is back to creating synthetic collateralized debt obligations, one of the more pernicious varieties of securities that blew up during the crash. And some consumers can still get a federally guaranteed mortgage with just 3.5% down.

The point is that although the economic conditions for a bubble haven’t yet materialized, the seeds of our destruction are still there, lying dormant. And with the same financial system in place, another crisis essentially is waiting to happen.

There are no simple answers. It will take a complex plan to seriously regulate a system that affects the broader economy in ways that it never has before and is dominated by banks the size of sovereign nations.

No simple answers?  At this point in history can Americans comprehend, or tolerate, any other kind?  I’ve read the Internet, so I have my doubts.  So what to do?  How to avoid the next financial disaster?  How to hold those who caused the last one to account?

I find myself bereft of brilliant ideas.  I could recommend you start a blog, but from personal experience that doesn’t appear to have much of a impact on the world.  I suppose it might help if people read it.  You could write your Congressperson or Senator I suppose…but the financial services industry writes them letters as well, and I bet their letters contain many more 0’s that yours will.  It would be kind of cool to get a form letter on some US Senate letterhead though.

Maybe it’s all the Stoic philosophy that I’ve read (actually about two pages of Epictetus, but I think I get the gist), but perhaps all this is just the part of life that needs to be borne with quiet reservation by us little people.  Perhaps the best we can hope for is the play Cassandra, able to see impending disaster, but powerless to prevent it.  Maybe we live in Chinatown.  Pleasant dreams!

Continuing on with the award winning series of “everything is rigged’ posts, here is a link to an informative piece at Barry Ritholtz’s blog.  The title is “Banks Are Manipulating Gold and Silver Markets”, but it goes on to list all kinds of market rigging, like energy, commodities, interest rates, currencies, etc.  With a plethora of links (as opposed to a plethora of piñatas).

I wonder:  At what point does the ubiquity though space and time of a phenomenon lead you to the conclusion that it’s a feature, not a bug?  Just how easily, and readily, is the invisible, though iron clad, hand of the market thwarted or appropriated?  The expansive list provided at the link would indicate that the answer is pretty damn readily.

In anything approaching a rational discourse, the endless lists of fraud, abuse, and manipulation that is the history of capitalism would serve as a insurmountable indictment against the benevolent, all powerful god of the free market.  But there is always a true believer to offer up a theodicy.  Like any fundamentalist, the market fundamentalist is looking for the practice of the pure, the true faith, one unsullied by the grimy compromises of this fallen world.  Something he will never find, at least not until he shuffles off this mortal coil to his final reward.

What’s become obvious to me: the markets aren’t magic, they’re us.  They always have been.  Markets are powerful, useful tools that can spurn innovation and improve lives.  They are tools created by us, and they can be broken by us.  They can be used for good or bad.  Having lived through the last five years of economic crisis and stagnation, how could you come to any other conclusion?