War and the Zionist Power

David Bromwich Become a fan 

Professor of Literature, Yale University

Netanyahu and His Marionettes

Posted: 08/07/2015 6:34 pm EDT  Updated: 08/12/2015 8:59 pm EDT 

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Benjamin Netanyahu is laying siege to the Congress of the United States, not for the first time. He has thrown his voice and channeled his influence into the arena of American legislative politics, to abort the P5+1 nuclear settlement with Iran, which was signed on July 14 by the US, Britain, France, Germany, China, and Russia. The Israeli strong man's latest intervention is in keeping with the rest of his political career. Netanyahu owes all his importance and his success to actions that have been purely destructive. 

He was first elected in 1996 on the wave of Israeli settler chauvinism that followed the signing of the Oslo Accords. His rise occurred in the wake of the assassination of his opponent, a courageous defender of the accords, Yitzhak Rabin. A public memorandum detailing the strategy for Netanyahu as leader of Israel was written by the neoconservative war propagandist Richard Perle, along with a small committee of others. The strategy document, "A Clean Break," called for Israel to free itself from the tedious demands of diplomacy once and for all, curtail its efforts to negotiate with Palestinians toward the creation of a state, and give up the idea of joining a neighborhood of nations in the Middle East. With American help, instead, Israel could stand alone as the dominant power, a position it should never compromise by bargaining for peace. To achieve this end, three countries had to be undermined, subdivided, or destroyed: Iraq, Syria, and Iran. 

So far, things have gone roughly according to plan. Iraq and Syria are out of the picture -- the latter with considerable satisfaction to the people around Netanyahu. But Iran has continued to pose a stumbling block; and as early as 2008, Barack Obama's interest in lowering the terrorist threat to the US by calming the violence of the region was perceived by Netanyahu as an impediment.

From their first meeting in 2009, Netanyahu made it plain that Obama was an obstacle to be overcome by any means necessary -- political assaults from the rear and flanks; concocted international incidents; speeches to Congress and the United Nations and AIPAC and Congress again. Obama was to be treated as an enemy in all but name. The story was to be circulated that Obama, possibly from motives of racial resentment, was profoundly unfriendly to the state of Israel. In the six years that followed their first meeting in May 2009, a continuous strand of Netanyahu's foreign policy has been devoted to weakening the Obama presidency. 

Over the same period, the Republican party set itself as a primary goal the nullification of everything Obama proposed. It was natural therefore that its alliance with Netanyahu would grow increasingly public. Only self-respect in the Republicans and a sense of decency in Netanyahu could have prevented it. But one should not underrate the element of racism in Netanyahu's resolve. On the day of the last Israeli election, in March 2015, which ended by returning him to office with a far-right, settler-based coalition, Netanyahu sent a panic Facebook message to his followers. "The right-wing government is in danger," he wrote. "Arab voters are coming out in droves to the polls. Left-wing organizations are busing them out." His followers had a particular duty to vote in order to offset the droves of Arabs. 

Now, "droves" is a word normally applied to cattle, just as "swarm" is applied to insects and "hordes" to murderous barbarians. The chairmen of White Citizens' Councils in the American South in the 1950s used to warn their faithful against the "hordes of n-----s" that would vote them out of office unless white people came out and voted. For Netanyahu, President Obama has always been one of the "droves." He has treated Obama with a degree of disrespect approaching and often crossing into contempt, without parallel in the previous relations of American leaders and our professed allies. The black caucus noticed this when they boycotted Netanyahu's speech to Congress in March; and among Jewish lawmakers, Dianne Feinstein has spoken with well-earned disgust of Netanyahu's "arrogant" presumption that he speaks for all Jews.

Reactions of this sort are likely to intensify among those (including the present writer) who feel the disgrace of a foreign leader singling us out in a speech carried in US media, which was addressed peculiarly to Jewish Americans and implicitly separated our interests from those of other Americans. The gesture embodied by such a speech bears a family resemblance to incitement to treason. Imagine a leader of India puffing himself up to deliver a special address to Americans of Indian descent, asking them to subvert the authority of the president who signed a trade deal the Indian prime minister judges to be disadvantageous. And yet, the relations today of Netanyahu to many of the biggest American Jewish donors, and of the same donors to the Republican Party -- these linkages are so extended and tangled that lesser actors can barely account for their actions. But they feel no responsibility to render an account. They only know that their arms and legs move obediently to execute a pilgrimage to Jerusalem or Las Vegas. And then they vote and then comes the money. 

The defection to the Republican side by Chuck Schumer was predictable, but the terms in which he cast his decision tell us much about the man and the situation. It has been said that one can judge a politician's intent not only by the things he says but by the things he crucially omits. In Schumer's written defense of his vote with the war party, in a text of some 1,700 words apparently drafted by the senator himself, a word that never appears is "Israel." (The exception is the almost anonymous appearance of the country in a catalogue with five other countries said to have been direct or indirect victims of Iran). But depend on it, Israel was on Schumer's mind. 

He has often said, with an artless self-love, that his name in Hebrew, "shomer," means "guardian"; and he takes pride in the fact because he thinks of himself as the appointed guardian of Israel's interests in the US. How bizarre and again how unprecedented this is! Think of any other nation in the world. Imagine an Italian-American named Frank Consiglieri assuring his listeners that his name means "advocate" in Italian and he is supremely vigilant for the interests of Italy as a lawmaker in the US. 

Schumer voted for the Iraq war on a rationale similar to the one he now urges as the path of reason and good sense with Iran. He may or may not recognize that he is only assisting the Likud and the neoconservatives with part three of the Middle East "clean break" strategy: Iraq, Syria, Iran. Their calculation is simple. When the work of destruction is complete, one country in the region will stand upright and intact amid the surrounding rubble. 

How many Americans know that the Iran deal is supported by the vast majority of Israel's defense and security establishment? The opinions of the security officials within Netanyahu's government are impossible to discern because they have been placed under gag order; but the suffrage of qualified judges in Israel, as also in Europe, Russia, China, and the IAEA, forms a strange contrast with the current alignments in America. "As unanimous as the politicians are in backing the prime minister," J.J. Goldberg recently wrote in Forward, "the generals and spymasters are nearly as unanimous in questioning him. Generals publicly backing Netanyahu can be counted on -- well -- one finger." Equally strange is the fact that security support for the deal is an open secret in the Israeli press, and in an American Jewish paper like Forward, but the evidence is subordinated to a point of near invisibility in the New York Times and other mainstream outlets. 

In defending the deal, in the most sober, straightforward, unapologetically argumentative and honest speech of his career, President Obama spelled out the reasons why its acceptance would surrender no opportunity while rejection would squander a chance that will not return.

If, in a worst-case scenario, Iran violates the deal, the same options that are available to me today will be available to any U.S. president in the future. And I have no doubt that 10 or 15 years from now, the person who holds this office will be in a far stronger position with Iran further away from a weapon and with the inspections and transparency that allow us to monitor the Iranian program.

Politicians and propagandists who oppose the deal have spoken of fifteen years as if it were the blink of an eye; but fifteen years is a long time in the history of a nation; and Americans should know it. Fifteen years ago George W. Bush had not yet won the presidency and delivered to the world his vision of a new Middle East. Destruction makes faster work than rebuilding or reform, but much that is good can happen in fifteen years. 

Obama delivered this speech at American University -- recalling President Kennedy's speech in support of the Test Ban Treaty at the same institution 52 years ago -- and with full awareness of the parallel he said: "Does anyone really doubt that the same voices now raised against this deal will be demanding that whoever is President bomb those nuclear facilities?" Kennedy at a press conference on August 20, 1963 faced a similar pretense of scientific skepticism founded on destructive intent, and had to answer questions about the opposition of Dr. Edward Teller, a fierce advocate of atmospheric nuclear testing. Asked whether he had curtailed a recent series of tests for political reasons, Kennedy replied:

Obviously, we don't like to test in the atmosphere unless the test is essential. Every test in the atmosphere produces fallout and we would, it seems to me, be remiss in not attempting to keep the number of tests to the minimum, consistent with our national security. ... So we kept a careful eye, and we in fact did more tests, several more tests than we had originally planned six months before. ... I think that they were an impressive series. But it would be very difficult, I think, to satisfy Dr. Teller in this field. 

Schumer is following the Dr. Tellers of our age, but they have invented nothing, improved nothing, are good at nothing except starting wars. They are, however, trained and seasoned by experience in the art of spreading fear. By joining their ranks again in 2015, as he did in 2003, Chuck Schumer has made much harder the fight against the chief hope today for lowering the risk of nuclear proliferation. He has done it for reasons no more compelling than those that drove the feverish opposition to Kennedy in 1963.

Meanwhile, 58 members of the US Congress have landed in Jerusalem, on a visit set to last from August 4 to August 10. Their trip was bought and paid for by the charitable arm of AIPAC. The lawmakers obeyed the command of Prime Minister Netanyahu to visit him instead of their own constituents in early August if they want support in the future by prominent Jewish donors. A gesture of more abject servility cannot be imagined. By agreeing to take the trip at this time -- so easy to decline if only for the perception of the thing -- these captive representatives have in effect declared their confidence in Netanyahu and their dependence on his favor. He will come back for more. 

Very likely we can expect to hear something from the same representatives concerning the "flaws" in the Iran deal which Schumer says prompted his early declaration of a negative vote. "Even more troubling [than the 24-day delay on inspections]," said Schumer," is the fact that the US cannot demand inspections unilaterally." The demand for immediate inspections, any time, any place, is not an initiative of Schumer's at all but a late-found and richly publicized Netanyahu obstruction, like his demand that Iran recognize Israel as "the Jewish state." It is tantamount to setting a precondition of total and round-the-clock American surveillance of Iranian sites. The only government that would submit to such a regimen is a client government; and the objection could only be satisfied in the aftermath of regime change. 

The most puzzling detail in Schumer's defense of his negative vote is the reversal on which it closes. He admits that the heart of the nuclear deal works against the development of nuclear weapons quite effectively. "When it comes to the nuclear aspects of the agreement within ten years, we might be slightly better off with it. However, when it comes to the nuclear aspects after ten years and the non-nuclear aspects, we would be better off without it." There, for all his elaborate show of scruple, he gives the game away. The "nuclear aspects" are the substance of the agreement. That is why they call it the nuclear deal. But no, for Netanyahu and Schumer what offends is the prospect of Iran's re-entry into the global community as a trading partner and a non-nuclear regional power of some resourcefulness. This emergence can only curb Israel's wish to dominate for another half century as it has done for the past half century. That, and not anything resembling an "existential threat," is the real transition at issue. 

In conclusion, Schumer tells his Democratic listeners that he does not want a war with Iran; but this is a hollow pretense. The preponderance of influential persons who side with him, as they did on Iraq in 2003, do indeed want a war, and they say they do. They say that war is inevitable, and that the sooner we get over delusions of compromise, the better for Israel and America. Even if he were in earnest, what could the peaceable Senator Chuck Schumer do? A shomer, after all, a guardian and not a buccaneer -- how could he prevail against the many who are made of sterner stuff? The Republican candidate now ranked third in the polls, Scott Walker, has said he would bomb Iran on his first day as president.

http://www.huffingtonpost.com/david-bromwich/netanyahu-and-his-marione_b_7958146.html

War and the Zionist Lobby

Obama on Iran: The specter of World War III

7 August 2015

In an extraordinary speech delivered Wednesday, US President Barack Obama went public with a warning that powerful factions within Congress and the state apparatus are determined to carry out a war against Iran that would have incalculable consequences.

Speaking on the eve of the 70th anniversary of the atomic bombing of Hiroshima, Obama said that a scuttling of the nuclear deal with Iran that was announced last month would mean war with Iran—a country nearly four times as large and with almost triple the population of Iraq. He further suggested, harking back to World War II and the Cold War, that a war with Iran could open the door to a Third World War.

At this juncture, it is not at all clear how the vote in Congress on the nuclear accord negotiated between Iran and the P5+1 (the US, China, Russia, Britain, France and Germany) and approved by the United Nations will go. Obama has announced that he will veto any measure that blocks the United States from implementing the agreement. Whether there are sufficient votes in both houses of Congress to assure the two-thirds majorities required to overturn a presidential veto is still undecided.

What is beyond dispute is that a large majority of the US Congress will vote for a policy that is predicated on a catastrophic escalation of American militarism.

If the House of Representatives and the Senate override his veto, Obama warned, war will come, and “soon.” The commander-in-chief gave the unmistakable impression that control over the movement toward war was slipping out of his hands.

As Obama spelled out: “Congressional rejection of this deal leaves any US administration that is absolutely committed to preventing Iran from getting a nuclear weapon with one option, another war in the Middle East. I say this not to be provocative; I am stating a fact.”

The debate over this accord shows that the American political establishment, including its vast military and intelligence complex, is deeply divided over whether US imperialism should pursue its global interests by means of yet another, and far more dangerous, war in the Middle East. What is not in dispute is Washington’s supposed prerogative to wage preemptive war, i.e., criminal aggression, against whatever nations or peoples it chooses. The US president underscored this point, citing his own record.

“As commander-in-chief, I have not shied away from using force when necessary,” he boasted. “I have ordered tens of thousands of young Americans into combat… I’ve ordered military action in seven countries. There are times when force is necessary, and if Iran does not abide by this deal, it’s possible that we don’t have an alternative.”

Yet, for all his multiple interventions, drone missile murders and massacres, Obama considers war with Iran a highly dangerous undertaking. His argument is that Washington can pursue its interests by using the nuclear accord as leverage to shift the Iranian regime behind US imperialism, while keeping “the military option on the table” should this strategy fail.

The reasons for Obama’s fear of a precipitous confrontation with Tehran go beyond the bloodbath that a war on Iran would entail. The US president warned that a repudiation of the nuclear deal would provoke a dangerous confrontation with Russia and China. It would also, he strongly suggested, inflame relations with Washington’s allies in Europe, in the first instance Germany, as well with those in Asia. None of them, he declared, will bow to the “dictates of the US Congress” and enforce a unilateral American sanctions regime that has already cost their economies billions upon billions of dollars.

Germany, France, Italy and other European countries have already dispatched high-level delegations to Tehran to negotiate lucrative contracts. They have made it clear that they will not return to the negotiating table, much less to sanctions.

Berlin’s second-highest-ranking diplomat in Washington warned Thursday that a US repudiation of the nuclear deal “would be a nightmare…a catastrophe,” driving Iran and possibly other countries to rapidly pursue nuclear weapons in the knowledge that no negotiated agreement will be respected by the US.

If the US military attacks Iran as European capitalism attempts to penetrate its market, the end result could well be the death of the NATO alliance and the eruption of military tensions between Europe and America.

Obama also called attention to the implications of any attempt to force China to return to the sanctions regime. “We’d have to cut off countries like China from the American financial system,” he said. “And since they happen to be major purchasers of our debt, such actions could trigger severe disruptions in our own economy, and, by the way, raise questions internationally about the dollar’s role as the world’s reserve currency.”

Implicit in such an outcome is a military confrontation with China. It would also plunge the US and world economy into a full-scale Depression, Obama suggested.

But precisely such a course is being plotted by powerful sections of the American ruling elite. They are doing so behind the backs of the American people, who overwhelmingly oppose war. Given the chilling implications of Obama’s warnings, the reaction of the American media has been remarkably muted.

With the 2016 election campaign already under way, popular antiwar sentiment finds no expression whatsoever in the corrupt and bankrupt US political system. Millions of people may well wake up some time after the congressional vote on the Iran agreement in September to find the US at war once again, on a far greater scale than the interventions in Afghanistan and Iraq combined. They could be suddenly engulfed by a collapse of employment and living standards, with the entire planet on the precipice of a third, nuclear, world war.

The policies of those prepared to drive the world down this path are a reflection of the desperate crisis of the US capitalist system and the determination of the ruling class to offset American capitalism’s global decline by military means. Frustrated by the failure of US wars in Afghanistan, Iraq, Libya and Syria to secure undisputed US hegemony over the Middle East and Central Asia, they now want another roll of the dice for the much higher stakes of militarily subduing Iran, the country that bridges these two energy-rich regions.

In the most cowardly section of his speech, Obama attributed the rabid opposition to the Iran deal within the American establishment to “sincere affinity for our friend and ally Israel, an affinity that…I deeply share.” There is nothing “sincere” about this poisonous relationship. The alignment with the Israeli regime by the most reactionary and reckless elements of the American political establishment is bound up with their common support for war.

The continuation and spread of what Obama’s predecessor termed “the wars of the 21st Century,” now including the promotion of war with Iran, also express the need to divert outward—in the form of ever greater eruptions of American militarism—the internal class tensions generated by growing social inequality.

This points to the only means of defeating American militarism and the threat of a Third World War—the development of the class struggle and the conscious preparation of the socialist revolution in the US and internationally.

Bill Van Auken

http://www.wsws.org/en/articles/2015/08/07/pers-a07.html

Bernie Sanders' Zionist Propaganda

Hi Stan,

Pro-Israel Bernie Sanders tegernwoordig toch niet zo’n goede man, als je hem hoort over Gaza tijdens een toespraak augustus 2014………….

Bernie Sanders town hall gives US party line when confronted re: #gaza - YouTube

Vriendelijke groet. Ron.

https://www.youtube.com/watch?v=Vf2cCdgwgoM

Bernie Sanders town hall gives US party line when confronted re: #gaza

Published on Aug 17, 2014

Town hall meeting in Cabot VT: an angry & defensive Bernie Sanders defending Israel's shameful bombings of #Gaza - and then tries to distract and deflect (and he says he isn't a politician) by "this isn't the only problem in the middle east - have you heard of ISIS?"

United Sates of Indebtedness

Our United States of Indebtedness

Saturday, 15 August 2015 00:00 By JP Sottile, Truthout | News Analysis 

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The conventional wisdom says that the United States is more divided than ever.

At least, that's according to network number crunchers and political pundits armed with snazzy, interactive maps. They tell the perennially sad story of the United States' deep divisions in distinct juxtapositions of red and blue. But the simple, mathematical fact is that these stark divides of party, race, gender and religion belie the obvious truth that the overwhelming majority of Americans are more united than ever.

They are united in a state of indebtedness to the tune of $11.86 trillion worth of mortgages, credit card bills, consumer debt and student loans.

There is a direct link between the unremitting financialization of the economy and the epic loss of wealth troubling a large majority of Americans.

A recent New York Times/CBS poll shows they are also united in their concerns over the widening gap between those at the topof the United States' pyramid and them. Only 35 percent of Americans believe "anyone" regardless of their station in life can "get ahead" in the post-crash economy. A full 66 percent think wealth should be more evenly distributed, and another 57 percent believe government should do something about it.

This emerging consensus on inequality might have something to do with a stunning 36 percent drop in net household worth in just 10 years. No doubt it also accounts for their overwhelming support for big changes on a variety of economic issues - from expanding paid family leave to increasing the minimum wage to raising taxes on those earning $1 million or more per year.

Simply put, they want government action to preserve the American dream.

Yet, only 33 percent of Americans favored additional taxes on financial transactions. Strangely, Americans see the need for government intervention on a host of issues, but they prefer to keep financial markets unfettered by taxes. This is odd because there is a direct link between the relentless swirl of financial transactions, the unremitting financialization of the economy and the epic loss of wealth troubling a large majority of Americans. This is also why so many Americans live in states of indebtedness.

The Drawbacks of Financialization

So, what is "financialization," anyway?

Financialization refers to the growing importance of financial institutions relative to industry, agriculture or other "hard" sectors of the economy. In other words, it is the relative value of the economy of "financial services" vis-à-vis the economy of actual "things."

Financialization transforms squishy things like leverage, risk, debt, derivatives, insurance and, in the final analysis, financial speculation itself into tradable "financial instruments" they can buy, sell, repackage, hedge and short. In the case of the subprime mortgage market at the molten core of the financial crisis, think of an "exotic financial instrument" like a "credit default swap" as a way to place a new bet (by buying and selling exotic forms of insurance) on a growing pool of risky, existing bets placed by unfettered financial institutions on incredibly risky borrowers. In essence, it's the commoditization of betting on multiple levels.

Total global debt hit a mindboggling $199 trillion in 2014. That's up $57 trillion since the crash.

According to a 2013 article by two Harvard economists, this highly profitable version of the "service economy" rose from 2.8 percent of GDP in 1950 to 4.9 percent in 1980, and then grew to a stunning 8.3 percent of GDP on the eve of the crash of 2008. That's when financial wizards were packaging subprime mortgages into securities (another tradable product), thus turning growing risk and potential liabilities into huge profits by selling them as assets. The beauty of this system is that regardless of the market's vicissitudes or the viability of the exotic instrument, the financial institutions always collect their transaction fees.

Yet, most Americans surveyed are not interested in raising taxes on financial transactions.

Of course, that's in spite of mounting evidence that a risk-embracing, debt-repacking, hyper-financialized economy overwhelmingly benefits "the few" at the cost of "the many." And it ignores the inexorable link between Americans' declining fortunes, their increasing household debt and the recurring pain of financially driven boom-and-bust cycles that disproportionately hit those who can least afford it.

Even worse, it might just be bad economics.

Too Much Finance

In a starkly worded report released on June 11, 2015, the Organization for Economic Cooperation and Development (OECD) determined that "too much finance may hamper economic growth and worsen income inequality."

Well, is there "too much" finance?

The OECD tracked the 50-year spike in financialization and found that credit floated "by banks and other intermediaries to households and businesses has grown three times as fast as economic activity."

Yes, three times.

Corporate book cookers are leveraging debt into the illusion of profitability.

Not coincidentally, that's the ratio of all the debt in the world relative to the world's total GDP. The McKinsey Global Institutefound that total global debt hit a mindboggling $199 trillion in 2014. That's up $57 trillion since the crash. Surprisingly, government debt only makes up $58 trillion of the $199 trillion. The rest is a mountain of interest-addled household, financial and corporate debt. And the grand total represents 286 percent of GDP, meaning all the world's debts are nearly three times the size of the world's economic output.

According to the OECD's report, the size of a debt ratio really does matter.

In fact, for every 10 percent rise in bank-issued credit, financialized economies see a 0.3 percent decline in GDP growth. Additionally, the OECD regards the staggering rise in credit as a troubling "misallocation" of capital that "magnifies" the cost of "implicit guarantees" to too-big-to-fail banks. And it also "generates boom-bust cycles" that ultimately force taxpayers to pay out on those "implicit guarantees," according to the report.

But wait, there's more.

The report's authors warn that further expansion of credit "is likely to slow rather than boost growth."

Well, that certainly seems important.

According to the OECD, more credit equals less growth. It's worth repeating because lackluster growth has bedeviled central bankers since the crash of 2008, even as the rising stock market has exceeded Wall Street's loftiest dreams of avarice.

So, how are these two trends possible?

The OECD believes steadily increasing private sector credit not only "slows growth in most OECD countries," but it also has the opposite effect on stock markets. In other words, there is a direct, inverse relationship between the rise of the financialized economy and the decline of something recognizable as a "real" economy of production and growth. Simply put, a growing flood of credit is decoupling the health of the "widget-making" economy from the ever more vigorous "deal-making" economy.

More troubling is that the deal-making economy is a self-reinforcing system. The recent trend in stock buybacks is a perfect example.

How Corporations Cook the Books

Companies with sagging profits and low "earnings per share" have found a novel way to spike their profitability. Instead of earning more profits, they just reduce the number of shares. To do this they've been buying back their own shares on the open market. This raises "earnings per share," thus masking flat or declining profits. It's an easy way to alter a basic market benchmark in quarterly reports.

But it is much more than that.

Much of the money for these buybacks doesn't come from surplus cash from rising profits because their profits are not rising. With interest rates so darn low and Wall Street increasingly indifferent to fundamentals like profits, corporate book cookersare leveraging debt into the illusion of profitability. They just borrow the money, buy back their own stock and profit off the difference between the minuscule interest rateon the debt and the sudden rise in stock prices from the debt-fueled buyback.

This also means corporations and financiers are not leveraging the Federal Reserve's policy of cheap money into "hard" investments in new, improved widget-factories that employ actual people. Instead, they are leveraging their exclusive access to cheap money into short-term spikes in stock valuations and bigger compensation packages for executives. That's not credit in the service of a "real" economy. That's financialization.

The captains of finance exhibited little embarrassment as they floated the whole economy on a sea of red ink.

Compounding the financialized problem of credit misallocation, according to the OECD, is the fact that the biggest drag on growth occurs when credit floods into "households rather than businesses." Most households simply cannot use debt like financiers use it. They don't get to enjoy the unbearable lightness of being highly leveraged in an artificially rising stock market. Ironically, many households rely on the flood of credit just to keep from going underwater.

Meanwhile, the OECD sees high-powered wheelers and dealers stoking "greater income inequality because higher income people can benefit more from the greater availability of credit and because the [financial] sector pays high wages." The trick is that they can easily afford to place their bets, service their debts and live well ... all at the same time.

So, why haven't debt-plagued, wage-challenged Americans connected the dots (and the bottom lines) between the rising world of finance and their deepening world of hurt?

Perhaps it's the byzantine, almost impenetrable and "exotic" nature of its jargon-encoded financial instruments. There also may be a little bit of Stockholm syndrome and a touch of Horatio Alger-ism contributing to this disconnection. As John Steinbeck pointed out, impoverished Americans do like to think of themselves as "temporarily embarrassed millionaires." This is the United States, after all.

Unfortunately, the captains of finance exhibited little embarrassment as they floated the whole economy on a sea of red ink. Unlike their fellow Americans, they've enjoyed a unique ability to socialize the risk of their private borrowing through well-paid political influence and with government-sponsored bailouts. Their nearly exclusive access to liquidity empowers them to use credit as a tool of wealth reallocation ... and it's sinking the American dream.

Understanding the Debt Tsunami

Since deregulatory floodgates were first opened by the Supreme Court in 1978, the United States has been drowning in a wave of consumer credit. The wave swelled as globalization and wage stagnation transformed the United States into a debt-driven economic system. Debt really is the fuel that propels contemporary capitalism. Debt blows bubbles on Wall Street that pop all over Main Street. Debt leads governments to socialize risk and externalize financial pain. And debt is a dangerous trap for the poor, a powerful drain on the dwindling middle class and a reliable revenue stream for the unfettered financiers of Wall Street.

Of course, debt in the abstract is not necessarily a problem. Collateralized debt (meaning it is tied to a hard asset like a house) has long been a reliable path to the American dream. Governments can use debt to build socioeconomic "goods" like roads, schools and power grids that contribute to economic productivity and growth. And debt is crucial to businesses quickly scaling up production or expanding into new markets.

A vast amount of the debt load carried by US households is not tied to a hard asset.

However, household debt, which has skyrocketed over the last three-plus decades, is mostly non-collateralized or "unsecured" debt. A vast amount of the debt load carried by US households - including credit cards, medical bills and student loans - is not tied to a hard asset. Automobile loans are tied to cars. And some household debt is leveraged against an actual asset, like a line of credit attached to home equity. But much of the United States' household debt is not tied to an asset that can be quickly and easily liquidated to settle outstanding accounts.

Since the early 1980s, more and more Americans filled their household troughs of red ink with general consumer debt - accumulating loans and charges and fees through the simple act of buying stuff. For instance, over the last two decades a lot of televisions and plastic tchotchkes have been converted into profitable, revenue-bearing debts managed by credit card companies. Those debts are often serviced by US households long after the plastic tchotchke breaks or the television becomes obsolete.

The key is that the asset acquired rarely holds any liquid value once the purchase is made. This lack of liquidity is a serious problem because any asset not convertible to cash is just a financial liability. And long-term servicing of that liability only compounds the loss.

More pernicious, though, are debts accrued to bridge the gap on basics like food, shelter, health care, education, taxes and utilities. These purchases are services that also lack liquidity, so there is no easy way out of those debts. There is no appreciation of those "assets" and no chance to convert them into cash when the going gets tough. The interest is often inescapable. And income spent or wealth reallocated toward that interest is lost forever.

The upshot is that people who really couldn't afford the widget or the medical care are forced to redirect much needed income to service interest payments on those debts. In terms of opportunity cost, that's also income that doesn't generate more wealth. It doesn't get invested in a rising stock market or help households keep pace with inflation. This debt acts like a wealth removal machine.

The Trickle-Up Economy

With wages also persistently flat - or worse - the two factors (debt and income) swirl into a perfect storm of wealth reallocation. That debt tsunami is also fed by an increasingly financialized, post-industrial economy that rewards those with liquidity and/or with specialized access to ultra-cheap money doled out by Federal Reserve policy makers.

And that's the maelstrom that transformed the United States into a "trickle-up" economy. No, this economy is not a drip system. It is a percolator.

As bubbles rise and pop, this recurring action presents profitable opportunities to those with either the liquidity or the leverage to exploit the crash. Each new boom-and-bust cycle compounds this effect as financial elites concentrate more wealth into their coffers as it drains out of the middle and working classes. When bubbles pop and assets drop in value - stocks, real estate, whole companies and industries - those armed with cash or easy, exclusive access to politically greased financial leverage (like a taxpayer-funded bailout or the perpetually low Fed lending rate) simply hoard those assets for pennies on the dollar.

"Top" CEOs of "leading firms" now earn 300 times these firms' "average" employees.

On the other hand, those outside the walnut-burled boardrooms of the financial system - but ever more beholden to it - must return to square one. They lack the protective armor of corporate personhood or the expertise of high-priced lawyers needed to escape pre-crash purchases. Some debts that don't "disappear" must be serviced during a prolonged period of recessionary pressure. That pressure means new debts are likely to accumulate until another bubble starts to pop out of Wall Street's financialized factory. This cyclical process drains off middle- and working-class wealth at rates higher than it can be replaced, while those at the top flourish.

For recent evidence of the growing divide, look no further than the last five years of income growth for CEOs versus income stagnation for their employees. Since the crash, CEO compensation in the biggest corporations spiked 54.3 percent, outpacing both the epic rise in the stock market and the lagging wage growth for their employees.

In fact, "top" CEOs of "leading firms" now earn 300 times these firms' "average" employees, according to the Economic Policy Institute. And a new International Monetary Fund study found that the top 1% in developed nations like the United States now take home 10 percent of the income, even as poverty has risen in those nations. Add the fact that the middle class has been waiting 15 years for a raise, and the picture is quite clear: The people who have liquidity are swimming in a wider and deeper ocean while the pool for everyone else is drying up.

Frankly, it's a zero-sum game.

The way the game is currently rigged, income rewards those playing financial games while debt compounds the loss of wealth for those being played by financial gamers. And if the OECD is right and credit hampers growth, the future looks fairly grim. With slow growth comes slow recovery. With slow recovery and stagnant wages comes the need to use widely available credit - both by financial speculators looking for bigger yields and by consumers looking to make ends meet. And debt that is not leveraged into hard assets or wealth generation soaks household debtors in a rising sea of red ink.

Return on Investment

In The Washington Times, an analyst at Bankrate.com explained the slow bleed of credit card debt: "If you owed $2,000 on a credit card with a 15.76 percent rate, it would take more than 10 years to pay off that card if you only made the minimum payment each month, and you'd pay an extra $1,330 in total interest."

That $1,330 is significant in two ways.

It's significant to the household trying to make ends meet during a slow "recovery." But it's also significant to a bank or financial company looking for reliable revenue. Even better, it is revenue that can be tallied on its quarterly reports during a period of otherwise hollow, financialized growth. The stock market likes any signs of "growth." And personal credit card debt becomes corporate balance sheet "revenue" that can be used to leverage the acquisition of more assets.

But it's worse than that.

The Fed's financial-friendly policy is, in fact, an engine of wealth reallocation.

As the OECD points out, debt leads to "low and slow" growth in the "hard" economy of wages and things. To counter "low and slow," the Federal Reserve handed out money through "quantitative easing" and continues to pass out nearly free money to Wall Street in the form of a low benchmark lending rate. So, the Fed's policy of lending and spending not only reinforced the financialized economy right after the crash, but it also rewarded it by doubling down after it lost all its bets. And the Fed's easy money not only made the stock market high and mighty, but it also discouraged personal savings while also making the margins on consumer debt incredibly rewarding.

The Fed's financial-friendly policy is, in fact, an engine of wealth reallocation.

A study by MagnifyMoney.com illustrates how the perpetual profit machine is fueled by the 75.7 percent of Americans who pay credit card interest of 15 percent or higher with an average monthly payment of $408. As Brian O'Connell of MainStreet.com starkly explains, just nudging that up to a "not-uncommon 18 percent" turns that debt into $1,707 of interest paid in just one year. That's a serious opportunity cost for many Americans. But, as the researchers at MagnifyMoney.com point out, "Banks will pay 0.01 percent for money [for savings account deposits]. So for $10,902 a bank would pay about $1 in interest. Then they turn around and charge the average American $1,707 in interest."

And those interest rate numbers may be conservative.

Many people wield plastic issued by margin-hungry retailers. The average APR on those "Do you want 15 percent off today's purchase?" cards is a painfully high 23 percent, while some top out as high as 28 percent. The equation of 15 percent off this one balance plus 23 percent added to everything you ever buy equals ka-ching for retailers.

And if you avoid those bait-and-switch tactics by sticking with bank-issued cards?

There is (of course) the dreaded "fine print" that can spike credit card interest as high as 36 percent by tripping up consumers in a tangled obstacle course of clauses and penalties. Most deadly are the sky-high fees on cash advances. It is part of the "complex web of fees and charges" that allowed Capital One to generate a "net revenue margin of 17.29 percent during the last three months of 2014," according to Forbes.

Talk about a return on investment! But it's actually a double whammy.

The same low Fed lending rate that makes consumer lending so profitable also translates into sparse returns on the simple savings accounts once used by average Americans as a slow, steady way to accumulate wealth. But savings accounts have slowly become worthless to ordinary Americans. That worthlessness stoked middle-income earners to engage in a risky "reach for yield" (meaning risk-taking in a low-income environment) as they tried to keep pace with the well-heeled Joneses playing Fed-sanctioned Monopoly on Wall Street.

Thirty-five percent of adults with a credit file have a delinquent account "in collections."

In the 1990s, yield-hungry baby boomers turned to the stock market. The rise of 401ks and tech-fueled day trading gave Wall Street access to a pool of wealth that'd long been held in banks and other less-risky investments. Expanding 401ks stoked dreams of a lively retirement filled with Viagra, golf and Caribbean cruises. It also stoked the dotcom bubble. Those dreams quickly disappeared when the bubble popped. And just a few years later, that wealth-removing cycle was repeated again as Americans gambled on a superheated housing bubble stoked by yet another risky reach for yield.

It's all about the yield ... or lack thereof.

By the start of 2015, "the 10 best" savings accounts had annual percentage yields ranging from .95 percent (APY) to 1.05 percent (APY), but the average is 0.1 percent (APY). By comparison, savings accounts paid around 3 percent in the mid-1950s and 5.75 percent in the mid-1980s. This miniscule, "downside-free" return for the 99% is all upside for financially minded money managers.

Really, it's a no-brainer.

Just take a chunk of the $2 trillion worth of capital that Americans deposited into savings accounts and lend it back to them in the form of credit cards they probably need to get by because they are getting little or no yield from their savings accounts. The kicker is that the Fed's low rate also makes it profitable for financial elites to borrow money at the institutional level and, among other speculative ventures, turn it into unsecured loans like credit cards.

Facing Debt Collection

Simply put, household debt is money in the bank for the United States' financial industry. But it's also the cost of doing business for the majority of "average" Americans. As of June 2015, figures compiled by Nerdwallet detailed the overall debt load for the "average" US household - with an "average" credit card debt at $15,706, an "average" mortgage at $156,333 and an "average" load of student loans at $32,953.

And the iron law of averages is catching up with more people.

In 2014, an Urban Institute study titled "Delinquent Debt in America" estimated that 35 percent of adults with a credit file have a delinquent account "in collections." That's roughly 77 million Americans who cannot service their non-mortgage debts, including credit cards, medical or utility bills that are more than 180 days past due. When debts go into collections, an individual's earnings are an easy target for creditors endowed with the legal resources needed to seek recourse in lieu of liquid assets. Unlike cunning "corporate persons" who are "too big to fail," these "economically fragile" folks get trapped in a Charybdis of non-collateralized debt.

In its recently issued "Report on the Economic Well-Being of US Households in 2014," the Federal Reserve shows the extent of the "economic fragility" crippling nearly half of all Americans. Their survey of 50,000 Americans found that just 53 percent could "easily" absorb an unexpected "financial disruption" costing a paltry $400 by turning to savings or a credit card. As for the other 47 percent, they said a $400 surprise would be a serious financial curveball. But that's just the tip of the iceberg:

• 76 percent of respondents have at least one credit card
• 56 percent said they "always" paid credit card bills "in-full" (the other 44 percent doesn't)
• 31 percent passed on medical care during 2014 because they could not afford it
• 37 percent said they saved no money in 2014
• 31 percent have no retirement savings or pensions
• 45 percent of future retirees expect to continue working during retirement to cover expenses

Somehow, this snapshot of economic well-being doesn't quite match the go-go engine of Wall Street or the epic rise of wealth and compensation for financial elites.

Not a True Economic Recovery

And as for those consistent reports of the United States' "recovery"?

In October 2012, The New York Times heralded the United States' mounting "recovery" from the debt-fueled, mortgage-driven disaster of 2008 with the following headline: "Rise in Household Debt Might Be Sign of a Strengthening Recovery." Obviously, it is an oddity of highly financialized capitalism that this headline makes any sense at all. Isn't it strange that rising household debt is even seen as a viable measuring stick for the "recovery"?

There's no doubt consumer spending is important. And Americans are spending. They're just not spending on widgets or buttressing retirement savings or buying big-ticket items that, truth be told, would've been made by workers in overseas factories, anyway.

Instead, Gallup reported in May 2015 that 55 percent of Americans are "spending more" on groceries, with utilities, gasoline, cable/satellite and rent or mortgage rounding out the top five expenses. It's not quite the kind of consumer spending that fuels "hard" economic growth. And Gallup's tracking poll for July 2015 showed consumer spending was "flat" - much like the wages many people need to service debts or to actually accumulate real wealth. It's no wonder that many Americans rely on the once-yearly "windfall" from a tax refund to help close the widening gap so many Americans desperately paper over with bank-issued plastic.

A rising tide of debt does not lift all boats, only the yachts.

Still, the White House and the mainstream media consistently talk about "the recovery" as if it's a thing, even though the economy is still heavily stained with red ink. Nearly seven years after the crash, some 4 million US homeowners still find themselves "drowning" in mortgage debt that exceeds the value of the home by 20 percent. According to MarketWatch, that's $579 billion "negative equity" still floating around in the housing market. Yes, it is a far cry from the 15 million homes that went underwater after the crash. But that number dropped in no so small part because the rate of homeownership keeps on dropping to new record lows as former homeowners flood the rental market.

But the "trickle-up" percolator economy kept on working.

After the bust, big financial players like Blackstone and Carrington Investments were well positioned to gobble up suddenly dirt-cheap foreclosures. Then they exploited readymade demand for their growing inventory of rentals, which of course was stoked by people losing their homes to foreclosure. Many of those were liquidated and purchased by future landlords like Blackstone and Kentucky billionaire B. Wayne Hughes.

It seems that a rising tide of debt does not lift all boats, only the yachts.

While much of the United States is drowning in debt, many of these luxurious yachts are buoyed on a sea of liquidity. Those at the very top - Blackstone, Goldman Sachs, JPMorgan Chase and other titans of financialization - are not in the same boat as those who went inexorably underwater, or the growing number of economically fragile Americans. Unlike the 99% of Americans who cannot seem to get ahead on the economic treadmill of constant borrowing, stagnant wages and persistent underemployment, the well-heeled 1% has stoked a renaissance in luxury goods, high-priced mansions and high-rise condos.

In the post-crash United States, liquidity is the true measure of wealth. Financialization has turned leveraged assets into the measure of economic "growth." Debt is the United States' leading product. And the debt-driven system became a wealth reallocation machine that reordered the red and blue political map into a red and black economic imbalance sheet. Now, a majority of Americans find themselves united below the bottom line in a sea of red ink.

Copyright, Truthout. May not be reprinted without permission. 

 

JP SOTTILE

JP Sottile is a freelance journalist, published historian, radio co-host and documentary filmmaker (The Warning, 2008). His credits include a stint on the Newshour news desk, C-SPAN, and as newsmagazine producer for ABC affiliate WJLA in Washington. His weekly show, Inside the Headlines w/ The Newsvandal, co-hosted by James Moore, airs every Friday on KRUU-FM in Fairfield, Iowa. He blogs under the pseudonym "the Newsvandal."

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