27, 2014
Crisis: Piketty, War, Drones, China, Private Equity, Derivatives, Friedman
   "They who can give up essential 
   liberty to obtain a little temporary
   safety, deserve neither liberty
   nor safety."
   -- Benjamin Franklin [1]
   "All governments lie and nothing
   they say should be believed.
   -- I.F. Stone.
   "Power tends to corrupt, and   
   absolute power corrupts
   absolutely. Great men are        
   almost always bad men."
   -- Lord Acton

Prev- crisis -Next

1. About Thomas Piketty
2. War Is A Racket
3. The Drone Memo's Hack Author Should Be In Prison.
     Instead, He'll Be a Judge.

4. From the Mao Generation to the Me Generation: Tales
     From the New China

5. The Private Equity Limited Partnership Agreement
     Release: The Industry’s Snowden Moment

6. The Size Of The Derivatives Bubble Hanging Over The
     Global Economy Hits A Record High

7. ‘Let Markets Rule Us’

About ME/CFS


This is the Nederlog of May 27. It is an ordinary crisis issue.

I will not summarize it as it is already over 55 Kb, but it does include some quite interesting articles, while the last item shows The Force Of Milton Friedman's Thinking, in song, no less, that is here transcribed.

O yes, there is no "On the crisis series" item: there is too much already. Maybe tomorrow.

1. About Thomas Piketty

The first item today are in fact two articles about Thomas Piketty. I could have selected more, but I use these today.

First, there is this, by Jennifer Rankin on The Guardian:

The reason is that the Financial Times criticized Piketty in what seemed to be a serious fashion - until one looks at what they say: mostly the same, except for the usual statistical vagueries and uncertainties, which they then use to support the opposite conclusion: Inequality has not risen since the 1970ies.

That is so absurd a conclusion that is so much in contradiction with all the other data, all not of Piketty's, that I have seen through the years, with one good example being this video - which was put on my site on April 6, 2013, that is, a year before I heard of Piketty:

So this it made me more pro-Piketty than I was before, though this still will not move me to read his book: I know a reasonable amount of economics (and I do not think it is a real science, for the most part); what Piketty says seemed to me anyway correct (see the above video); and I do not have the patience to work through yet another thick volume of economics that explains conclusions I mostly agree to anyway: Yes, there has been an enormous increase in inequalities since Keynes was replaced by Friedman (and also see the last item), and indeed that was also the main point of Friedman replacing Keynes: the unstoppable greed of many of the rich.

Anyway, here is the beginning of the above first dotted link:

Thomas Piketty has accused the Financial Times of ridiculous and dishonest criticism of his economics book on inequality, which has become a publishing sensation.

The French economist, whose 577-page tome Capital in the Twenty-First Century has become an unlikely must-read for business leaders and politicians alike, said it was ridiculous to suggest that his central thesis on rising inequality was incorrect.

The controversy blew up when the FT accused Piketty of errors in transcribing numbers, as well as cherry-picking data or not using original sources.

The newspaper concluded there was little evidence in Piketty's original sources to verify his theory that the richest were accumulating more wealth, widening the gap between the haves and the have-nots in Europe and the United States.

In an interview with the Agence France-Presse news agency, the economist said: "The FT is being ridiculous because all of its contemporaries recognise that the biggest fortunes have grown faster."

That is about it, and I agree with Piketty, also for the quoted reason, and indeed without necessarily agreeing with him on the details, that I also do not want to read.

There is considerably more in the above linked article, but I turn to the second one, which is by Paul Mason, also on The Guardian:
This starts as follows:

Thomas Piketty's Capital was still No 3 on the Amazon bestseller list when the Financial Times dropped its front-page bombshell. By picking through the spreadsheets the "rock-star French economist" had placed online, the FT concluded that his key data appeared to be "constructed out of thin air".

Piketty's claim that inequality in the west has risen since the 1970s is wrong, says the FT's Chris Giles. And on this basis, Piketty's view that rising inequality is the central contradiction of capitalism, and will get worse, is also wrong.

As I explained, I think Chris Giles is lying. Paul Mason explains it as follows (and I select only one quote: there is much more in the article):

Piketty's figures show a clear upward trend to inequality in the UK since the 70s; the FT's preferred official data dissolves into a series of squiggles that show nothing conclusive. And let's be clear why: the HMRC currently estimates that the top 10% of the population own 70% of the wealth, while the Office for National Statistics thinks they own just 44%. The discrepancy occurs because, of course, there is neither requirement nor desire to record actual market wealth at all. There are only inheritance tax returns on estates big enough to pay it.

The old Inland Revenue figures for UK wealth were so wonky that they abandoned efforts to calculate them: but in their last attempt (2005) they said that on top of 3.4tn "identified" wealth in the UK, a further 1.7tn had to be assumed that was either not declared or belonged to people who slipped through the net.

That is, the FT "relied" on the official numbers, that grossly underestimate the wealth of the rich. So yes, it seems Piketty is quite right: The FT was - quite consciously also - dishonest.

2. War Is A Racket

The next item is the text of a speech made by Major General Smedley Butler USMC, in 1933. I'd heard of this before, but now found it:
This begins as follows, by the at the time most decorated Marine in US history, and it also explains something about the sources of wealth of some of the currently rich (not all of course: quite a few of the mega-rich these days are newly rich, due to computing or the internet):

WAR is a racket. It always has been.

It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.

A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small "inside" group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.

In the World War [I] a mere handful garnered the profits of the conflict. At least 21,000 new millionaires and billionaires were made in the United States during the World War. That many admitted their huge blood gains in their income tax returns. How many other war millionaires falsified their tax returns no one knows.

Notice this is the beginning of a rather long but very clear speech, in which Hitler and Mussolini are also mentioned. It certainly is worth reading in full, and I may return to it.

3. The Drone Memo's Hack Author Should Be In Prison. Instead, He'll Be a Judge.

The next item is an article by Ted Rall on Common Dreams:

This starts as follows:

Conservatives say, and this is one of their more successful memes, that poor people are immoral. The proles have sex and kids out of wedlock and expect us (i.e., upstanding middle- and upper-class patriots) to pay for them. They steal Medicare and cheat on welfare. They don't follow The Rules (rules written by, let's just say, not them). Which makes them Bad.

This was always hogwash, of course. Though it is true that poverty causes people to do bad things, class and morals are uncorrelated. But who's worse, the poor thief or the wealthy person who refuses to pay him a living wage?

Yes, indeed. But in fact Ted Rall is out for David Barron, and with reason:

 I'm a cartoonist, but I can't imagine any reading of the Constitution — left, right, in Swahili — that allows the president to circumvent due process and habeas corpus. I can't see how Obama can get around Ronald Reagan's Executive Order 12333, even after Bush amended it. Political assassinations are clearly proscribed: "No person employed by or acting on behalf of the United States Government shall engage in, or conspire to engage in, assassination." (Yes, even bin Laden.)

I have no doubt that David Barron, who is a professor at the very fancy Harvard Law School and held the impressive title of Former Acting Chief of the Justice Department's Office of Legal Counsel, and who furthermore is President Obama's nominee to fill a vacancy on the United States Court of Appeals for the First Circuit in Boston, did his very bestest with his mad legal skillz to come up with a "kill 'em all, let Obama sort 'em out" memo he could be proud of.

Still, this topic prompts two questions:

What kind of human being would accept such an assignment? Did anyone check for a belly button?

How badly would such a person have to mangle the English language, logic, Constitutional law and legal precedent, in order to extract the justification for mass murder he was asked to produce?

In fact, there is no legal or moral justification, as Barron also knew. And yes, I agree Rall is angry, but he has the right to be angry, and he is right that the - secret! - memo must be filled with twisted legalese quasi-logic.

There is more under the last dotted link, and it is worth reading, though indeed I do not think it will make a difference, though that is not Rall's fault: The rich and the government can do almost any crime and not go to jail or even face a court; the poor are locked up for years in for-profit prisons merely for having or selling marijuana.

4. From the Mao Generation to the Me Generation: Tales From the New China

The next item is an article by Jaeah Lee and James West on Mother Jones:

In fact, it is a long interview with Evan Osnos, who knows China well and has lived there.

Here is a bit from the introduction:

How does one tell the story of a place changing so rapidly that the outside observer can hardly keep up? In his book, released just last week, Osnos argues that the country's remarkable growth has unleashed an age of possibility for Chinese citizens, an unprecedented fervor for chasing dreams and soul-searching. For eight years, Osnos followed the lives of Chinese people tugged by these tides of change: A peasant's daughter turned online dating tycoon, a young political scientist and ardent defender of China's one-party system, a street sweeper moonlighting as a poet, a political dissident revered abroad but erased at home, corrupt officials that make Washington look like child's play.

The fact is that China has enormously and very rapidly changed since Osnos first went there, in 1996. Here are the first question and answer:

Mother Jones: What are the most notable ways China has changed since you first visited?

Evan Osnos: This is one of the things that's thrilling about China's metamorphosis, which is really what it is. It's how physical it is. When I lived in Beijing in 1996, it was a horizontal city. If you wanted to go out for a burger, if you wanted to really treat yourself, you went to this place called the Jianguo Hotel. The architect had proudly described it as a perfect replica of a Holiday Inn that he had seen in Palo Alto, California. It's exactly what you would imagine a Palo Alto Holiday Inn looks like.

Now, of course, 40 percent of the skyscrapers under construction worldwide are in China. It's rare, if you look back through history, there are these moments—we had one in the United States, there was one in the UK—where countries just physically transform themselves. That was quite striking.

There is a lot more under the last dotted link, and I thought it a good and interesting interview.

Indeed, this may be because I'm interested in China since the early seventies (I even tried to learn the language by myself ca. 1972 but failed), but I do not really think so: It is an enormous country that is now extremely fast developing, and it also has a history that is quite amazing (for which see the excellent and amazing books by the late Joseph Needham)

5. The Private Equity Limited Partnership Agreement Release: The Industry’s Snowden Moment

The next item is an article by Yves Smith on Naked Capitalism:

This is fairly technical, though the basic idea is simple:

Private Equity Limied Partnership Agreements, that codify the contracts between private equity firms and investors, were so secret that they should be kept secret in their entirety, as trade secrets, which means that they are not even open to Freedom of Information Act laws, but now at least some have been released in Pennsylvania.

Actually, these legal "agreements" were quite dishonest, but no one could find this out without seeing them, which was impossible. Now some have been seen, and the relation with Snowden is as follows:

The Snowden/NSA Analogy

For decades, the NSA kept its domestic spying activities under wraps, claiming that it served as a wise and responsible steward of the powers with which it had been entrusted. Similarly, the private equity industry has insisted for decades that none of the usual SEC and FOIA transparency requirements should apply to its activities, but that the general partners should be trusted to comply with the law and treat investors fairly.

Snowden’s documents revealed that much of the NSA’s domestic spying is arguably illegal, and that a primary objective of the secrecy surrounding it was to shield the NSA from accountability and oversight, since that would curb the scope of the agency’s actions. The private equity industry now finds itself in much the same situation, albeit in this case, there’s no Snowden-like insider who chose to break institutional rules and give confidential information to journalists. Here, a public pension fund had simply made them public and it took a surprisingly long amount of time for anyone to notice.

Nevertheless the uncomfortable analogy to the NSA’s fetish with secrecy remains. Here the exposure of key documents reveals the private equity industry’s claims that the general partners obey the law are false. Instead, critical elements of their scams and violations of public interest depend on their being hidden from view.

Of course, I do not think this is as large or as important as Snowden, and in fact I do not expect to read much about it in the ordinary media, but I've always thought - and I worked for a bank, long ago, which may explain part of my interest - that "private equity firms" are scams, from the name "equity" (which was taken from Aristotle) downwards, and so it is nice to see that they are.

And they are scams in the sense that they draw investors to make money, but in fact make money from their investors in dishonest ways.

6. The Size Of The Derivatives Bubble Hanging Over The Global Economy Hits A Record High

The next item is an article by Michael Snyder that I found on Washington's Blog but that originates on Snyder's The Economic Collapse site:

This starts as follows, with heartening news, so to speak:

The global derivatives bubble is now 20 percent bigger than it was just before the last great financial crisis struck in 2008.  It is a financial bubble far larger than anything the world has ever seen, and when it finally bursts it is going to be a complete and utter nightmare for the financial system of the planet. (...) Instead of actually doing something about the insanely reckless behavior of the big banks, our leaders have allowed the derivatives bubble and these banks to get larger than ever.  [Background.] In fact, as I have written about previously, the big Wall Street banks are collectively 37 percent larger than they were just prior to the last recession.  “Too big to fail” is a far more massive problem than it was the last time around, and at some point this derivatives bubble is going to burst and start taking those banks down.  When that day arrives, we are going to be facing a crisis that is going to make 2008 look like a Sunday picnic.

There is considerably more in the article, that I found fairly convincing, if only because no precise predictions are made, except for insisting that the situation now is considerably worse than it was in 2008, and it is worse simply because (1) no one has done anything about the banks while (2) the banks are even larger than they were and (3) the bank managers are even more reckless than they were in 2008.

7.  ‘Let Markets Rule Us’

The next item is not an article but a video that I found thanks to a reference  on Truthdig. This is the Milton Friedman Choir, introduced by Milton Friedman, who sing the following song:

This is frighteningly stupid, to be sure, so here is the full text, presumably all from Friedman (who was an ideologist very much more than an economist) and who also introduces them.

I quote:

MF: Ha, ha, ha. And now ladies and gentlemen,
      the Milton Friedman Choir

Milton Friedman on corporations says
Corporations have no social duty                             ?
Except to those who own their stock                         ?
The corporation really has no choice                         ?
Milton Friedman on corporations says
Corporations are amoral                                        ?
Corporate conscience is impossible                           ?
The corporation really has no choice                         ?
So for those who want corporations virtuous
It's not possible that is unless

It makes some cash for the shareholders                   ?
The corporation really has no choice                         ?
So if you want your freedom                                
Let the corporate seize the day                               ???
There really is no better way                                  ???
Let's privatize, choice is the way                             ???
Let corporations run our schools                              ??
Let the free market make the rules                         ???
Choose to privatize I say
From kindergarten to senior high school
Today the parents have no choice                            ?
But in the future they will choose their schools            ?
Competition will make all the rules                           ??
So if you want your freedom                            
It's a corporate world today                                   
There really is no better way                                  ???
Let's privatize I always say                                   
Let corporations run our schools                               ???
Let's use free markets as our tool                            ???
Privatize I always say
From student to client to customer
Let's get this school stuff straight
Let markets rule us                                              ???
States should not school us                                    ?
Now we're free to choose
We'll retrain our teachers
And purchase our players                                       ?
For business is business                                         
And school is school
And freedom to choose says Friedman
Or you will loose says Friedman                              ?
Freedom is freedom says Friedman

Unquote. That is to say (but MF did not say it):

          If the rich are free, the poor will be poorer
          If the rich are free, the poor will perish

          In concentration camps or other misery
          But the rich will smile, and smile, and smile
          For corporations have no conscience.

It is totally insane and incoherent nonsense - see William Hazlitt's "On Corporate Bodies", and yes: I have inserted the question-marks - but as Bill Mayer said: "Americans are stupid".

Indeed, for those who are not - not all are, indeed! - here is the beginning of "On Corporate Bodies":

Corporate bodies have no soul.

Corporate bodies are more corrupt and profligate than individuals, because they have more power to do mischief, and are less amenable to disgrace or punishment. They feel neither shame, remorse, gratitude, nor goodwill. The principle of private or natural conscience is extinguished in each individual (we have no moral sense in the breasts of others), and nothing is considered but how the united efforts of the whole (released from idle scruples) may be best directed to the obtaining of political advantages and privileges to be shared as common spoil. Each member reaps the benefit, and lays the blame, if there is any, upon the rest.

And so on... (but I agree Hazlitt was a real genius, quite unlike Friedman).

P.S. May 28, 2014: I corrected the date in the first line of the Introduction.

[1] Here it is necessary to insist, with Aristotle, that the governors do not rule, or at least, should not rule: The laws rule, and the government, if good, is part of its executive power. Here I quote Aristotle from my More on stupidity, the rule of law, and Glenn Greenwald:
It is more proper that law should govern than any one of the citizens: upon the same principle, if it is advantageous to place the supreme power in some particular persons, they should be appointed to be only guardians, and the servants of the laws.
(And I note the whole file I quote from is quite pertinent.)

About ME/CFS (that I prefer to call M.E.: The "/CFS" is added to facilitate search machines) which is a disease I have since 1.1.1979:
1. Anthony Komaroff

Ten discoveries about the biology of CFS(pdf)

3. Hillary Johnson

The Why  (currently not available)

4. Consensus (many M.D.s) Canadian Consensus Government Report on ME (pdf - version 2003)
5. Consensus (many M.D.s) Canadian Consensus Government Report on ME (pdf - version 2011)
6. Eleanor Stein

Clinical Guidelines for Psychiatrists (pdf)

7. William Clifford The Ethics of Belief
8. Malcolm Hooper Magical Medicine (pdf)
Maarten Maartensz
Resources about ME/CFS
(more resources, by many)

       home - index - summaries - mail