Big Swinging Dicks?

Liars Poker, by Michael Lewis, 1990

I’ve spent some time cleaning up the elephant dung from a bond trading floor, so this book strikes home. Lewis makes raw fun of the incompetence and ‘big swinging dicks’ of Salomon Brothers in the 80s, where he trained in New York and worked in London as a bond salesman. It’s just not clear which meaning of the word ‘dick’ we’re talking about. The phrase was used in the film “Wall Street,” a sequel about the recent market crash which is soon to premiere. This book also served as background for Tom Wolfe’s “Bonfire of the Vanities.” Liar’s Poker stands out because most insider books about the ‘market’ are nothing but apologies. This one isn’t. Lewis is coming out with a new book, “The Big Short,” about the short sellers who anticipated the housing bubble and the Collateralized Mortgage Obligation (CMO) crash.

CMO’s – which recently brought down Wall Street - were actually invented in the early 1980s at Salomon Brothers, when Lewis Ranieri developed a way to take a group of mortgages and turn them into a 'stable' bond. A little later, Drexel Burnham’s Michael Milken developed the “junk” bond – the debt of supposedly weak corporations. Milken guessed correctly that a firm that was big enough would not be allowed to go bankrupt, and so the bonds would be paid off. Milken later used junk bonds for hostile takeovers, because ownership of enough debt ensures you have control of a corporation. This is, of course, similar to stock ownership, but right out of left field.

Both these products bloomed during the Reagan era, and through several Reagan recessions, resulting in massive profits and growth for the financial sector, at the same time as the productive economy constricted like a puking stomach. They were examples of the ‘creative’ products American financialization wrought. What is clear throughout the book is the central role played by Fed monetary policies and federal tax and administrative laws in their development. Apologists for the market claim it is the geniuses from the Ivy League who make the money. However, it is changes in government conditions that allow, no, force Wall Street to make it. The era ended with the 1987 market crash – when the only people who made money were the people who shorted equities or who traded bonds.

Lewis was a Princeton and London School of Economics grad who knew next to nothing about being an investment banker in spite of all his education. What is extraordinary about this is that during this period many, many Harvard, Yale and other Ivy League graduates all wanted to be investment bankers too. The bourgeoisie’s ‘best and brightest’ were attracted to making massive amounts of money quickly. Which shows you the real quality of these people. Lewis himself was not a blue-blood, however, which gave him a bit of perspective. He never confuses gambling with ‘investing.’ He clearly saw how many traders (some babies with only a few months experience) intentionally ripped off customers in the interests of the firm or themselves, knew next to nothing about the products they sold, used (illegal) inside information, and were, as Frank Zappa would say, “only in it for the money.”

Essentially, Salomon sold mortgage bonds to S&Ls, which, after a change in federal law, allowed that once staid industry to turn into extreme gamblers. Because of the massive amount of mortgages in the US, the market seemed endless. Lewis, however, spends little time on the parallel collapse of the S&L industry during this period – hastened by its gambling on CMOs.

This is a hilarious book. Lewis shows how the mortgage-trading department at Salomon was run by fat Italians who never stopped eating, swearing, playing practical jokes and making money. In the good days in the early 80s they were more like a frat house than a business unit. Ranieri himself came from the back-office at the firm, and then became the head of mortgage trading. He always wore ugly, cheap suits to remind himself and others where he came from. The firm was run mostly by Jewish businessmen – John Gutfruend being the notorious CEO. Unlike other Wall Street ‘white shoe’ firms like Morgan Stanley full of WASPs, Salomon's ethnics specialized, not in equities, but in debt – government, municipal, corporate and mortgage. As the slogan kind of went, “Debt is Good.” They had a monopoly on mortgage debt for about 4 years. Salomon eventually weakened itself by not paying its traders a real percentage of what they made (Lewis got $90,000 and still thought he was screwed…), then refusing to get involved in junk bonds – and the traders deserted to every other firm on the Street, creating competition for Salomon.

Lewis quit in 1988, even though he knew he could have made millions if he’d stayed at Salomon. The whole time he was there, he kept notes on events which formed the basis for this book. Lewis is not an opponent of capital, but he's an honest observer nevertheless.

And I did not buy it at May Day Books.
Red Frog - 3/30/32010

Thirteen

Thirteen is a science fiction novel by Richard Morgan, published perhaps two or three years ago, and set about a century in the future. The United States has splintered into three entities -- the high-tech Pacific Rim, the North Atlantic Union (the northern and northwestern states + Canada), and the Republic (aka "Jesusland"). Thirteens are genetically engineered alpha males developed in the last decades of the 21st century, genetically programmed for combat. Certain qualities -- e.g., paranoia, reflexes, combat readiness -- that have been genetically bred out of modern humans by the Neolithic revolution are to be found in these males. The story involves one Thirteen methodically hunting down another such and takes us through all three of the US splinters. A review of the book better than I could possibly write can be found here:

http://www.zone-sf.com/wordworks/blackman.html

I wanted to focus on something else Morgan brings up explicitly in the course of his story. Just as the poodle is descended from the wild wolf, the pig from the wild boar, the sheep from the mountain goat, so, too, are modern humans descended from much more formidable ancestors. Just as the wolf, the boar, and the goat have been domesticated by deliberately selecting for certain qualities generation after generation, so also have modern humans been deliberately selected for docility, herd behavior, compliance with rules, and so on. Modern humans are the equivalent of factory-farm animals, and serve a roughly similar function. That's what being civilised means. In modern societies the true dissidents and revolutionaries have mostly been bred out, ostracised, denied a living, killed outright. I can't arrive at any other tenable hypothesis as to why humans remain so docile (leaving aside some ineffectual bleating) at transparent and brutal exploitation. The exploitation isn't even surreptitious -- it's out in the open. But nothing changes. The silence and docility of the lambs.

And nope, I didn't buy my copy of Thirteen from Mayday: not the kind of book the store stocks.

The realities of power

How many ways do I loathe liberals and progressives? Let me count the ways .... One thing in particular that arouses my ire is the emphasis on nonsense like "energising the grass roots," on meaningless "activism," on cheap moral indignation and fury. Behind all this I sense the influence of the European Enlightenment, of humanism, of the emphasis on individual qualities of honor, integrity, and shame that the sheer force of numbers can somehow affect. If somehow Obama could only be reached and convinced how morally reprehensible is his war in Afghanistan! He would be shamed into withdrawal. Or how reprehensible his unwitting support of the health care travesty is! He would surely do a volte-face if he realised. And if liberals and progressives could just "mobilise," then all would become possible. I've been listening to this hogwash for years. It's like listening to craven mice philosophically discussing the ravenous cat waiting outside their hole.

The realities of power are different. A tiger is a tiger, with its own appetites. Trying to convert it to a vegetarian by either reasoning with it or shaming it is unlikely to work. What did people do with rogue carnivorous tigers in the past? They would methodically hunt down and destroy them. Villagers didn't sit in a circle and talk about "energising the grass roots" so as to convince the tiger of the error of its ways. In like manner, US imperial and military power is not going to be tamed one iota by all this mobilising and hand-wringing.

The US imperium follows its own violent logic and is not amenable to the kind of control nitwitted liberals might imagine. Sure, the empire's functionaries use logic as an instrument when they can -- but that is similar to the reasoning of the wolf in La Fontaine's fable of the wolf and the lamb, where the strongest reasons always yield to the reasons of the strongest:

That innocence is not a shield,
A story teaches, not the longest.
The strongest reasons always yield
To reasons of the strongest.

A lamb her thirst was slaking,
Once, at a mountain rill.
A hungry wolf was taking
His hunt for sheep to kill,
When, spying on the streamlet's brink
This sheep of tender age,
He howl'd in tones of rage,
'How dare you roil my drink?
Your impudence I shall chastise!
''Let not your majesty,' the lamb replies,
'Decide in haste or passion!
For sure 'tis difficult to think
In what respect or fashion
My drinking here could roil your drink,
Since on the stream your majesty now faces
I'm lower down, full twenty paces.
''You roil it,' said the wolf; 'and, more, I know
You cursed and slander'd me a year ago.
''O no! how could I such a thing have done!
A lamb that has not seen a year,
A suckling of its mother dear?
''Your brother then.'
'But brother I have none.
''Well, well, what's all the same,
'Twas some one of your name.
Sheep, men, and dogs of every nation,
Are wont to stab my reputation,
As I have truly heard.
'Without another word,
He made his vengeance good--
Bore off the lambkin to the wood,
And there, without a jury,
Judged, slew, and ate her in his fury.

Master of Disaster:

“Reinventing Collapse” – Dmitry Orlov, 2008

Dmitry Orlov is a Russian-born peak-oil theorist who also visited the Soviet Union / Russian Federation several times after the collapse of the Soviet workers state in December 1991. These visits gave him an insight into how a society reacts after its economy is destroyed. In this case the destruction was intentional – due to the violent introduction of ‘free enterprise’ by European & US bankers and Jeffrey Sachs, which enabled Boris Yeltsin and his kleptocracy of primitive accumulators to loot the commons. It took 10 years for the Russian economy to get back to pre-collapse levels – at least statistically. Many workers, elderly and poor people have never ‘recovered,’ of course.

Like many former Russians and Eastern Europeans, Orlov is no simplistic fan of capitalism. He is keenly aware of the benefits of the planned economy, and also of its deficits as practiced by the Soviet bureaucracy. Because of peak oil, global warming and bourgeois economic failure, Orlov is predicting a collapse of American society in the close future – it seems around 10 years.  So he's kind of a prepper. Orlov thinks this collapse mirrors what happened in the USSR, though it will be much worse, because of various safeguards built into the Soviet economy but not the US. Those safeguards were:

1. Commissaries at workplaces. Even after people stopped getting paid, they could still eat at work for free. Nothing like this exists in the US. According to Orlov, there was no starvation and little malnutrition in the ex-USSR.
2. Socialized health care continued to function for years, as it was a right that only slowly got whittled away. The US still has privatized health care, though now Obama’s plan will make it compulsory. That still does not remove the cash/profit nexus from health care, of course.
3. Mass transit. It also continued to function in the ex-USSR, and was built with basic technology. Housing was built around the transit, so being without a car was not such a hardship. Nothing like this exists in the US, except in some big cities.
4. A national rail system existed. See #3.
5. ‘Kitchen gardens’ in many of the Soviet big cities had already grown up to cope with food shortages in the degenerated workers’ state. So when the food system really collapsed, there was already a pre-existing support system.
6. Lack of a monetary attitude. After the collapse, the ruble became worthless. Barter predominated. Since the USSR was never a society based primarily on money, the lack of it was not so traumatic. Soviets had always used personal relationships, skills and connections to get goods – not simply a credit card.
7. Housing was not based on bank ownership, but was a right. So when the economy collapsed, people retained their apartments and houses, as there was no bank to ‘foreclose’ on them. According to Orlov, homelessness in the USSR did not make it into the double-digits, unlike the possibility in the US.
8. Heat was supplied centrally in each neighborhood, by large, centralized boiler systems, which reduced the chances of individuals freezing to death. Not so in Minnesota. You are on your own.
9. State enterprises were not based on ‘just in time’ manufacturing, but instead had large inventories. As 'ineffcient' as this is, the enterprise and employees themselves then had goods on hand for barter. In the US, enterprise goods are not the property of the workers who work at a location, nor is there much inventory, so this is not as possible.
10. Goods were manufactured in the USSR or the workers states surrounding it. Goods did not have to travel large distances by ship to be delivered. This involved less oil reliance. The USSR was also an economy that was based on the production of ‘things,’ not services or intellectual property. And ‘things’ are more valuable after an economic collapse. You cannot sell legal services when the legal system itself is breaking down, for instance. Certain frivolous 'services' and 'intellectual property' will die a quiet death.
11. The USSR was self-sufficient in skilled labor. In the US many skilled workers from other countries will head home in the event of serious economic collapse.
12. Russians for the most part knew their neighbors, as they lived where they were born. A support system was far easier to construct. Not so in the US, where people move every 6 years, at least until the recent real-estate collapse. Even many families in the US are split-up geographically.
13. Many Soviet goods were built to last. The concept of “planned obsolescence” is peculiar to a commodity-based economy, as is the concept of buying something new instead of repairing it.
14. Soviet education was based on teaching general skills, so that students could solve specific problems. US education is based on passing tests, unconnected to problem-solving or thinking. Which creates issues when there are real problems to be solved.

Orlov sees many parallels between the two countries. High military spending is common to both societies. Invading Afghanistan has now happened to both nations. It was Bin Laden’s plan from the beginning to pull the US into Afghanistan. The US is now the leading jailer in the world, with 2 million behind bars as we operate our own gulags. US state illegality, ala Guantanamo, secret rendition, torture, enemy combatants without any rights, warrantless searches, no-fly lists, warrantless eavesdropping, a massive internal security apparatus, police-state conditions applied to protests – all parallel the Soviet security approach. Both societies use oil-based farming, pesticides and chemical-based fertilizers to grow crops and deplete the soil. (see review below on “The Ecological Revolution.”) He compares Chernobyl to Katrina as events which de-legitimized the rulers. Orlov, who is familiar with software, even points to the increasing corporate bureaucratization of software and ‘intellectual property’ in the US as evidence of stagnation in the high tech areas that mirrors the Soviet approach. To Orlov, at bottom, the leaderships of both societies lost or are losing any claim to legitimacy, based on their failures.

As such, the United States is extremely vulnerable to an economic collapse based on oil shortages, a massive debt crisis and global climate change. He thinks the US is bankrupt financially . He thinks a revolution of some sort is needed to prevent collapse from happening, but he doubts this will occur, so he wrote this to prepare people for severe economic dislocations.

So what should you do? Orlov calls his book an ‘exercise’ in thinking about the future. Here are his predictions and suggestions to prepare:

1. Get used to discomfort, both physically and mentally.
2. Money/investments will become increasingly useless, based on hyper-inflation. Barter of goods and services will replace it.
3. He suggests hoarding certain items – razors, soap, shampoo, liquor, marijuana, hand tools, condoms, medical drugs, bicycle tires, etc. He does not mention solar/crank flashlights and radios, or water purifiers or more techie stuff.
4. Bicycles will become a major form of transport. Bike trailers will become useful for hauling items.
5. He thinks ‘protection’ will arise in various ways. He does not suggest buying guns, but only finding, or being in, an organization that will protect you.
6. Keep moving. He mentions shopping carts as something of value. This will make all the fans of “The Road” happy. (See review below) He thinks a sailboat you can live on will be safe. (!)  He actually lives on one...
7. Environments that are too hot, or cold, or dry, or crowded with different ethnicities might be problematic. He thinks small towns might be best.
8. Figure out a way to grow much of your own food. Orlov said that Russians survived on garden plots of 1075 sq feet, or 50 feet by 22 feet.
9. Alcoholism, mental breakdowns and suicide will grow, especially among white middle and working-class, middle-aged males.
10. Life will slow down immensely. Which means more time for creative activity, talk, reading – if you survive.

I have some quarrels with Orlov's approach. He blames US consumer goods for the breakdown of the Soviet system, while admitting the Soviets never made money off their 'empire' - but ran it at a loss. What he does not notice is that the US DID make money off of their empire - which can show up in the world of consumer goods. And he swings between faith in family, small groups of people and organizations to combat collapse, and none at all. He does not believe that political action is possible. Basically he is some kind of an isolated anarchist at heart.

And I bought it at Mayday Books!

Red Frog – 3/21/2010

And the pox on social democrats as well:

In a word, social-democrats are capitalists who imagine themselves socialist or
want to reform the worst elements of capitalism. They desire what is essentially
the status quo with significantly less inequality and poverty. As well, they
believe this can be done peacefully through the ballot box, with no revolution
being necessary. Human rights campaigners and charitable organizations are an
example. Some of them may harbor anti-capitalist, anti-imperialist and otherwise
progressive views, but the fact is that social-democracy remains firmly planted
in the camp of imperialism. Social-democrats fail to look at the real
relationship between boss and worker and between oppressed and oppressor.

(source essay)

Jameson's review of Zizek's "The Parallax View"

Fredric Jameson's review of Zizek's "The Parallax View" (of which Mayday has at least a couple of copies in stock) came out a little over three years ago. I was dithering a little as the review is not exactly fresh off the presses but since it gives such an excellent synopsis of Zizek's massive book I decided to post it. I generally don't have much time for Jameson as I consider him so much pretentious hot air but he has done a good job here.

The inherent flaws in the trade union movement

I found this enlightening essay by Ulrich Rippert a day or so back:

The rightward evolution of the trade unions arises out of fundamental
features of this form of organisation. In his lecture “Marxism and the Trade
Unions,” the chairman of the World Socialist Web Site international
editorial board, David North, stated: “Standing on the basis of capitalist
production relations, the trade unions are, by their very nature, compelled to
adopt an essentially hostile attitude toward the class struggle. Directing their
efforts toward securing agreements with employers that fix the price of labour
power and determine the general conditions in which surplus value will be pumped
out of the workers, the trade unions are obliged to guarantee that their members
supply their labour power in accordance with the terms of the negotiated
contracts. As Gramsci noted, ‘The union represents legality, and must aim to
make its members respect that legality.’

“The defence of legality means the suppression of the class struggle,
which, in the very nature of things, means that the trade unions ultimately
undermine their ability to achieve even the limited aims to which they are
officially dedicated. Herein lies the contradiction upon which trade unionism
flounders.”

How to stay awake during Obama speeches

I confess I can't bear to sit through any politician's speeches. But for those who must listen to the speeches of Obama, here is one way to survive the ordeal:

1. Before Barrack Obama’s next televised speech, prepare your “Bullshit Bingo” card by drawing a square. I find that 5″ x 5″ is a good size — and dividing it into columns –five across and five down. That will give you 25 1-inch blocks.

2. Write one of the following words/phrases in each block:

Restored our reputation
Strategic fit
Let me be clear
Make no mistake
Back from the brink
Signs of recovery
Out of the loop
Benchmark
Job creation
Fiscal restraint
Win-win
Affordable health care
Previous Administration
At the end of the day
Empower (or empowerment)
Touch base
Mindset
Bipartisan
Trust
Inherited as in “I inherited this mess”
Relief for working families
Unprecedented
Accountable (or held to account)
Free market
Reform

Players can make substitutions to this list, but only one phrase can be used in any one block. Alternatives include:

Change (as in “change you can believe in)
Universal health care
Brought the economy back from the brink

3. Check off the appropriate block when you hear one of those words/phrases.

4. When you get five blocks horizontally, vertically, or diagonally, stand up and shout ”BULLSHIT!”

Testimonials from past satisfied “Bullshit Bingo” players:

”I had been listening to the speech for only five minutes when I won.” - Jack W., Boston