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PAX, LUX ET VERITAS SINCE 1965
Post Deep State: Let's Agree on a Definition
Created by John Eipper on 09/22/21 2:29 AM

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Deep State: Let's Agree on a Definition (Tor Guimaraes, USA, 09/22/21 2:29 am)

Thank you, John Eipper, for your explanation on the Deep State. Now I know why we have had this communication problem.

You have a powerful imagination:  "My skepticism has to do with the existence of smoke-filled rooms with oligarchs scheming in concert." Also you are very clever: "Doesn't such coordination give them too much credit? If they are so greedy, wouldn't the evildoers stab each other in the back? Moreover, the Deep State is described in countless ways. At one level, you have the banksters, powerful industrialists, and Jeff Bezos. Probe deeper, and you get the blood-drinking pedophiles."

And yet, for some reason you ignore what your intelligence is telling you and seem to believe all the nonsense and unreal narrative such as "smoke-filled rooms" and the "blood-drinking pedophiles." How about looking for evidence that these things exist before allowing them to cloud your thinking? Why not analyze what more dedicated investigators are telling us? They provided plenty of names, places, time, events which can be easily checked for accuracy. Can we find any contradicting evidence?

We must fight the deadly disease of living in imaginary worlds which the regular media uses to lull us into lack of awareness and complacency. I am sure you know that a few big corporations also control most of the media content in the world. Without that, the big corporations controlling most major business sectors (arms, agriculture, chemicals, oil, finance, etc.) would not destroy the environment and rip people off as badly as they do.

I am very glad to hear that you are on to the Citizens United decision. How do you suppose they managed to get the Supreme Court to support such destructive power against Democracy? Is this something helpful to the Deep State as I defined it? To accomplish this, did they have to use any "smoke-filled rooms?" Or do any "blood-drinking pedophiles" care about the decision? One can define DS any way they want, but that is a smoke screen to confuse reality. If you don't accept my definition of DS, let's talk about it, but please don't just add smoke to the discussion.

JE comments: Tor, I didn't make this stuff up.  (I'm not so clever.) The so-called QAnon conspiracy theorists borrowed several pages from the "blood libel" legend of Medieval/Early Modern anti-Semites.  This time, they somehow added pizza to the mix:

QAnon conspiracists believe in a vast pedophile ring. The truth is sadder | Moira Donegan | The Guardian

Rather than Deep State, what you are describing is the age-old phenomenon of rich, powerful elites using their influence to get richer and more powerful.  Nothing deep about that.  Is it even a conspiracy?

An interesting tidbit:  the modern usage of "Deep State" goes back to Turkey, of all places, and a cabal of military officers and civilian allies seeking to preserve the secular order of Kemal Ataturk.  Possibly Yusuf Kanli could comment?  (Yusuf:  we miss you!  Please check in with WAIS.)


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  • Concentration of Power in America: Two Classic Books (Francisco Ramirez, USA 09/23/21 3:59 AM)
    These are two examples of earlier works that highlighted the concentration of power in America.

    The Power Elite is a 1956 book by sociologist C. Wright Mills, in which Mills calls attention to the interwoven interests of the leaders of the military, corporate, and political elements of society and suggests that the ordinary citizen is a relatively powerless subject of manipulation by those entities.


    Originally published: 1956

    Author: C. Wright Mills



    Who Rules America? is a book by research psychologist and sociologist G. William Domhoff, PhD, published in 1967 as a best-seller. WRA is frequently assigned as a sociology textbook and documents the dangerous concentration of power and wealth in the American upper class.


    Originally published: 1967

    Author: G. William Domhoff


    Give the Golden Calf due credit for popularizing the words Deep State. Had the words been "Deep Capitalism," their impact would have been limited. After more than fifty years in the USA, I have come to the conclusion that the deep culture of America is libertarianism or if you prefer, 19th-century liberalism. No one thundered Give me Equality or Give me Death! Such a culture primes one to be receptive of Deep State critiques, regardless of party affiliation.


    The above authors come from the Left while much of the critique now appears to come from the Right. The critiques assume a lot of coherence among elites or the ruling class, while elite or class segmentation may in fact be the reality in some countries during some eras. The New Deal, for example, was attacked by some elites but supported by others. The coherent class theory is critiqued in the context of the New Deal (Skocpol, Theda, "Political Response to Capitalist Crisis: Marxist Theories of the State and the Case of the New Deal," Politics and Society, March 1980.


    The Golden Calf had no use for the Bald Bezos, but are they not both part of the power elite?


    JE comments:  Francisco, you've put this in much-needed perspective.  The terminology changes over time, but the realities remain constant.  We could go back even further, to the 19th-century Robber Barons, who actually did congregate in smoke-filled rooms.  Interestingly, the Mills and Domhoff books came out at the time when there were probably the lowest levels of inequality in the US.


    Ever notice that the Deficit Hawks-Tea Party types of ten years ago are strangely silent?  A result of the pandemic, or is it another achievement of Trump?


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    • Theda and Bill Skocpol in Flint, Michigan (Patrick Mears, -Germany 09/23/21 5:43 AM)
      This is more in the nature of gossip, but if you want to post it, it is fine by me. [Absolutely! This is a textbook example of the "WAIS Effect"--JE]

      In Francisco Ramírez's post, he cites an article written by Theda Barron Skocpol, who was born in Detroit in 1947. In 1967, she married Bill Skocpol, a physics major from Texas who attended Michigan State University, where they had met as students. In the fall of 1968, they had moved to Flint, Michigan, where Bill was hired by St. Agnes High School to teach Physics to seniors like myself. He was an extremely intelligent, kind, and thoughtful person and teacher. I never had the opportunity to meet his wife, unfortunately. I am not surprised that their son clerked for Justice Sonia Sotomayor.


      Here is her Wikipedia entry. https://en.wikipedia.org/wiki/Theda_Skocpol


      JE comments:  Pat, Small World indeed!  This question has never appeared on WAIS, but it might yield some fascinating fruit:  Did any of you have a high school, or even elementary school, teacher who went on to great achievements?  Granted, an inspirational HS teacher is a tremendous achievement in itself.


      Theda Skocpol (Harvard U) is possibly best known for the State Autonomy theory.  Here's my bare-bones gloss:  Government bureaucracies take on a life of their own, completely divorced from the societies they purportedly serve.  I am convinced.  We could say the same thing about all institutional bureaucracies--corporate, academic, military...

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    • Deep State and Hidden Bureaucracies: Bagehot, Glennon (David A. Westbrook, USA 09/23/21 9:12 AM)
      With regard to the Deep State discussion, one might also mention the 19th-century political economist (and editor of the Economist) Walter Bagehot, who wrote of the development of a hidden bureaucratic apparatus for doing the actual business of government that was (re)presented by the more visible organs, such as Parliament.

      One should be careful, though. I think it is too "loose" to equate the idea of the Deep State with elites writ large--you lose all analytic rigor. Even confining the concept to government, ordinarily understood, the idea is ancient. Surely Machiavelli was comfortable with the idea that the visible/obscured parts of government are in tension with one another. Governments, and especially militaries, have always required administration, coordination, counting, taxes, and so forth. The first thing William the Conqueror did was have everything in England counted.


      The idea that even our putatively enlightened, democratic, transparent, etc., government really is not what it appears to be was updated, with regard to US security and the Forever War in particular, by Michael Glennon, in "National Security and Double Government." I posted an appreciative review on WAIS way back in 2014 (wow).


      https://waisworld.org/go.jsp?id=02a&o=81760



      That was during the Obama administration. Rereading today, and with Clinton/Trump in mind, I was struck by this:


      "Instead, Glennon shows how bureaucracy constrains and ultimately vitiates democratic possibility. In doing so, the security state not only disenfranchises, but discourages, 'Joe Sixpack.' We watch football, and elections as football, but we cease to be democratic actors--we the people are not overthrown, but dissolved, and each make our separate ways....


      "At some point, democracy is dependent on the virtues of the people, the demos. And maybe this nation of so many millions is losing its capacity to instill civic virtue--which is after all a paternalistic, and in that sense illiberal, task--in a sufficient number of its people to produce 'a people' capable of self-governance.


      "Glennon, in short, is discussing how the American project may end."


      JE comments:  Bert, I re-read your post from seven years ago, and it reads more true now than then.  Glennon stresses that it's not the case of the elite lording over the ignorant masses for their own good (Frederick the Great?), but an elite that is entangled in its own web of ambitions and rivalries.  All this begs the (unanswerable?) question:  what is to be done?  Glennon described the conditions for the rise of Trumpism, but more so he explained why Hillary Clinton would not prevail.  Trump's "draining the swamp" was one solution, albeit an incoherent and ultimately failed one.

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  • Do The Corporations Gobble Up Everything? (Tor Guimaraes, USA 09/27/21 10:02 AM)
    John Eipper commented on my last post: "I didn't make this stuff up... The so-called QAnon conspiracy theorists borrowed several pages from the 'blood libel' legend of Medieval/Early Modern anti-Semites."

    We must not continue to spread QAnon's obvious nonsense like it might be true. We must look for evidence provided by dedicated investigators with their reputations at stake. They provided plenty of names, places, time, events which can be easily checked for accuracy. Can we find any contradicting evidence? It is unconscionable for anyone to treat statements by "the so-called QAnon conspiracy theorists" as anything to be taken seriously in comparison to someone like Chris Hedges and Lawrence Wilkerson, whose presentations I provided.


    Last, John stated, "Rather than Deep State, what Tor is describing is the age-old phenomenon of rich, powerful elites using their influence to get richer and more powerful. Nothing deep about that. Is it even a conspiracy?"


    No, it is not a conspiracy, it is just regular people doing what they can to make profits for themselves while screwing the nation because we are too distracted by nonsense and misinformation while they hire managers and politicians to advance their interests. I would be doing the same if my god were profits. The problem that John doesn't seem to grasp is that the old-age phenomenon became a huge monster gobbling up everything; corporations now are global, they can control national governments, they control even our government and have managed to reduce or eliminate any legislation designed in the past to control their egocentric interests.


    JE comments:  Tor, I believe we are in agreement, but the monsters occasionally get their due.  Two recent examples:  the takedown of the Theranos medical testing scheme (our own Phyllis Gardner had a heroic role in exposing the fraud), and the recent prosecution and bankruptcy of the drug giant Purdue Pharma, makers of OxyContin.


    Or...do the monsters occasionally accept sacrificing one of their own, to keep the pressure off the larger herd?


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    • Theranos Scandal and Stanford Connections (Francisco Wong-Diaz, USA 09/28/21 3:25 AM)
      A short note on the Theranos criminal fraud case, which is now being tried in a San José federal court.

      The notorious Stanford dropout founder of Theranos, Elizabeth Holmes, is now married, pregnant with child and living in tony Woodside in a rented house on the $135 million (asking price) Green Gables estate. Former Secretary of Defense retired four-star General Mattis, now at Hoover, recently testified on his involvement in the board of directors and confirmed that she was totally in charge. A testimony that is a direct threat to the defense strategy that she was manipulated and controlled by her former boyfriend/partner.


      Other Stanford University celebrities associated with the Theranos case are former SecDef William Perry and the late former Secretary of State George Schultz. The latter's grandson is the whistleblower who opened the doors to the Theranos scam.


      JE comments:  And we must put in a word for the WAIS Chair Emerita, Dr Phyllis Gardner, who questioned Elizabeth Holmes's snake-oil show from the very beginning.  Since Phyllis is as modest as she is accomplished (and beloved!), I'll let the San José Mercury-News tell her story, in this 2019 interview:


      Theranos: Stanford prof never trusted Elizabeth Holmes (mercurynews.com)


      Bravo, Phyllis!


      One correction to Francisco Wong-Díaz's comment:  Elizabeth Holmes has already given birth, back in July.  The pregnancy delayed her trial until now.  Francisco, are you following the proceedings?  I'd be grateful for updates as they unfold.

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    • Deep State, Power, and Some Nuggets of FinSpeak (from Ric Mauricio) (John Eipper, USA 09/29/21 2:19 AM)

      Ric Mauricio writes:



      Of all the things that are beyond my power, I value nothing more highly than to be allowed the honor of entering into bonds of friendship with people who sincerely love truth.


      --Baruch Spinoza, Dutch philosopher


      The Deep State perhaps includes the Wall Street movers and shakers. The Federal Reserve is owned and controlled by large money centers such as banks and brokerage firms. Oh, yes, the Golden Rule: "He who owns the gold, makes the rules." There is a reason for inflation, whether benign or aggressive. It keeps the masses under control by manipulating their currencies and wealth to keep them in line. This is not a US empire philosophy, but a global philosophy as well as an historic one. Every government does it. Eugenio Battaglia keeps referring to the US as the Empire, but the same can be applied to the Chinese, Russians, and Europeans.


      Today, there are no smoke-filled rooms (except maybe in the Altria boardroom). I remember when I was CFO of a fuel distribution company when the government threatened to come down on us for price fixing. Alas, we gas companies did not meet in smoke-filled rooms. If that was a requirement, I would have been in trouble, since I don't smoke. I asked our VP in charge of prices how he set the prices for our gas stations. He told me that it was based on how much the gas cost us from the refiners and the trend of those prices. Then he laughed. He said he drives around and checks on what the other gas stations are posting, and based on his algorithms with set margin spreads, he sets the prices. Yup, no smoke-filled room here. Doesn't even talk to anyone from other fuel distributors.


      The issue here is not capitalism. Seneca teaches, "It is not the man who has too little, but the man who craves more, that is poor." When I was a rookie stockbroker, I was told by another broker that "the goal is not to make your clients money, but to make yourself a lot of money." Unfortunately many stockbrokers/financial advisors have this mindset. The culprit is not capitalism, but rather extremism. I like to practice what I call "compassionate capitalism." The company should place its employees and customers first, which in turn, rewards its shareholders with a good return. It should provide a product or service that helps the customer achieve their needs. Ah, there is a reason I do not invest in the money-center banks.


      FinSpeak is very interesting. For example, government wonks, led by the Fed's Powell and Treasury's Yellen, speak of the current inflation rate as "transitory." I looked up what the dictionary defines "transitory" as. It defines it as "not permanent." OK, I doubt you will find any clarification on what the government means when it describes the current 5.4% inflation rate as "transitory." Do they mean that the 5.4% inflation rate is "not permanent," and that it may go below that to, let's say, 5.3%? Or 5.0%? Or 4.0%? I've asked some people what comes to mind when they hear "transitory," and most who responded said that inflation will subside, and perhaps the higher prices will go down again (deflation?). If you believe that prices will go down again soon (OK, yes it could, if the government stops printing [in digital form] money or raising the debt ceiling), then I've got a bridge you might want to buy.


      Another FinSpeak headline is that "oil prices are in a positive trajectory." Positive sounds good, right? Never mind that in this case, higher oil prices (positive for oil companies?) results in increased fuel costs, which results in increased delivery costs, which results in increase cost of goods. Ah, inflation. Loss of purchasing power. Not so good. Not so positive.


      Then the FinSpeak talks of "injecting liquidity." Ah, like injecting a vaccine? Maybe more like injecting cocaine. Creating digital money and providing it to over-indebted companies like Chinese development company Evergrande. Wait, didn't we do that with the US banks? Oh, that's why the dollar (and other fiat currencies) continue to lose value.


      Jerome Powell now admits he was wrong about inflation. Actually, he and Yellen knew they were wrong, but in order to calm the markets, they had to provide information that they were hoping the markets would bail them out of. Now that they are caught with their hand in the cookie jar, they are admitting they had made a tactical error.


      Elizabeth Holmes of Theranos, the Girl with the Golden Tattoo. Oh, sorry, confusing her with Lisbeth Salander, hero of The Girl with the Dragon Tattoo.  Being a consultant (with a file full of NDAs, I always have to be careful what I write or say) to Biotechs, High Techs, VC firms and Private Equity firms, I often see the inner sanctums (and accounting) of companies. I have come up with an "A Factor" in judging whether it is a company is one that I would invest in. No, sorry, no insider trading here based on financials. The "A" does not stand for accounting, it stands for arrogance. The more arrogance executives exhibit on a day-to-day basis, the worst their grades get. And Ms. Holmes is a very public face on that arrogance. Oftentimes, the arrogance is exhibited by the person not admitting that they may have reached their level of incompetence. Screaming and yelling at their underlings is what I've seen in corridors of corporate power. Trying to cover up their ignorance by lying is another symptom. The CFO of one company once suggested a code name for my email to render me invisible to the rest of the company.


      JE comments:  Nothing like a positive trajectory!  If you want this kind of trajectory with the prices of stuff, injecting liquidity is the way to accomplish it. 


      Ric, your Emperor-has-no-clothes style must have injected apoplexy into the corridors of power!  You advise us to run away from arrogance, but there is something seductive, even reassuring, about entrusting your money to those who exude boundless confidence.  As a society we are enamored of "aggressive leadership style" and "visionary risk-taking."  What happened to Blessed are the Meek?


      And here's my favorite Spinoza quote:  "Do not weep.  Do not wax indignant.  Understand."  This would do nicely as an alternate motto for WAIS.

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      • Why There is But One Empire at Present (Eugenio Battaglia, Italy 09/30/21 3:48 AM)
        In his detailed and learned post of September 29th, Ric Mauricio wrote: "Eugenio Battaglia keeps referring to the US as the Empire, but the same can be applied to the Chinese, Russians, and Europeans."

        I always make a distinction between America with its kind and helpful citizens (my family and I lived among them; we were happy and we loved them deeply) and the Empire controlled by the Deep State. Do you really believe that the foreign policy of the Empire has differences between Trump and Biden, Carter and Reagan, Clinton and Bush? Probably in internal policies, but not in imperial policies.


        The Empire is the Empire. In previous posts I have written of its huge geographic space and its numerous military bases abroad (about 750 in 80 countries, 38 of which are not considered democratic!).  However, if we include the sporadic presence of US Special Forces, the number of countries increases to 135, while the cost is more than $156 billion per year. Some 96% of the foreign military bases in the world belong to the Empire. The remaining 4% are in the hands of China, the UK, France, Italy, and Russia. Please note that Djibouti alone has military bases of China, the US, Italy, Japan, and France.


        China is not yet an empire even if its soft power starts to be worrisome. By the way, how much money and how many assets have been relocated to China from the West? How many Western producers have been laid off to achieve this?


        Russia used to be the Soviet empire. Now it is a military powerful Federation but not really an empire.


        Europe, the so-called European Union, was formed in order to be a good lackey of the Empire and so far has remained a bunch of lackeys, even if France dreams of grandeur and is now is really pissed off about the failed submarine deal with Australia.


        One final consideration about empires: be careful of Erdogan. He is trying his best to revive the Ottoman Empire, very skillfully playing with the other powers. For instance, he is clearly claiming all of Cyprus, the Dodecanese Islands and other Aegean islands, part of Syria, etc. Nobody says anything. Maybe it's because not many understand the Turkish language?


        JE comments:  The 96% figure strikes me as high for the proportion of foreign bases in US hands.  According to our old friend Wikipedia, the UK alone stations military personnel in some 145 places abroad.  It all depends on how you define a base, I presume.


        Eugenio Battaglia ruffles some feathers with his insistence on the term "Empire" for the US.  I understand his point, but my vote would be for the more accurate term "hegemon."  Contrast the US at present with the genuine empires of Rome, Spain, France, the UK, or even the Soviets in Eastern Europe.


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        • Hegemony, Dominion, Empire: Some Definitions (Harry Papasotiriou, Greece 09/30/21 10:19 AM)

          Adam Watson in The Evolution of International Society makes a useful
          distinction between hegemony, dominion and empire.
          He views hegemony as control of another state's foreign policy (the
          Soviet Union in the Cold War vis-a-vis Finland).
          He views dominion as control not only of another state's foreign policy,
          but also its domestics politics (the Soviet Union vis-a-vis the
          Stalinist regimes in the Warsaw Pact).
          Empire for him means complete loss of independence (the Soviet Union
          vis-a-vis the Baltic Republics).


          JE comments:  Thanks, Harry!  By this metric, the US is a hegemon but not imperial.  Even Puerto Rico is arguably in a dominion status with the US.  It fields its own Olympic team, as a sign of some independence.

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        • What Is Meant by the US "Empire"? (José Ignacio Soler, Venezuela 10/01/21 11:00 AM)

          I have been following the WAIS debate that has arisen over the term Empire, which Eugenio Battaglia has repeatedly associated with the United States.


          It seems to me that this difference of opinion is leading nowhere. Essentially because "empire" associates a concept of the historical past with a contemporary reality and it does not make much sense.


          I understand that empires arose in the past through invasions and military conquests, or else through coalitions of monarchical powers. An "empire" today is not built on military action or political coalitions, nor is it necessarily exercised only through hegemony or dominance over internal or external politics. In that sense, the foreign policy of the USA, exercised through the influence of its supposed military power and control, its bases abroad and its political influence, has been rather clumsy and erratic, if not failed.


          It seems to me that an "empire" in the modern sense is built on other combined vectors of influence and control--political, economic, cultural, or technological. There is no doubt that the US exercised these influencing factors quite effectively after the Second World War.  In that sense we could call the United States a modern empire, hegemonic and dominant at the same time around the world. This is nothing to be ashamed of for the sake of political correctness; on the contrary it has played a positive historical role in many ways.


          China, the most likely candidate to succeed it, is still on the way to becoming an empire; Russia, it seems to me, has lost a lot of influence and will have a hard time regaining it, and Europe can hardly become an empire in the modern sense.


          JE comments:  I see all sides here.  For Eugenio Battaglia, the US military bases in his native Italy have an imperial vibe to them.  That's what empires do:  occupy militarily, even if they are welcomed by the occupied peoples.


          Ultimately, "empire" is a metaphor, but metaphors can have deep meaning.  I still prefer to talk about hegemons and spheres of influence.  


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          • On Empires and Fish: Both Smell (Eugenio Battaglia, Italy 10/02/21 3:57 AM)
            John E mentioned the US military bases in Italy. The foreign military forces in any country are like fish. Eventually they begin to smell and are no longer welcomed.

            There have been US military forces with nuclear weapons in Italy since after WWII. Let's say that until 1991 they may have had a reason to stay. Afterwards this has not been the case, and do not believe that the average Italian welcomes them. Of course, some local suppliers of the GIs would like them to stay forever.


            I fully understand that you prefer to use the concept of hegemony and spheres of influence. Any good American rejects the idea that the US has become an Empire. Unfortunately, it is an empire run by the Deep State, not by the people, in spite of controversial, big-money dominated, elections.


            JE comments:  The ever-wise Margaret Eipper (Mom) always compares house guests with fish:  both smell very bad after three days.  Seventy-six years is a long, long time for a houseguest/house guest.  (One word or two?  The 'Net cannot make up its mind.)


            One constant of all US administrations has been their reluctance to re-think the foreign military bases.  Lots of bluster about "coming home" and putting more of the cost on the hosts, but little substantive change.  Does this fact give fuel to sundry Deep State theories?  Yet beyond the armaments industry, how does the DS supposedly benefit from foreign bases?


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        • The US is a Reluctant "Empire"; Expatriation of US Citizens (Francisco Wong-Diaz, USA 10/02/21 3:22 AM)
          I agree with John E that Eugenio Battaglia's Old World attachment to the slogan "empire" in referring to the USA is bothersome and intellectually vacuous in today's world.

          The US has been at best a reluctant "empire," since most reasonably intelligent and educated US travelers, business people, soldiers deployed abroad, etc., get tired of being abroad for long and loved getting back home. How many Americans rushed to Iraq or Afghanistan or any other alleged "colony" to own cheap land, cattle and resources? (This is what the Chinese communists are doing worldwide.) The happy return home is now less attractive, however, due to the domestic rise in criminality, homelessness, rioting, divisiveness, corruption, health mismanagement, inflationary spiral, open border, human sex trade, deaths from drug use, CRT in critical institutions, and dangerously stupid wokeness found everywhere including our military, the decline of freedom of speech, and the aggressive culture of death all added to the Biden Administration's self-inflicted crises (e.g. Kabul debacle, Del Rio Haitian shantytowns) and official abject lying! The number of expatriates has been rising significantly, as well as the number of Americans who are renouncing their citizenship. (See Bambridge Accountants report, 2020-21; in particular, the renouncers include many ultra wealthy like one of the two founders of Google.)


          The Chinese are inexorably seeking global dominance using a whole-of-government approach and a strategy based on the ancient game of GO. They do not honestly abide by established rules because they seek to eliminate the Western-based international nation-state order which they constantly undermine once inside its basic institutions like the UN. Furthermore, while people focus on their military power the Chinese communist so-called soft power diplomacy now labeled "hostage diplomacy" (look it up) is gaining ground in what used to be called the Third World.


          So I advise Eugenio to refocus on what is significantly more relevant and transparent to mature critical thinkers.


          JE comments:  Francisco, the Bambridge reports I could find seem to paint a different picture from what you describe above:  that the number of US citizens renouncing their nationality increased under Trump, and is decreasing at present.  See below, which addresses only the final months of 2020:


          Bambridge Accountants- US and UK Chartered Accountants


          The #1 reason for expatriation is also clear:  tax avoidance or some related financial benefit.  Possibly this is not the entire picture.  The Bambridge folks are accountants, after all.


          Our beloved colleague on the Isle of Wight, John Heelan, used to compare China's plan for global domination with the traditional game GO, in which victory requires a long-term strategy and near-infinite patience.  Francisco, could you tell us more about this metaphor?  (And John H:  I trust you are well.  It's been WAY too long since we last heard from you.)

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          • Thoughts on the "Intellectually Vacuous" (Eugenio Battaglia, Italy 10/05/21 4:09 AM)
            I would like to answer Francisco Wong-Díaz, 2 October, who wrote:

            1) "Eugenio Battaglia's Old World attachment to the slogan 'empire' in referring to the US is bothersome and intellectually vacuous."


            2) "I advise Eugenio to refocus on what is significantly more relevant and transparent to mature critical thinkers."


            These statements border on ad hominem attacks, and are also inaccurate.


            I never denied, as Francisco wrote, that "the Chinese are inexorably seeking global dominance using a whole-of-government approach and a strategy on the ancient game of GO." What I wrote was possibly more forceful, that the US Deep State is running the Empire and unfortunately in the last 30 years it has run it a very poor way. Furthermore, I wrote that the same people who undermine the Empire through relocation of funds and assets to China have created this situation, thereby impoverishing and laying off many of the Empire's producers.


            JE comments:  It's a good time to remind WAISworld about our ban on ad hominem statements.  As the gatekeeper, I do my best to soften the most strident examples.  Is calling someone's argument "intellectually vacuous" the same as attacking the person?  Gray area, gray area...but please remember:  we're all friends here.

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      • Is the Fed Part of the Deep State? (Tor Guimaraes, USA 09/30/21 4:42 AM)
        My good friend Ric Mauricio is right as usual regarding the US financial system, except he is not diving down deep enough into the barrel of crap managed by the Fed.  (See Ric's post of September 29th.)

        As we have discussed on this Forum before, since its inception the Fed is an integral part of the Deep State: The financial barons retreated to an island in Georgia and sketched a list of wishes to provide guidance to Congress for creating the Fed. Much to their surprise, our political "representatives" made this list the framework for the approved legislation.


        Obviously we cannot blame everything on the Fed.  Nixon was forced to break the dollar-gold link in 1971, opening the floodgates for unlimited printing and borrowing money. The infamous Alan Greenspan helped destroy many laws protecting the American people from the financial engineers, and today the Fed continues to help them tremendously by having interest rates at practically zero for member banks.  These are mostly free profits for those properly connected. That is democracy and freedom for you.


        Since the 2008 financial disaster (for the American people and real economy), the Fed and the big banks have embarked on an orgy of borrowing money for massive speculation for their benefit. Again for the last decade our real economy has not recovered from 2008, but the financial markets have done just fine and today stocks are extremely expensive.  Actually everything has gone up except the American average standard of living.


        Because most fiat currencies are linked to the US dollar, all of them are going worthless. The Fed is completely out of control and only idiots listen to what they say. They are playing for the big banks and for the politicians who don't want things to unravel during their tenure in power. They have no choice but to BS around and try to continue the money orgy. For how much longer can this charade remain? No one really knows since this is a new disgrace; but it's already been going long for longer than I ever thought possible. One thing for sure, when the music stops, 2008 will be seen as a minor event. No wonder the Russians and Chinese want their own financial system.


        JE comments:  Tor, I suspect your experience growing up in Brazil has impacted your thinking on US inflation.  And why shouldn't it?  Why the heck isn't there more inflation, given all the money that's being given away?  One lesson we've learned:  just like it's good to be the king, it's possibly even better to possess the reserve currency.


        (If I may be cheeky:  your fiat currencies are losing value, but they're still cheerfully accepted at WAIS!  Send checks payable to WAIS c/o John Eipper, Goldsmith Hall, Adrian College, Adrian MI 49221 USA, or via PayPal to donate@waisworld.org.  A special thanks to our latest additions to the 2021 WAIS Honor Roll:  Mike Calnan and Brian Blodgett.  You gentlemen are my heroes!)


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        • The Fed and the "Deep State"; from Michael Frank (John Eipper, USA 10/01/21 2:41 AM)

          Michael Frank writes:



          My concept of "deep state" is best illustrated by the old British television show Yes, Minister, in which an elected official is unable to achieve his agenda due to the machinations of an entrenched civil service bureaucracy. In a sense, the Fed is deliberately that: the idea is that for any given moment, there is a monetary policy that is rigorously correct from a technical economic viewpoint, and which must be implemented for the good of all participants in the economy. But since this policy may not align with the prevailing political order, the Fed needs a degree of independence from government. This independence isn't absolute: the Fed faces Congressional oversight, and the board members need to be periodically renominated.


          In fact, the structure is a public/private enterprise: the Federal Reserve itself is owned by the member banks, who elect the leadership of the district banks. But the Federal Reserve board members are nominated by the President and confirmed by the Senate. I would tend to agree that the current Fed Board tests the limits of independence: thanks to appointments being slowed by McConnell in the Obama years, Trump made a nearly clean sweep of board members. So the political diversity that is normally typifies the board has been compromised, even more so than the Supreme Court. That aside, the Fed has too much visibility and oversight to be regarded as some secret Deep State evil. That doesn't mean it's not subject to error and misdirection, though.


          A few more or less random points:


          --The ebb and flow of commerce makes it impossible for the money supply to be perfectly balanced indefinitely: conditions will be either inflationary or deflationary. Assuming that there's a choice, which is better? A deflationary currency means that money is constantly increasing in buying power. With such a currency, there's a strong incentive to save, because the money you put away today will buy more tomorrow. As a result, demand falls and business conditions deteriorate. A recession or depression follows. By contrast, inflation incents spending, because money loses value over time. By targeting a low rate of inflation, the theory is that you have an expanding economy that isn't wildly out of control. That's the simple idea behind Fed policy, and it seems to work pretty well. If you're discomforted by your money continuously losing value, you either spend now, or seek investments that earn above the rate of inflation. That makes the economy grow, which should be better for everyone.


          --Fiat currency defines all currency. Bitcoin, gold, Federal Reserve notes. All fiat. In every case, the currency has little or no intrinsic value. It's only worth is imputed by its perceived transactional value.  The term is used as a pejorative, but it's just redundant.


          --"Interest rates kept low for the banks." Let's think about this critically. If you were a lender, would you want to write a mortgage at 1.5%? I really don't think so. Over thirty years, the odds are that you would be losing money. When rates are low, banks become tougher on credit quality and are less likely to lend. Which is why reducing rates has such a slow effect during recessions. Banks simply prefer stable rates, high or low, and will find ways to make money either way.


          The Fed today is using new tools and is in a very different place than it's ever been. The divergence began at the end of 2018, shortly after Powell became Chair. At the beginning of his term, he tried to continue Yellen's program of gradually reeling in the Obama stimulus, by tapering bond acquisition and raising rates. By the end of 2018, it was obvious that he had moved too aggressively, as asset prices were collapsing. Whether due to the market pressure or political pressure from the White House, he stopped raising rates. From his ascent to the Chair at the beginning of 2018 until August 2019, the Fed balance sheet had shrunk by $700 billion. Then something unexpected happened: the money market collapsed. For a brief time, short rates spiked. The Fed was forced to intervene and began adding repo's to its balance sheet. Although the problem was never adequately explained, it appeared to be persistent. Week after week, the balance sheet continued to grow until $400 billion had been added back on the eve of the Covid crash.






          If the repo crisis added a tool to the Fed workshops, Covid re-engineered the entire toolbox. An additional $4.3 trillion has been added to the balance sheet. The Fed now holds an $8 trillion portfolio of government debt, up from a few hundred billion in 2008. Now this is where it gets interesting. When the Fed buys government debt, it buys from banks, which then deposit the cash as excess reserves back into the Fed. For this deposit, they receive a nominal interest payment. Without looking it up, say it's about 25 basis points. But the Fed now holds government bonds paying 1.5% or more. The difference is profit and is eventually paid back to the Treasury. So the government is effectively borrowing short to finance long. This debt is serviced for just a few basis points. So we're in a new and different place. A place where regardless of nominal rates, debt has negligible cost and no limits--as long as the cost of short-term debt doesn't spike as it did in 2019. But we have a tool for that, too. I don't think Powell set out with the idea of testing Modern Monetary Theory, but there it is.





          JE comments:  For the visually challenged such as me, the first table is the Fed's total assets by year, the second by month since the onset of Covid.  Michael, this stuff is complicated for the non-specialist, but your insider's perspective is (forgive the monetary metaphor) priceless.  If I may summarize with two takeaways, here goes:  1)  The Fed is "deep-statey" (not really answerable to anyone but itself) by design, to insulate its policies from political shenanigans; and 2) As long as interest rates remain so low, we shouldn't fear a total meltdown in the financial system.  Did I get this more or less correct?


          Oh, and a third point:  All currency is fiat by definition.  Even gold is worthless if you can't buy stuff with it.  I always teach my students this nugget about the Aztec economy:  gold was considered simply pretty, while the real transactional power lay in cocoa beans and quetzal feathers.

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          • Near-Zero Interest Rates: Further Thoughts (from Michael Frank) (John Eipper, USA 10/02/21 6:34 AM)

            Michael Frank writes:



            Sorry about the scaling in the tables I forwarded yesterday: the first graph is the Fed balance sheet from Jan 2018-March 2020. The second is the Fed balance sheet since March 2020.


            The significance of these tables is that the Fed was dealing with some sort of crisis from Sept 2019, before Covid was even a word. Nobody was paying attention. Since Covid, the balance sheet explosion has been monumental.


            I didn't mean to imply that low interest rates are OK, only that low interest rates aren't necessarily implemented for the benefit of the banks. In fact, I think near-zero interest rates are a huge problem, because they distort asset prices.


            JE comments:  Thanks for the followup, Michael.  Could I append a simplistic but perhaps useful question:  Is there such a thing as an ideal interest rate?  "It depends" may be the only answer--just enough to keep inflation at 1-2%, and growth at a little bit more?

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            • Is There an Ideal Interest Rate? (Jordi Molins, -Spain 10/03/21 3:34 AM)
              John Eipper asked: "Is there such a thing as an ideal interest rate?"

              The answer to these questions, for the last few decades, has been, as John described, "just enough to keep inflation at 1-2%."


              However, there is not a single rational argument to support an inflation at 1-2%. At the maximum, most would agree with Greenspan's definition of price stability as "that state in which expected changes in the general price level do not effectively alter business and household decisions."


              Demographic changes and, especially, the supply glut induced by China, have resulted in quasi-deflationary (and, sometimes, outright deflationary) forces for the last three decades.


              Please note that deflation caused by heavy supply is a boon. For example, people keep buying computers and smartphones, even though they know that next year these products will be cheaper. It is only deflation related to low demand that is considered a problem.


              Tradable goods have become cheaper and cheaper. Non-tradable goods had little inflation due to aging, in overall terms. As a consequence, it would have been reasonable to expect an inflation rate of around 0% or, even negative, for these last c. 30 years.


              However, the 1-2% inflation became a fetish, and Western World Central Banks pushed for a massively expansive monetary policy in order to accomplish that 1-2% inflation. Even when other mandates were in contradiction with such low interest rates--for example, the lowest interest rates in history are, obviously, in contradiction with the second part of the Fed's Dual Mandate (maximum sustainable employment).


              Why did the Federal Reserve, with a staff of knowledgeable economists, become prey to a fetish that has no rational or empirical basis whatsoever?


              A possible explanation is the Federal Reserve knew the US political system wanted a loose monetary policy. The Dual Mandate apparently blocked political interference in the Fed's actions. But, instead, pushing for a 1-2% inflation rate, when a slight negative inflation rate would have probably been more neutral given demographic and trade forces, became the way to keep the US political system happy, and not to lose face at the same time.


              Finally, the Federal Reserve heavily depends on its credibility. The recent cases of trading for the Personal Account by several high-level Fed members have the risk of destroying much of the credibility of the institution.


              JE comments:  Jordi, I don't follow the "obvious" part of low interest rates being incompatible with high employment.  Doesn't cheap money spur investment, and presumably, employment as well?  Ah, the dismal science...


              Your linking of abundant Chinese products with the near-total lack of inflation in the last 30 years is a revelation to me.  But yes, what other explanation could there be?  Regardless of the reason, the Generation of the Cheap now seems to be coming to a close.

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              • Ideal Interest Rates and the Taylor Rule; from Michael Frank (John Eipper, USA 10/05/21 7:10 AM)

                Michael Frank writes:



                There have been several attempts to define "rules" for setting interest rates. The most quoted rule is the "Taylor Rule," proposed by John Taylor of Stanford, but there are many others. The most common application for these rules is to back-test Fed policy, not set it. Here's a very wonkish paper from the Fed which explains half a dozen different rules, and compares them to Fed policy over the last few years:


                https://www.federalreserve.gov/monetarypolicy/2021-02-mpr-part2.htm



                This chart from the report shows how Fed policy has tracked against the various methodologies:





                The result suggests that Fed policy has tracked fairly well with academic theory. Where there is a significant divergence, it's because the rate can't fall below an "effective lower bound," i.e. zero percent interest. While breaching the bound might be indicated by a model, the Fed's approach would be to maintain the lower bound for a longer period of time, rather than implementing negative rates. So nothing unreasonable has happened. But reasonability may or may not be synonymous with ideal.


                I'm not an economist. But my observation is that the economy is a chaotic system. Chaotic being a mathematical term, indicating that it is subject to exponential effects. So the classical analogy is the beating of a butterfly's wings halfway around the world, through many exponential interactions, gradually builds to a hurricane in Carolina. After the storm, we may be able to back track to the guilty butterfly. But it's impossible to find that butterfly and divert it before it causes problems. And for this reason, the search for a rule book is probably fruitless. The precisely correct interest rate at any point in time can't be solved analytically. And it never is solved that way...the Fed reacts to problems by trying stuff until something works. But saying that outright doesn't build confidence.


                I would also suggest that the Fed Funds rate is less important than the Fed's broader open market operations. The headline Fed Funds rate is the rate charged for interbank lending, not the rate you pay on your mortgage or are paid on Government bonds. But the Fed has a broad power to influence the credit markets by buying or selling securities, which is how its balance sheet arises. In the last dozen years, it has used this portfolio to influence rates on everything from long-term government debt to municipal bonds. So the question of what is the ideal interest rate goes back to you: what interest rate are you talking about?


                As a bit of trivia, I'll point out that the only rate that the Fed sets directly is the Discount Rate, which is the rate paid by banks when they borrow directly from the Fed. This is a relatively uncommon occurrence under good economic conditions. All other rates are set in the open market, which the Fed can only influence by purchase or sale of bonds. For these rates, the Fed sets a target, and tailors its massive buy and sell program to drag market prices up or down.


                JE comments:  Taylor's Rule (different Taylors have also given us a Law and a Theory) holds that you raise interest rates with inflation or "overly" high employment, and cut them when you have the opposite.  A basic idea in practice, but it comes accompanied with complex mathematical formulas.


                My clearest lesson from Michael Frank's comments is that the Fed tries things until something works.  There's a reassuring simplicity in this.

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          • Thoughts on the Fed...Or No Thoughts at All? (Francisco Ramirez, USA 10/03/21 10:05 AM)
            I much appreciate Michael Frank's thoughtful and informative post on the Fed (October 1st).

            Though we all enjoy an old-fashioned in-your-face polemic (especially if it is not in our face), once in a while a sober analytic piece is needed.


            I confess I have not given much thought to money matters. My bad, as the kids are apt to say. Back in 1972 when martial law in the Philippines made me hit the pause button, I bought my home in Palo Alto for $38,900. Last year I bought the adjacent house. I paid a little more.


            Now I need to figure out how many weapons of some destruction I need to amass to protect my property (and my life to boot) when "they" come after me.


            JE comments:  Francisco, congratulations. Yours may have been the most brilliant real estate deal ever!  (Manhattan for twenty bucks comes in second.)  No need to understand the arcane details of finance; all you have to do is buy property twenty or so years before that address becomes the most desirable in the nation.


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          • Who Thinks the US is Doing Fine? Please Let me Know (Tor Guimaraes, USA 10/04/21 2:33 AM)

            I enjoyed reading Michael Frank's post (October 1st) and his description of the dire situation the Fed has helped place our nation in.


            The part that is missing is how our nation will ever get back to an economy that works for the American people rather than just billionaires and financial engineers. Remember when you could tell your kid to do an honest day's work, save your money, and you will do just fine?


            I also remembered the old British television show Yes, Minister, but never thought of it as an illustration for the Deep State, which I suppose it can be. Now, if either the elected official or the entrenched bureaucrat Michael referred to, managed to introduce or eliminate some legislation designed for the great financial benefit of a special interest group, then we would move one step closer to my definition of the Deep State. One more step further, when these unelected subsidy-seeking special interests continuously gorging themselves can over time multiply in numbers and intensity, then we would have the Deep State that I think has been sucking the blood and even the marrow of the American middle class for so long.


            Again, I must ask, if we live in a democracy with so many God-fearing patriots who love the Constitution and law and order, how can we possibly be in this situation: a divided country, with a national government incapable of agreeing on or doing anything meaningful for the benefit of the nation as a whole. Is there anyone who believes our nation is doing fine? I would love to hear it.


            I know that many billionaires are not even aware that they are benefiting from the government manipulations by more active members of the Deep State. Nevertheless, it sure seems like they are benefiting significantly. I just learned: The 400 wealthiest households' effective tax rate is just over 8% vs. the average rate for all taxpayers at 14%. The 100 wealthiest have become $469 billion richer since the start of the year because of gains on their stock holdings. Biden supports a proposal to tax billionaires for asset appreciation on an annual basis. --Menu, Wall Street Journal. I have to pay much more than 14% in income tax; probably I should be happy about that.


            JE comments:  As long as they're billionaires, most would say soak 'em...but how would taxing asset appreciation work?  It sounds very, very unwieldy in practice.  Such a move would probably send the financial markets into a tailspin.  As for real properties, it would incentivize "subtracting value" from your house.  Remember the old yarn about countries that taxed properties by the number of windows?  Almost overnight, windows got bricked up.

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      • In Praise of Ric Mauricio (Francisco Wong-Diaz, USA 09/30/21 7:43 AM)
        I appreciate Ric Mauricio's honesty and ethical posture and philosophy. Thank you for the post of September 29th!

        JE comments: I occasionally remind WAISers that we don't publish attaboys, but at frightful times like these, we need a few. Our beloved Ric Mauricio is the finance guy most of us can only dream about: as careful with other people's money as he is with his own. That's why I entrust my (modest) portfolio to...myself, with the added wisdom of the WAIS community.

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