Trump’s strategic vision of chaos: Inventing a nonexistent crisis so he can “solve” it

The president depicts a failing America that’s more like 2009 than 2017 — so he can take credit for doing nothing

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Trump's strategic vision of chaos: Inventing a nonexistent crisis so he can "solve" it

(Credit: Reuters/Jonathan Drake)

As you know, our administration inherited many problems across government and across the economy. To be honest, I inherited a mess. It’s a mess. At home and abroad, a mess. Jobs are pouring out of the country; you see what’s going on with all of the companies leaving our country, going to Mexico and other places, low pay, low wages, mass instability overseas, no matter where you look. The Middle East is a disaster. North Korea — we’ll take care of it, folks; we’re going to take care of it all. I just want to let you know, I inherited a mess.
Donald Trump, Feb. 17

These words of the president are not quite as evocative as his doomsday inaugural “American carnage” address, but it may be more effective in the long run. Donald Trump is ignorant in most ways a president should be smart, but he does have an unerring instinct for hype.

One of his favorite tall tales is the miraculous “comeback” story. You’ve heard him endlessly recount the tedious details of his Great Campaign in which nobody said he could get the nomination and yet he defied the odds and vanquished 16 men, Carly Fiorina and one crooked Hillary, ultimately winning a historic landslide of epic proportions. No, it wasn’t historic and it wasn’t epic and it wasn’t a landslide, but that’s part of the myth Trump has created for himself: He only wins big.

The point is that he’s making himself out to be a hero who can defy tremendous odds to fight back and win. That’s why he insists that he inherited a terrible mess that will take a heroic effort to turn around, and he’s the only guy who can do it.

The country he describes is very familiar: Its economy is terrible, millions of people are going bankrupt and losing their jobs, their homes and their health care. People who have saved money for decades have seen their retirement funds shrink to nothing in the stock market crash, while Wall Street masters of the universe collect millions and tell everyone financial institutions are simply “too big to fail.” Major industries are on the verge of collapse. Banks are closing all over the country.

Tens of thousands of troops are still stationed overseas in a war that seems to never end. Terrorist bombings are happening all over the world and nobody knows when the next one is going to hit close to home. Even the natural disasters are catastrophic, taking out whole American cities and seeming to portend more of the same as the climate changes and nobody knows what to do about it. The future seems bleak indeed.

We all know that country. It was America in 2009.  It was the mess our last president inherited, not this one. (If you need a little refresher course on how bad the employment situation was during the Great Recession, you can read all about it in a recap from the Bureau of Labor Statistics.) It was the worst economic recession in the lifetime of anyone younger than age 70 and it came on the heels of a period of tremendous fear and anxiety after 9/11 and the debacle of the Iraq war.

Now that was a real mess.

To be sure, the recovery has been a long, uneven slog and many people are still reeling. There are long-term economic trends that have hit some communities very hard for decades and the Great Recession exacerbated their suffering. And much of the gains have gone to the upper 1 percent.

But millions more people have jobs, homes and health care today than they did eight years ago. That is just a fact. The idea that Donald Trump is facing an emergency of that magnitude, even among many of the white working-class folks who remain underemployed and financially insecure is ridiculous. We were on the verge of another global Great Depression. Now we’re not.

As I pointed out before the election in September, whoever won was going to have the economic wind at his or her back, which is a lucky thing for any president. I quoted economist Jared Bernstein who wrote in The Washington Post that “poverty fell sharply, middle-class incomes rose steeply, and more people had health coverage” in 2015, which meant that many of those who had been left behind by the recovery were starting to see the benefits. But there is often an emotional hangover after a deep economic crisis that takes some time to dissipate; even when things have improved,  people still feel anxious for some time afterwards.

One suspects Trump understood from the beginning that the economy was rebounding. But in order to take advantage of his reputation as a wealthy businessman, he needed to pump up those feelings of anxiety so that he could take credit for the upturn once in office. The dystopian hellscape that he describes today will quickly give way to “Morning in America” for his followers. And he doesn’t have to do anything.

This is lucky for him since Trump doesn’t have a clue about what a president has to do in a real crisis and doesn’t have the temperament or skills to do it anyway. As Jonathan Cohn wrote in this piece for The Huffington Post on Tuesday, as much as Trump and his minions insist that his first month in office has been historically successful, it’s been nothing more than endless gaffes, scandals and flashy edicts that are far less substantial than the sweeping and complicated legislation that President Barack Obama ushered through Congress in the corresponding period.

Cohn related Trump’s attitude toward the hard work of creating policy:

During the presidential campaign, Trump mocked Hillary Clinton for her wonkishness: “She’s got people that sit in cubicles writing policy all day,” he said during one interview. “It’s just a waste of paper.” At one point, Trump’s own policy advisers quit because nobody was paying them or taking them seriously.

That’s appalling. But unless Trump’s GOP colleagues in the Congress muck up things badly by repealing the Affordable Care Act or making such drastic cuts that employment falters, he doesn’t really have to do much. He can just tweet about saving some manufacturing jobs that CEOs are happy to pretend he personally negotiated, and his followers will be happy to give him credit for “saving” an economy that was already on the upswing.

There is one problem with his cunning plan, however. If a healthy economic environment requires the confidence of people that their future looks bright, then this growth may just come to a screeching halt. The “carnage” he likes to describe may not exist today. But millions of people are frightened to death that the nightmare of Donald Trump may make it very real in the days to come.

Heather Digby Parton

Heather Digby Parton, also known as “Digby,” is a contributing writer to Salon. She was the winner of the 2014 Hillman Prize for Opinion and Analysis Journalism.

Trump’s “America First” policies and the global eruption of economic nationalism

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By Nick Beams
21 February 2017

While the battle in Washington between the intelligence agencies, the media and the Trump administration over the question of Russia and Trump’s supposed ties to Putin is attracting most of the headlines, a conflict on the economic front is of no less significance.

Earlier this month, in response to Trump’s “America First” agenda and what it called his “divisive delusions on trade,” the Financial Times, the voice of British and to some extent European finance capital, warned that if the Trump administration continued on its present course, it would represent a “clear and present danger to the global trading and monetary system.”

The immediate cause of this unusually strong language was the claim by the Trump administration that the euro was significantly undervalued, operating to the benefit of Germany, which enjoys a trade surplus with the US.

The editorial called for other countries to “stand ready to resist bullying and not to let the US drive wedges between them.”

The Financial Times did not go any further, but the logic of this position is clear. If countries are to stand together to combat what are seen as American attacks, then the next step is the development of trade and economic agreements directed against the US—in short, a major step down the road to the kind of economic and currency blocs that exacerbated the 1930s Depression and played a major role in the drive to a second world war in the space of two decades.

No one has yet put forward the formation of such alliances, but the issue is assuming a larger presence in public pronouncements and no doubt in discussions behind closed doors.

Last month, speaking to the New York Times on the sidelines of the Davos summit of the World Economic Forum, Jeroen Dijsselbloem, the president of the euro group of finance ministers, pointed to possible major shifts in orientation. “We’ve always said that America is our best friend,” he said. “If that’s no longer the case, if that’s what we need to understand from Donald Trump, then, of course, Europe will be looking for new friends.

“China is a very strong candidate for that. The Chinese involvement in Europe in terms of investment is already very high and expanding. If you push away your friends, you mustn’t be surprised if the friends start looking for new friends.”

So far as the Trump administration is concerned, China, and to some extent Germany, is the main economic opponent and threat to the economic pre-eminence of the United States. This orientation is one of the reasons for its conflict with the sections of the military and intelligence establishment that are pressing for a more open confrontation with Russia.

Trump has variously threatened to brand China a currency manipulator and impose tariffs as high as 45 percent on its exports to the US. While he has yet to announce any concrete policies and his positions so far have been set out only in tweets and similar remarks, the underlying position of the administration and the economic processes that are driving it were set out last September in a paper on the Trump economic plan authored by the then-business professor at the University of California-Irvine, Peter Navarro, and equity investor Wilbur Ross.

Since the election Navarro has become the head of Trump’s National Trade Council and Wilbur Ross has become commerce secretary.

The paper began by noting that in the period from 1947 to 2001, US gross domestic product grew at an annual rate of 3.5 percent a year, but from 2002, that average had fallen to 1.9 percent, representing a 45 percent reduction in the US growth rate from its historical pre-2002 norm.

The authors dismissed the claims of the Obama administration that lower growth was a “new normal,” labelling that position “defeatist” and claiming that low growth was the result of higher taxes, increased regulation and the “self-inflicted negative impacts from poorly negotiated trade deals,” including NAFTA and China’s entry into the World Trade Organisation (WTO).

The latter, they wrote, negotiated under Bill Clinton, “opened America’s markets to a flood of illegally subsidized Chinese imports, thereby creating massive and chronic trade deficits.”

China’s accession to the WTO, they argued, “also rapidly accelerated the offshoring of America’s factories and a concomitant decline in US domestic business investment as a percentage of our economy.” They noted that from 1999 to 2003, US investment flows to China were stable at around $1.6 billion per year, but jumped in the period 2004–2008 to an annual average of $6.4 billion a year.

In other words, according to their argument, the flow of investment funds to China, made possible by its accession to the WTO, is one of the chief causes of the long-term slowdown in US economic growth.

The authors also hit out at WTO rules, saying that the exemption of exports to the US from value added taxes (VAT) imposed by European governments and the fact that US exports to Europe are subject to these taxes was a form of discrimination against US firms. These conclusions form the basis for the discussion within the Trump administration on the possible imposition of taxes on imports.

They wrote that unequal treatment of US exports was an example of “VAT gaming,” and that the US should have demanded equal tax treatment for US exports.

“Since the WTO would be meaningless without the presence of the world’s largest importer and third largest exporter, we had the leverage then—and we have the leverage now—to fix this anomaly and loophole,” they asserted, adding the implied threat that “without the US as a member, there would not be much purpose to the WTO.”

The Trump administration’s denunciations of China as a currency manipulator have attracted most of the media attention. But Navarro and Ross were no less strident when it came to the European Monetary Union.

“While the euro freely floats in international currency markets, this system deflates the German currency from where it would be if the German Deutschmark were still in existence,” they wrote. This was the reason, they claimed, that the US had a large trade in goods deficit with Germany, some $75 billion in 2015, even though German wages were relatively high.

The paper gave a clear summing up of where the Trump administration sees the position of the US in regard to the struggle for global markets. Answering critics of the “America First” agenda, they wrote: “Those who suggest that Trump trade policies will ignite a trade war ignore the fact that we are already engaged in a trade war. It is a war in which the American government has surrendered before engaging.”

They held out the prospect that in pursuing a policy of what they termed “more balanced trade,” the US would be able to secure cooperation because US trade partners were more dependent on American markets than America is on their markets.

As with so many of Trump’s policies, the trade war agenda outlined by Navarro and Ross represents not so much a break from the policies of the Obama administration as a continuation of their basic thrust and, at the same time, a qualitative escalation.

The underlying strategy of the Trans-Pacific Partnership and its counterpart for Europe, the Transatlantic Trade and Investment Partnership, promoted by the Obama administration, was that privileged access to the vast American market for those countries that signed up would enable the US to force concessions upon them.

Both proposed trade investment deals specifically scrapped the system that had governed trade relations since World War II under the General Agreement on Tariffs and Trade (GATT) and then the WTO, which maintained that concessions offered to one country should be offered to all. This policy was in recognition of the damage done to the world economy and trade system through the formation of exclusivist blocs in the period of the 1930s.

Outlining the rationale for the proposed agreements in 2014, Obama’s trade representative Michael Froman wrote in a major Foreign Affairs article that “trade policy is national security policy,” and that the aim of the agreements was to “place the US at the center of agreements that will provide unfettered access to two-thirds of the global economy.”

He went on to explain that the post-war system was no longer adequate and that the US no longer held “as dominant a position as it did at the end of World War II” and had to build new “trade coalitions working toward consensus positions.” In other words, the development of new mechanisms whereby the US could counter its economic decline vis-à-vis its rivals.

The Trump policy is being driven by this same agenda, albeit in a different form. The underlying driving forces can be clearly seen.

First, there is the contraction in economic growth not only in the US but internationally. It has been estimated that the economic slowdown since the financial crisis of 2008 means that developed economies are one sixth smaller than they would have been had pre-crisis growth trends been maintained.

The contraction is even more pronounced in world trade. Since 2012, world trade has advanced by little more than 3 percent per year, less than half the average expansion of the preceding decades. As the International Monetary Fund has noted, between 1985 and 2007 real world trade grew on average twice as fast as global gross domestic product (GDP), whereas over the past four years it has barely kept pace. “Such prolonged sluggish growth in trade volumes,” it concluded, “relative to economic activity has few precedents during the past five decades.”

Even before the accession of Trump, the WTO noted the rise of protectionist measures. It pointed out that members of the G20 group—all of which pledged to eschew 1930s style measures—had, in the five months leading up to last October, been implementing an average of 17 trade constraints a month, a situation it described as a “real and persistent concern.”

In other words, the accession of Trump and his “America First” agenda of economic nationalism and a war of each against all is not some aberration, but the qualitative development of a trend that has been building up within the world capitalist economy over the past decade, but which is now coming to the surface with explosive force.

WSWS

 

 

 

 

 

How to Build an Autocracy

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The preconditions are present in the U.S. today. Here’s the playbook Donald Trump could use to set the country down a path toward illiberalism.

It’s 2021, and president Donald Trump will shortly be sworn in for his second term. The 45th president has visibly aged over the past four years. He rests heavily on his daughter Ivanka’s arm during his infrequent public appearances.

Fortunately for him, he did not need to campaign hard for reelection. His has been a popular presidency: Big tax cuts, big spending, and big deficits have worked their familiar expansive magic. Wages have grown strongly in the Trump years, especially for men without a college degree, even if rising inflation is beginning to bite into the gains. The president’s supporters credit his restrictive immigration policies and his TrumpWorks infrastructure program.

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The president’s critics, meanwhile, have found little hearing for their protests and complaints. A Senate investigation of Russian hacking during the 2016 presidential campaign sputtered into inconclusive partisan wrangling. Concerns about Trump’s purported conflicts of interest excited debate in Washington but never drew much attention from the wider American public.

Allegations of fraud and self-dealing in the TrumpWorks program, and elsewhere, have likewise been shrugged off. The president regularly tweets out news of factory openings and big hiring announcements: “I’m bringing back your jobs,” he has said over and over. Voters seem to have believed him—and are grateful.

Anyway, doesn’t everybody do it? On the eve of the 2018 congressional elections, WikiLeaks released years of investment statements by prominent congressional Democrats indicating that they had long earned above-market returns. As the air filled with allegations of insider trading and crony capitalism, the public subsided into weary cynicism. The Republicans held both houses of Congress that November, and Trump loyalists shouldered aside the pre-Trump leadership.

The business community learned its lesson early. “You work for me, you don’t criticize me,” the president was reported to have told one major federal contractor, after knocking billions off his company’s stock-market valuation with an angry tweet. Wise business leaders take care to credit Trump’s personal leadership for any good news, and to avoid saying anything that might displease the president or his family.

The media have grown noticeably more friendly to Trump as well. The proposed merger of AT&T and Time Warner was delayed for more than a year, during which Time Warner’s CNN unit worked ever harder to meet Trump’s definition of fairness. Under the agreement that settled the Department of Justice’s antitrust complaint against Amazon, the company’s founder, Jeff Bezos, has divested himself of The Washington Post. The paper’s new owner—an investor group based in Slovakia—has closed the printed edition and refocused the paper on municipal politics and lifestyle coverage.

 

CONTINUED:

https://www.theatlantic.com/magazine/archive/2017/03/how-to-build-an-autocracy/513872/

How Goldman Sachs Sacked Washington

THE RIGHT WING
Trump attacked Hillary for her finance ties, and then proceeded to stock his Cabinet with former executives at the nation’s largest banks.

Photo Credit: Screenshot / YouTube

Irony isn’t a concept with which President Donald J. Trump is familiar. In his Inaugural Address, having nominated the wealthiest Cabinet in American history, he proclaimed, “For too long, a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost. Washington flourished—but the people did not share in its wealth.” Under Trump, an even smaller group will flourish—in particular, a cadre of former Goldman Sachs executives. To put the matter bluntly, two of them (along with the Federal Reserve) are likely to control our economy and financial system in the years to come.

Infusing Washington with Goldman alums isn’t exactly an original idea. Three of the last four presidents, including The Donald, have handed the wheel of the U.S. economy to ex-Goldmanites. But in true Trumpian style, after attacking Hillary Clinton for her Goldman ties, he wasn’t satisfied to do just that. He had to do it bigger and better. Unlike Bill Clinton and George W. Bush, just a sole Goldman figure lording it over economic policy wasn’t enough for him. Only two would do.

The Great Vampire Squid Revisited

Whether you voted for or against Donald Trump, whether you’re gearing up for the revolution or waiting for his next tweet to drop, rest assured that, in the years to come, the ideology that matters most won’t be that of the “forgotten” Americans of his Inaugural Address. It will be that of Goldman Sachs and it will dominate the domestic economy and, by extension, the global one.

At the dawn of the twentieth century, when President Teddy Roosevelt governed the country on a platform of trust busting aimed at reducing corporate power, even he could not bring himself to bust up the banks. That was a mistake born of his collaboration with the financier J.P. Morgan to mitigate the effects of the Bank Panic of 1907. Roosevelt feared that if he didn’t enlist the influence of the country’s major banker, the crisis would be even longer and more disastrous. It’s an error he might not have made had he foreseen the effect that one particular investment bank would have on America’s economy and political system.

There have been hundreds of articles written about the “world’s most powerful investment bank,” or as journalist Matt Taibbi famously called it back in 2010, the “great vampire squid.” That squid is now about to wrap its tentacles around our world in a way previously not imagined by Bill Clinton or George W. Bush.

No less than six Trump administration appointments already hail from that single banking outfit. Of those, two will impact your life strikingly: former Goldman partner and soon-to-be Treasury Secretary Steven Mnuchin and incoming top economic adviser and National Economic Council Chair Gary Cohn, former president and “number two” at Goldman. (The Council he will head has been responsible for “policy-making for domestic and international economic issues.”)

Now, let’s take a step into history to get the full Monty on why this matters more than you might imagine. In New York, circa 1932, then-Governor Franklin Delano Roosevelt announced his bid for the presidency. At the time, our nation was in the throes of the Great Depression. Goldman Sachs had, in fact, been one of the banks at the core of the infamous crash of 1929 that crippled the financial system and nearly destroyed the economy. It was then run by a dynamic figure, Sidney Weinberg, dubbed “the Politician” by Roosevelt because of his smooth tongue and “Mr. Wall Street” by the New York Times because of his range of connections there. Weinberg quickly grasped that, to have a chance of redeeming his firm’s reputation from the ashes of public opinion, he would need to aim high indeed. So he made himself indispensable to Roosevelt’s campaign for the presidency, soon embedding himself on the Democratic National Campaign Executive Committee.

After victory, he was not forgotten. FDR named him to the Business Advisory Council of the Department of Commerce, even as he continued to run Goldman Sachs. He would, in fact, go on to serve as an advisor to five more presidents, while Goldman would be transformed from a boutique banking operation into a global leviathan with a direct phone line to whichever president held office and a permanent seat at the table in political and financial Washington.

Now, let’s jump forward to the 1990s when Robert Rubin, co-chairman of Goldman Sachs, took a page from Weinberg’s playbook. He recognized the potential in a young, charismatic governor from Arkansas with a favorable attitude toward banks. Since Bill Clinton was far less well known than FDR had been, Rubin didn’t actually cozy up to him from the get-go. It was another Goldman Sachs executive, Ken Brody, who introduced them, but Rubin would eventually help Clinton gain Wall Street cred and the kind of funding that would make his successful 1992 run for the presidency possible. Those were favors that the new president wouldn’t forget. As a reward, and because he felt comfortable with Rubin’s economic philosophy, Clinton created a special post just for him: first chair of the new National Economic Council.

It was then only a matter of time until he was elevated to Treasury Secretary. In that position, he would accomplish something Ronald Reagan—the first president to appoint a Treasury Secretary directly from Wall Street (former CEO of Merrill Lynch Donald Regan)—and George H.W. Bush failed to do. He would get the Glass-Steagall Act of 1933 repealed by hustling President Clinton into backing such a move. FDR had signed the act in order to separate investment banks from commercial banks, ensuring that risky and speculative banking practices would not be funded with the deposits of hard-working Americans. The act did what it was intended to do. It inoculated the nation against the previously reckless behavior of its biggest banks.

Rubin, who had left government service six months earlier, wasn’t even in Washington when, on November 12, 1999, Clinton signed the Gramm-Leach-Bliley Act that repealed Glass-Steagall. He had, however, become a board member of Citigroup, one of the key beneficiaries of that repeal, about two weeks earlier.

As Treasury Secretary, Rubin also helped craft the North American Free Trade Agreement (NAFTA). He subsequently convinced both President Clinton and Congress to raid U.S. taxpayer coffers to “help” Mexico when its banking system and peso crashed thanks to NAFTA. In reality, of course, he was lending a hand to American banks with exposure in Mexico. The subsequent $25 billion bailout would protect Goldman Sachs, as well as other big Wall Street banks, from losing boatloads of money. Think of it as a test run for the great bailout of 2008.

A World Made by and for Goldman Sachs

Moving on to more recent history, consider a moment when yet another Goldmanite was at the helm of the economy. From 1970 to 1973, Henry (“Hank”) Paulson had worked in various positions in the Nixon administration. In 1974, he joined Goldman Sachs, becoming its chairman and CEO in 1999. I was at Goldman at the time. (I left in 2002.) I remember the constant internal chatter about whether an investment bank like Goldman could continue to compete against the super banks that the Glass-Steagall repeal had created. The buzz was that if Goldman and similar investment banks were allowed to borrow more against their assets (“leverage themselves” in banking-speak), they wouldn’t need to use individual deposits as collateral for their riskier deals.

In 2004, Paulson helped convince the Securities and Exchange Commission (SEC) to change its regulations so that investment banks could operate as if they had the kind of collateral or backing for their trades that goliaths like Citigroup and JPMorgan Chase had. As a result, Goldman Sachs, Lehman Brothers, and Bear Stearns, to name three that would become notorious in the economic meltdown only four years later (and all ones for which I once worked) promptly leveraged themselves to the hilt. As they were doing so, George W. Bush made Paulson his third and final Treasury Secretary. In that capacity, Paulson managed to completely ignore the crisis brewing as a direct result of the repeal of Glass-Steagall, the one I predicted was coming in Other People’s Money, the book I wrote when I left Goldman.

In 2006, Paulson was questioned on his obvious conflicts of interest and responded, “Conflicts are a fact of life in many, if not most, institutions, ranging from the political arena and government to media and industry. The key is how we manage them.” At the time, I wrote, “The question isn’t how it’s a conflict of interest for Paulson to preside over our country’s economy but how it’s not?” For men like Paulson, after all, such conflicts don’t just involve their business holdings. They also involve the ideology associated with those holdings, which for him at that time came down to a deep belief in pursuing the full-scale deregulation of banking.

Paulson was, of course, Treasury Secretary for the period in which the 2008 financial crisis was brewing and then erupted. When it happened, he was the one who got to decide which banks survived and which died. Under his ministrations, Lehman Brothers died; Bear Stearns was given to JPMorgan Chase (along with plenty of government financial support); and you won’t be surprised to learn that Goldman Sachs thrived. While designing that outcome under the pressure of the moment, Paulson pled with Nancy Pelosi to press the Democrats in the House of Representatives to support a staggering $700 billion bailout. All those taxpayer dollars went with the 2008 Emergency Financial Stability Act that would save the banking system (under the auspices of saving the economy) and leave it resplendently triumphant, bonuses included), even as foreclosures rose by 21 percent the following year.

Once again, it was a world made by and for Goldman Sachs.

Goldman Back in the (White) House

Running for office as an outsider is one thing. Instantly inviting Wall Street into that office once you arrive is another. Now, it seems that Donald Trump is bringing us the newest chapter in the long-running White House-Goldman Sachs saga. And count on Steven Mnuchin and Gary Cohn to offer a few fresh wrinkles on that old alliance.

Cohn was one of the partners who ran the Fixed Income, Currency and Commodity (FICC) division of Goldman. It was the one that benefited the most from leverage, trading, and the complexity of Wall Street’s financial concoctions like collateralized debt obligations (CDOs) stuffed with derivatives attached to subprime mortgages. You could say, it was leverage that helped propel Cohn up the Goldman food chain.

Steven Mnuchin has proven particularly adept at understanding such concoctions. He left Goldman in 2002. In 2004, with two other ex-Goldman partners, he formed the hedge fund Dune Capital Management. In the wake of the 2008 financial crisis, Dune went shopping, as Wall Street likes to do, for cheap buys it could convert into big profits. Mnuchin and his pals found the perfect prey in a Pasadena-based bank, IndyMac, that had failed in July 2008 before the financial crisis kicked into high gear, and had been seized by the Federal Deposit Insurance Corporation (FDIC). They would pick up its assets on the cheap.

At his confirmation hearings, Mnuchin downplayed his role in throwing homeowners (including members of the military) out of their heavily mortgaged homes as a result of that purchase. He cast himself instead as a genuine hero, the guy who convened a cadre of financial sharks to help, not harm, the bank’s customers who, without their benevolence, would have fared so much worse. He looked deeply earnest as he spoke of his role as the savior of the common—or perhaps in the age of Trump “forgotten”—man and woman. Maybe he even believed it.

But the philosophy of swooping in, attacking an IndyMac-like target of opportunity and converting it into a fortune for himself (and problems for everyone else), has been a hallmark of his career. To transfer this version of over-amped 1 percent opportunism to the halls of political power is certainly a new definition of, in Trumpian terms, giving the government back to “the people.” Perhaps what our new president meant was “the people at Goldman Sachs.” Think of it, in any case, as the supercharging of a vulture mentality in a designer suit, the very attitude that once fueled the rise to power of Goldman Sachs.

Mnuchin repeatedly blamed the FDIC and other government agencies for not helping him help homeowners. “In the press it has been said that I ran a ‘foreclosure machine,’” he said, “On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘Loan Modification Machine.’ Whenever we could do loan modifications we did them, but many times, the FDIC, FNMA, FHLMC, and bank trustees imposed strict rules governing the processing of these loans.” Nothing, that is, was or ever is his fault—reflecting his inability to take the slightest responsibility for his undeniable role in kicking people out of their homes when they could have remained. It’s undoubtedly the perfect trait for a Treasury secretary in a government of the 1 percent of the 1 percent.

Mnuchin also blamed the Federal Reserve for suggesting that the Volcker Rule—part of the Dodd-Frank Act of 2010 designed to limit risky trading activities—was harming bank liquidity and could be a problem. The way he did that was typically slick. He claimed to support the Volcker Rule, even as he underscored the Fed’s concern with it. In this way, he managed both to make himself look squeaky clean and very publicly open the door to a possible Trumpian “revision” of that rule that would be aimed at weakening its intent and once again deregulating bank trading activities.

Similarly, at those confirmation hearings he said (as Trump had previously) that we needed to help community banks compete against the bigger ones through less onerous regulations. Even though this may indeed be true, it is also guaranteed to be another bait-and-switch move likely to lead to the deregulation of the big banks, too, ultimately rendering them even bigger and more dangerous not just to those community banks but to all of us.

Indeed, any proposition to reduce the size of big banks was sidestepped. Although Mnuchin did say that four monster banks shouldn’t run the country, he didn’t say that they should be broken up. He won’t. Nor will Cohn. In response to a question from Democratic Senator Maria Cantwell, he added, “No, I don’t support going back to Glass-Steagall as is. What we’ve talked about with the president-elect is that perhaps we need a twenty-first-century Glass-Steagall. But, no I don’t support taking a very old law and saying we should adhere to it as is.”

So, although the reinstatement of Glass-Steagall was part of the 2016 Republican election platform, it’s likely to prove just another of Trump’s many tactics to gain votes—in this case, from Bernie Sanders supporters and libertarians who see too-big-to-fail institutions and a big-bank bailout policy as wrong and dangerous. Rest assured, though, Mnuchin and his Goldman Sachs pals will allow the largest Wall Street players to remain as virulent and parasitic as they are now, if not more so.

Goldman itself just announced that it was the world’s top merger and acquisitions adviser for the sixth consecutive year. In other words, the real deal-maker isn’t the former ruler of The Celebrity Apprentice, but Goldman Sachs. The government might change, but Goldman stays the same. And the traffic pile up of Goldman personalities in Trump’s corner made their fortunes doing deals—and not the kind that benefited the public either.

A former Goldman colleague recently asked me whether it was just possible that Mnuchin was a good person. I can’t answer that. It’s something only he knows for sure. But no matter how earnest or sympathetic to the little guy he tried to be before that Senate confirmation committee, I do know one thing: he’s also a shark. And sharks do what they’re best at and what’s best for them. They smell blood in the water and go in for the kill. Think of it as the Goldman Sachs effect. In the waters of the Trump-Goldman era, don’t doubt for a second that the blood will be our own.

 

Nomi Prins, a TomDispatch regular, is the author of six books, a speaker, and a distinguished senior fellow at the non-partisan public policy institute Demos. Her most recent book is All the Presidents’ Bankers: The Hidden Alliances That Drive American Power (Nation Books). She is a former Wall Street executive.

http://www.alternet.org/right-wing/goldman-sachs-effect?akid=15164.265072.h9MZKP&rd=1&src=newsletter1071426&t=6

Week one of the Trump administration: A government of war and social reaction

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28 January 2017

It is one week since the inauguration of Donald Trump as president of the United States, and the actions and orders of the new government make clear what the working class can expect from the next four years.

At the center of Trump’s “America First” agenda is a massive escalation of military violence. At a swearing-in ceremony at the Pentagon Friday for the new secretary of defense, retired general James Mattis, Trump signed an executive order to begin a major “rebuilding” of the military. The order directs Mattis to prepare a policy to upgrade the US nuclear arsenal and prepare for conflict with “near-peer competitors,” a term that traditionally refers to China and Russia.

The action follows Trump press secretary Sean Spicer’s reaffirmation of a statement by incoming Secretary of State Rex Tillerson, the former CEO of ExxonMobil, that the US would seek to bar Chinese access to islets in the South China Sea, implying military actions that would amount to a declaration of war.

Trump has also pledged to establish “safe zones” in Syria, which will be coupled with a temporary ban on all immigration from a number of majority Muslim countries. While Democrats have denounced Trump for being “too soft” on Russia, during the elections the Clinton campaign called for the setting up of “safe” no-fly zones, policed by US military aircraft, as part of an effort to counter Russian backing of the Syrian government of Bashar al-Assad. In a speech at CIA headquarters, Trump also said that the US should have “taken the oil” in Iraq, and pledged that the CIA would have another chance to do so.

On domestic policy, Trump signed a series of executive orders that freeze hiring on all federal workers, freeze all pending government regulations and remove all obstacles to the completion of the Keystone and Dakota Access oil pipelines. Early in the week, he held meetings with the CEOs of the largest US manufacturing companies and with US auto companies, promising to “cut regulations 75 percent” and shift the business climate from “truly inhospitable to extremely hospitable.”

On Wednesday, Trump announced that his administration would proceed with the construction of a wall along the US-Mexico border, while launching a crack-down targeting millions of immigrant workers for detention and deportation. The same day, he said that the White House would seek a “major investigation” into completely unfounded allegations that “voter fraud” by millions of people cost him the popular vote in November—a claim aimed at creating the conditions for a further assault on the right to vote.

As part of a policy of extreme economic nationalism, early in the week Trump signed an executive order blocking US entry into the Trans-Pacific Partnership and pledged to renegotiate the North American Free Trade Agreement.

Many of the policies of the incoming administration were outlined in Trump’s interview Wednesday night with ABC News anchor David Muir, during which Trump interspersed lying claims about his own popularity and the size of his inauguration with casual threats of war, torture and repression. The overall impression of Trump during the interview was that of a gangster in the Oval Office, the assumption of power by an underworld reflecting all that is corrupt and filthy in American capitalist society.

On torture, Trump proclaimed that if Mattis and incoming CIA Director Mike Pompeo “want to do [waterboarding], that’s fine. If they do wanna do, then I will work toward that end.” A draft memorandum is circulating in the White House that would reopen secret CIA prisons and torture centers overseas.

And this is only the first week. With the support of Democrats, Congress is moving rapidly to approve Trump’s cabinet of billionaires, former generals and corporate CEOs, and it has already approved Mattis, Pompeo and the head of the Department of Homeland Security, retired Marine Gen. John Kelly. Trump’s other cabinet picks are committed to a policy of destroying public education, eliminating basic social services and slashing Medicare, Medicaid and Social Security.

There is no doubt that the election of Trump marks a watershed in American politics. However, when future historians examine this period, they will inevitably direct attention to what preceded it, to the conditions and climate out of which the Trump presidency arose. Many factors could be pointed to—the extraordinary decay in the political culture of the United States, the domestic consequences of unending war and violence abroad, the extreme growth of social inequality and the rise of a parasitic financial oligarchy.

Rather than a complete break, the Trump presidency represents a transformation of quantity into quality. He is, in the final analysis, the product of the desperate crisis that afflicts American and world capitalism.

For four decades, the ruling class in the United States has been engaged in a campaign of social counter-revolution, systematically eliminating all the gains won by workers through bitter struggles in previous decades. The Obama administration accelerated these processes. Obama’s White House continued and expanded the bank bailouts initiated under the Bush administration and helped funnel trillions of dollars to Wall Street through the Federal Reserve’s “quantitative easing” programs, while working, as in the 2009 auto restructuring, to slash wages for the working class.

The results are expressed in the extraordinary growth of social inequality. According to a recent report by University of California Berkeley economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, between 1980 and 2014, the share of pre-tax national income going to the bottom 50 percent of the population fell from 20 percent to 12 percent, while the share going to the top 1 percent increased from 12 percent to 20 percent. The gains for the top .1 and .01 percent of the population are even more extreme.

The foreign policy of the Trump administration likewise does not arise out of nowhere. For a quarter century, the American ruling class has been engaged in a desperate project to reverse its economic decline through military force—in the Balkans, North Africa, the Middle East and central Asia. Fifteen years of the “war on terror” have metastasized into an ever more direct conflict with larger competitors. Trump’s focus on China is in fact in continuity with the Obama administration’s “pivot to Asia,” which has seen the deployment of US military resources throughout the South Pacific and East Asia.

What Trump adds to these processes is the distinct odor of fascism, of extreme nationalism and the threat of violent repression of opposition. His declaration in his inaugural address that the “bedrock of our politics will be total allegiance to the United States of America” is a threat to criminalize dissent, which will be associated with treason.

However, here too Trump is giving naked expression to the long-term decay of democratic forms of rule. It was, after all, Obama who will go down in history as the president who proclaimed the power to assassinate US citizens without due process. Guantanamo Bay, Abu Ghraib, drone assassination, NSA spying—this is the toxic mix out of which Trump’s particular contempt for constitutional norms emerges.

In July, as Trump was formally nominated as the candidate of the Republican Party at the Republican National Convention, the WSWS noted that “Trump’s particular fascistic personality was forged not in the beer halls of Munich and the trenches of World War I, but in the real estate market of New York City. With his casinos, his fictional universities and his endless stream of failed businesses, this personification of corporate fraud could hardly be a more fitting symbol for the state of American capitalism.”

There are sharp and bitter divisions within the American ruling class, but these divisions are over tactics, not basic class policy. It will not take much for Trump to bring on board many of his present critics within the political establishment and media, or, for that matter, more privileged sections of the upper middle class.

It is not from such forces that enduring opposition to the new administration will develop, but from the working class, in the United States and internationally. Trump’s absurd posturing as a defender of the “forgotten man” will, sooner rather than later, give rise to bitter class conflict as the impact of the new administration’s policy are felt. It is to the broad mass of the working class that socialists must now turn, and, through systematic organization and education, forge a political leadership to prepare for the struggles on the horizon.

Joseph Kishore

WSWS 

For most Americans, Dow 20,000 carries little benefit

Not helping the little man:

Your 401(k) may see a little bump, but the Dow’s surge is mainly helping the richest Americans

Not helping the little man: For most Americans, Dow 20,000 carries little benefit
FILE – In this Monday, Aug. 24, 2015, file photo, pedestrians walk past the New York Stock Exchange. While Wall Street celebrates yet another stock market record, surpassing 20,000 on the Dow Jones industrial average on Wednesday, Jan. 25, 2017, most of America has little reason to cheer. The wealthiest one-tenth of Americans owns 80 percent of stock market wealth. (AP Photo/Seth Wenig, File)(Credit: AP)

WASHINGTON — While Wall Street celebrates yet another stock market record — surpassing 20,000 on the Dow Jones industrial average — many Americans have little reason to cheer.

Despite the spread of 401(k) retirement plans, the wealthiest 10 percent of households own roughly 80 percent of stock market wealth. The Dow’s 23 percent surge over the past year has benefited mostly investors who were already well-off.

The rising concentration of wealth at the top is one reason why the economy’s significant gains since the Great Recession ended 7½ years ago haven’t been felt by many Americans. Though the Dow more than doubled in President Barack Obama’s two terms, pay growth was stagnant, especially for people without higher education or high-tech skills. Discontent and anxiety about the economy’s direction helped fuel President Donald Trump’s election victory.

Now, a major challenge for Trump is to help extend the economy’s gains beyond wealthier households and those in thriving large metro areas to struggling regions and many rural areas.

Research by Edward Wolff, an economist at New York University, found that the wealthiest 10 percent of households owned 81.4 percent of stock market wealth as of 2013, the most recent year for which figures are available. The middle 60 percent of U.S. households owned just 7.7 percent. Those figures include stocks held in individual retirement plans and 401(k)s as well as in mutual funds.

“Any boom in the stock market is going to pass by the great majority of Americans,” Wolff said.

Other data echo his findings. The richest 1 percent of Americans owned 44 percent of stock market wealth in 2012, according to calculations by Gabriel Zucman, an economist at the University of California, Berkeley.

A rising stock market does provide benefits to the broader economy. Wealthier households typically increase their spending as their assets rise in value. And even Americans with only modest retirement accounts may feel wealthier and spend more. Such increased spending, in turn, can spur economic growth and lead to more hiring.

And when the stock market is strong, businesses are more likely to issue new shares, and some will use the proceeds from those share sales to add jobs. A study by the Kauffman Foundation found that in 2010, 62 percent of the jobs at startup companies had been added after those companies sold shares to the public.

For typical American families, though,the largest source of wealth is the equity in their home. In large part, that explains why even after the recession officially ended in June 2009, many Americans enjoyed little improvement in their finances.

Stock markets rebounded beginning that spring. But home values kept falling until 2012 and returned to pre-recession levels only in September 2016, according to one national measure. In many parts of the country, home values are still below their levels of nearly a decade ago .

Just under half of American households own stock, either directly or through retirement accounts, according to Federal Reserve data. Most of those portfolios are relatively small. Only one-quarter of the poorer half of American households own stock. The average holding for those people is $54,000. The giant mutual fund company Vanguard says its typical retirement account balance in 2015 was $26,405.

Among the wealthiest 10 percent, more than 90 percent own shares, and their accounts, on average, are nearly 20 times as large, at $970,000, according to Fed data.

The proportion of Americans with retirement accounts actually declined slightly from 2010 to 2013 — from 50.4 percent to 49.2 percent.

 

 

SALON

Wall Street’s Trump euphoria propels Dow above 20,000

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By Barry Grey
26 January 2017

On Wednesday, Wall Street celebrated the installation of an administration staffed by CEOs and pledged to remove all obstacles to corporate profit-making by pushing the Dow Jones Industrial Average above the 20,000 level for the first time in history. US stock indexes have been soaring since the November 8 election of Donald Trump, with the Dow rising 9 percent in just 11 weeks.

The blue chip index gained 155 points to close at 20,068 on Wednesday. The Standard & Poor’s 500 and Nasdaq indexes also recorded strong gains and ended the day in record territory.

Trump hailed the record-breaking close with a tweet: “Great!#Dow20K.” His senior economic adviser, the former hedge fund boss Anthony Scaramucci, congratulated Trump for the market surge, tweeting, “Stock market performance in 6 weeks following President Trump’s victory is best among all elections since 1900#ThankYouTrump.”

The record close came one day after Trump issued orders aimed at removing all obstacles to the completion of the Keystone and Dakota Access pipelines, demonstrating his contempt for environmental concerns and the sentiments of Native American tribes and their supporters, who have been protesting for months against the Dakota project’s threat to the Standing Rock Reservation’s water supply and traditional lands.

This boon to the energy and materials corporations and their Wall Street backers coincided with meetings between Trump and corporate CEOS on Monday and Tuesday at which the billionaire real estate mogul-turned president reiterated his pledge to gut health and safety and environmental regulations and slash corporate taxes.

In remarks just prior to meeting Tuesday with the CEOs of the US-based auto companies, Trump promised to shift the business climate “from truly inhospitable to extremely hospitable.” He called current business regulations “out of control.” Administration officials broadly hinted that Trump would meet one of the auto bosses’ key demands by rolling back fuel efficiency standards. On Monday, Trump told a meeting of a dozen CEOs that his advisers thought “we can cut regulations 75 percent, maybe more.”

Other actions Trump has taken in the five days since his inauguration include a freeze on all pending regulations and a hiring freeze for all federal agencies.

While there have been certain improvements in the economic situation in the US and internationally in recent months, including signs of stronger growth in Europe and an upsurge in fourth quarter US corporate profits, these changes do not explain the extraordinarily rapid rise in the American markets.

The surge began the day after Trump’s November 8 election victory, as the markets, initially shaken by the unexpected defeat of their favored candidate, Democrat Hillary Clinton, turned sharply upward, buoyed by Trump’s promises of massive tax cuts for corporations and the rich, the wholesale lifting of business regulations, a massive expansion of military spending, and the prospect of a full-scale attack on social programs.

As Trump began to name one billionaire or multi-millionaire after another to his cabinet, along with ex-generals and far-right opponents of public education, Medicare and Social Security, housing assistance, environmental protections, the minimum wage and occupational health and safety, the upward spiral on Wall Street accelerated. It is barely two months since the Dow first hit 19,000.

The rise stalled for several weeks while the financial elite waited to see if Trump really intended to carry out the social counterrevolution to which he had alluded during the campaign. The markets soared once again after Trump’s installation and initial pro-corporate moves.

Trump is the embodiment of the American financial aristocracy, in all its brutish and violent backwardness and criminality. What the markets are celebrating is a government that in an unprecedented manner openly functions as the instrument of this oligarchy.

On Wednesday, the Wall Street Journal if anything understated the greed-driven euphoria in corporate and financial circles in an article headlined “CEOs Savor New Washington Status.”

“For CEOs,” the Journal wrote, “the moves have sent a message that their stock is rising in Washington, with some betting that they will have a bigger say in running the country…

“Along with [former Exxon Mobil CEO Rex] Tillerson at State, billionaire investor Wilbur Ross [Commerce], former Windquest Group chairwoman Betsy DeVos [Education], Andy Puzder, chief executive of CKE Restaurant Holdings [Labor] and former World Wrestling Entertainment CEO Linda McMahon [Small Business Administration] have been tapped to play big roles in his administration.”

The Journal could have added, among others, longtime Goldman Sachs lawyer Jay Clayton the head the main Wall Street regulation, the Securities and Exchange Commission.

The presence of three former Goldman Sachs executives in top positions in the Trump administration, in addition to Clayton, helps explain the frenzied runup in the share prices of major banks. Goldman Sachs and JPMorgan Chase together account for some 20 percent of the rise in the Dow since November 22.

Trump’s plan to “make America great again” is a drive to wipe out every social gain won by the working class in the course of more than a century of struggle and return to a supposed “golden age” when the corporations could plunder and pollute the country to their heart’s content.

The fraud of Trump’s “concern” for the American worker is exposed by the reality of the forces that are actually benefitting from his policies.

One of the Goldman alumni chosen by Trump for top posts in his administration is Gary Cohn, the bank’s former president and chief operating officer. In return for his leaving the bank and assuming the post of director of Trump’s National Economic Council, Goldman is handing Cohn more than $285 million in bonuses, stock holdings and other investments, according to Bloomberg News.

The Wall Street Journal, in an article published Tuesday titled “Bankers Cash In on Post-Election Stock Rally,” reported that executives of major Wall Street banks have sold almost $100 million worth of stock since the election, more than in that same period in any year for the past decade.

In addition to the share sales, bank officials have sold another $350 million worth of stock to cover the cost of exercising stock options.

Morgan Stanley CEO James Gorman, according to the newspaper, sold 200,000 Morgan Stanley shares three days after the election, and has since sold another 385,000 shares, altogether realizing a profit of at least $8.4 million.

Six Goldman Sachs executives, as well as board member and ex-finance chief David Vinar, exercised 983,000 options, representing $200 million worth of shares.

The advent of Trump has already boosted the fortunes of Wall Street bankers by millions of dollars, and this is only a small preview of the colossal plundering of the American and world economy that is to come.

All the more politically criminal are the efforts of the Democrats, including supposed “left” figures such as Bernie Sanders and Elizabeth Warren, to lend credibility to Trump’s claims to be fighting for American workers by backing the new president’s xenophobic “America First” policies of economic nationalism and trade war.

WSWS