Did Gore Throw the 2000 Election?

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The Nader-baiting continues untrammeled and was even on display with the CNN Green Party Town Hall. I have previously written about this but would like to articulate an addendum that few have yet to discuss.

The basic fact is this, Al Gore threw the fight with George W. Bush over Florida’s bizarre electoral process. It had nothing to do with Nader and everything to do with the transformation of the Presidency by Clinton, our first post-Cold War president. Clinton’s reckless economic policies and utopian visions of neoliberal paradise made Gore behave like the Black Sox.

For confirmation of these points, I would advise readers consult economist Robert Pollin’s very useful book Contours of Descent: US Economic Fractures and the Landscape of Global Austerity, an analysis of the Clinton economy and the first two years of the Bush tenure. On page 78 is a key paragraph that should be etched in stone above any Green Party threshold:

Amid such talk of unending good times, it came as a jolt to most observers when the Republican Vice Presidential candidate Dick Cheney announced on a television talk show on December 3, 2000 that “we may well be on the front edge of a recession here. There is growing evidence that the economy is slowing down.” After Cheney’s statement, George Bush also began interjecting gloomy economic prognostications into his public statements. This was the time when Bush and Cheney, along with Gore and the Democrats, were still fighting over who actually won the election. It would be another week before the Supreme Court threw the victory to Bush. The timing is important: Bush had some obvious political motives for turning negative on the economy at this point, after having been almost entirely upbeat throughout the election.

Pollin’s book describes how the Clinton-Greenspan economy was nothing more than a series of bubbles that were generated in a ten year period, roughly 1992 to 2002, when the United States lived in a massive utopian delusion about the nature of capitalism as a system of political economy.

Clinton’s “new economy” was based in the neoclassical economic coordinates of a post-capitalist order and therefore the abnegation of class warfare, a fantasy that was reinforced by the end of the Cold War and our installation of a puppet regime in Russia. In simpler terms, the Soviet Union had collapsed, proving that Marxism was false (although Marx’s theories had almost nothing to do with Gorbachev’s shortcomings), and thus Western media began a decade-long mythological narrative of life in the post-Soviet states as fantastic (all while in reality Jeffrey Sachs and fellow members of the neoliberal cadre were turning Eastern Europe into a neo-feudal colony of Wall Street where the life expectancy of Russian men dropped by four years).

But by the end of 2000, the delusion stopped working and the Democrats were facing the prospect of responsibility for an economic downturn. Why bother with such a hassle when it would be much easier to blame it on the neocons and their village idiot puppet President? By throwing the contest in a fashion akin to a bribed prize fighter, right in the heat of battle when the American public was revved up by a media drama that made Days of Our Lives seem uneventful, it would make the Democratic Party come out looking like winners instead of losers, perhaps like the end of ROCKY where the Italian Stallion technically is beaten ends up a champ.

And what was responsible for this downturn? Or in fact who?

Pollin does not reach for this conclusion in his book, but it seems pretty likely to me that, given the role Goldman Sachs played in the Clinton Treasury, we can lay the responsibility at the feet of one policy pivot at a key moment, which in turn was caused by one woman, namely Monica Lewinsky.

Recall the masterful essay by Robin Blackburn, How Monica Lewinsky Saved Social Security.

Robert Rubin and Larry Summers are the neoliberal economic policy gurus who have defined the New Democrats and their fiscal conservatism for three decades now. Both men are longtime proponents of the privatization of Social Security, and given their Wall Street connections, it is logical to assume that the next bubble meant to follow the dot-com one was going to be inflated by the influx of Social Security’s capital.

But then along came the intern in the blue dress.

Clinton’s pivot to the left and advocacy of “saving” Social Security rather than privatizing it was a defensive posture taken up to consolidate support within the Democratic base as he faced the inquiry of Ken Starr. But prior to the development of the Lewinski scandal, he had begun to make moves towards privatization at a moment when the public perception of the “magic of the market” was hegemonic among the white middle class, a period when 60 Minutes was featuring stories about stay-at-home day traders who, using recently-premiered world wide web and a proliferation of consumer-grade stock broker websites, were fashioning themselves into a veritable cottage industry of people who were so crazy they thought they would become millionaires with mouse clicks! Things were looking so dire that Dean Baker and Mark Weisbrot published an entire book, titled Social Security: The Phony Crisis, that began with this passage:

“We have a chance,” said President Clinton, to “fix the roof while the sun is still shining.” He was talking about dealing with Social Security immediately, while the economy is growing and the federal budget is balanced… The roof analogy is illuminating, but we can make it more accurate. Imagine that it’s not going to rain for more than 30 years. And the rain, when it does arrive (and it might not), will be pretty light. And imagine that the average household will have a lot more income for roof repair by the time that the rain approaches. Now add this: most of the people who say that they want to fix the roof actually want to knock holes in it.

But because of Bubba’s pivot, he was unable to provide the soap to inflate the next bubble. As a result, when the dot-com bubble began to collapse, there was nothing to replace it and a recession, caused by Democratic policies, would have been what a Gore presidency would have inherited. Why not quit while you are ahead?

Clinton’s behavior here, combined with how his staff went to absurd lengths to vandalize the White House offices as the Republicans moved in for revenge over the impeachment proceedings, has become the modus operandi of the post-Cold War presidencies, leaving the country in as bad shape (or perhaps worse) then when you found it. We have seen nearly a quarter century of White House tenures, in economic terms, looking like waves on the high seas, peaks and valleys that correspond with entrances and exits. There has been no ethic of leaving things better than when you found it. When Eisenhower took office, the country was in the midst of a Red Scare that destroyed a generation of activists while, in domestic transit terms, the postwar population was effectively still living in the nineteenth century. When he gave the country to John Kennedy, he had spent massive amounts on the construction of an interstate highway system that revolutionized how Americans moved around the country and creation of civic infrastructure, such as schools and hospitals, that we still (rather embarrassingly) depend on daily and which is remembered as the golden era of American labor irregardless of the purging of the Communists.

So, with all this in mind, can we start blaming Gore for what he has done to America via his proxy George W. Bush? “Say it ain’t so Al!

Andrew Stewart is a documentary film maker and reporter who lives outside Providence.  His film, AARON BRIGGS AND THE HMS GASPEE, about the historical role of Brown University in the slave trade, is available for purchase on Amazon Instant Video or on DVD.

Did Gore Throw the 2000 Election?

Why Did the Saudi Regime and Other Gulf Tyrannies Donate Millions to the Clinton Foundation?

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(Photo: Hassan Ammar/AP)

As the numerous and obvious ethical conflicts surrounding the Clinton Foundation receive more media scrutiny, the tactic of Clinton-loyal journalists is to highlight the charitable work done by the foundation, and then insinuate — or even outright state — that anyone raising these questions is opposed to its charity. James Carville announced that those who criticize the foundation are “going to hell.” Other Clinton loyalists insinuated that Clinton Foundation critics are indifferent to the lives of HIV-positive babies or are anti-gay bigots.

That the Clinton Foundation has done some good work is beyond dispute. But that fact has exactly nothing to do with the profound ethical problems and corruption threats raised by the way its funds have been raised. Hillary Clinton was America’s chief diplomat, and tyrannical regimes such as the Saudis and Qataris jointly donated tens of millions of dollars to an organization run by her family and operated in its name, one whose works has been a prominent feature of her public persona. That extremely valuable opportunity to curry favor with the Clintons, and to secure access to them, continues as she runs for president.

 

The claim that this is all just about trying to help people in need should not even pass a laugh test, let alone rational scrutiny. To see how true that is, just look at who some of the biggest donors are. Although it did not give while she was secretary of state, the Saudi regime by itself has donated between $10 million and $25 million to the Clinton Foundation, with donations coming as late as 2014, as she prepared her presidential run. A group called “Friends of Saudi Arabia,” co-founded “by a Saudi Prince,” gave an additional amount between $1 million and $5 million. The Clinton Foundation says that between $1 million and $5 million was also donated by “the State of Qatar,” the United Arab Emirates, and the government of Brunei. “The State of Kuwait” has donated between $5 million and $10 million.

Theoretically, one could say that these regimes — among the most repressive and regressive in the world — are donating because they deeply believe in the charitable work of the Clinton Foundation and want to help those in need. Is there a single person on the planet who actually believes this? Is Clinton loyalty really so strong that people are going to argue with a straight face that the reason the Saudi, Qatari, Kuwaiti and Emirates regimes donated large amounts of money to the Clinton Foundation is because those regimes simply want to help the foundation achieve its magnanimous goals?

Read the full article at The Intercept.

Glenn Greenwald is a Pulitzer Prize-winning journalist, constitutional lawyer, commentator, author of three New York Times best-selling books on politics and law, and a staff writer and editor at First Look media. His fifth and latest book is, No Place to Hide: Edward Snowden, the NSA, and the U.S. Surveillance State, about the U.S. surveillance state and his experiences reporting on the Snowden documents around the world. Prior to his collaboration with Pierre Omidyar, Glenn’s column was featured at Guardian USand Salon.  His previous books include: With Liberty and Justice for Some: How the Law Is Used to Destroy Equality and Protect the PowerfulGreat American Hypocrites: Toppling the Big Myths of Republican PoliticsA Tragic Legacy: How a Good vs. Evil Mentality Destroyed the Bush Presidency, and How Would a Patriot Act? Defending American Values from a President Run Amok. He is the recipient of the first annual I.F. Stone Award for Independent Journalism, a George Polk Award, and was on The Guardian team that won the Pulitzer Prize for public interest journalism in 2014.

 

Obama offers pittance to flood victims in Louisiana

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By David Brown
24 August 2016

President Obama made a perfunctory visit to flooded areas in Louisiana Tuesday, after facing sharp criticism for refusing to cut short his two-week vacation in Martha’s Vineyard to respond to the worst natural disaster in the US since Hurricane Sandy in 2012. In public comments, which together with questions lasted merely 13 minutes, the president praised the miserly federal response and suggested that flood victims should chiefly rely on private donations because “volunteer help actually helps the state because it can offset some of its costs.”

The flooding, which began in earnest on August 12, killed 13 people and resulted in the Federal Emergency Management Agency (FEMA) declaring 20 parishes (counties) natural disaster areas. The amount of rain unleashed by this unnamed storm was immense. Over 7.1 trillion gallons of water, more than three times that dropped by Hurricane Katrina, fell in the course of a week. Some areas received over two feet of rain within just a few days.

The impacts are far reaching. Within the state capital of Baton Rouge an estimated 146,000 homes have been damaged. At least a quarter of the state’s students saw the start of school delayed as districts shut down and many school facilities were flooded. Since floodwaters carry sewage, chemicals and heavy metals, crops exposed to the flood waters are considered unfit for human consumption. The agricultural impact of the flood is at least $110 million, according to the Louisiana State University AgCenter.

Most private insurers do not cover flood damage and many working class families cannot afford the flood insurance underwritten by FEMA. Only 42 percent of homes in high-risk areas of the state have flood insurance, according to FEMA, while 12.5 percent of homeowners in low and moderate-risk zones are covered. Many of the areas hit by flooding, including Baton Rouge and Lafayette, were not considered high-risk.

The full economic impact statewide is still unknown, but the FEMA response fails to address the immediate needs of those affected. So far over 100,000 people have filed for federal assistance and have received a total of $127 million, averaging a little less than $1,300 per application. According to theWall Street Journal FEMA is currently paying for just 700 families to stay in hotels and motels while they find housing. The maximum FEMA award for a family that has just lost its home and personal possessions is just $33,000.

In a callous decision reminiscent of President Bush during Hurricane Katrina in 2005, Obama remained on vacation in the Massachusetts resort town, playing golf with the rich and famous, until this past Sunday. In the aftermath of Katrina, Bush was roundly criticized for his indifference to the crisis. Then as now, federal aid remained wholly inadequate and masses of poor people were left to effectively fend for themselves. After Katrina, those applying for assistance got an average of just over $7,000 from FEMA.

In his remarks Obama cited favorably the current condition of New Orleans as proof of the resilience of the state, saying, “I know that you will rebuild again.” In the eleven years since Katrina, however, the people of New Orleans have not recovered. The population of the city sits around 60,000 below its pre-Katrina level of 455,000. Public assets were privatized under the guise of “rebuilding,” and the public school system was dismantled and replaced with charter schools.

Obama’s remarks in Baton Rouge recall his similarly indifferent comments in Flint, Michigan whose residents have been poisoned with lead. After thousands of small children were exposed to the toxic chemical Obama insisted there was nothing to worry about. Unwilling and unable to outline an effective federal response or propose an infrastructure program to prevent the next disaster, Obama told Flint residents to rely on charities and philanthropists.

In comparison to the mere $127 million that FEMA has found so far for Louisiana, Obama and the rest of the political establishment can find unlimited amounts of money to bail out banks and drop bombs. In the current presidential race, Hillary Clinton’s campaign has already spent $256 million, more than double the FEMA flood relief. While Obama was not interested in cutting his vacation short for the flooding, he did find time to host a fund-raising dinner for Clinton on August 15, with 60 people paying between $10,000 and $33,400 apiece.

FEMA relief so far would only amount to less than 0.02 percent of the 2017 US military budget. It would not even cover eight of the Reaper drones used in Obama’s assassination program. The military has budgeted $4.61 billion on drones over the coming year.

Obama’s enthusiasm for the military and indifference to social crises in America is no accident. His political program of wars abroad and austerity at home demands it.

http://www.wsws.org/en/articles/2016/08/24/loui-a24.html

Liberal, Moderate or Conservative? See How Facebook Labels You

You may think you are discreet about your political views. But Facebook, the world’s largest social media network, has come up with its own determination of your political leanings, based on your activity on the site.

And now, it is easy to find out how Facebook has categorized you — as very liberal or very conservative, or somewhere in between.

Try this (it works best on your desktop computer):

Go to facebook.com/ads/preferences on your browser. (You may have to log in to Facebook first.)

That will bring you to a page with your ad preferences. Under the “Interests” header, click the “Lifestyle and Culture” tab.

Then look for a box titled “US Politics.” In parentheses, it will describe how Facebook has categorized you, such as liberal, moderate or conservative.

(If the “US Politics” box does not show up, click the “See more” button under the grid of boxes.)

Facebook makes a deduction about your political views based on the pages that you like — or on your political preference, if you stated one, on your profile page. If you like the page for Hillary Clinton, Facebook might categorize you as a liberal.

Even if you do not like any candidates’ pages, if most of the people who like the same pages that you do — such as Ben and Jerry’s ice cream — identify as liberal, then Facebook might classify you as one, too.

Facebook has long been collecting information on its users, but it recently revamped the ad preferences page, making it easier to view.

The information is valuable. Advertisers, including many political campaigns, pay Facebook to show their ads to specific demographic groups. The labels Facebook assigns to its users help campaigns more precisely target a particular audience.

For instance, Donald J. Trump’s presidential campaign has paid for its ads to be shown to those who Facebook has labeled politically moderate.

Campaigns can also use the groupings to show different messages to different supporters. They may want to show an ad to their hard-core supporters, for example, that is unlike an ad targeted at people just tuning in to the election.

It is not clear how aggressively Facebook is gathering political information on users outside the United States. The social network has 1.7 billion active users, including about 204 million in the United States.

Political outlook is just one of the attributes Facebook compiles on its users. Many of the others are directly commercial: whether you like television comedy shows, video games or Nascar.

To learn more about how political campaigns are targeting voters on social media, The New York Times is collecting Facebook ads from our readers with a project called AdTrack. You can take part by visiting nytimes.com and searching for “Send us the political ads.”

Russian Threat Is Good for Business, U.S. Defense Contractors Tell Investors

Posted on Aug 19, 2016

As the media and politicians work to cast Russia as a great threat to Americans, the arms industry is pressuring NATO member states to spend at least 2 percent of their gross domestic products on weapons and defense systems.

Lee Fang reports at The Intercept:

Retired Army Gen. Richard Cody, a vice president at L-3 Communications, the seventh largest U.S. defense contractor, explained to shareholders in December that the industry was faced with a historic opportunity. Following the end of the Cold War, Cody said, peace had “pretty much broken out all over the world,” with Russia in decline and NATO nations celebrating. “The Wall came down,” he said, and “all defense budgets went south.”

Now, Cody argued, Russia “is resurgent” around the world, putting pressure on U.S. allies. “Nations that belong to NATO are supposed to spend 2 percent of their GDP on defense,” he said, according to a transcript of his remarks. “We know that uptick is coming and so we postured ourselves for it.”

Speaking to investors at a conference hosted by Credit Suisse in June, Stuart Bradie, the chief executive of KBR, a military contractor, discussed “opportunities in Europe,” highlighting the increase in defense spending by NATO countries in response to “what’s happening with Russia and the Ukraine.”

The National Defense Industrial Association, a lobby group for the industry, has called on Congress to make it easier for U.S. contractors to sell arms abroad to allies in response to the threat from Russia. Recent articles in National Defense, NDIA’s magazine, discuss the need for NATO allies to boost maritime military spending, spending on Arctic systems, and missile defense, to counter Russia.

Many experts are unconvinced that Russia poses a direct military threat. The Soviet Union’s military once stood at over 4 million soldiers, but today Russia has less than 1 million. NATO’s combined military budget vastly outranks Russia’s — with the U.S. alone outspending Russia on its military by $609 billion to less than $85 billion.

And yet,  the Aerospace Industries Association, a lobby group for Lockheed Martin, Textron, Raytheon, and other defense contractors, argued in February that the Pentagon is not spending enough to counter “Russian aggression on NATO’s doorstep.”

Continue reading.

—Posted by Alexander Reed Kelly.

http://www.truthdig.com/eartotheground/item/us_defense_contractors_tell_investors_russian_threat_is_good_for_20160819

The social roots of unrest in Milwaukee, Wisconsin

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16 August 2016

Once again deeply rooted social anger has boiled over in an American city against police violence. This time protests erupted in the Sherman Park neighborhood of Milwaukee, Wisconsin following the killing of 23-year-old African American Sylville K. Smith by an as yet unidentified African American police officer Saturday afternoon.

Approximately 100 people gathered Saturday night to protest near where Smith was killed. The night ended with a handful of nearby businesses looted as well as a gas station, a bank branch and an auto parts store torched. A handful of cop cars and other vehicles were damaged or destroyed. The police arrested 31 people during protests Saturday and Sunday night.

At the request of Milwaukee County Sheriff David Clarke, a prominent African American backer of Republican Presidential candidate Donald Trump, Wisconsin Governor Scott Walker has mobilized the National Guard. At least 100 members have been placed on standby to respond to protests if deemed necessary by city officials, adding to the 150 specially trained Milwaukee Police Department (MPD) officers and regular police patrols.

This marks the second time since 2014 that Walker has put the National Guard on notice for deployment in response to protests against police violence in the city. The National Guard, a branch of the military, has been used to put down popular protests in Ferguson, Missouri in 2014 and Baltimore, Maryland in 2015.

While the killing of Smith is the immediate cause of the protests in Milwaukee, it is clear that broader issues are involved—bound up not with racial divisions, but a one-sided class war waged by the American financial elite. Like so many cities in the United States, Milwaukee has been devastated by decades of deindustrialization and financialization, which has produced the highest levels of inequality since the 1920s. The factories that provided decent wages and benefits for tens of thousands of workers have all but disappeared.

The city lost three-quarters of its industrial jobs between 1960 and the 2010. The disappearance of manufacturing employment had a particular impact on black male workers in the city. From 1970 to 2010, the employment rate for black men aged 16 to 64 in the metro Milwaukee region fell precipitously, from 73.4 percent to only 44.7 percent.

The city’s overall poverty rate in 2014 was 29 percent, nearly double the national rate. Children and youth aged 18 and under were the worst affected, with more than 42 percent growing up poor. More than 43 percent of the population in the Sherman Park neighborhood lives below the poverty line.

It is fitting that President Barack Obama visited the Sherman Park area in 2012 where he spoke at the Master Lock factory, one of the few remaining industrial facilities in the area. Obama hailed Master Lock as a great example of the “insourcing” of low wage manufacturing jobs. In its more than seven years in office, the Obama administration has not proposed a single initiative or program that would begin to address the staggering levels of social inequality, poverty and unemployment in the United States.

The growth of poverty and inequality, the eruption of social anger and the build-up of the police forces are interrelated components of the same class dynamic. Whatever the role racism may play—a 2011 analysis of traffic stop data found that African American drivers were more than seven times as likely as white drivers to be pulled over by the MPD—the war waged by the American ruling class has been directed at the working class of all races.

In considering the issue of police violence, it is once again necessary to stress that the majority of those killed by police in the United States are white. As for the conditions that are fueling social anger, these transcend race as well. The majority of poor in the United States are white, and white workers have suffered some of the most disastrous declines in conditions of life over the past several decades. One only needs to cite the stunning rise in mortality rates among working class whites in recent years.

As for African Americans, one of the most significant if very little noted facts of American life is the extraordinary growth of social inequality within the African American population over the past four decades. A black family in the top 1 percent of the US population has a net worth 200 times the average black family, and the top 10 percent controls 67 of the wealth held by all African Americans.

In politics, African Americans have been elevated to positions of power by both the Democrats and Republicans—Obama, Loretta Lynch, Condoleezza Rice and Colin Powell being some of the most notable. Many major American cities have had black mayors and city councils are populated by African American politicians.

Those promoting racial politics speak for this social layer of more privileged sections of the middle class and for sections of the ruling class itself whose interests are thoroughly hostile to those of African American workers and youth.

A genuine fight against police violence must proceed from an understanding of certain basic facts.

First, that police violence is the product not of racial animosity of “white America” against “black America,” but rather is a reflection of the nature of the state as an instrument of class rule. The build-up of police power, which is a component part of a vast apparatus of repression, from the military to the spying agencies, will be used against all social opposition to the policies of the financial aristocracy.

Second, all factions of the political establishment are committed to the defense of the police. In the 2016 elections, Trump and the Republicans are running on a program of “law and order” and calls for criminalization of opposition to police violence (expressed most ruthlessly by Milwaukee County Sheriff Clarke at the Republican National Convention last month).

Meanwhile Hillary Clinton and the Democrats hail the police while sickeningly and hypocritically exploiting the family members of the victims of police violence to promote racial identity politics. She is committed to continuing and extending the policies of the Obama administration—which means escalating the assault on the working class, expanding war abroad and doing nothing to halt the reign of police violence in the United States.

The fight against police violence means a fight against the society that creates it. It requires a political struggle to unify all sections of the working class, of all races, in a common fight against unemployment, poverty, inequality and the capitalist profit system.

Niles Niemuth

http://www.wsws.org/en/articles/2016/08/16/pers-a16.html

International bond markets turn “surreal” as speculation grows

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By Nick Beams
15 August 2016

The value of negative-yielding bonds reached more than $13.4 trillion last week amid growing concerns that the actions of major central banks in pumping billions of dollars into the global financial system via various forms of “quantitative easing” are creating the conditions for a financial disaster.

According to figures compiled by Tradeweb for the Financial Times, the mass of bonds, corporate and government, with sub-zero yields rose by $300 billion in the course of the week. The escalation seems to have been sparked, at least in part, by the decision of the Bank of England to resume bond buying with purchases of £60 billion worth of government debt over the next six months in a bid to boost the markets following the Brexit vote to quit the European Union.

The decision sent yields plunging as bond prices rose—the two move in an inverse relationship to one another—with the yield on 30-year UK bonds now down to a record low of 1.3 percent, compared to 2.3 percent just three months ago.

The UK central bank was unable to find sufficient sellers for all the bonds it wished to purchase last Tuesday, indicating that bond market investors and speculators expect still further central bank action and even higher bond prices.

The international bond market is increasingly taking the form of a speculative bubble. A negative yield means that demand for a bond is so great and its purchase price so high that any purchaser would incur a loss if he held the bond to maturity. The investor is purchasing the bond in the expectation that its price will rise even further and he will be able to make a profit by selling it at a later date.

The demand for German government debt is so high that it now has on issue €160 billion of zero coupon bonds. These bring no interest and have been purchased solely in the expectation that their price will continue to rise.

Significant profits have already been made as the international bond market, once regarded as providing stability for the global financial system, increasingly resembles a multitrillion-dollar casino.

The soaring price of long-term British government debt means that the rate of return on 30-year bonds over the past 12 months is 31 percent. The rise in price of so-called “gilts” has been so rapid that the yield on the longest-dated bond, which matures in 2068, has almost halved since the day of the Brexit referendum, falling from 2 percent to 1.06 percent. The price of the bond has risen by 53 percent so far this year—the kind of rise normally associated with highly speculative stock, not long-term debt issued by the British government.

Mike Amey, the manager of sterling portfolios for the one of the world’s largest bond-trading companies, Pimco, described the speed of the move as “eye-popping.”

A senior investment officer at Prudential Fixed Income, Gregory Peters, told the Financial Times the situation had become “surreal.” He said, “It’s clear that central banks are dominating markets. There’s a race to the bottom.”

It appears that trading in bond markets has assumed the form of a mania, as everyone seeks to maximise immediate profits with no concern for what could be the consequences. “There’s too much acceptance of this,” Peters warned. “We’re talking about it in a cavalier way, but that’s not appropriate. It’s extremely distortive, and if we see a pick-up on the fiscal side, or inflation, it will look less comfortable sitting in this negative-yielding universe.”

The concern is that any action taken by governments to boost their economies through increased spending, or any unexpected spike in inflation, could send bond yields rising and prices falling. This would leave speculators who bought in at the top of the market, in the expectation that bond prices would climb still higher, with major losses.

The amounts involved are massive. Earlier this month, Fitch Ratings estimated that if yields went back to the levels of 2011, when they were already at historically low levels as a result of the quantitative easing programs following the 2008 financial crisis, total market losses could be as much as $3.8 trillion.

The official rationale for the quantitative easing policy was that lower interest rates were necessary to stimulate investment and consumer spending by lowering the cost of borrowing, thereby preventing the global economy from falling into a full-scale depression. But almost eight years of financial stimulus have failed to lift the real economy, with investment rates remaining well below where they were before the financial crisis. In the US, for example, the latest data on gross domestic product shows investment dropping by 9.7 percent in the second quarter.

In a comment published in the Financial Times on Friday, Eric Lonergan, the macro fund manager at M&G Investments, wrote that the policy of the central banks had been based on a false theory. There was, he noted, no empirical evidence to show that consumers tended to increase spending as a result of lower interest rates, and that when interest rates were very low, households tended to save more because of concerns about the future direction of the economy. Corporate investment was similarly unresponsive to lower rates.

“Investment decisions have financial consequences over many years, and are more influenced by beliefs about future growth and attitudes to risk than by overnight rates set by central banks,” he wrote.

“Companies have in the past few years responded to very low borrowing costs by engaging in relatively low-risk financial engineering such as share buybacks, potentially crowding out productive risk-taking.”

Lonergan did not say so openly, but his remarks pointed to the underlying cause of falling investment despite lowered borrowing costs—the persistent tendency of the rate of profit to fall. This decline was in evidence even before the crisis of 2008, and has increased since.

In the US, where the stock market has reached record highs because of low interest rates, profitability is worsening, with S&P 500 firms reporting weakening overall profits for four quarters in the row.

The only major area where falling interest rates have had a significant impact on the real economy is in housing, where ultra-low rates have fuelled the formation of housing bubbles in a number of leading economies, creating the risk of a new collapse in the housing mortgage market, as happened with the bursting of the subprime bubble eight years ago.

But the world’s major central banks are now caught in a trap produced both by fundamental trends in the global capitalist system and the results of their own policies. The US Fed would like to bring about a return to a more normal interest rate regime, while in the UK, Bank of England Governor Mark Carney declared that he was “not a fan of negative interest rates,” even as he introduced policies that sent British rates lower.

Such is the extent of speculation resulting from the quantitative easing regime that any return to even a semblance of normalcy threatens to set off a financial crisis that would go far beyond that of 2008.

Last week, the Swiss-based financial corporation UBS issued a research note citing several factors that could set off a major sell-off in the US Treasury market. Among the factors it listed were higher growth and inflationary expectations. But a return to these conditions is supposedly the aim of official policy.

As a comment in the Financial Times noted last month, any policy switch to loosen the austerity agenda that is devastating the lives of workers the world over would “herald a stampede” from the best performing sectors of global markets and prompt a rush for the exits, as investors moved to sell off their holdings.

WSWS