Why are there so many billionaires leading money-losing companies?

Uber lost $708 million in 6 months, but its CEO/founder is worth billions. Is Silicon Valley a pyramid scheme?

Why are there so many billionaires leading money-losing companies?
(Credit: Getty/Ronstik)

In a financial report released last week, ride-hailing app company Uber reported a staggering $708 million loss for the first three months of the year. Since the company was founded eight years ago, it’s burned through almost half of the $15 billion in private venture capital that it has raised.

But despite the mounting losses, the departure of more than a dozen company executives over the past year and a string of controversies that would send the typical company plunging into an irreversible death spiral, Uber CEO and co-founder Travis Kalanick’s net worth is immense.

According to Forbes, Kalanick is worth $6.3 billion, making him the world’s 226th wealthiest billionaire and the 35th richest magnate of the global tech industry. That makes him richer than Wal-Mart heiress Christy Walton and Liu Qiandong, founder and head of Chinese e-commerce and retail giant JD.com, which recently reported $11 billion in quarterly sales and its first profit as a publicly traded company.

Kalanick’s bounty seems largely immune (so far) to Uber’s string of mishaps, including allegations of about its workplace being hostile to women, a bitter legal fight with Google over allegedly stolen self-driving car technology, scrutiny over the company’s attempt to deceive government officials, and other controversies concerning its treatment of drivers.

So how does a 40-year-old computer programmer heading a beleaguered and unprofitable company have a net worth greater than the gross domestic product of Barbados?

The short answer is: hopes, dreams and aspirations. Specifically, those of the Uber’s financial backers, who believe in the gospel that Uber is on its way to killing the global taxi industry.

Under normal startup circumstances, a business faces intense pressure to attain profitability within a short period of time. According to the U.S. Small Business Administration, 1 in 5 new businesses goes under in the first year while nearly half fail within the fifth year. According to a 2015 study from Babson and Baruch Colleges, the typical entrepreneur provides nearly 60 percent of the funding needed for his or her business.

But in the world of Silicon Valley, profitability takes a back seat as deep-pocketed investors throw money at long-term aspirations. For years private investors have assigned sky-high valuations to tech industry startups in a bid to find the next Amazon or Google nestled in some Northern California office building or garage. Billionaire investors, private equity firms and sovereign wealth fund managers are willing to take considerable risks that mushroom the wealth of founders and CEOs to astronomical levels.

Kalanick is a billionaire because private investors have assigned a value to Uber based on its future potential; that’s where the hopey-dreamy stuff comes in. The company is currently valued at a sky-high $68 billion according to CBInsights, more than half the value of global aerospace behemoth Boeing. Because Kalanick is a primary shareholder of Uber, his net worth is boosted by this potentially irrational valuation, making him a “paper” billionaire.

Though what he does with his equity is not publicly known, Kalanick can potentially leverage this net worth to grow his personal fortune by using his stake in Uber to engage in other business endeavors, like buying real estate or investing in securities, all based on what private investors think his startup is worth.

In the typical scenario, an executive at private equity firm considering an investment in a private startup might compare the numbers offered in a business plan with those of a comparable publicly traded company and examine operating costs, profit margins and overall capital structure. If the startup has a prospectus with targets that seem viable compared with those of an existing competitor, investors will have some degree of confidence that they’ll wind up with a windfall of profit once the company is acquired or it files an initial public offering.

But because of the strange nature of the tech industry, there often isn’t a comparable company upon which investors can base their assessments. When Amazon was raising money in the early 1990s, there was no existing competitor with a similar business model, so early investors had to make estimates and assumptions to base their hopes on. It is interesting that very few individuals invested in Amazon prior to its initial public offering.

In retrospect, offering seed money to Amazon was a no brainer. Internet commerce was growing by a staggering 2,300 percent a year in 1994, and Jeff Bezos saw that light early and famously drew up a business plan during a road trip to Seattle. Venture capital firm Kleiner Perkins Caufield & Byers was one of a few private investors that gave Bezos money early on, and it reaped a fortune after Amazon filed its initial public offering in 1997 just as the dot-com bubble peaked.

But the success of tech companies like Amazon.com and Google are few and far between. Often the decision by private investors whether to invest in a technology startup is based on assumptions, best estimates and industrywide averages of publicly traded companies in the same sector.

While private equity firms have special access to review a startup’s books, CEO- founders have much more latitude in selling their plans and manipulating their numbers than the heads of established publicly traded companies, who face more regulatory scrutiny.

Once startups make their way to the public markets through initial public offerings, founder-CEOs can continue to reap billions from their company’s valuations without the companies making a dime in profit. Tesla CEO Elon Musk, who’s worth an estimated $16 billion, the head of Snap, Evan Spiegel ($4.7 billion) and Twitter’s Jack Dorsey ($1.8 billion) are notable examples of rich CEOs who head unprofitable companies.

These founder-CEOs can spend good portions of their lives as billionaire heads of money-losing companies as long as investors keep believing that these companies may someday strike it rich. But there’s always a make-or-break point, and paper billionaire are always at risk of sinking their fortunes with investors losing their shirts. One thing is almost certain: Even if Uber crashes and burns, Kalanick would likely walk away from the wreckage a very wealthy computer programmer.

 

How Trump and Obama are Exactly Alike

Not until faithfulness turns to betrayal
And betrayal into trust
Can any human being become part of the truth.

— Rumi

Trump won the 2016 nomination and election largely because he was able to pose as a populist and anti-interventionist “America Firster”.

Similarly, Obama won the 2008 election in good part because he promised “hope and change” and because he had given a speech years earlier against the then-impending invasion of Iraq.

Short of disclosure of diaries or other documents from these politicians, we can’t know for certain if they planned on reversing much of what they promised or if the political establishment compelled them to change, but they both eventually perpetrated a massive fraud.

What is perhaps most striking is actually how quickly each of them backtracked on their alleged purpose. Particular since they were both proclaimed as representing “movements”.

Even before he took office, Obama stacked his administration with pro-war people: He incredibly kept Bush’s head of the Pentagon, Robert Gates; nominated Hillary Clinton for Secretary of State, who he beat largely because she voted for giving Bush authorization to invade Iraq. Other prominent Iraq War backers atop the administration included VP Joe Biden, Susan Rice and Richard Holbrooke. Before he was sworn in, Obama backed the 2008 Israeli slaughter of Palestinians in Gaza. See from 2008: “Anti-War Candidate, Pro-War Cabinet?

Predictably, the Obama years saw a dramatic escalation of the U.S. global assassination program using drones. Obama intentionally bombed more countries than any other president since World War II: Iraq, Syria, Afghanistan, Libya, Somalia, Yemen and Pakistan. Obama talked about a nuclear weapons free world, but geared up to spent $1 trillion in upgrading the U.S. nuclear weapons arsenal. At the end of his administration, attempts at the UN to work toward banning nuclear weapons were sabotaged, efforts that the Trump administration continues. At his first news conference as president, Helen Thomas asked Obama if he know of any country in the Mideast that had nuclear weapons. Obama passed on the opportunity to start unraveling the mountain of deceits that constitutes U.S. foreign policy by simply saying “Israel” and instead said that he didn’t want to “speculate” about the matter.

As many have noted recently, Trump seemingly reversed himself on Syria and launched a barrage of cruise missiles targeting the Assad regime. It’s part of a whole host of what’s called “flip-flops” — Ex-Im Bank, NATO, China, Russia, Federal Reserve — but which are in fact the unraveling of campaign deceits.

Fundamentally, Obama and Trump ran against the establishment and then helped rebrand it — further entrenching it.

And of course it’s not just foreign policy. Obama brought in pro-Wall Street apparatchiks Tim Geithner and others around Robert Rubin, like Larry Summers. Some were connected to Goldman Sachs, including Rahm Emanuel, Gary Gensler and Elena Kagan and Obama would back the Wall Street bailout. Trump campaigned as a populist and brought in a litany of Goldman Sachs tools, most prominently Steven Mnuchin at Treasury Secretary and Gary Cohn as chief economic advisor.

The nature of their deception is different. Obama is lawyerly and, like jello, hard to pin to the wall. Many of his broken promises are actually violations of the spirit of what he said, not the letter. He can promise to withdraw “all combat troops” from Iraq — but doesn’t inform voters that “combat troops” in his parlance is not the same as “troops”. And most certainly many of his backers were utterly infatuated with him and seemed incapable of parsing out his deceitful misimpressions. Obama did however outright violate some promises, most obviously to close the the gulag at Guantanamo Bay in his first 100 days.

Trump triangulates by being an electron. He can say X and not-X in the span of a minute. Like an electron, he can be in two places at the same time. Trump is just an extreme example of what should be evident: It’s largely meaningless if a politician declares a position, especially during a campaign. The question is: What have they done? How have they demonstrated their commitment to, say, ending perpetual wars or taking on Wall Street?

These people are largely salesmen.

Nor are these patterns totally new. George W. Bush campaigned against “nation building” (sic: nation destroying); Bill Clinton campaigned as the “man from Hope” for the little guy; George H. W. Bush claimed he was a compassionate conservative. All backed corporate power and finance. All waged aggressive war.

In both the cases of Obama and Trump, the “opposition” party put forward a ridiculous critique that pushed them to be more militaristic. Obama as a “secret Muslim” — which gave him more licence to bomb more Muslim countries while still having a ridiculous image of being some sort of pacifist. Much of the “liberal” and “progressive” critique of Trump has been focusing on Russia, in effect pushing Trump to be more militaristic against the other major nuclear state on the planet.

One thing that’s needed is citizens aided by media that adroitly and accessibly pierce through the substantial deceptions in real time.

Another thing that’s needed is that people from what we call the “left” and “right” need to join together and pursue polices that undermine the grip of Wall Street and the war makers. They should not be draw into loving or hating personalities or take satisfaction from principleless partisan barbs.

Only when there’s adherence to real values and when solidarity is acted upon will the cycles of betrayal be broken.

Sam Husseini is founder of the website VotePact.org

COUNTERPUNCH

The Deep State and the Dark Arts

There’s a superb scene in the movie Syriana where CIA bureaucrats distance themselves from one of their agents, Bob, played by George Clooney, who has become a troublesome asset for the agency. Terry, the pack leader, begins to extemporize a narrative to his subordinates. With cool detachment, he tells them: “Put some space between us and Bob. Bob has a long history of entrepreneurial operations. We haven’t really had a handle on Bob for years. After 9/11, some people got a lot of leeway, let their emotions get the best of them. These are complex times. There’s already an active investigation into Bob’s activities in…help me out here.”

At this point, the group flesh out the details of how they’re going to burn the agency’s connection to Bob, painting him as an agent gone rogue, slipping the net of agency supervision, defying protocol, and ultimately selling himself to unsavory elements that want a U.S. asset killed. In this way, the leviathan spits out a loyal servant, rendering him obsolete with a fable and a slander, sanctified by the imprimatur of the officialdom.

We should note the importance of the media in all this storyline, albeit fictional. The dark arts of propaganda aren’t overtly mentioned, but they are the pivotal tools that will animate the destruction of Bob’s career. All sound strangely familiar? It should. It’s pretty much the script the intelligence community uses as its modus operandi when it needs to deal with an inconvenient public servant.

Theater of the Absurd

With rumors of detente crackling through the ether, the imperialist machinery of anti-Russian foreign policy has cranked into high gear, leveraging leaks and the press to mute Trump’s overtures of peace. Leaks to the The Washington Post were leveraged in last month’s excommunication of National Security Advisor Michael Flynn. Flynn was rather easily vanquished by a leak from within the American intelligence community outing him as a confabulator and, in pundit spin, a man vulnerable to blackmail by the Kremlin.

After Flynn’s unceremonious ouster, Attorney General Jeff Sessions was the next target, pilloried by Democrats for his contacts with the Russian ambassador Sergey Kislyak, something he declined to mention in his confirmation hearings. A third interaction has now been surmised, with tantalizing rumors Sessions was in the same room as Kislyak during a cocktail party. Did they conspire over canapes? Smuggle thumb drives wrapped in prosciutto? Exchange piquillo peppers stuffed with nuclear codes? The possibilities blossom like a mushroom cloud. Can you feel the frisson of treason?

Of course, the FBI has been investigating more mundane contacts between the Trump team and Moscow, a project that will either result in Trump’s impeachment for some manner of treason or his complete and utter subjection to the foreign policy whims of the foreign policy establishment. A Times article reported that the Obama administration furiously laid the foundation for this investigation by disseminating innuendo that Trump was under Russian influence during the peace laureate’s last days in office. Typically, the unofficial commentariat in the comments thread praised Obama’s patriotism, as though this wanton Wall Street servant was doing anything other than performing last-minute janitorial services for his venal party.

A few weeks ago, a Congressman (Rep. Darrell Issa) obscurely called for the appointment of a special prosecutor. But now Lindsey Graham has embraced the call, suggesting one be named if contact between Trump aides and Moscow were found, regardless of the content of that contact. It reminds one of the proverb that Caesar’s wife must be above even unfounded suspicion, let alone actual wrongdoing. In any event, Graham and his monomaniacal bedmate, John McCain, continue their lurid press junket, now looking to subpoena intelligence agencies for wiretaps of Trump phone calls, though former Director of National Intelligence (DNI) James Clapper refuted the wiretap rumor, as did FBI Director James Comey, albeit by the oblique means of asking the Justice Department to do so. In any event, the banishment of Flynn, the tarring of Sessions, and the net of suspicion cast over the Trump administration are fierce warnings from a rattled foreign policy community, a modern equivalent of the severed heads of Roman soldiers set on pikes as a message from Visigoth hordes.

The enveloping of the president in a cacophony of innuendo is likely a collaborative effort between the Justice Department, the National Intelligence Agency, the CIA, and crucially, the mainstream press. Beyond the corridors of the Capitol Hill, civil-society organizations like the George Soros-funded MoveOn.org and Barack Obama’s robust Organizing for Action (OFA) are turning up the heat on the streets, creating the visible signs of unrest, sometimes violent, that have capsized governments from Venezuela to Ukraine at the behest of Western oligarchs.

In recent weeks, President Donald Trump’s appointment of delusional hawk H.R. McMaster as National Security Advisor, a call for an unnecessary $54 billion dollar expansion of the military budget, his sudden demand for the return of Crimea to Ukraine, his fulminant echoes of Bush administration hysteria over Iran, among other hawkish developments, can be read as an unsettled president’s efforts to appease a foreign policy establishment that is ruthlessly using the media to undermine, and reign in, a wayward steward of empire.

Full-Spectrum Dominance vs. Clear-Headed Detente 

But why is Russia such a perennial target of Washington’s? Why are peaceful overtures toward Moscow so scorned? As the Trump administration found out, de-escalation is a no-no in Washington. Russia, along with China, are the leading targets of American long-term foreign policy. They represent the only two nations that might seriously rival the U.S. in Eurasia, which is considered the fulcrum of the 21st century global economy. Preventing the rise of new rivals is long-standing U.S. policy, most explicitly articulated by Paul Wolfowitz on behalf of the Clinton administration in early 1990s.

None of this should come as a surprise. Consider what was at stake. At the macro level, the entire program for global hegemony is under threat. Outlined over decades by foreign policy luminaries such as George Kennan, Allen Dulles, Wolfowitz, and Zbigniew Brzezinksi, the general plan is for full-spectrum dominance, meaning control of land, sea, air, and space, on a planetary basis, with a special emphasis on “Eurasian landmass,” as the ghoulish McMaster called it in a recent anti-Russian speech.

If history is any guide, it is unacceptable for a U.S. president to thaw relations with Russia unless that thaw consists of Russia capitulating to American demands. Mikhail Gorbachev’s trusting dismantling of the Soviet Union and the Warsaw Pact led to a decade of Western looting of Gorbachev’s country. Vladimir Putin has since restored a measure of Russia’s economic and military strength. Where Gorbachev was exploited, Putin is proving resistant to such entreaties, except on the economic front, where he appears to have bought into some of Western neoliberal policy.

Instead, Putin is posing a threat to the forward progress of Washington’s neoconservative foreign policy. He has actively promoted a variety of pipeline projects that would speed Russian oil and gas to Western Europe, undercutting profits of Western multinationals and addicting NATO nations to the energy teat of the Russian Federation. And he has conducted a few military maneuvers that have enraged the Washington elite, which are used to being conciliated by effete comprador elite in developing nations. This is different. A nuclear nation that can’t be overrun or bombed into submission. And it shows.

After successfully dismembering Yugoslavia, Congo, Afghanistan, Iraq, Libya, Yemen, the West-led spread of chaos across the Middle East stalled in Syria. After happily expanding NATO throughout Eastern Europe with little opposition, expansion hit a wall in Ukraine. In both instances, it is Moscow behind the holding action preventing the American project of global dominion from advancing. That’s why Putin has replaced Hugo Chavez as the West’s most demonized public figure.

Worryingly for covetous D.C. schemers, there’s a lot of new economic activity afoot in Eurasia, little of it involving the U.S. This activity includes plans for a Eurasian Union headed by Russia, a metastasizing Shanghai Cooperation Organization (SCO), and the rapidly advancing One Belt, One Road vision of the Chinese. The latter would effectively be a New Silk Road stretching from Vladivostok to Lisbon, animating Chinese and Russian economic influence across the Asian and European continents, and lifting countries like Kyrgyzstan, Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan. This is Washington’s nightmare scenario, since no serious geo-strategist believes global hegemony is feasible short of dominion in Central Asia. This understanding fuels the underlying animus toward Moscow and Beijing. It has nothing to do with ceaseless repeated lies about Russian aggression in Eastern Europe and Chinese aggression in the South China Sea. And it has nothing to do with lies about Moscow rigging the election for Donald Trump or Michael Flynn lifting sanctions in a nefarious quid pro quo.

The Deep State vs. the Nation State

Long-time Congressional staffer Mike Lofgren refers to the murky agencies at work to ensure this planetary plan stays on track as the “deep state,” in his book of the same name. He writes that it includes key elements of the national security state, which ensure continuity of policy despite the superficial about-faces from one administration to the next. The deep state is effectively a warlike oligarchy, hell-bent on full spectrum dominance, driven by a lust for wealth and power, and anxious to inscribe its name in history. Specifically, Lofgren says, the deep state includes the Department of Defense, the State Department, the National Intelligence Agencies, Wall Street, the defense industry, and the energy consortium, among other major private players. They share common agendas, operate a revolving door of employees, and have a collective distaste for democracy, transparency, and regulation. The deep state is the link between military interventions and trans-pacific trade deals, between sanctions and IMF loans. All of these tools, be they arms or loans or legal structures, serve a single purpose: the overarching control of world resources by a global community of corporate elites. One can also see how these three instruments of policy and power all do tremendous damage to a particular entity, the nation-state. It is the nation-state that is considered by elites to be the sole remaining barricade between populations in nominal democracies and their unfettered exploitation by multinationals, although one might reasonably argue that the state more often abets exploitation rather than deters it.

The Dystopia to Come

So where is this all headed? Aside from the theatrics of the Trump presidency and its sequestration or removal. What would full-spectrum dominance look like? Probably something like a one-world market, populated by enfeebled states, ruled by a worldwide raft of interlocking investor rights agreements that allowed private capital to plunder natural resources free of state restraints, such as labor safeguards, environmental protections, reasonable tax regimes, capital controls or border tariffs. Faceless multinationals would pillage the planet, their anonymous appointees manning the joysticks of power behind the reflective glass of their cloud-draped spindles, unreachable and unelected by the armies of the destitute that prowled the wastelands below. The amalgamated forces of corporate elitism would coolly play labor arbitrage across continents, threaten and destroy defiant economies through currency flight and commodity manipulation, and continue to consume an outsized percentage of the world’s resources. This would fulfill the hegemonic dreams of former State Department Director of Policy Planning Kennan, who once argued that we must dispense with humanitarian concerns and “deal in straight power concepts,” the better to control and consume an outsized portion of the world’s resources, presumably a privilege reserved for elite whites, and a selection of mandarins from other ethnicities with special clearances.

A criminal corporate commonwealth, supported by a fiat dollar as global reserve currency enforced by threat of war and economic collapse, will be deaf to protest from below, its weaponized satellites aimed at populations like sunlit magnifiers at a column of ants. Currency itself would be wholly digitized. This move would be sold as a positive advance as it would provide better tax accountability and therefore fund future programs of social uplift. Rather it will be employed as a means of totalitarian financial control over populations. Their wealth will be institutionalized. The concept of withdrawal will fade along with the fiction of ownership.

Terrorism will become the chosen tool of this elite power (insofar as it isn’t already). Surgical strikes, be they military, economic, or news-driven, will “keep the rabble in line” as all societies become subservient to the portents of war, the fear of inaccessible funds, and the black smears of an amoral media. The ‘deep state’ will become an obsolete term, as the nation-state will recede in memory as a relic of a strife-ridden dark age.

After all, the laissez faire cult of the beltway actually believes the planet would prosper sans nation-states. As another scene from Syriana reminds us, elite capital has a very different worldview from the majority of labor, who continue to believe the state has a role to play defending their interests. At one point in the film, Texas oil man Danny Dalton lectures lawyer Bennett Holiday on the true definition of corruption, “Corruption!? Corruption is government interference in market efficiencies in the form of government regulation. That’s Milton Friedman! He got a goddamn Nobel Prize!” The U.S. already practices free-market militarism, refusing to recognize borders, legal constraints, or geostrategic jurisdiction. Why not free-market finance and trade?

The good news is that, if you can clamber into the top one percent of the U.S. population, for instance, serving as a parasite on the grizzled hide of the corporate beast, you might yet partake of unimaginable luxuries, high in the clouds, sipping Mimosas as you transit between the ring-fenced metropoles of the world, where stateless elites intermingle.

Jason Hirthler is a veteran of the communications industry and author of The Sins of Empire: Unmasking American Imperialism. He lives in New York City and can be reached at jasonhirthler@gmail.com.

http://www.counterpunch.org/2017/03/10/the-deep-state-and-the-dark-arts/

America Is in Warp-Speed Decline—It’s Way Bigger Than Trump

As conditions in the U.S. deteriorate, the world will continue to suffer the consequences of U.S. military force—but without the mitigating influences of U.S. foreign aid and diplomacy.

Photo Credit: Getmilitaryphotos / Shutterstock

The first signs of decline are physical. Citizens don’t grow as tall. They don’t live as long. They start killing each other in large numbers.

Sounds like the post-mortem for a society that disappeared long ago, a conclusion that archaeologists deliver after sifting through bone fragments and pottery shards. Why, the puzzled scholars ask, did such a vibrant society, which produced beautiful art and remarkable scientific advances, fall apart so rapidly and leave so little behind in the unforgiving rainforest?

This time, however, the diagnosis is being provided in real time. And the society in decline is the most powerful country in the world.

According to the most recent global health surveys, the United States is witnessing a decline in life expectancy for the first time in nearly a quarter century. America is also the first high-income country to see its adults, on average, no longer growing taller. Writes Lenny Bernstein in The Washington Post:

The reasons for the United States’ lag are well known. It has the highest infant and maternal mortality rates of any of the countries in the study, and the highest obesity rate. It is the only one without universal health insurance coverage and has the “largest share of unmet health-care needs due to financial costs,” the researchers wrote.

I’d like to pin this one on Donald Trump. But U.S. decline has been ongoing for some time.

For instance, the United States ranked 16th in the 2014 Social Progress Index developed by Michael Porter at the Harvard Business School. Two years later, the United States slipped to 19th place, with particularly mediocre scores in environmental quality (#36), nutrition and basic medical care (#37), and access to basic knowledge (#40).

Let’s compare that to Canada, which sat near the top of the rankings at number two in the SPI. Canada was a little better on environmental quality (#32), quite a bit better on basic medical care (#26), and a whole lot better on access to basic knowledge (#2).

Even though Trump can’t be blamed for these mediocre social indicators, his party’s steadfast opposition to spending on social welfare and the environment certainly contributed to the problem. And Trump’s promise to “replace” Obamacare, cut social spending even further, and roll back regulatory oversight — all while boosting the Pentagon budget by an extraordinary 10 percent — will send the United States into free fall. The violent crime rate, which dropped nearly in half over the last 20 years despite what Trump claims, may well start to edge up as our pro-gun president makes firearms even more widely available and the economy takes a turn for the worse.

After what Donald Trump does to the United States, Americans won’t be able to stand tall and proud. That’s because we’ll either be short, sick, or dead.

What Goes Up…

Predictions of the eclipse of American power have been around since Donald Trump was a 30-something playboy.

It’s not just the overall health of the population and the toxicity of the environment. The United States has been hobbled by an enormous federal debt, an overextended global military presence, our failing infrastructure, and a paralyzed political system. It’s no wonder that so many Americans were sufficiently fed up in November to vote for anyone who promised to shake up the status quo.

Many Trump supporters are already having second thoughts after witnessing their leader’s first weeks in office. The new administration has given every indication that it’s exchanging the status quo for something incomparably worse.

Much of the problem lies with Trump himself. He has been erratic, often incoherent, and so disconnected from reality that he might be the first president to tweet himself out of office (if the investigation into his campaign’s connections to Moscow doesn’t get him first).

Say what you will about the early Roman emperors, they at least knew something about governance. Then, in the 1st century AD, the imperial stock started to run thin and the empire ran into serious trouble under the deranged progeny of Augustus. Donald Trump is the Caligula of our times: lascivious, incurious, and power-drunk. At what point will our American Caligula, running out of willing and even marginally suitable candidates, try to appoint a horse to his cabinet?

It’s bad enough from a domestic standpoint to have a laughing-stock for a president. The international implications are even worse. As Patrick Cockburn writes in The Independent, “It will be difficult for the U.S. to remain a super-power under a leader who is an international figure of fun and is often visibly detached from reality. His battle cry of ‘Fake News’ simply means an inability to cope with criticism or accept facts or views that contradict his own. World leaders who have met him say they are astonished by his ignorance of events at home and abroad.”

It’s no surprise that other countries are rushing to take advantage of the Trump administration’s early missteps. “It’s not just that Trump seems to have abandoned the larger geopolitical playing field to America’s principal rivals,” writes analyst Michael Klare. “He appears to be doing everything in his power to facilitate their advance at the expense of the United States. In just the first few weeks of his presidency, he has already taken numerous steps that have put the wind in both China’s and Russia’s sails, while leaving the U.S. adrift.”

China sees an enormous opportunity to cast itself as the responsible global leader on trade and climate change. Russia is angling for more influence in its near abroad, the eastern parts of Europe, and the Middle East. Germany and the European Union more generally have sought to replace the United States as a moral leader on diplomacy, human rights, and intercultural engagement.

It’s as if the empire has already fallen apart and the rivals are carving up the corpse. Except that it’s not territory that they’re grabbing, but chunks of America’s political and economic capital.

Those who believe that the United States has had only a malign influence on the world will cheer this downgrade in status. But so far only America’s soft power has taken a hit. The Pentagon remains on the ascendant. The world will continue to suffer the consequences of U.S. military force but without the mitigating influences of U.S. foreign aid and diplomacy.

What about the Stock Market?

So, if everything is doom and gloom, why is the stock market so bullish right now?

The S & P 500 rose to record highs this week. So did the Dow Jones industrial average, establishing the longest stretch of gains in 30 years. Naturally, Trump has claimed credit for all this even as he has complained of inheriting “a mess” from Barack Obama. Kellyanne Conway rushed to judgment as well, attributing the market expansion to “the Trump effect.”

The stock market responds to short-term trends and signals, and it’s focused largely on the health of the business sector. Trump has promised tax cuts, a helping hand to military contractors and energy companies, and a big infrastructure development plan. What’s not to like if you’re a CEO or a large corporation?

But beware irrational exuberance. Much of what Trump is doing is setting up Wall Street for a very unpleasant fall. The administration’s trade policies, particularly with Mexico, will hit producers hard. The infrastructure bill may not come until 2018. The impact of simultaneously adding $54 billion to the Pentagon budget and cutting taxes will throw the economy seriously out of whack.

Ultimately, however, the health of Wall Street is not the issue — it’s the health of Main Street that matters most. When the Obama dividend runs out and economic indicators start to turn south, when the coal mines and steel plants fail to magically return to their glory days of the 1950s, when farmers and blue-collar workers see how much their livelihoods depend on good relations with the world beyond U.S. borders, Trump will have a full-blown revolt on his hands. Then we’ll finally understand the real reason for the boost in Pentagon spending.

Martial law, anyone?

 

John Feffer is the director of Foreign Policy In Focus at the Institute for Policy Studies. His dystopian novel, Splinterlands, a Dispatch Books original (with Haymarket Books), will be published on December 6th. He is a TomDispatch regular.

http://www.alternet.org/world/making-america-mediocre-warpspeed-decline?akid=15264.265072.cKh0Uq&rd=1&src=newsletter1073286&t=6

Wall Street, media celebrate Trump’s address to Congress

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2 March 2017

Wall Street celebrated Donald Trump’s Tuesday speech to a joint session of Congress—in which he promised massive tax cuts for business and the virtual elimination of government regulations—with a record-breaking surge in stock values. And the US media, for its part, entered a phase that might be described as “learning to love the Donald.”

Almost universally, the major media outlets—many of which were denounced only last week by Trump as “the enemies of the people”—presented Trump’s speech as a tour de force, a truly “presidential” address that marked a “pivot” for his administration. Trump’s language and tone in the address were interpreted as a signal that he is serious about getting Congressional approval for his right-wing, pro-corporate measures, that he will not let factional infighting get in the way of showering Wall Street with riches.

The stock markets followed suit, with the Dow-Jones Industrial Average rising more than 300 points Wednesday to end above 21,000 for the first time ever. Financial stocks led the rally, with JPMorgan Chase, Bank of America and Citigroup up more than 3 percent in one day. ExxonMobil and Boeing gained more than 2 percent, as did American Express and Travelers. The broader S&P 500 index, the Nasdaq Composite Index of mainly tech stocks, and the Russell 2000 index of smaller firms all closed at record levels.

As Trump boasted in his speech, since his election victory last November 8, the Dow has soared nearly 3,000 points, as part of a stock market boom that has added an estimated $3 trillion in value to the shares of American banks and corporations.

Wall Street had plenty to celebrate even before the speech in which Trump laid out his pro-corporate agenda. The first six weeks of the Trump administration have featured a series of executive orders loosening regulations on corporate polluters, particularly in the fossil fuel industries, and on banks, hedge funds and other swindlers whose operations led to the 2008 financial crash.

Trump has reiterated his support for major tax cuts for US corporations and for wealthy individuals. He has also pledged a major increase in military spending that will benefit the giant defense contractors and an infrastructure program to funnel hundreds of billions into the coffers of private construction companies and manufacturers like Caterpillar.

These themes were spelled out in Trump’s address to a joint session of Congress Tuesday night, to general enthusiasm from Republicans, near-universal praise from the media and significant backing from congressional Democrats. Trump also pledged to wage war against public education, intensify the brutal assault on immigrant workers, slash social programs and otherwise further redistribute wealth to the financial aristocracy.

For the media, the consensus reaction to the speech appeared fully-formed within seconds of the end of the speech.

On CNN, one of several outlets deliberately barred from a briefing at the White House by press secretary Sean Spicer last week, every panelist declared the speech at least a relative success. Van Jones, a former Obama White House aide and Bernie Sanders supporter, declared that Trump’s crass exploitation of the death of Navy SEAL William Owens, in the closing section of his speech, was “one of the most extraordinary moments you have ever seen in American politics, period” and that it was the moment Trump “became president of the United States.” This was only the most grotesque prostration before Trump on the part of the media.

The Democratic response to Trump, both in the hall and afterwards, spoke volumes about the reactionary and politically bankrupt character of the so-called opposition party. Senator after senator applauded the speech: Bernie Sanders clapped for Trump’s profession of economic nationalism; Tammie Baldwin cheered his reference to Harley-Davison motorcycles, built in her state; Debbie Stabenow applauded his support for the auto industry; Amy Klobuchar praised his pledge to reduce the cost of prescription drugs.

Wall Street watched it all, and liked what it saw. The stock exchange has long known it can count on Senate Democratic Leader Charles Schumer—the biggest single recipient of Wall Street campaign contributions. The newly cooperative “tone” struck by Trump, and responded to in kind by the Democrats, is of greatest importance to finance capital, since some of most important policy changes promised by Trump, especially tax cuts for business and the wealthy, require significant Democratic support.

Divisions remain within the ruling class, centered on foreign policy. In its editorial commenting on the speech, the New York Times, a mouthpiece for the Democratic Party, focused criticism on Trump’s failure to spell out a policy “to deal with an increasingly aggressive Russia, which the Pentagon considers America’s No. 1 threat, or China, which has become more assertive in the South China Sea.” The newspaper brought up again what it called Trump’s “murky ties to Russia” to explain what dominant sections of the military-intelligence apparatus consider to be an overly accommodative attitude toward Putin.

Yet the dominant tone, including from the Times, was one of celebration of what unites the ruling class. The perspective of the financial aristocracy is that the twentieth century was one big mistake. Corporate America was compelled to make concessions to working people, because of fears provoked first by the Russian Revolution of 1917, then by the upsurge of the labor movement in the 1930s, and the extended struggles for civil rights and social gains in the 1960s. All this is to be taken back, in a rampage of reaction in which the watchword is that American corporations can do whatever they want.

Whom the gods would destroy, they first make mad. The American financial aristocracy is gripped by the delusion that they can roll back history without paying any price, counting on the role of the Democratic Party, the trade unions, and other instruments for the disorganization and disorientation of the working class.

The working class in the United States, and internationally, faces a deadly threat to all of its social gains and democratic rights. It is in the working class that enduring and genuine opposition to the Trump administration will develop. Every effort must be devoted to the building of a mass movement of working people, independent of and opposed to the Democratic Party, and based on a socialist and internationalist program.

Patrick Martin

http://www.wsws.org/en/articles/2017/03/02/pers-m02.html

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

Chinese Billionaire Says US Wasted Trillions on Wars and Wall Street

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Alibaba founder Jack Ma said the U.S. should stop blaming other countries for stealing jobs and, instead, invest in ‘your own people’

"In the past 30 years, America had 13 wars spending $2 trillion," said Alibaba founder Jack Ma. "What if the money was spent on the Midwest of the United States?"(Photo via CNBC)

“In the past 30 years, America had 13 wars spending $2 trillion,” said Alibaba founder Jack Ma. “What if the money was spent on the Midwest of the United States?” (Photo via CNBC)

Speaking at the World Economic Forum in Switzerland on Wednesday, Chinese billionaire Jack Ma accused the United States of spending too much money on foreign wars and risky financial speculation and not enough money “on your own people.”

The founder of the world’s largest retailer, Alibaba, was addressing a question posed by CNBC‘s Andrew Ross Sorkin about the U.S. economy in relation to China.

In response, Ma said the U.S. should stop blaming other countries and look at its own spending priorities:

“It’s not that other countries steal jobs from you guys,” Ma said. “It’s your strategy. You did not distribute the money and things in a proper way.”

“It’s not that other countries steal jobs from you guys. It’s your strategy. You did not distribute the money and things in a proper way.”He said the U.S. has wasted over $14 trillion in fighting wars over the past 30 years rather than investing in infrastructure at home.

Ma said that when Thomas Friedman published the 2005 pro-globalization tribute The World is Flat, taking advantage of the world economy seemed like “a perfect strategy” for the U.S.

“We just want the technology, and the IP, and the brand, and we’ll leave the other jobs” to other countries like Mexico and China, he said, according to Business Insider. “American international companies made millions and millions of dollars from globalization.”

“The past 30 years, IBM, Cisco, Microsoft, they’ve made tens of millions—the profits they’ve made are much more than the four Chinese banks put together,” he continued. “But where did the money go?”

“The money goes to Wall Street. Then what happened? Year 2008 wiped out $19.2 trillion in U.S. income,” he said. What’s more, he added, “In the past 30 years, America had 13 wars spending $14.2 trillion…no matter how good your strategy is you’re supposed to spend money on your own people.”

“What if the money was spent on the Midwest of the United States?” he asked. “What if they had spent part of that money on building up their infrastructure, helping white-collar and blue-collar workers? You’re supposed to spend money on your own people.”

While he did emphasize that globalization is a good thing, according to CNBC, Ma reportedly noted that it “‘should be inclusive,’ with the spoils not just going to the wealthy few.”

Ma’s critique came weeks after he attended a meeting in New York City with President-elect Donald Trump, who has threatened to impose punitive tariffs against the Asian superpower.

When asked about that conversation, the internet tycoon “said the consequences of a trade war between the world’s biggest and second-largest economies would be too grave for both countries to bear and they should do everything to avoid it,” reported the South China Morning Post, which Ma owns.

“It’s so easy to launch a war. It’s so difficult, almost impossible sometimes, to terminate that war,” he said. “The Iraq war, the Afghanistan war, are those finished?”