Cracks in the Liberal Order
Ross Douthat, The New York Times
DEC. 26, 2015
In the twenty-five years since the fall of the Berlin Wall, the architecture of liberal modernity has looked relatively stable. Not flawless or wonderful or ideal, to be sure; not free of discontents and decadence. But it’s been hard to imagine the basic liberal democratic capitalist order cracking up, let alone envision what might take its place.
Through the dot-com bust, 9/11, the Iraq war, and the financial crisis, it was striking how consensus held, how elites kept circulating, how quickly populist movements collapsed or were co-opted, how Washington and Brussels consolidated power even when their projects failed. No new ideological movement, whether radical or reactionary, emerged to offer the alternative to liberalism that fascism and Marxism and throne-and-altar traditionalism once supplied. And no external adversary, whether Putinist or Islamist or Chinese, seemed to offer a better way than ours.
Here in the dying days of 2015, though, something seems to have shifted. For the first time in a generation, the theme of this year was the liberal order’s vulnerability, not its resilience. 2015 was a memento mori moment for our institutions — a year of cracks in the system, of crumbling firewalls, of reminders that all orders pass away.
Now normally I wouldn’t quote Ross “Thoroughgoing Asshat” Douthat because he’s basically a Neolib self-righteous elitist. He’s also a moron. But he is in fact as right as a stopped clock on this one- the era of the Neoliberal consensus, the anti-democratic belief of the privileged “Best and Brightest” who had the money and connections to buy themselves a prestigious degree no matter how stupid and inbred they actually are that they alone are best suited to guide the destiny of nations and institutions while the rest of us mere proletariat (you know, the 99%) are barely able to not drool at the table and wipe our own bottoms.
“Oh no dear, that’s a dessert fork not a salad fork.” While cutlery varies a dessert fork has either 3 tines of equal size or 4 tines with the leftmost being wider than the others. By contrast a salad fork has 4 tines with a longer cut in the center. They are both smaller than a dinner fork. The dessert fork is at the top of the plate, on the inside when a special relish fork is provided. The salad fork is at the extreme left in Anglo culture, next to the plate in French. This is because the place setting is presented in the order utensils will be used from outside to the plate and in most cases soiled cutlery departs with the dish the food was consumed on. Am I a Class Traitor? Yes, why do you ask?.
We live in Revolutionary times. People are extremely angry with 40 years of abject failure and despite elite consensus they are not dumb. They will keep voting for change until they get it. Unless the Neoliberal elite are very careful and lucky the next forks we shall be talking about are pitchforks followed by the tumbrel.
The GOP Will Be Changed Forever
By Eugene Robinson, Washington Post via Truthdig
Posted on Dec 28, 2015
History will remember 2015 as the year when The Republican Party As We Knew It was destroyed by Donald Trump. An entity called the GOP will survive – but can never be the same.
Am I overstating Trump’s impact, given that not a single vote has been cast? Hardly. I’m not sure it’s possible to exaggerate how the Trump phenomenon has torn the party apart, revealing a chasm between establishment and base that is far too wide to bridge with stale Reagan-era rhetoric. Can you picture the Trump legions meekly falling in line behind Jeb Bush or Marco Rubio? I can’t either.
At year’s end, the campaign is dominated by three candidates who appeal over the heads of the establishment and straight to the unruly base: Ted Cruz, who negates the fact that he is a sitting senator by waging all-out war against the party leadership; Ben Carson, a distinguished neurosurgeon who seems increasingly out of his depth; and Trump, the undeniable front-runner.
What Trump has done is call out the establishment on years of dishonest rhetoric. Progressives often asked why so many working-class whites went against their own economic interests by supporting the GOP. The answer is that Republicans appealed to these voters on cultural grounds, subtly exploiting their resentments and fears.
Enter Trump, who has the temerity to point out that the party establishment says one thing but does another.
Trump has given voice to the ugliness and anger that the party spent years encouraging and exploiting. He let the cat out of the bag, and it’s hungry.
The party might nominate Trump, in which case the establishment will have lost all control. Or party leaders might somehow find a way to defeat him, in which case they will have lost the allegiance of much of the base. In either event, the GOP we once knew is irredeemably a thing of the past.
Bernie Sanders is exactly correct in thinking that between him and Hillary, he is best positioned to siphon off some (not all, but some) of Trump’s support. Personally I think Trump will be jobbed by the Republican Party and The Donald will be driven by ego and pique to mount a third party effort. If he doesn’t millions of Republicans will be looking for a new way to express their anger at the Neoliberal consensus. Bernie fits the bill. Now you may say that Trump’s audience is bigots and racists and yeah, that’s true. But there are plenty of Republican Presidential candidates who are willing to pander to bigots and racists if that’s what it takes. What makes The Donald different?
He’s also running against the Right Right Wing of the Money Party establishment. They lie to people constantly and never, ever deliver except to the .01% and corporations.
Over on the Not-So-Right-But-Still-Right Wing of the Money Party establishment we have Hillary mouthing promises that we know after 8 years of Barack Obama failure she will ignore the moment she gets elected.
Where is the choice? All we have are echos. It is worth noting that between the 2 Wings of the Money Party establishment, they’ve pissed off about 45% of their base. Independents were already pissed off, Centrists do not exist.
And economically, catastrophic collapse is all but inevitable-
2016 Is An Easy Year To Predict
By Raúl Ilargi Meijer, Naked Capitalism
December 29, 2015
(A) whole bunch of irreversible things happened in 2015 that were not recognized for what they are, either intentionally or by ‘accident’. Things that will therefore now be forced to play out in 2016, when denial will no longer be an available option.
2015 was … the year when deflation, closely linked -but by no means limited- to China, got a firm hold on the global economy. Denial and fear have restricted our understanding of this development just as much.
The price of oil was a big story, and China plays the lead role in that story, even if again poorly understood. All the reports and opinions about OPEC plans and ‘tactics’ to squeeze US frackers are hollow, since neither OPEC as a whole nor its separate members have the luxury anymore to engage in tactical games; they’re all too squeezed by the demise of Chinese demand growth, if not demand, period.
Ever since 2008, the entire world economy has been kept afloat by the $25 trillion or so that China printed to build overleveraged overcapacity. And now that is gone, never to return. There is nowhere else left for our economies to turn for growth. Everyone counted on China to take them down the yellow brick road to la-la-land, forever. And then it didn’t happen.
What 2015 should have made clear, and did in a way but not nearly clear enough, is that the world economy is falling apart due to a Ponzi bubble of over-production, over-capacity, over-investment, over-borrowing, all of which was grossly overleveraged. And that this now is, for lack of a better word, over.
Not only do the losses and redemptions at investment funds drive these funds to the brink, everything they’ve invested in also tumbles. Add to this the fact that most of the investments are highly leveraged, which means that typically a loss of just a few percent can wipe out all of the principal, and a notion of the risks becomes clear.
Of course, since many of the funds hold the same or similar investments, we can add yet another risk factor: contagion. Things will blow up first where the risk is highest. Then everything else becomes riskier. Low interest rates have caused many parties to chase high yields -junk bonds-, and that’s where risks are highest.
This is the 2015 story of investment funds, and it will continue, and aggravate, in 2016. Ultra low interest rates drive economies into deflation and investors into ever riskier assets. This is a process of unavoidable deterioration, unstoppable until it has played out in full. A 0.25% rate hike won’t do anything to change that.
Why do interest rate hikes pose such a problem? Because ZIRP has invited if not beckoned everyone to be up to their necks in debt. The entire economy is being kept lopsidedly upright, Wile. E style, by debt. Asset prices, even as commodities have now begun to fall in serious fashion, still look sort of OK, but only until you start to look at the amount of leverage that’s pinning it all up.
Once you see that, you understand how fragile it all is. Go one step further, and it becomes clear that this exponentially growing ‘machinery‘ can only be ‘sustained’ by ever more debt and leverage. Until it no longer can.
Commodities prices have nowhere to go but down for a long time to come. These prices have been propped up by the illusionary expectations for Chinese growth and demand, and now that growth is gone. So, too, then, must the over-leveraged over-investments both in China and abroad.
But there’s another, again interlinked, development that is very poorly understood. Which is that in a debt deflation, the ‘money’ that appears to be real and present in leveraged investments more often than not doesn’t get pulled out of one ‘investment’ only to be put into another, it just goes POOF, it vanishes.
And though it may seem strange, conventional economics has a very hard time with that. In the eyes of that field, if you don’t spend your money, you must be saving it. The possibility of losing it altogether is not a viable option. Or, if you lose it, someone else must be gaining it, zero-sum style.
But that view ignores the entire ‘pyramid’ of leveraged loans and investments and commodity prices, which precisely because that pyramid contained no more than a few percentage points of ‘real collateral’ to underpin everything it kept afloat, should have been a red flag. Because this is the very essence of debt deflation.
I certainly won’t weep for the Billionaires who will lose the most in asset value (inevitable because they own most of it) and have to adjust to the fact that double digit yields are unsustainable in a single digit growth economy- screw you, you greedy assholes.
Nor do I wish to convey a loss of faith in the principles of Modern Monetary Theory. The reason this “money” will go POOF! is that it never represented anything except notional value created by the leverage of non-sovereign institutions. Fiat currency of a sovereign government can only lose value relative to the cost of imported goods. Commodity prices are dropping like a stone.
Further, as a good classical Keynesian, I would like to point out that this is an issue of demand, not supply. What good is a factory that can produce a Million cars a year if people can’t afford to buy them?
And finally we get to the point, why is deflation bad for you? Well, what it means is that Millions of jobs will be lost because there is no incentive to create new capacity. The danger is that there will be even less demand due to loss of income creating what is called a deflationary spiral. Think it can’t happen here? It did in Japan.
Fortunately I have a solution. Tax the hell out of the wealthy and spend it on creating jobs. Use government policy to make it more expensive to store wealth than it is to put it to productive use.
The current Neoliberal system can not stand. There are too many of us and not enough of them.