Nick Hanauer is one of the richest men in America, and he’s written a compelling letter to all the other super rich people out there about the state of America’s income inequality, which was published in Politico. You might think he’s writing to all his rich friends to warn them about Democrats talking more and more about wealth redistribution, or about U.N. initiatives to prevent privatizing things like fresh water. You might think he’s one of the people behind calls to start making plans to go hide in New Zealand. This letter could read like that, if you don’t read the whole thing, but it turns out, he’s a rich person who gets it.
Hanauer starts off his “memo” talking about how he got super rich. Then he says:
But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code.
Right off the bat, he acknowledges that not all the super rich got that way through the sweat of their brow, or because they were unusually intelligent. Yet we hear all the time from Republicans that higher taxes on the rich punishes people for hard work – the backbone of American culture. They never talk about the real backbone of America, which is the middle class, and how they’re punished not just by policy, but also by the super rich.
Hanauer believes that what sets him apart from others is his ability to see the future. That enables him to know what risks to take, and when, and he profits off them. What does he see for the future of the super rich? He said:
I see pitchforks.
There are pitchforks, and possibly torches, because while he and his super rich friends are “thriving beyond the dreams of any plutocrats in history,” the other 99.99 percent of America is struggling. The French Revolution, the Russian Revolution, even Arab Spring, had their roots in extreme inequality of one type or another. Hanauer warns his friends:
I know you fellow .01%ers tend to dismiss this kind of argument; I’ve had many of you tell me to my face I’m completely bonkers. And yes, I know there are many of you who are convinced that because you saw a poor kid with an iPhone that one time, inequality is a fiction.
Here’s what I say to you: You’re living in a dream world. What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time.
He goes on to say that “revolutions, like bankruptcies, come gradually, and then suddenly.” He’s right, too. One moment it’s a few disaffected people, with movements that seem to fizzle. That can go on for years, like what’s happened to the Occupy movement, and what people believe will happen to the movements wrought from Ferguson and Baltimore. But then the masses are increasingly disaffected, and increasingly angry about having no voice. When they figure out how to find that voice, they will take it, quickly, painfully, and violently if they have to. History has bore this out repeatedly.
In the face of this, what does Hanauer recommend we do? Is he really, quietly recommending that all the rich people get the hell out of Dodge so they don’t have to face the consequences? No, actually he’s not. He wants us to adjust our policies so they’re more favorable to everybody, not a select, rich few. He says:
The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.
What a great idea. My suggestion to you is: Let’s do it all over again. We’ve got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too. [emphasis mine]
He also points out one salient fact that those who tout labor costs as a market price subject to the laws of supply and demand tend to ignore: Pay for CEOs, hedge fund managers and other investment banker-types, and people in those sectors has skyrocketed, and yet, we have more of them, not less. If rising wages and salaries mean less employment, then why do we have so many more of these people than we used to?
Guess the “fact” that rising wages means less employment only applies to the unwashed masses, and not the super rich in their ivory towers. The unwashed masses, he says, are the engine of the economy, not the super rich. Yet, the Republican-pushed trickle-down theory would have us believe that the rich getting richer is good, while the poor getting any richer at all will destroy us. It’s flat-out wrong, and Hanauer knows it. More of the super-rich need to know it, too, and stop lobbying Congress to shrink government by letting the “free market” work, and gutting the social safety net.
How does the size of the government fit into Hanauer’s ideas? Do we need more, or less, or is the current size good? Republicans want to shrink the government, and he actually agrees. Before you burn him at the stake as a sham, though, consider this: He says you shrink the government the way you shrink an industry – by reducing demand for it. Why do we have so much government that the Republicans hate? Because we have so much need for it, but all that demand is not going to the right places. Therefore, calls to shrink it are not going to the right place, either. Hanauer says:
The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit. [emphasis mine]
He does blast Democrats for pushing the message that we need to treat workers better because we feel sorry for them. He’s right when he says that doesn’t help the conversation. What can help convince the plutocrats to give it a rest is looking at it from business and economic standpoints. The proper standpoints are correctly defining who creates the jobs, and who boosts the profit margins, around here. It’s not the rich. It’s the middle class.
Hanauer says, to his super rich friends: “Capitalism left unchecked tends toward concentration and collapse.” Unchecked, unfettered capitalism, this idea that the so-called “free market” can take care of everything if we’d just let it, is catapulting us toward ruin, not prosperity.
The super rich, and their Congressional Republican friends, would do well to learn this, and learn it soon. Or, as Hanauer puts it, “We could sit back, do nothing, enjoy our yachts. And wait for the pitchforks.” What he didn’t say is, “Your choice.”
You can watch his TED Talk here:
Featured image via YouTube screen capture
Here’s a very interesting pdf document, worthy of a good read on banking history, the IndoSwiss Royal family and the Federal Reserve.
Uploaded by GnosticMedia on Feb 4, 2011
One of the factions that controls nearly every moment of our lives is hardly understood by the large majority of the population. To gain an understanding of today’s topic deepens our understanding of the world and how it works and exactly what we can do to effect change when and where needed.
Our deepening investigation into the freedom of consciousness cannot go without a deeper understanding of what we all use for exchange or trade – money.
Exactly how we define the word ‘money’ defines our very society and affects nearly every facet of our lives. It also tells us exactly what we can expect from our political representatives. All we need is to understand the language of money.
Beginning today in this detailed two part series we begin to look into the fundamental concepts of money: What is money and how is it defined? What is the history of money? How does it tie to religion, government and private business? What is the difference between credit and money? What is FIAT money? Is there a difference between private versus nationalized banks and how they operate? And why is any of this important to YOU? And how could it possibly affect YOUR life?
Stephen Zarlenga is the founder of the American Monetary Institute (AMI) – the leading American monetary think tank for monetary history, theory and reform. An economic historian and author, Zarlenga provides us the clearest picture of how money and monetary systems work in his incredible 2002 tome The Lost Science of Money, and he’s also the author of the American Monetary Act, submitted to congress by Dennis Kucinich in March of this year.
Listen to the entire interview at:
More from Gnostic Media at:
We certainly would’ve avoided the sub-prime collapse in 2008 if stiffer laws were in place to punish wrong doing, thanks for the link DP! ~A~}
Tyler Durden on 04/12/2012 – 10:11
Let’s be clear: financial misdeeds ruin lives. If a Madoff takes your money and uses it to pay off other investors in a ponzi scheme, you won’t be able to get it back. If a Blankfein underling issues you with misleading advice, and then bets against you (creaming himself a nice profit), you won’t be able to get it back. If a Corzine steals your money and uses it to bet on the European sovereign debt market, you might not be able to get it back. You might end up in poverty or worse. You might lose your children’s college money, your retirement money, or capital you needed for your business. You might lose your home. So shouldn’t we take a tough line against financial misdeeds? Shouldn’t tricking and stealing from investors, tricking and stealing from the public, tricking and stealing from clients carry a heavy disincentive, like death? Would a corrupt banker not think twice about their misdeeds if they knew that apprehension would mean a noose around their neck and a kicked bucket? A lot of commentators — like for example, Max Keiser — seem to think so. And in China financial crimes are treated with a gravity far beyond a cushy minimum security cell, and home visits on the weekends. Financial criminals in China are often executed.
Gee while the Republicons are waging an austerity war against women, children and the poor why don’t we take a look at what’s going on in the Pentagons black budget for unnecessary, wasteful spending? Bet if they were honest about the spending, Americans would agree that billions of dollars should be cut and deferred back into the general budget to save desperately needed programs from being eliminated. Thanks goes to kevin for another great find!
The military keeps a lot of little things secret. It could be the exact range of a jammer, sensitive missile data or the timing of a raid. But the larger context — that jammers and missiles exist, or that our forces conduct raids — is unclassified and even listed in the Pentagon’s budget for all to see.
These secrets are different. Their names are obscured by code words, or simply listed as “classified programs.” But with a little digging, we can get a (limited) sense of how much money is being spent on the U.S. government’s most secret military projects. In fact, you can take a look for yourself. We’ve put together this spreadsheet with the latest information. Feel free to add, subtract and edit it — kind of like a classified cash wiki.
This year, the military’s black budget appears to be a little over $51 billion, down from the $56 billion which held steady for the last two years, not including inflation. The reductions are also not really a surprise considering the cuts happening nearly everywhere else.
Because it’s not easy saying we have the complete number. The Pentagon likes to play a little hide and seek with its black budget. Projects with code names like the Navy’s “RETRACT JUNIPER” and “LINK PLUMERIA” are simple enough to find in the research development, testing and evaluation budget (.pdf). As are many of the Army’s “TRACTOR” projects: “TRACTOR NAIL,” “TRACTOR CAGE,” and so on. But then comes along a project like “TRACTOR DESK” hiding in one of the Army’s eight research budget documents, while others find their way to the operations and maintenance and procurement budgets.
These projects are also where to go when searching for what’s getting cut. Something called the “Classified Program USD(P),” formerly valued around a respectable $100 million, had its budget reduced to zero. “TRACTOR JUTE” is on life support and “COBRA JUDY” had the sting taken out of it.
Most other projects saw lesser cuts, however, and others like “RETRACT MAPLE” even saw minor gains. This is also while the researcher at Darpa only received a slight trim.
Though to put it in perspective, the Pentagon is still spending more on classified projects than most nations spend on their entire military forces in year. And that’s just the beginning. The budget for the Military Intelligence Program was released this week, adding another $19.2 billion — down from a record $27 billion in 2010. That also doesn’t include the budget for the National Intelligence Program, which oversees spy agencies like the CIA. Their budget hasn’t been released yet but prior budgets have shown it to hover in the $50 billion range. So we could be talking about $120 billion or more in black accounts.
There’s also a slight problem. The Pentagon has another “classified” budget line with the money to show for it, but the dollar-amounts don’t match the individual projects. In other words, the exact amount the Pentagon spends on its black projects may, in fact, be a mystery even to itself.
Over the past year, I’ve seen these words posted by many of the FP’ers here, and they are thus: “It’s sad to see what passes for happy news about our economy these days.” IMHO, folks are grabbing at straws. Frankly, I get the sense from some that it’s bordering on (wilted) “green shoots” déjà vu. Those talking points didn’t work for our Party in 2010, and they sure as hell won’t do the job for us in 2012.
Perhaps, as Paul Krugman notes in Monday’s NY Times (and if you read the collective commentary of some of the better-known economic pundits in the MSM over the past 48 hours), we really are teetering on the abyss.
Many important opinion pieces on these inconvenient economic realities have been published over the past couple of days. Phenomenal in their succinct and elegantly simple observations of fact, I’m providing links to them, down below. They speak for themselves. Taken together, they provide us with the over-arching narrative on much of what is wrong within our global society, today; and, here in the U.S., where many of our international economic woes began.
Two pieces stand out as bookends to these truths, however. First, as Kossack La Feminista noted in her post here less than 24 hours ago, covering a column in the (UK) Independent by Robert Fisk: “Bankers are the dictators of the West.”
The other bookend to this weekend’s enlightening narrative/commentary appears in Monday’s NY Times, by none other than Paul Krugman, in: “Depression and Democracy.” The opening sentence pretty much says it all…
It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege.
On that last point, I am not being alarmist. On the political as on the economic front it’s important not to fall into the “not as bad as” trap. High unemployment isn’t O.K. just because it hasn’t hit 1933 levels; ominous political trends shouldn’t be dismissed just because there’s no Hitler in sight.Let’s talk, in particular, about what’s happening in Europe — not because all is well with America, but because the gravity of European political developments isn’t widely understood.
Bold type is diarist’s emphasis.
Krugman discusses the rise of authoritarian rule in Hungary, and he closes with a warning — one which certainly resonates here in the U.S. today, too — economic unrest breeds political unrest..
He states: “…it’s a sample of what may happen much more widely if this depression continues.”
Krugman notes that Europe’s leaders must try to halt the authoritarian slide in Hungary “…or [they] risk losing everything they stand for. “
The Nobel laureate closes with the following warning…
…they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy — and the breakup of the euro may be the least of their worries.
For many years, much to the chagrin of some in this community, I’ve been saying that the biggest tactical mistake the Obama administration made (and, to some extent, continues to make, even when they make occasional pronouncements to the contrary) was when they decided to not use the “D”-word (with regard to the shambles that were left behind for the current administration to address) from the very first day they took office. Tonight, as noted in a highly-rec’d diary in the community, the Party line—and as Morgenson also notes in Sunday’s NY Times, the media’s beginning to get the semblance of a clue, as well–is changing. But, don’t look too closely, because you’ll see that many/most of the same people that were managing the economy when Bush was in office are (still) at the helm, today.
Morgenson and NY Times Editor Eduardo Porter also authored two outstanding columns (in-between Fisk’s and Krugman’s “bookends”), this weekend, about the basic realities that, given record-breaking U.S. income inequality and the reality that our nation’s too-big-to-fail banks are bigger now than they’ve ever been, our economy—and our very way of life–is more at risk now than ever.
Read together (and while this certainly is NOT news to many reading this), these four pieces by Fisk, Porter, Morgenson, and Krugman, all appearing within the MSM in the past 48 hours, serve as a wake-up call: The very fabric of our society—both nationally and globally, as we’ve known it–is at risk.
First, here’s Fisk:
…The banks and the rating agencies have become the dictators of the West. Like the Mubaraks and Ben Alis, the banks believed – and still believe – they are owners of their countries. The elections which give them power have – through the gutlessness and collusion of governments – become as false as the polls to which the Arabs were forced to troop decade after decade to anoint their own national property owners. Goldman Sachs and the Royal Bank of Scotland became the Mubaraks and Ben Alis of the US and the UK, each gobbling up the people’s wealth in bogus rewards and bonuses for their vicious bosses on a scale infinitely more rapacious than their greedy Arab dictator-brothers could imagine.I didn’t need Charles Ferguson’s Inside Job on BBC2 this week – though it helped – to teach me that the ratings agencies and the US banks are interchangeable, that their personnel move seamlessly between agency, bank and US government. The ratings lads (almost always lads, of course) who AAA-rated sub-prime loans and derivatives in America are now – via their poisonous influence on the markets – clawing down the people of Europe by threatening to lower or withdraw the very same ratings from European nations which they lavished upon criminals before the financial crash in the US. I believe that understatement tends to win arguments. But, forgive me, who are these creatures whose ratings agencies now put more fear into the French than Rommel did in 1940?
Why don’t my journalist mates in Wall Street tell me?
…The Arabs have at least begun to shrug off this nonsense. But when the Wall Street protesters do the same, they become “anarchists”, the social “terrorists” of American streets who dare to demand that the Bernankes and Geithners should face the same kind of trial as Hosni Mubarak. We in the West – our governments – have created our dictators. But, unlike the Arabs, we can’t touch them.
And, here’s Pulitzer Prize-winner Gretchen Morgenson, from Sunday’s NY Times: “The Fattest or the Fittest?”
ELIMINATING the benefits reaped by institutions that are too politically powerful and interconnected to fail has been an elusive goal in the aftermath of the credit crisis. Institutions most likely to receive assistance from the federal government if they become troubled — behemoths like Citigroup, Bank of America or Wells Fargo — have grown only larger in recent years. Efforts to pare down these banks have met well-financed resistance among policy makers.
She notes that “…reducing the perils of gargantuan institutions — and the threat to taxpayers — is an idea that seems to be taking hold in Washington. To be sure, the army arguing for change is far outgunned by the battalions of bankers and lobbyists working to maintain the status quo. But some combatants seeking reform believe they are making headway.”
Exemplifying this new development, Morgenson points to Richard W. Fisher, the president of the Dallas branch of the Federal Reserve.
…In a speech last month he described, quite colorfully, the problems of these unwieldy institutions and the regulatory ethic “that coddles survival of the fattest rather than promoting survival of the fittest.” Bank regulators should follow the lead of the health authorities battling obesity rates among our population, he said, adding that he favored “an international accord that would break up these institutions into more manageable size.”This is a banker talking, not a member of the Occupy Wall Street drum circle…
(More from Morgenson in a moment.)
In his NY Times’ “Sunday Observer” editorial, Eduardo Porter talks of “The 1 Percent Club’s Misguided Protectors.”
The Republican right is pushing back hard against the 99 percent movement and its focus on the widening chasm between the fortunes of the few at the summit of the income scale and everybody else…
Porter then continues to echo a theme (which he documents quite nicely with graphics—checkout his commentary, linked just a few sentences above) which, at this point, is very familiar to those in this community…
…This indifference is grounded in a proposition that has for decades dominated American debate over redistributive policies like steeper taxes for the rich: that inequality is an expected outcome of economic growth, and that efforts to tamp down inequality would slow growth down. As President Obama said in his speech in Kansas last week, this strain of thought goes back to at least the turn of the last century when “there were people who thought massive inequality and exploitation of people was just the price you pay for progress.”
(As most reading this post already know, the U.S. is currently experiencing the greatest level of income inequality between our nation’s haves and have-nots since reliable metrics [back in the nineteen-teens] were first introduced to adequately measure those statistics.)
Porter discusses International Monetary Fund (IMF) research by economists Andrew Berg and Jonathan Ostry that “…reveals the link between inequality and the sustainability of economic growth. Igniting growth is easier than maintaining it. They found that in high-inequality nations spurts of growth ended more quickly, and often in painful contractions.”
More from Porter…
…The economists found that income distribution contributes more to the sustainability of economic growth than does the quality of a country’s political institutions, its foreign debt and openness to trade, the level of foreign investment in the economy and whether its exchange rate is competitive.It’s not too hard to see why. Extreme inequality blocks opportunity for the poor. It can breed resentment and political instability — discouraging investment — and lead to political polarization and gridlock, splitting the political system into haves and have-nots. And it can make it harder for governments to address economic imbalances and brewing crises.
Porter concludes with more statistical annotation supporting the reality that “…inequality in America has soared over the last 30 years, approaching and even surpassing that in many poor countries. Today, America is an outlier among industrial nations. Its distribution of income looks closer to that of Argentina than, say, Germany.”
In his closing sentences he compares what has happened in the U.S. economy with the…
… characteristics of boom-and-busts in less developed nations. It was triggered, in part, by 1 percenters on Wall Street persuading regulators to remove restrictions on their casino. It led workers to pile on debt to supplement falling incomes. It ended with a vast deployment of tax dollars to bail out fallen plutocrats. And our political system seems unable to deal with the aftermath.
Gretchen Morgenson spends the second half of her column discussing one Democrat who’s attempting to deal with “the aftermath,” Ohio Democratic Senator Sherrod Brown. He’s doing everything he can, in his role as the Chair of the Senate Banking subcommittee on financial institutions and consumer protection, to put a saddle on “megabank risk.”
…In April 2010, he was a co-sponsor of the Safe Banking Act of 2010 with Ted Kaufman, the former Democratic senator from Delaware. The bill, which would break up some of the largest banks by requiring caps on institution size and leverage, ran into a buzz saw of opposition from the usual suspects.But Mr. Brown soldiers on; he said in an interview on Thursday that he, too, believes the debate is changing. “We’re seeing sentiment grow on the Brown-Kaufman idea,” he said. “We are seeing some people who are pretty conservative here understanding the implicit subsidies these megabanks receive. Our goal is that senators understand this to the point of wanting to take action.”
As Morgenson notes in her closing comments from Sunday, Wall Street fatcats “…are being paid for taking risks that generate lush bonuses when things go well but that require taxpayer bailouts when the tide turns. Main Street understands that this is wrong and that allowing it to continue is dangerous. It’s past time that Washington did something about it.”
As Krugman reminds us, today, our near-term and future well-being relies upon responsible government action, both here and abroad, coming to pass—not just in words but in actions–NOW.
I cannot help but get a sense that we are witnessing a massive historical failure of government, not just nationally, but globally. At then end of the day, compared to the suffering it will bring, it won’t matter who’s to blame.
We are all in this together. It may be the greatest bipartisan sentiment of all. Dare I say it…even a lot of Republicans, and perhaps a few bankers, will understand that.