Blackmail on an institutional scale

By Alexander Ross

Well, we've had an interesting couple of weeks. In my mind, the biggest event these past two weeks was definitely the admission that Bank of America got cold feet over the Merrill Lynch takeover and the chief executive had to effectively be blackmailed by Paulson and Bernanke to continue with the announced takeover. All this was admitted as much in the New York Times, and nobody batted an eyelid.

We live in strange times, but now the citizens are baying for blood and politicians are answering the call in spades. The only problem with that is they have no idea what they are doing but conversely they want to be seen to be doing something.

Last week, we were treated to the spectacles of the ultimate bankers’ and politicians’ showdown, at least for the English-speaking world. We saw the failed chief executives of HBOS and RBS take a total skewering at a parliamentary select committee on Monday, and then on Wednesday it was the American version, with top bankers all being summoned to a hearing in Washington. Although their tone wasn’t as contrite as their UK counterparts, and perhaps because they haven’t been nationalized yet by less obvious magic, they realize that public opinion is against the banking industry for the excesses of the past couple of decades.

Within all this extra global spending, consumers are actually paying down debt with any spare cash, in preference, to just going out and spending it. This data comes to us from Australia, which instituted its own spending package and surprise, surprise, the data shows that indebted consumers preferred to pay down debts rather than spend the money.

It could be worse. In the 1990s, when the Japanese government made a similar move, a lot of the extra cash ended up in extra savings.

Perhaps the politicians are hoping that by throwing enough cash at the problem that the problem will go away, and they won’t be labeled as the lame ducks they are.

Here in Japan, the hopelessly outclassed premier, Taro Aso, starts trying to rewrite history and mentions that he was against the corporatization of the Post Office, so effectively pushed through by his successful predecessor, Junichiro Koizumi. The former premier was so flabbergasted that he could only laugh in response.

This is unprecedented in Japan’s postwar economic history; it only shows a total lack of understanding of the situation facing this country right now. Then, his politically appointed finance minister gets a well deserved roasting for falling asleep at an important meeting of politicians. Good on him, I say; he showed the true utility of these multilateral ministerial parties.

You may not be aware from the media at least, but the U.S. unemployment rate is probably around 20% already, if one reads Extrapolate these trends a little, and we are already in a depression. For most working people, we all know that, but the media are trying to tell us that we aren’t, in the hope that if we don’t realize it, we’ll continue spending.

One investment you should make, and this is probably the cheapest, longest lasting effective investment, is an investment in your own health. A good friend is about to publish his manuscript on the subject of how capitalism and healthy societies are mutually exclusive forces and the more a society becomes engaged in capitalism, the worse it is for general health levels and later generations to succeed and prosper.

Look at the U.S., or any OECD nation, health and disease levels are all showing worsening trends. I rest my case.

The writer is an independent investor in Tokyo.

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This is a strange "article". There are several incoherent sentences and unverifiable "facts". For example:

What does "they haven’t been nationalized yet by less obvious magic" mean?

The word "data" is plural.

Who is "the hopelessly outclassed premier, Taro Aso", outclassed by?

"the U.S. unemployment rate is probably around 20% already, if one reads": I looked at that site and it doesn't seem to contain any useful information whatsoever, and certainly nothing about a 20% unemployment rate. Please give a link to the page which shows this information.

"Look at the U.S., or any OECD nation, health and disease levels are all showing worsening trends. I rest my case.": How do you explain increasing longevity in the US and OECD nations then?

Very poor. D-.

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I feel sorry for the author. He obviously has a hard time organizing his thoughts.

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Where is the Blackmail? Only in the beginning of the story. Then the topic disappears.

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Random strange article. No point here other than venting random thoughts.

We do not live in strange times. We live in the inevitable times that follow a generation of excess and an economic system that behaves like a rampant virus rather than an organized and controlled system.

We institutionalized greed and made heroes of the people who personified avarice and greed. We made gurus of people who cared little for anything but money and we all fell prey to their pipe dream of individual wealth and mega prosperity.

What we should have been doing, all along, is valuing sustainable systems. We should have honored the idea of fair and understandable trade and markets. We should have known that rabid growth would never last forever or our credit driven mega modern lives would never make us happy or provide for our security.

We should have nurtured and maintained our local industries and jobs. We should have applied more value to heroes who work in our communities and contribute to the well being of people instead of profits. And our gurus should have been people telling us to save our money, live within our means and to value community and society over wealth.

But we didn't... So now it is payback time. And guess what? The heroes of capitolism are not standing shoulder to shoulder with the misled masses. They are ok while we see our communities fall into depression.

So do we feely sympathy for these same leaders being raked over the political fires? No. It is better than the blindfold and wall experience many of them deserve. And it makes us feel a little better for our own stupidity over the last couple decades.

What comes next is what we should be writing articles about. Where will the jobs to employ the many out of work people come from? Will "green" technology and industry pull us out of our decline?

We need to think about how we will reinvent our local economies to provide jobs while still encouraging enough global openness to maintain our economies. We need to think about how a shift from consumerism to a more modest life will impact everything around us, and how we can retool our society to employ people for services over sales.

We can no longer allow the captains of industry to determine our collective fate. Nor can we continue to buy into the dreams they sell us in advertising. We need new dreams. Dreams for a sustainable and more balanced future. Dreams that will come from necessity, but that can restore some of the long lost values that once bound commuities together and made business an integrated part of our communities.

It is time we stopped complaining or ranting like this article has done. It is time to accept our situation and to begin to look for real solutions. I believe these rest in the restoration of micro economies in our communities. I believe the future must be in greater civil control over business and greater accountability of corporations to society. We need intelligent and insightful regulation and a diversification from the rabid capitolism of the last few decades to a socially, environmentally and culturally responsible business world where the interests of society stand equal and protected along side the interests of business.

Change is now inevitable. The sooner we accept this fact and move on the better.

JT. This article is truly terrible. Want a new writer with at least a point to make?

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And our gurus should have been people telling us to save our money, live within our means and to value community and society over wealth.

Well spoken tkoind2.

When the student is ready the teacher will appear.

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Yes, Well spoken tkoind2.

The heroes of capitalism

No one would argue that eating is not a necessity. Gluttony on the other hand, is a form of eating and obviously not healthy. Capitalism by itself is not consumerism or casino economics.

We need to think about how a shift from consumerism

Right! I agree. The shift away from consumerism will happen for all the right reasons, but too late for any soft landing. Consumerism and borrowing have fueled the global economy since 1971. Replacing that with anything sustainable would be like finding a viable replacement for fossil fuels all at once, which will never happen. Economic growth for the foreseeable future, is over. Globalism is over. We are adrift in unchartered shark infested waters.

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I enjoyed the article.

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was the author drinking with Nakagawa when he wrote this...

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What a poorly written article.

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The actual US unemployment rate is MUCH higher. The "unemployments" statistics that are SHOWN on TV are ONLY the current number of people able to receive unemployment. That figure is at roughly 9.5% at the moment. The total number of people that are STILL unemployed even AFTER collecting unemployment is double that - so 19%, and THEN you have the people that could NOT collect unemployment, and you are over 20% already.

Now, these figures are also tempered by these other factors: (1) Only include people we have worked - does not include people who are going into the work force for the first time or who have never worked (2) Excludes anyone under 21 and over 65

The number of people between the ages of 21 and 65 who normally NEVER work is over 45%. Add to that the 20% plus that is UNEMPLOYED and WANT to work, you have over 65% of the employable adult population OUT OF WORK.

THAT is the TRUE figure of the American job market. 36% of those who WANT to work are OUT OF WORK. THAT IS HUGE!

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kokuryu: to argue that 65% of the employable adult population is out of work is clearly wrong.

According to the bureau of labour statistics, there were 142 million people in work in January 2009. This is almost half of the entire US population (300 million). This means that 52.7% of the total population are not in employment. This is already lower than your made-up figure of 65%.

Now, about 120 million of the population are below 21, or over 65 (from US demographic data). Around 100 million of those are babies, in education, or retired. Therefore, the potential labour pool is only 200 million people. If 142 million of those are in work, only 58 million, or 29%, are not working, and not all of that 29% will want, or need a job.

Whilst I agree that the employment situation is bad and getting worse, pulling numbers out of thin air to try and prove a point isn't helpful.

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I heard the national unemployment rate was about 7.5% (NPR) and some states are getting close to 10% unemployment. -Still big numbers.

When people pay off debts to banks the banks can typically loan 10-20x that amount to others.. Best way to clear up the credit crunch.

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What's wrong with criticizing the editor of this article? My post was deleted for saying that it's obvious someone failed in their duties to correct the bad grammar in this article.

That's about as pathetic as the quality of Mr Ross's writing. It was one of the most important things my high school English teachers taught us: If you want your writing to be taken seriously, you have to be coherent.

"Extrapolates these trends a little, we are already in a depression."

This is not a sentence.

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Whoa. This is impressively poorly written. What was the point?

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Can someone summarize for me what this independent investor wants to say about capitalism?

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