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Trump Can Prove He’s Not a Putin Puppet by Blowing Up the World

By Norman Solomon

Four weeks into Donald Trump’s presidency, New York Times columnist Paul Krugman wrote that “nothing he has done since the inauguration allays fears that he is in effect a Putin puppet.” The liberal pundit concluded with a matter-of-fact reference to “the Trump-Putin axis.”

Such lines of attack have become routine, citing and stoking fears that the president of the United States is a Kremlin stooge. The meme is on the march -- and where it will end, nobody knows.

Actually, it could end with a global nuclear holocaust.

The incessant goading and denunciations of Trump as a Kremlin flunky are escalating massive pressure on him to prove otherwise. Exculpatory behavior would involve setting aside possibilities for detente and, instead, confronting Russia -- rhetorically and militarily.

Hostile behavior toward Russia is what much of the U.S. media and political establishment have been fervently seeking. It’s also the kind of behavior that could drag us all over the brink into thermonuclear destruction.

But c’mon, why worry about that?

For countless media commentators and partisan Democrats including many avowed progressives -- as well as for some Republican hawks aligned with the likes of Sens. John McCain and Lindsey Graham -- the benefits of tarring Trump as a Russian tool are just too alluring to resist.

To be clear: For a vast number of reasons, the Trump administration is repugnant. And the new president’s flagrant violations of the U.S. Constitution’s foreign and domestic emoluments clauses are solid grounds for impeaching him. I’m glad to be involved with a nationwide petition campaign -- which already has 890,000 signers -- urging Congress to begin impeachment proceedings. We should go after Trump for well-grounded reasons based on solid facts.

At the same time, we should refuse to be stampeded by the nonstop drumbeats from partisan talking points and mainline media outlets -- as well as “the intelligence community.” It wasn’t mere happenstance when the Director of National Intelligence, James Clapper, openly lied at a Senate committee hearing in early 2013, replying “No sir” to a pivotal question from Sen. Ron Wyden: “Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?” The lie was exposed three months later when Edward Snowden made possible the release of key NSA documents.

Yet now we’re supposed to assume straight-arrow authoritative honesty can be found in a flimsy 25-page report "assessing Russian activities and intentions," issued in early January under the logo of Clapper’s Office of the Director of National Intelligence. That report has been critiqued and demolished by one astute analyst after another.

As investigative journalist Gareth Porter noted, “In fact, the intelligence community had not even obtained evidence that Russia was behind the publication by WikiLeaks of the e-mails [of the] Democratic National Committee, much less that it had done so with the intention of electing Trump. Clapper had testified before Congress in mid-November and again in December that the intelligence community did not know who had provided the e-mails to WikiLeaks and when they were provided.”

More broadly and profoundly, many cogent analyses have emerged to assess the proliferating anti-Russia meme and its poisonous effects. For instance: “Why We Must Oppose the Kremlin-Baiting Against Trump” by Stephen F. Cohen at The Nation; “The Increasingly Unhinged Russia Rhetoric Comes From a Long-Standing U.S. Playbook” by Glenn Greenwald at The Intercept; and “The Did-You-Talk-to-Russians Witch Hunt” by Robert Parry at ConsortiumNews.

The frenzy to vilify Russia and put the kibosh on the potential for detente is now undermining open democratic discourse about U.S. foreign policy -- while defaming advocates of better U.S.-Russia relations in ways that would have made Joe McCarthy proud. So, President Trump’s expressions of interest in improving relations with Russia -- among his few lucid and constructive statements about anything -- are routinely spun and smeared as corroborations of the meme that he’s in cahoots with the Russian government.

Many organizations that call themselves progressive are culpable. One of the largest, MoveOn, blasted out an email alert on February 10 with a one-sentence petition calling for a congressional investigation of Trump -- flatly declaring that he has “ties to the Russian government.”

Consider these words from President Trump at his February 16 news conference:

*  “Look, it would be much easier for me to be tough on Russia, but then we’re not going to make a deal. Now, I don’t know that we’re going to make a deal. I don’t know. We might. We might not. But it would be much easier for me to be so tough -- the tougher I am on Russia, the better. But you know what? I want to do the right thing for the American people. And to be honest, secondarily, I want to do the right thing for the world.”

*  “They’re a very powerful nuclear country and so are we. If we have a good relationship with Russia, believe me, that’s a good thing, not a bad thing.”

*  “By the way, it would be great if we could get along with Russia, just so you understand that. Now tomorrow, you’ll say ‘Donald Trump wants to get along with Russia, this is terrible.’ It’s not terrible. It’s good.”

Rather than being applauded and supported, such talk from Trump is routinely depicted as further indication that -- in Krugman’s words -- Trump “is in effect a Putin puppet.”

And how could President Trump effectively allay fears and accusations that he’s a Kremlin flunky? How could he win cheers from mainstream newsrooms and big-megaphone pundits and CIA headquarters? He could get in a groove of decisively denouncing Russian President Vladimir Putin. He could move U.S. military forces into more confrontational stances and menacing maneuvers toward Russia.

Such brinkmanship would occur while each country has upward of 4,000 nuclear warheads deployed or stockpiled for potential use. Some are attached to missiles on “hair-trigger alert” -- which, the Union of Concerned Scientists explains, “is a U.S. military policy that enables the rapid launch of nuclear weapons. Missiles on hair-trigger alert are maintained in a ready-for-launch status, staffed by around-the-clock launch crews, and can be airborne in as few as 10 minutes.”

Those who keep goading and baiting President Trump as a puppet of Russia’s government are making nuclear war more likely. If tensions with the Kremlin keep escalating, what is the foreseeable endgame? Do we really want to push the U.S. government into potentially catastrophic brinkmanship with the world’s other nuclear superpower?

____________________

Norman Solomon is the coordinator of the online activist group RootsAction.org and the executive director of the Institute for Public Accuracy. He is the author of a dozen books including “War Made Easy: How Presidents and Pundits Keep Spinning Us to Death.”

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Kenneth Arrow’s (Ignored) Impossibility Theorem

William K. Black, February 22, 2017     Bloomington, MN

Kenneth Arrow, one of the giants of economics, has died at the age of 95.  He became a Nobel Laureate in 1972.  As a young lawyer in 1977, I saw him in action as an expert witness on the subject of risk.  The context was setting the rates for shipping oil through the Trans-Alaska Pipeline System (TAPs).  Arrow testified about the risks of oil prices falling.  The FERC administrative law judge thought such a scenario was ridiculous.  Within four years, oil prices fell sharply.  Arrow’s experience was a common one for economists dealing with lawyers – the ALJ ignored him.

The New York Times obituary for Arrow is revealing about how the conventional wisdom distorts economic theory in a predictably skewed fashion.  It begins by discussing Arrow’s “impossibility theorem,” which states that where there are more than two choices it is impossible to construct perfect majority choice systems.

The author of the obit stressed the impossibility of such systems being optimal.  Contrast that emphasis with the author’s treatment of Arrow’s work on “general equilibrium.”

Professor Arrow proved that their system of equations mathematically cohere: Prices exist that bring all markets into simultaneous equilibrium (whereby every item produced at the equilibrium price would be voluntarily purchased). And market competition puts society’s resources to good use: Competitive markets are efficient, in the language of economists.

Professor Arrow’s theorems set out the precise conditions under which Adam Smith’s famous conjecture in “The Wealth of Nations” holds true: that the “invisible hand” of market competition among self-serving individuals serves society well.

That is one way to phrase it, but a more accurate, parallel way to phrase Arrow’s work on general equilibrium would be as an “impossibility theorem.”  Arrow actually proved that it was impossible for general equilibrium to occur.  The “precise conditions” in which economists can guarantee that a market transaction “serves society well” is the null set.  There is no market that meets those “precise conditions” because they are impossible to meet.

Market competition does not inherently “put society’s resources to good use” and “competitive markets” can be enormously inefficient.  In a Gresham’s dynamic, for example, the more competitive the market the more CEOs put society’s resources to bad uses and the more inefficient the results.  When hit men compete to murder spouses, the price of hiring hit men declines, but this does not serve society well and it is not efficient.  (The same is true for competition by cigarette company CEOs.  When companies prosper by increasing greenhouse gas emissions it, eventually, does not serve society well and it is not efficient.

The author of the obit accurately reflects the conventional economic wisdom in the two paragraphs that I quoted.  The conventional economic wisdom is flat out wrong.  As I have emphasized in prior posts, a prominent economist (who loves general equilibrium) admits that the conventional wisdom would only be true under the “silent” “assumption” that “God” mystically ensures that buyers and sellers do not act in a “self-serving” manner that harms society and reduces efficiency (Athreya 2013: 104).  We should call it the Arrow-Debreu-McKenzie (ADM) “impossibility theorem,” but instead orthodox economists make the hilarious (implicit) assumption that God loves laissez faire so much that he prevents all predation.  As Dr. Athreya phrases it, the “ADM God” prevents CEOs from even considering the possibility of predating on customers.

The author of the obit understands most of these points.

[Arrow] made clear, his powerful conclusions about the workings of competitive markets held true only under ideal — that is to say, unrealistic — assumptions.

His assumptions, for example, ruled out the existence of third-party effects: The sale of a product by Harry to Joe was assumed not to affect the well-being of Sally — an assumption routinely violated in the real world by, for example, the sale of products that harm the environment.

Note, however, that the author does not go back and correct his earlier errors and he never states that the ADM general equilibrium model shows that it is impossible for laissez faire to produce general equilibrium.

He also fails to inform readers that orthodox economists’ twin “dystopian” assumptions (Athreya 2013) make it impossible for laissez faire to guarantee either efficiency or socially desirable outcomes. The twin dystopian assumptions are self-interested behavior and rationality.  Orthodox economists such as N. Gregory Mankiw define actions by CEO, such as the refusal to “loot” the firm, as “irrational” rather than “moral” because it would harm the CEO’s “self-interest” (Akerlof & Romer 1993: 65).

The punch line to the defining economist joke is “assume a can opener.”  To “silently” assume an ADM God,” however, takes that joke to an unprecedented level worthy of a superlative humorist.

“Modern macro economists” have surpassed micro economists’ supreme act of humor.  Modern macro silently assumes an ADM God – and invariably describes its use of general equilibrium models as “rigorous.”  One imagines the rigor of “modern macro” proponents as they begin their incantations, using an analog to a pilot’s pre-flight checklist.  Step one:  silently assume an “ADM God.”  Step two: silently assume that the “ADM God” is the patron of laissez faire and acts rigorously to prevent any predation by CEOs (even though the express dystopian assumptions would produce widespread CEO predation).  Step three: Define steps 1 and 2 as the “rigorous” treatment of “micro foundations.”  Step four: chant the mantra endlessly and with a straight face.  Step five: do not fly on the ADM plane – and blame the crashes on “governmental interference” with the otherwise inerrant ADM checklist.

A last nerdy note.  The author of the obit stresses repeatedly how impressed he is by Arrow’s general equilibrium math.  The math only general equilibrium, however, because the model assumes away reality.  If the model attempted to deal with reality, without the “ADM God’s” aid, the math would produce indeterminacy or spiral away from equilibrium into bubbles and market breakdowns.  The math would also show that laissez faire is frequently criminogenic and would produce epidemics of elite fraud and other predatory abuse.  Arrow made his absurd assumptions in his model not because they reflected reality, or proved reliable in prediction, but to make the “system of equations mathematically cohere.”  When the math fails to explain reality and predict events it is a grave error (rather than a cause for celebration) when economists assume out of existence reality and torture the model until the math “coheres.”

The ultimate failure of economics as a field is to:

(1)  worship an economic model that is criminogenic,

(2)  hide that disaster from the public by assuming “silently” an “ADM God” that contradicts the model’s express assumption,

(3)  continue to worship and proselytize that model when its silent assumption of an “ADM God” repeatedly produces criminogenic policies and epic predictive failures, and

(4)  praise your models as “rigorous,” “scientific,” and “transparent,” and

(5)  define critics as anti-scientific and demand that their critiques be excluded as heresy.

Arrow was brilliant and well meaning.  We celebrate his life and mourn his passing.  The opportunity cost to our field is how much he could have accomplished had his research not been so distorted by neoclassical dogma.

 

 

 

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The Rehabilitation of George W. Bush, War Criminal

By Vijay Prashad This article was first published on AlterNet

Don't be fooled by the watercolors; he's still responsible for the death of a million Iraqis.

Photo Credit: ChameleonsEye / Shutterstock.com

So, he’s back. George W. Bush leaves his Dallas attic and his paintbrushes to visit the television studios. He has a book to flog—Portraits of Courage: A Commander in Chief’s Tribute to America’s Warriors.

Since he left the White House, Bush has taken refuge in his canvases, on which he has painted the faces of about 100 of the veterans he sent to war. "I was thinking of their stories, their troubles, their joys," he told Sandra Sobieraj Westfall of People magazine in one of the many fluff pieces that have come out on his book tour.

On Ellen DeGeneres’ television show, Bush spoke with evident sentimentality about his close relationship with Michelle Obama. "She likes my sense of humor," said the ex-president. Pictures of Obama hugging Bush are not uncommon on social media. It is as if her hug is a sign of his rehabilitation.

Bush has been reticent to talk politics, but seems to have made an exception in the Trump years. This is personal. Trump not only belittled Bush’s brother, Jeb, but also his mother, Barbara, and Trump suggested that Bush’s war on Iraq was a fiasco. George W. Bush came out of retirement to stump for Jeb in South Carolina. He intimated that he would not vote for Trump. During his book tour, Bush made critical noises about Trump’s immigration policies and his attack on the press. "We need an independent media to hold people like me to account," Bush told Matt Lauer with a smirk.

Dismay at Trump’s presidency is allowing for the rehabilitation of George W. Bush. It is now a cliché for people to say that they look back longingly at the Bush years as an antidote to the harshness of Trump. In November 2016, Mehdi Hasan of al-Jazeera wrote an op-ed in the New York Times called "Why I miss George W. Bush." Hasan considered Bush’s statements after 9/11 where he distinguished between Islam and terrorism. The "miasma of anti-Muslim hate and fear-mongering" of the present, Hasan suggested, made Bush admirable.

Certainly, Bush made favorable noises after 9/11 about the difference between Islam and terrorism. But Bush’s policies of war in West Asia, notably Iraq, and his rhetoric of warfare collapsed any possible distinctions. One forgets that on October 6, 2005, Bush gave a speech to the National Endowment for Democracy where he discussed the "murderous ideology of the Islamic radicals," which he called the "greatest challenge of our century." Such language dovetailed with the gurgle in the sewers of American fascism, which had incubated the term "radical Islamic extremism" (preferred by Donald Trump), and with the snarls in the Republican Party, which used the term "radical Islam" as an explanation for all the world’s ills.

Bush’s Iraq War

It is one thing to curl one’s lip in disgust at ISIS and to sneer at the Eastern maladies of dictatorship and religion that seem to curdle the social worlds of West Asia. It is another to acknowledge the authorship of the United States in the destruction of nations in the region, and its role in the incubation of groups like ISIS. How does one even begin to consider that Bush—the instigator of the destruction of Iraq—is now considered to be an avuncular figure among liberals?

It is a sign of his own anxiety that Bush decided to paint veterans. Perched in his study, he must ponder the cost of the war on those who wear the uniform of the United States. But there are no paintings of Iraqis, civilians, or soldiers. There is no mention of the million Iraqis who died as a consequence of Bush’s decision to conduct what the UN Secretary General Kofi Annan called an "illegal war." Not one of the profiles in courage includes the Iraqis who collaborated with the U.S. occupation and now find themselves unable to enter the United States as a consequence of Trump’s Muslim ban.

Illegal war: On 15 February 2003, 15 million people marched across the countries of the world to protest the anticipated U.S. war against Iraq. This was the largest known protest in world history. Our slogans warned not only that the war was illegal, but that it would have a catastrophic impact on West Asia. We were ignored. When asked about this protest on March 6 by Fox News’ Jim Angle, Bush brushed aside any warnings. "We will respect innocent life in Iraq," he said with a straight face. At that time, UN Secretary General Annan was silent about the illegality of the war. A year later, on BBC, Annan said, "I have indicated that it was not in conformity with the UN charter from our point of view, from the charter point of view, it was illegal."

Horrendous war: The U.S. opening salvo against Iraq followed the "shock and awe" doctrine. Harlan K. Uliman, who developed the theory, told CBS’ David Martin, "You take the city down. You get rid of their power, water. In two, three, four, five days, they are physically, emotionally and psychologically exhausted." A Pentagon official said at that time, "There will not be a safe place in Baghdad. The sheer size of this has never been seen before, never been contemplated before." Hundreds of cruise missiles rained on Baghdad and other Iraqi cities, 400 on the first day and a comparable number on the second. UN Assistant Secretary General Denis Halliday said at the time, "The United States and Britain are proceeding with plans to annihilate Iraqi society, a catastrophe that would be heightened by the threatened use of tactical nuclear weaponry." In fact, the U.S. used depleted uranium shells, which in Fallujah produced cancer rates higher than in Hiroshima after the nuclear bomb.

Destruction of the State: When the United States occupied Iraq, it systematically—and against the Geneva Conventions—dismantled the state. Bureaucrats of the ministries and officers of the military were fired, and U.S. officials arrived to privatize Iraq to the benefit of multinational corporations. On May 27, 2003, Defense Secretary Donald Rumsfled wrote in the Wall Street Journal that Bush wanted to "favor market systems" and "encourage moves to privatize state-owned enterprises." There was to be no Iraqi vote on these moves. They were to be dictated by the United States, which would also deliver a Constitution for Iraq. As Rajiv Chandrasekharan’s Imperial Life in the Emerald City documents, the White House sent "loyalists" from the Republican Party to help privatize Iraq and hand it over for profit. The country was to be gutted. And it was.

Torture Occupation: When the Iraqi insurgency broke out against the occupation, the United States found itself ill-prepared to tackle the rise of Iraqi patriotism. Harsh torture, as at Abu Ghraib, and massive violence, as against the city of Fallujah, defined the U.S. reaction. A defeated and captured Saddam asked to negotiate. If he had been treated with some dignity and allowed to bring in his followers, the insurgency might have been quelled. It would have been possible, at that time in December 2003, to allow the various sections of Iraq to come together. But instead the U.S. occupation used sectarian divisions to consolidate its fading power, breaking Muqtada al-Sadr’s attempt at Shia-Sunni unity, building up the most sectarian forces against each other and delivering Saddam’s loyalists to the more hardened extremists who would appear (such as later, ISIS). Iraqi society, fragile during the sanctions years of the 1990s, broke under the pressure of the U.S. occupation.

Producing ISIS: The U.S. occupation forces decided to cut agricultural subsidies, which tore into the livelihood of farmers in northern Iraq. In Diyala province, farmers hastened to the insurgency. "Americans will be kicked out," said Saad Adnan, one of the farmers. It was in Diyala and Anbar that the farmers would later join the Islamic State of Iraq, which was formed in 2006. This is the parent of ISIS. It is convenient for the U.S. to claim that ISIS is a Syrian group. Its Iraqi history links it too closely to Bush’s illegal war. Part of the rehabilitation of Bush and his war is to avoid this connection.

When Bush went to Iraq in 2008, Iraqi journalist Muntadhar al-Zaidi threw his shoes at him and yelled, "This is a farewell kiss from the Iraqi people, you dog." In Tikrit, Saddam’s hometown, Laith al-Amari designed a statue of a shoe to honor al-Zaidi’s message. It had to be taken down almost immediately. The Iraqis have a greater right to define how Bush is remembered. Their art is sharper than his. Their message more moral.

Vijay Prashad is professor of international studies at Trinity College in Hartford, Connecticut. He is the author of 18 books, including Arab Spring, Libyan Winter (AK Press, 2012), The Poorer Nations: A Possible History of the Global South (Verso, 2013) and The Death of a Nation and the Future of the Arab Revolution (University of California Press, 2016). His columns appear at AlterNet every Wednesday.

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Bank of International Settlements Paper Confirms That High Levels of Household Debt Hurt Growth

By Yves Smith. This article was first published on Naked Capitalism.

We’ve written from time to time that not all debt is created equal. Prudent business borrowing enables companies to make investments and expand operations. And even though governments like the US that issue their own currency may nevertheless sell bonds, operationally they can simply create more dough to fund spending. The constraint on spending is creating too much inflation, not bankruptcy. And since as we’ve regularly discussed, the business sector chronically underinvests, deficit spending is necessary and desirable most of the time. Economist Mariana Mazzucato has argued that there are certain risks, such as engaging in basic research, where the uncertainty is too great for entrepreneurs. And that’s before getting to the fact that the party that makes the discovery could easily see its technology exploited by free riders.

However, economic studies have regularly found that high levels of household debt is a negative for economic growth. Moreover, some economists have found a strong relationship between high levels of consumer debt and economic crises. Yet if you read the business press, analysts and government officials see rising consumer borrowing as a plus for growth. How does that make sense?

A recent Bank of International Settlements paper (hat tip UserFriendly) helps reconcile this apparent paradox. The immediate impact of household borrowing does indeed spur the economy near-term but creates drag down the road. And the level at which household borrowing becomes a net negative is 60% of GDP, when nearly all advanced economies are at higher levels. Worse, the dampening effect is more pronounced when the household debt to GDP level exceeds 80% The BIS puts the US as above that threshold

From the study by Marco Lombardi, Madhusudan Mohanty and Ilhyock Shim:

Our results suggest that debt boosts consumption and GDP growth in the short run, with the bulk of the impact of increased indebtedness passing through the real economy in the space of one year. However, the long-run negative effects of debt eventually outweigh their short-term positive effects, with household debt accumulation ultimately proving to be a drag on growth. Our estimates suggest that a 1 percentage point increase in the household debt-to-GDP ratio tends to lower output growth in the long run by 0.1 percentage point, suggesting that policy makers face non-trivial, real costs in stimulating the economy through credit expansion. These findings are robust to alternative lag structures and control variables. Our analysis of the threshold effect suggests that the negative long-run impact of household debt on consumption growth intensifies as the household debt-to-GDP ratio exceeds a threshold of 60%. The estimated threshold is somewhat larger for GDP growth, with the negative debt effects intensifying as the household debt-to-GDP ratio exceeds 80%.

And what did they find explained most of the differences among the 54 countries they studied from 1990 to 2015? How much power the lenders had in forcing borrowers to pay them back:

Another interesting aspect of our results is the role of country-specific characteristics in determining debt limits. One key result is that the only institutional factor able to account for cross-country variation is the degree of legal protection of creditors. In particular, we find that countries with stronger creditor protection tend to experience more drag on long-run growth from higher levels of household indebtedness. We interpret this result as implying that in countries with stronger creditor rights, household borrowers are less likely to default on their loans and more likely to service their debt in the long run. This reduces consumption growth and eventually GDP growth to the extent that banks in the countries do not sufficiently reduce ex ante their loan spreads in consideration of higher expected earnings due to stronger creditor rights.

Note that this paper isn’t set up to capture what amounts to changes in the legal regime. In particular, in the US, mortgage borrowers had the belief, which historically was sound, that if they got into trouble, as in had a work interruption or a financial emergency, that the bank would work with them, as they do with business borrowers who have a bad spell but look to be viable in the long run. That went out the window with the rise of mortgage servicing, since the servicers found it more profitable to foreclose than modify loans, even though the investors would also do better with a successful mortgage modification than a foreclosure sale.

And you can see that in this chart. The US has supposedly had the largest post-crisis household deleveraging of any advanced economy, and much of that was involuntary, meaning the result of foreclosures. Banks also became stringent post crisis about issuing new mortgages, more the result of typical behavior and the need to strengthen their balance sheets than the favorite scapegoat of regulations:

And even with all of its deleveraging, the US is still just above the 80% level1:

The researchers tried to decompose long versus short-term effects:

The right-hand panel of Graph 3 makes two points very clear. First, past increases in household debt are not a good predictor of positive growth but appear to be associated with weaker consumption and higher risks of recession. Second, the downward-sloping line suggests that the negative correlation between household debt and consumption actually strengthens over time, following a surge in household borrowing. What is striking is that the negative correlation coefficient nearly doubles between the first and the fifth year following the increase in household debt.

As is well known, simple correlation does not suggest anything about the causal effects. That said, the preliminary evidence in Graph 3 appears to support the view that credit expansions may have very different effects on the short- and medium-run economic prospects of countries. It also confirms the findings of King (1994) that large increases in private debt in the 1980s made many OECD countries vulnerable to problems of weak growth and “debt deflation”. He shows that the most severe recessions since the 1930s have occurred in countries that have seen the largest increases in private debt in the preceding five years.

If you like nerdy papers, you’ll enjoy the data analysis here. In addition to using several different methodologies to examine the data, they also tested extensively for cross-country explanatory variables and robustness.

The authors point to the open policy questions at the end:

An important question, on which this paper is largely silent, is the role of various factors in the accumulation of household debt.20 One key issue in the context of the risk-taking channel of monetary policy (Borio and Zhu (2012)) is the extent to which low short- and long-term rates over the past eight years may have played a role in the recent rapid rise in household debt in many countries and may even have constrained central banks in raising rates. Even though such a question remains beyond the purview of this paper, any assessment must consider the various short- and long-run effects associated with any strategy aimed at stimulating the economy through ever larger debt levels.

Let us offer our own bit of speculation from ECONNED in 2010:

Let’s use a different metaphor to illustrate the problem. Say a biotech firm creates a wonder crop, the most amazing creation in the history of agriculture. It yields far more calories per acre than anything else, is nutritionally extremely complete, and can be planted and harvested with far less machinery and equipment than any other plant. It is tasty and can be prepared in a wide variety of ways. It is sweet too, so it can be used in place of sugar and high fructose corn syrup at lower cost. We’ll call this XCrop.

XCrop is added as a new element in the food pyramid and endorsed by nutritionists and public health officials all over the globe. It turns out that XCrop also is an aphrodisiac and a stimulant (hmm, wonder how they engineered that in) and between enhanced libido and more abundant food supplies, the world population rises at a faster rate.

Sales of XCrop boom, displacing traditional agriculture. A large amount of farmland is turned over from growing other types of produce to XCrop. XCrop is so efficient that agricultural land is taken out of production and turned to other uses, such as housing, malls, and parks. While some old-fashioned farms
still exist, they are on a much smaller scale and a lot of the providers of equipment to traditional farms have gone out of business.

Twenty years into the widespread use of XCrop, doctors discover that diabetes and some peculiar new hormonal ailments are growing at an explosive rate. It turns out they are highly correlated with the level of XCrop consumption in an individual’s diet. Long-term consumption of high levels of XCrop interferes with the pituitary gland, which controls almost all the other endocrine glands in the body and the pancreas.

The public faces a health crisis and no way back. It would be very difficult and costly to put the repurposed farmland back into production. Some of the types of equipment needed for old-fashioned farming are no longer made. And with the population so much larger than before, you’d need even more farm- land than before. The world population has become dependent on the calories produced by XCrop, so going off it quickly means starvation for some. But staying on it is toxic too. And expecting users simply to restrain themselves will likely prove difficult. The aphrodisiac and stimulant effects of XCrop make it addictive.

Advanced economies have become hooked on debt technology, which, like XCrop, is habit forming and hard to wean oneself off of due to its lower cost and the fact that other approaches have fallen into partial disuse (for instance, use of FICO-based credit scoring has displaced evaluations that include an assessment of the borrower’s character and knowledge of the community, such as stability of his employer). In fact, the current debt technology results in information loss, via disincentives to do a thorough job of borrower due diligence (why bother if you are reselling the paper?) and monitoring of the credit over the life of the loan. And the proposed fixes are not workable. The Obama proposal, that the originator retain 5% of the deal and take correspondingly lower fees, is not high enough to change behavior. And a level that would be high enough to make the originator feel the impact of a bad decision would undercut the cost efficiencies that made securitization popular in the first place. You’d have better decisions, but less lending, and higher interest rates. That’s ultimately a desirable outcome, but as in the XCrop situation, no one seems prepared to accept that a move to healthier practices will result in much more costly and less readily available debt.The authorities want to believe they can somehow have their cake and eat it too.

Note this hasn’t proven to be quite correct; the most rapidly growing category of consumer debt post crisis has been student debt. With most loans government guaranteed, investors have no credit concerns…but the high level of delinquencies and defaults attests to the severity of that ticking time bomb. And we have the more immediate effect that generous student loans simply produce more college education cost bloat, while leaving many graduates with debt burdens that in many cases keep them from getting married, buying a house, and starting a family, and can wind up being a millstone.

Yet both parties shy away from addressing this issue. The Democrats are particularly complicit since academia serves as an informal but very large addition to their think-tank apparatus. Where is our William Jennings Bryant, who will talk about a cross of debt?

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1 Bear in mind that the researchers made adjustments for consistency, which may explain why their figures for the US, which exclude student debt (they consider only borrowings made via banks, while the Federal government makes the majority of student loans via colleges) come up with a higher debt to GDP ratio than if you take the New York Fed’s quarterly report on household debt for year end 2016, and divide that by the fourth quarter GDP just released.

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Is the Vault 7 Source a Whistleblower?

By Jesselyn Radack. This article was first published on Expose Facts.

It is the leakiest of times in the Executive Branch. Last week, Wikileaks published a massive and, by all accounts genuine, trove of documents revealing that the CIA has been stockpiling, and lost control of, hacking tools it uses against targets. Particularly noteworthy were the revelations that the CIA developed a tool to hack Samsung TVs and turn them into recording devices and that the CIA worked to infiltrate both Apple and Google smart phone operating systems since it could not break encryption. No one in government has challenged the authenticity of the documents disclosed.

We do not know the identity of the source or sources, nor can we be 100% certain of his or her motivations. Wikileaks writes that the source sent a statement that policy questions “urgently need to be debated in public, including whether the CIA’s hacking capabilities exceed its mandated powers and the problem of public oversight of the agency” and that the source “wishes to initiate a public debate about the security, creation, use, proliferation and democratic control of cyber-weapons.”

The FBI has already begun hunting down the source as part of a criminal leak investigation. Historically, the criminal justice system has been a particularly inept judge of who is a whistleblower. Moreover, it has allowed the use of the pernicious Espionage Act—an arcane law meant to go after spies—to go after whistleblowers who reveal information the public interest. My client, former NSA senior official Thomas Drake, was prosecuted under the Espionage Act, only to later be widely recognized as a whistleblower. There is no public interest defense to Espionage Act charges, and courts have ruled that a whistleblower’s motive, however salutary, is irrelevant to determining guilt.

The Intelligence Community is an equally bad judge of who is a whistleblower, and has a vested interest in giving no positive reinforcement to those who air its dirty laundry. The Intelligence Community reflexively claims that anyone who makes public secret information is not a whistleblower. Former NSA and CIA Director General Michael V. Hayden speculated that the recent leaks are to be blamed on young millennials harboring some disrespect for the venerable intelligence agencies responsible for mass surveillance and torture. Not only is his speculation speculative, but it’s proven wrong by the fact that whistleblowers who go to the press span the generational spectrum from Pentagon Papers whistleblower Daniel Ellsberg to mid-career and senior level public servants like CIA torture whistleblower John Kiriakou and NSA whistleblower Thomas Drake to early-career millennials like Army whistleblower Chelsea Manning and NSA whistleblower Edward Snowden. The lawbreaker does not get to decide who is a whistleblower.

Not all leaks of information are whistleblowing, and the word “whistleblower” is a loaded term, so whether or not the Vault 7 source conceives of him or herself as a whistleblower is not a particularly pertinent inquiry. The label “whistleblower” does not convey some mythical power or goodness, or some “moral narcissism,” a term used to describe me when I blew the whistle. Rather, whether an action is whistleblowing depends on whether or not the information disclosed is in the public interest and reveals fraud, waste, abuse, illegality or dangers to public health and safety. Even if some of the information revealed does not qualify, it should be remembered that whistleblowers are often faulted with being over- or under-inclusive with their disclosures. Again, it is the quality of the information, not the quantity, nor the character of the source.

Already, the information in the Vault 7 documents revealed that the Intelligence Community has misled the American people. In the wake of Snowden’s revelations, the Intelligence Community committed to avoid the stockpiling of technological vulnerabilities, publicly claiming that its bias was toward “disclosing them” so as to better protect everyone’s privacy. However, the Vault 7 documents reveal just the opposite: not only has the CIA been stockpiling exploits, it has been aggressively working to undermine our Internet security. Even assuming the CIA is using its hacking tools against the right targets, a pause-worthy presumption given the agency’s checkered history, the CIA has empowered the rest of the hacker world and foreign adversaries by hoarding vulnerabilities, and thereby undermined the privacy rights of all Americans and millions of innocent people around the world. Democracy depends on an informed citizenry, and journalistic sources—whether they call themselves whistleblowers or not—are a critical component when the government uses national security as justification to keep so much of its activities hidden from public view.

As we learn more about the Vault 7 source and the disclosures, our focus should be on the substance of the disclosures. Historically, the government’s reflexive instinct is to shoot the messenger, pathologize the whistleblower, and drill down on his or her motives, while the transparency community holds its breath that he or she will turn out to be pure as the driven snow. But that’s all deflection from plumbing the much more difficult questions, which are: Should the CIA be allowed to conduct these activities, and should it be doing so in secret without any public oversight?

These are questions we would not even be asking without the Vault 7 source.

About Jesselyn Radack

Jesselyn Radack is a national security and human rights attorney who heads the “Whistleblower & Source Protection” project at ExposeFacts. Twitter: @jesselynradack

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