April 25th, 2014 // 10:41 am @ Oliver DeMille
Another Domino Falling
This creates a very dangerous standard. When something bad happens, Washington will naturally seek to find fault in a place that brings it a lot of extra cash—the most profitable businesses.
As Ken Kurson put it:
“This settlement sets a terrible precedent. Companies with strong balance sheets can expect to become targets of the government…”[i]
This is another domino in the decline of our freedoms, and it’s a big one. This new approach allows, even incentivizes, government corruption. Let’s review how this process works:
- The federal government passes laws that require or incentivize businesses to give loans or offer services/products to people who can’t actually afford them. Businesses that refuse are penalized.
- As a result of this kind of bad policy, many businesses fail. Businesses that comply, but only make middling profits, are left alone.
- Businesses that comply, and make big profits, are targeted by the federal government and end up paying huge sums of money to the government.
Godfather Over Again
This is a great racket. It’s akin to a mafia protection scheme: “You need protection from us. We’ll provide it, for a fee. The fee will be set by us, without appeal or negotiation. If you don’t pay it, we’ll hurt you and/or your business—thus proving that you really did need protection.”
An official term for this new precedent is “corruption.” Except that the Supreme Court gets to determine the actual definition of the word. And who gave the Court the power to do this?
The Supreme Court did, in a string of cases starting in 1803 through 1936.
Is this recurring pattern starting to make sense?
“Wait,” the critics say. “The crash was real! And JP Morgan and other companies that participated need to pay! Right?”
As Kurson wrote:
“Of course, most of JP Morgan’s wrongdoing—70 to 80 percent of the exposure—was committed by two companies, Bear Stearns and Washington Mutual, it acquired in 2008 at the request, to the point of command, of then-Treasury Secretary Henry Paulson. JPM acquired those companies as acts of mercy during a crisis.”[ii]
Let’s get this straight. The economy was tanking, so the government demanded that JP Morgan buy two flailing firms—to help save the economy. Then, when the fall came, the government targeted JP Morgan for the mistakes of these two firms and made it pay for them.
Godfather corruption indeed.
Who It Hurts
How are businesses responding to this emerging new economy? Many are closing. Others are going abroad, to China, India, Brazil, etc. Those that make enough from the U.S. economy simply pay the fines, settlements, and fees—it’s the cost of doing business.
The real problem is for American workers and families. JP Morgan has increased its litigation reserve up to $23 billion (from $3 billion in 2010).[iii] Other companies are learning to do the same.
What happens when the extra billions are refocused this way? Money moves away from salaries and purchases, the economy is hurt, private sector jobs are cut or curtailed.
The government is currently seeking similar payoffs from a number of other big companies. As this precedent sends its ripples through the economy, it will harm a lot of families.
More firms will move operations and jobs abroad, and others will shift more money from jobs and put it to litigation and fees.
Old Pattern, New Cloth
Oh, and just re-read the government’s pattern outlined above for the mortgage bubble, but this time read it with Obamacare in mind:
- The federal government passes laws that require or incentivize businesses to offer services/products to people who can’t actually afford them. Businesses that refuse are penalized.
- As a result of these bad policies, many businesses fail. Businesses that comply, but only make middling profits, are left alone.
- Businesses that comply, but make big profits, are targeted by the federal government and end up paying huge sums of money to the government.
This really is as shocking as it sounds. Yes, this really is happening in the United States.
The worst news in all this is that most people will do nothing about it, because this kind of financial news is considered technical mumbo jumbo.
Citizens usually just ignore it. “What can I do, after all?” is the typical response.
This is how freedoms decline: slowly for a while–then all at once. The amazing part is that when the “all at once” crash comes, almost everyone acts surprised.
But what can a regular person do? Really? It’s not like you can stop government overspending, party bickering, or a growing culture of corruption with a call to your Congressman or a letter to the editor.
The answer to this major post-modern question (What can a regular person do?) is interesting: We can start with not being surprised.
Problems and Solutions
We can know what is coming. A government addicted to spending and borrowing, and constantly increasing its spending and borrowing, is going to cause problems for the economy and for its citizens.[iv]
A government addicted to increased regulations is going to cause problems.[v]
A government that demands official secrecy from its own people while increasing how it spies on its own citizens is going to cause problems.[vi]
A government that inflates its currency and borrows from its biggest enemies and competitors is going to cause problems.[vii]
A government whose top officials routinely make promises during elections or to pass big agendas and then break them once they win is going to cause problems.[viii]
A government that uses statistics it knows distort reality (just revising them a few months later once decisions have been made), in order to support its continued ideological course, is going to cause problems.[ix]
A citizenry that turns a collective blind eye to these realities is enabling the very problems it fears. Then the people claims surprise when the crash comes.
Anyone who is surprised by the next crash has been lying to themselves for a long time.
As Allan Greenspan wrote in November 2013:
“One can hope that in a future financial crisis—and there will surely be one…”[x]
Calomiris and Haber noted that banking crises should be expected:
“The banking system in the United States has been highly crisis-prone, suffering no fewer than 14 major crisis in the past 180 years.”[xi]
The question isn’t if, but when, the next one will come.
Or consider what J. Bradford DeLong wrote in a piece in Foreign Affairs titled “The Second Great Depression: Why the Economic Crisis is Worse Than You Think”:
“The U.S. economy has enjoyed a recovery [since 2009] only in the sense that conditions haven’t gotten worse…. But it is unlikely that the economic downturn will be over by 2017…”[xii]
Greenspan suggested the second thing people can do. He wrote:
“Financial firms could have protected themselves…if…they had prepared for a rainy day.”[xiii]
Though he addressed this belated counsel to companies, it certainly applies to regular people as well.
Time and Two Steps
To summarize, we have covered two things a regular person can do about our current problems. First, know about them. Pay attention. Keep a close eye on the government, the economy, and current events. Read the fine print and the technical mumbo jumbo put out by government.
The English word for this daily activity and focus is “citizenship.”
The second is to prepare. Look around, see what is really needed, and what is likely to be needed in the years ahead—and take action to help your community flourish.
Not just for you, but for others.
The word for this kind of initiative and foresight is “entrepreneurship.” It isn’t pessimistic, doomsayer, or extreme. In fact, effective entrepreneurialism is precisely the opposite.
It only works if it is optimistic, positive, and sustained.
Without such citizenship and entrepreneurialism, the decline of freedom is only going to accelerate. We’ve still got time for these two things to work, but time is running out.
[i] Ken Kurson, “The Portfolio,” Esquire, February 2014.
[iv] See, for example, Edward Conard, “How to Fix America: Which Tools Should Washington Use? Unleash the Private Sector,” Foreign Affairs, May/June 2013. See also: Fareed Zakaria, “Can America Be Fixed?: The New Crisis of Democracy,” Foreign Affairs, January/February 2013. For example: “In 1980 the United States’ gross government debt was 42 percent of its total GDP; it is now 107 percent.”
[v] Ibid. For example, the United States is ranked 76th in the world for its “burden of government regulations.”
[vi] See Jack Shafer, “Live and Let Live,” Foreign Affairs, March/April 2014. “[A]ccording to the White House review panel convened last year to examine the NSA’s surveillance practices, the bulk collection of phone records has stopped precisely zero attacks.”
[vii] See, for example, Minxin Pei, “How China and America See Each Other: And Why They Are On A Collision Course,” Foreign Affairs, March/April 2014. For example: “In 2007, the United States’ economy was four times as large as that of China; by 2012, it was only twice as large.”
[viii] E.g. “If you want to keep your doctor, you can keep your doctor.” See also: Michael A. Cohen, “Hypocrisy Hype: Can Washington Still Walk and Talk Differently?” Foreign Affairs, March/April 2014.
[ix] See Zachary Karabell, “(Mis)leading Indicators: Why Our Economic Numbers Distort Reality,” Foreign Affairs, March/April 2014.
[x] Allan Greenspan, “Never Saw It Coming: Why the Financial Crisis Took Economists by Surprise,” Foreign Affairs, November/December 2013.
[xi] Charles W. Calomiris and Stephen H. Haber, “Why Banking Systems Succeed and Fail: The Politics Behind Financial Institutions,” Foreign Affairs, November/December 2013.
[xii] J. Bradford DeLong, “The Second Great Depression: Why the Economic Crisis is Worse Than You Think,” Foreign Affairs, July/August 2013.
[xiii] Op Cit., Greenspan.
March 18th, 2014 // 10:04 am @ Oliver DeMille
When Mitt Romney said during the 2012 presidential campaign that Russia is America’s biggest international foe, President Obama and the entire national security establishment laughed and poked fun at him.
They collectively called his views outdated. Quaint. Out of touch.
Nobody’s laughing today. The experts were wrong. Romney was right. Moreover, he did something that may be the most important trait for a U.S. president to display: he read foreign leaders correctly. Despite the experts, even in the face of widespread ridicule, he understood Putin.
In contrast, President Obama has proven that this is a major weakness of his leadership. Reading Putin wrong is a serious problem. Obama read Putin wrong during the Syria crisis, when deciding whether or not to remove strategic missiles from Eastern Europe, regarding Iran, on harboring Snowden, and most recently during the Crimean emergency.
President Obama warned Putin that there would “be consequences” for Russia if it pursued these power grabs. But so far this has been mostly bluster, hardly any meaningful consequences.
Clearly Putin has read Obama right: a politician, someone who thinks words matter more than might, a head of state who shies away from real conflict, a president who will back down in the face of actual force.
Putin’s policy has been to nod, agree, and make nice when words are at play, then to stay silent and let the politicians debate and posture while the troops march in. He has does this in each of the cases mentioned above.
Putin isn’t a politician, not in the Western sense. He is an old KGB operative, trained and conditioned that physical actions speak louder than words. He is convinced that the Obama Administration will rise to mere words when a debate is needed, but back down from physical force.
Putin is also following the old KGP agenda of reestablishing the Russian empire—one piece at a time. For Putin, it’s two steps forward, one step forward.
Looking the Wrong Way
Meanwhile, the NSA and other agencies under Obama’s watch use massive resources spying on Americans, resources that could be utilized spying on Russia and other true security threats.
The clip of President Obama telling Putin that he’d have more flexibility to work with Russia once he won the 2012 election has been played repeatedly. Since it was captured on an open mike blunder when Obama didn’t realize he was on the air, it has fueled numerous conspiracy theories.
But few have pointed out perhaps the most interesting part of this clip: the look on Putin’s face.
The operative, the bully, the bad cop, realizing that his biggest foe, the American president, is a talker above all, that he wants to be liked, that his words don’t directly correlate with his action.
That he can be swayed, even shocked, by violence.
That raw physical force is outside his comfort zone.
That he probably won’t pull the trigger unless he can be almost entirely sure that the other guy can’t fight back.
Is this what Putin was thinking?
Whether or not this is actually President Obama’s character, it is clearly how Putin has sized him up.
They’re Not Playing Games
The Administration makes war on Fox News, Edward Snowden, Ted Cruz, Bill O’Reilly, anti-Obama Care Republicans, or conservative groups seeking IRS approvals, but Syria, Iran, North Korea, and Putin get to do whatever they want.
Putin has apparently decided that he can operate without any real opposition from the White House. No discussion, no diplomacy, no talk needed, until the power has been wielded.
Afterword, once the troops have done their work, Obama will be only too happy to talk with Putin, to smooth things over, to declare “peace in our time” based on nice words and promises.
For Putin, Obama is Neville Chamberlain, so interested in peaceful words that they can be used after aggression to cover any sin. No need for permission when apologies will suffice.
While the phrase “Putin is playing chess while Obama is playing checkers” makes its rounds inside the Beltway, the truth is a bigger concern:
Putin is playing Stalin and Obama is playing Carter.
What we need from our president in national security is a Truman, a Churchill, a Thatcher, a Reagan—someone that a Khrushchev, Brezhnev, or Putin has no choice but to respect.
Because even though Putin doesn’t bother anymore to care what Obama is doing or thinking, now that he has pegged him as an easy mark, China and Iran are watching. Closely.
How did we get to this point?
High School Politics in Washington
Americans elect the “cool” candidate as president in the Entertainment Age. Carter was cooler than Ford, Reagan was cooler than Carter and Mondale, Bush I was cooler than Dukakis but not as cool as Clinton, Clinton was cooler than Dole, Bush II was cooler than Gore and Kerry, and Obama was cooler than McCain and Romney.
A simple “cool” test (who is more likely to sing, dance, play the saxophone, fuel high school ambitions in the youth, etc.) would have accurately predicted every one of these elections.
It’s High School Musical at the White House.
As for the 2016 presidential election, no potential candidate so far is nearly as “cool” to a majority of the national electorate as Hillary Clinton. Nobody is even close.
The problem is that when it comes to the main Constitutional role of the Chief Executive (keeping the nation safe from foreign aggression), teenage-style “cool” is arguably irrelevant.
The most important trait may well be the ability to effectively size up foreign leaders and project real strength to them. Rahm Emanuel, Mitt Romney, Bill Clinton—Putin would tread more lightly.
But since we are caught in this Entertainment Society where the political parties pick their presidential candidate based on ideology mixed with electability, and then the American voters reject both of these and simply elect the “cool” candidate, maybe the best we can hope for is a president who demands respect—not from the Nobel Prize committee of idealists but from dangerous world leaders like Putin.
Ironically, this is becoming increasingly important as the current Administration drastically cuts the military (and ramps up debt, inflation, and spending on everything else), and as a number of nations become closer in the balance of power to the United States.
More military conflict will certainly happen in the coming two decades. Russia, China and many nations in the Middle East are actively and specifically preparing for this.
The U.S. is doing the opposite—cutting the military and looking for the next Zac Efron as president—hoping that no conflicts come.
But they will.
Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.
Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.
April 18th, 2012 // 6:25 pm @ Oliver DeMille
But one does come pretty close.
When an incumbent president is running for reelection, the growth rate of discretionary income citizens have during the first two quarters of the election year always accurately predicts the election.
If it increases during the first six months of the election year, the incumbent is reelected.
If not, he isn’t.
There are no exceptions to this rule in recent American history, and the rate of discretionary income so far in 2012 is decreasing. Moreover, most people feel it is seriously decreasing.
For example, though we’ve seen over two years of slight economic growth, which in technical terms means we are in a recovery, over 70% of Americans polled in April 2012 say we are still in recession.
Their discretionary income is down, and they feel it.
This is bad or good news—depending on who you want to win the presidential election in November.
Certainly the race promises to be a tough one where simple statistics won’t sway everything.
But there has yet to be an exception to this formula.
There is always the potential of some major surprise—positive or negative—in world affairs or economic events.
And even some predictable surprises are possible, like a shocking Supreme Court decision on health care, economic collapse of another European country, massive increases—or reductions—in oil prices, major mistakes by one of the candidates, a history-changing international incident, or something else.
In short, “It’s the economy, stupid…unless something unexpected happens.”
Or, maybe, it’s the economy regardless of what happens.
Because whatever happens or doesn’t happen, when most households feel their pocketbooks shrinking they want change, and the closer we get to an election, the more drastically things would have to improve in order to change their minds.
Or their votes.
Common wisdom says it’s way too early to predict who will win the 2012 race for the White House.
The thing about statistics is that they can tell us a lot about the past but are seldom deemed reliable in foretelling the future.
Calculations and forecasts have proven a poor substitute for patience.
November 6 (or whenever we actually find out for sure who won) isn’t that far away.
Still, at least a few Beltway insiders will tell you (with a smile or frown, depending on which side of the aisle they support) we are in an election year and most households are feeling the pressures of less discretionary income…
If this turns out to be the reality in yet another presidential election, as tight as the 2012 race seems to be, it will make a believer out of me.
Time will tell.
He is the co-author of New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.