Thread: We Cannot Separate Economics, Politics, War, Financial Lies

Monday, February 7, 2011

We Cannot Separate Economics and Politics. And Those Who Speak Out Against Bad Policy Are Helping the Economy ... And Our Individual Investments

Some people criticize the injection of politics into economic discussions.

But economic historians tell us that economists used to understand and accept that economics is wholly interrelated with politics, and that politics affects our economy. They note that modern economists have artificially tried to somehow separate the two, like Descartes tried to separate the mind from the body.

Indeed, the father of modern economics - Adam Smith - talked a lot about politics in relation to economics.

If mainstream ("neoclassical") economists think that politics is an irrelevant and separate topic, it may be because they are using wholly discredited models or that "it is difficult to get a man to understand something, when his salary depends upon his not understanding it."

In the real world, political decisions determine who gets bailed out and who doesn't, who stays afloat and who goes under, who gets rewarded and who gets prosecuted (and if prosecuted, who gets hit hard and who gets off with a slap on the wrist ... or a slap on the back). As such, it should be obvious that we cannot discuss our economy or even investing decisions without addressing politics.

Another example of the intersection of politics and the economy is military policy. America's military policy is directly connected with the economy, and is indirectly connected with our individual investments.
Specifically:

1. War is bad for the economy. The multi-trillion dollar price tag for the wars in Iraq and elsewhere are bankrupting our country. Moreover, war always causes inflation, and thus decreases the value of our money.

2. We were lied into war

3. The lies are continuing

4. The state of emergency we've been living under for the past 10 years has interfered with the free markets

5. It is much harder to make investment decisions when we are not in a free market

6. Therefore, if enough of us speak out against the ongoing lies, we may have some chance of helping the economy and reinstating some semblance of a free market ... which would help increase the value of our money, and make investing simpler

As I noted last November, the lack of trust by the American people in the government's military decisions is harming the economy: Trust in Government is Necessary for a Stable Economy

A 2005 letter in premier scientific journal Nature reviewed the research on trust and economics:

Trust ... plays a key role in economic exchange and politics. In the absence of trust among trading partners, market transactions break down. In the absence of trust in a country's institutions and leaders, political legitimacy breaks down. Much recent evidence indicates that trust contributes to economic, political and social success.

Forbes wrote an article in 2006 entitled "The Economics of Trust". The article summarizes the importance of trust in creating a healthy economy:

Imagine going to the corner store to buy a carton of milk, only to find that the refrigerator is locked. When you've persuaded the shopkeeper to retrieve the milk, you then end up arguing over whether you're going to hand the money over first, or whether he is going to hand over the milk. Finally you manage to arrange an elaborate simultaneous exchange. A little taste of life in a world without trust--now imagine trying to arrange a mortgage.

Being able to trust people might seem like a pleasant luxury, but economists are starting to believe that it's rather more important than that. Trust is about more than whether you can leave your house unlocked; it is responsible for the difference between the richest countries and the poorest.

"If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia," ventures Steve Knack, a senior economist at the World Bank who has been studying the economics of trust for over a decade. That suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are wondering, is 99.5% of this country's income. ***

Above all, trust enables people to do business with each other. Doing business is what creates wealth. ***

Economists distinguish between the personal, informal trust that comes from being friendly with your neighbors and the impersonal, institutionalized trust that lets you give your credit card number out over the Internet.

Similarly, market psychologists Richard L. Peterson M.D. and Frank Murtha, PhD noted: Trust is the oil in the engine of capitalism, without it, the engine seizes up.

Confidence is like the gasoline, without it the machine won't move.

Trust is gone: there is no longer trust between counterparties in the financial system. Furthermore, confidence is at a low. Investors have lost their confidence in the ability of shares to provide decent returns (since they haven't).

Two professors of finance pointed out:

The drop in trust, we believe, is a major factor behind the deteriorating economic conditions. To demonstrate its importance, we launched the Chicago Booth/Kellogg School Financial Trust Index. Our first set of data—based on interviews conducted at the end of December 2008—shows that between September and December, 52 percent of Americans lost trust in the banks. Similarly, 65 percent lost trust in the stock market. A BBB/Gallup poll that surveyed a similar sample of Americans last April confirms this dramatic drop. At that time, 42 percent of Americans trusted financial institutions, versus 34 percent in our survey today, while 53 percent said they trusted U.S. companies, versus just 12 percent today.

As trust declines, so does Americans’ willingness to invest their money in the financial system. Our data show that trust in the stock market affects people’s intention to buy stocks, even after accounting for expectations of future stock-market performance. Similarly, a person’s trust in banks predicts the likelihood that he will make a run on his bank in a moment of crisis: 25 percent of those who don’t trust banks withdrew their deposits and stored them as cash last fall, compared with only 3 percent of those who said they still trusted the banks. Thus, trust in financial institutions is a key factor for the smooth functioning of capital markets and, by extension, the economy. Changes in trust matter.

They quote a Nobel laureate economist on the subject:

“Virtually every commercial transaction has within itself an element of trust,â€

Monday, February 7, 2011

Rumsfeld Lies About Iraq and the War on Terror ... Again

ABC News reports today on Diane Sawyer's recent interview with former Secretary of Defense Donald Rumsfeld.

Rumsfeld claims:

Powell -- along with other top Bush administration officials and advisers -- truly believed Saddam had weapons of mass destruction at the time of his famous presentation to the United Nations in February 2003.

The truth, however, is that everyone knew that Iraq didn't have WMDs.

ABC also notes:

Asked if he turned the conversation inside the administration to Iraq in the wake of 9/11, Rumsfeld said "absolutely not."
But as I have repeatedly pointed out, the reality is that Rumsfeld tried to use the 9/11 attacks as an excuse to attack Iraq:

5 hours after the 9/11 attacks, Donald Rumsfeld said "my interest is to hit Saddam".

He also said "Go massive . . . Sweep it all up. Things related and not."
Indeed:

Former British Prime Minister Tony Blair is currently saying that Dick Cheney's vision of policy towards the Middle East after 9/11 was to re-draw the map ....

What does this mean?

Well, as I have repeatedly pointed out, the "war on terror" in the Middle East has nothing to do with combating terror, and everything to do with remaking that region's geopolitical situation to America's advantage.

For example, as I noted in January::

Starting right after 9/11 -- at the latest -- the goal has always been to create "regime change" and instability in Iraq, Iran, Syria, Libya, Sudan, Somalia and Lebanon; the goal was never really to destroy Al Qaeda. As American reporter Gareth Porter writes in Asia Times:

Three weeks after the September 11, 2001, terror attacks, former US defense secretary Donald Rumsfeld established an official military objective of not only removing the Saddam Hussein regime by force but overturning the regime in Iran, as well as in Syria and four other countries in the Middle East, according to a document quoted extensively in then-under secretary of defense for policy Douglas Feith's recently published account of the Iraq war decisions. Feith's account further indicates that this aggressive aim of remaking the map of the Middle East by military force and the threat of force was supported explicitly by the country's top military leaders.

Feith's book, War and Decision, released last month, provides excerpts of the paper Rumsfeld sent to President George W Bush on September 30, 2001, calling for the administration to focus not on taking down Osama bin Laden's al-Qaeda network but on the aim of establishing "new regimes" in a series of states...

General Wesley Clark, who commanded the North Atlantic Treaty Organization bombing campaign in the Kosovo war, recalls in his 2003 book Winning Modern Wars being told by a friend in the Pentagon in November 2001 that the list of states that Rumsfeld and deputy secretary of defense Paul Wolfowitz wanted to take down included Iraq, Iran, Syria, Libya, Sudan and Somalia [and Lebanon].

When this writer asked Feith . . . which of the six regimes on the Clark list were included in the Rumsfeld paper, he replied, "All of them."

The Defense Department guidance document made it clear that US military aims in regard to those states would go well beyond any ties to terrorism. The document said the Defense Department would also seek to isolate and weaken those states and to "disrupt, damage or destroy" their military capacities - not necessarily limited to weapons of mass destruction (WMD)...

Rumsfeld's paper was given to the White House only two weeks after Bush had approved a US military operation in Afghanistan directed against bin Laden and the Taliban regime. Despite that decision, Rumsfeld's proposal called explicitly for postponing indefinitely US airstrikes and the use of ground forces in support of the anti-Taliban Northern Alliance in order to try to catch bin Laden.

Instead, the Rumsfeld paper argued that the US should target states that had supported anti-Israel forces such as Hezbollah and Hamas.

After the bombing of two US embassies in East Africa [in 1998] by al-Qaeda operatives, State Department counter-terrorism official Michael Sheehan proposed supporting the anti-Taliban Northern Alliance in Afghanistan against bin Laden's sponsor, the Taliban regime. However, senior US military leaders "refused to consider it", according to a 2004 account by Richard H Shultz, Junior, a military specialist at Tufts University.

A senior officer on the Joint Staff told State Department counter-terrorism director Sheehan he had heard terrorist strikes characterized more than once by colleagues as a "small price to pay for being a superpower".
No wonder former U.S. National Security Adviser Zbigniew Brzezinski told the Senate that the war on terror is "a mythical historical narrative".

The number two man at the State Department, Lawrence Wilkerson, said:

The vice president and the secretary of defense created a "Cheney-Rumsfeld cabal" that hijacked U.S. foreign policy.

And at 2:40 p.m. on September 11th, in a memorandum of discussions between top administration officials, several lines below the statement "judge whether good enough [to] hit S.H. [that is, Saddam Hussein] at same time", is the statement "Hard to get a good case." In other words, top officials knew that there wasn't a good case that Hussein was behind 9/11, but they wanted to use the 9/11 attacks as an excuse to justify war with Iraq anyway.

Moreover, "Ten days after the September 11, 2001, terrorist attacks on the World Trade Center and the Pentagon, President Bush was told in a highly classified briefing that the U.S. intelligence community had no evidence linking the Iraqi regime of Saddam Hussein to the [9/11] attacks and that there was scant credible evidence that Iraq had any significant collaborative ties with Al Qaeda".

And a Defense Intelligence Terrorism Summary issued in February 2002 by the United States Defense Intelligence Agency cast significant doubt on the possibility of a Saddam Hussein-al-Qaeda conspiracy.

And yet Bush, Cheney and other top administration officials claimed repeatedly for years that Saddam was behind 9/11. See this analysis. Indeed, Bush administration officials apparently swore in a lawsuit that Saddam was behind 9/11.

Moreover, President Bush's March 18, 2003 letter to Congress authorizing the use of force against Iraq, includes the following paragraph:

(2) acting pursuant to the Constitution and Public Law 107-243 is consistent with the United States and other countries continuing to take the necessary actions against international terrorists and terrorist organizations, including those nations, organizations, or persons who planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001.

Therefore, the Bush administration expressly justified the Iraq war to Congress by representing that Iraq planned, authorized, committed, or aided the 9/11 attacks. See this.

Indeed, the torture program which Cheney created was specifically aimed at producing false confessions in an attempt to link Iraq and 9/11.
Rumsfeld had a big hand in torture as well.

http://www.washingtonsblog.com/2011/02/ ... ar-on.html

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