A Banana Republic With No Bananas → Washingtons Blog
A Banana Republic With No Bananas - Washingtons Blog

Monday, April 12, 2010

A Banana Republic With No Bananas


Experts on third world banana republics from the IMF and the Federal Reserve have said the U.S. has become a third world banana republic (and see this and this).

Are they right?

Well, let's look at Wikipedia's description of the four factors which make a country a banana republic.

Profits Privatized and Debts Socialized

The first feature of a banana republic as "A collusion between the overweening state and certain favored monopolistic concerns, whereby the profits can be privatized and the debts socialized."

✓ Check.

As I pointed out in November:

Nouriel Roubini writes in a recent essay:

This is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest...

The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending.

Roubini has previously written:

We're essentially continuing a system where profits are privatized and...losses socialized.

Nassim Nicholas Taleb says the same thing:

After finishing The Black Swan, I realized there was a cancer. The cancer was a huge buildup of risk-taking based on the lack of understanding of reality. The second problem is the hidden risk with new financial products. And the third is the interdependence among financial institutions.

[Interviewer]: But aren't those the very problems we're supposed to be fixing?

NT: They're all still here. Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient's symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment.

[Interviewer]: Are you saying the U.S. shouldn't have done all those bailouts? What was the alternative?

NT: Blood, sweat and tears. A lot of the growth of the past few years was fake growth from debt. So swallow the losses, be dignified and move on. Suck it up. I gather you're not too impressed with the folks in Washington who are handling this crisis.

Ben Bernanke saved nothing! He shouldn't be allowed in Washington. He's like a doctor who misses the metastatic tumour and says the patient is doing very well.
Nobel prize winning economist Joseph Stiglitz calls it "socialism for the rich". So do many others.

Devalued Paper Currency

The second characteristic of a banana republic is "Devalued paper currency in the international community."

✓ Check. Here's a chart of the trade weighted US Dollar from 1973-2009.

US_dollar

And here's a bonus chart showing the decline in the dollar's purchasing power from 1913 to 2005:

US_dollar

Politicians Use Time in Office to Maximize Their Own Gains


The third characteristic of a banana republic is:

Kleptocracy -- those in positions of influence use their time in office to maximize their own gains, always ensuring that any shortfall is made up by those unfortunates whose daily life involves earning money rather than making it.

✓ Check. As I wrote last month:

Summers, Geithner, Bernanke and Congress like things just the way they are.

Of course they do ... they're bought and paid for:

  • Lobbyists from the financial industry have paid hundreds of millions to Congress and the Obama administration. They have bought virtually all of the key congress members and senators on committees overseeing finances and banking. The Congress people who receive the most money from lobbyists are the most opposed to regulation. See this, this, this, this, this, this, and this.
  • Obama received more donations from Goldman Sachs and the rest of the financial industry than almost anyone else
  • Summers and the rest of Obama's economic team have made many millions - even in the first few months of being appointed, or right beforehand - from the financial industry
The chairman of the Department of Economics at George Mason University (Donald J. Boudreaux) says that it is inaccurate to call politicians prostitutes. Specifically, he says that they are more correct to call them "pimps", since they are pimping out the American people to the financial giants ...

Corruption Remains Unchecked, Politicians Are Only for Show

And the fourth characteristic of a banana republic is:

There must be no principle of accountability within the government so that the political corruption by which the banana republic operates is left unchecked. The members of the national legislature will be (a) largely for sale and (b) consulted only for ceremonial and rubber-stamp purposes some time after all the truly important decisions have already been made elsewhere.

✓ Check. There's no accountability.

For example, former Vice President of Dallas Federal Reserve, who said that the failure of the government to provide more information about the bailout signals corruption. As ABC writes:

Gerald O'Driscoll, a former vice president at the Federal Reserve Bank of Dallas and a senior fellow at the Cato Institute, a libertarian think tank, said he worried that the failure of the government to provide more information about its rescue spending could signal corruption.

"Nontransparency in government programs is always associated with corruption in other countries, so I don't see why it wouldn't be here," he said.

As I noted in October:

William K. Black - professor of economics and law, and the senior regulator during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are ("the entire strategy is to keep people from getting the facts").

Indeed, as I have previously documented, 7 out of the 8 giant, money center banks went bankrupt in the 1980's during the "Latin American Crisis", and the government's response was to cover up their insolvency.

Black also says:

There has been no honest examination of the crisis because it would embarrass C.E.O.s and politicians . . .

Instead, the Treasury and the Fed are urging us not to examine the crisis and to believe that all will soon be well.

PhD economist Dean Baker made a similar point, lambasting the Federal Reserve for blowing the bubble, and pointing out that those who caused the disaster are trying to shift the focus as fast as they can:

The current craze in DC policy circles is to create a "systematic risk regulator" to make sure that the country never experiences another economic crisis like the current one. This push is part of a cover-up of what really went wrong and does absolutely nothing to address the underlying problem that led to this financial and economic collapse.
Baker also says:
"Instead of striving to uncover the truth, [Congress] may seek to conceal it" and tell banksters they're free to steal again.

Politicians are for sale.

And Congress made a big show of passing derivatives reform legislation, but actually weakened existing regulations. In fact, the legislation was "probably written by JP Morgan and Goldman Sachs" (two of the biggest derivatives players). In other words, Congress just rubber-stamped decisions which were already made elsewhere.

The same is true with every other piece of financial "reform" legislation which has been passed. See this and this.

It's all for show, folks. Dodd, Frank, Obama and all the other politicians of both parties (with the exception of a handful trying to do the right thing) are "consulted only for ceremonial and rubber-stamp purposes some time after all the truly important decisions [about economic legislation] have already been made elsewhere"

Without the Bananas

Wikipedia gives some additional background on the term "banana republic":
Banana republic is a pejorative term originally used to refer to a country that is politically unstable, dependent on limited agriculture (e.g. bananas), and ruled by a small, self-elected, wealthy, and corrupt clique.

Well, America isn't dependent on limited agriculture like bananas. But just about the only areas of growth are in the military and in giant companies lavished with buckets of cash and special "favors" by Uncle Sugar.

As one commentator succinctly put it, America has become:

A banana republic with no bananas.

16 comments:

  1. You forgot the nukes, George. A banana republic with no bananas and a lot of nukes.

    The lunatics running the asylum are itching for a war to start an inflation to inflate out the debt.

    The only way to fix our broken government, I am convinced, is a Constitutional convention, outside of Washington. Let the states take the government back.

    See www.CallAConvention.org and http://www.thedailybeast.com/blogs-and-stories/2010-04-06/how-to-tell-dc-politicians-to-go-to-hell/.

    God help us.

    cheers,
    Benign

    ReplyDelete
  2. great analysis and documentation, G!

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  3. No bananas? !*$# that! Costa Rica better watch out!

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  4. A constitutional convention will NOT fix things if the government even now refuses to follow the constitution. All it will do is allow the entrenched crooked interests of Wall Street manipulate the constitution so that it enshrines their power and ill-gotten gains over the American people.

    The only peaceful solution is to acquire the means of self-sufficiency in food, water and energy and drop out of the system altogether. Starving the beast on a massive scale should bring it back down to Earth...

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  5. So does that mean that Michele Obama is now senior chiquita of the banana republic?

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  6. "Banana Republic!"

    In the 1st place, Americans, are so full of hubris!

    THe International Fruit Companys, Dole and Del Monte, go into a tropical country and thru the local governments, undercuts and forces out the local growers, who had a wide variety of crops.

    The Fruit Co. then take those small pieces of land, adding them, it to the vast plantations. Meanwhile, the samll farmers - who now have no income, HAVE to go to work as pickers, for the fruit companies.

    And what is grown on the vast plantations, but BANANAS.

    And so for these Latin American countries / Peoples, INSULT is now added to injury.

    So, Americans, I hope you like a lot of bananas.

    You could have got a whole lot of lucious, other tropical fruits:

    cashew fruit - guaba - pixba - nance - guanabana - mamey - canafistula -mamoncillo - naranjilla - caimito - guayaba

    To name only a few.

    ReplyDelete
  7. I wonder what happened before FDR when banks used to just go under and depositors got fried. If you look back pre-New Deal there was a literal depression/panic every 8 to 12 years. The poverty rates including starvation in our very own country would approach 40 percent, and then suddenly we would boom.

    What were we doing wrong then? In spite of everything the financial system still seems better now than it was then. Would any political system today bear the kind of pain we had then?

    When there is an analysis that points out all that is wrong I wish they would give how it could be fixed, without going back to the poverty and misery pre-New Deal.

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  8. You are putting up some terrific posts here. I don't comment much, but I read 'em! Keep up the good work.

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  9. So are we now an Obomber Republic?

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  10. nader paul kucinich gravel mckinneyApril 14, 2010 at 8:21 AM

    There's a sunny little country south of Mexico
    Where the winds are gentle and the waters flow
    But breezes aren't the only things that blow
    in El Salvador

    ReplyDelete
  11. I'll second what Gordon said.

    I get thought provoking news and stories here and at some other sites like it. I then try to share them at places like Huffpost, Alternet, rawstory and CBC.
    They censor the hell out of me, but hopefully I get a few people to think by offering them links to well written well researched stuff.

    ReplyDelete
  12. Excellent analysis. There is really no hope left for us as the foxes are all guarding the hen houses and they are not about to let we the people take control and have proper representation.

    This is why they are creating more of a police/homeland security/patriot act state to bring down the hard core controls on the people as we realize more and more how we are being screwed.

    Wall street is Washington and Washington is Wall st. ed of story. We have no control - it is all a giant kabuki dance.

    ReplyDelete
  13. Max and Stacy featured this piece on today's Keiser Report.

    http://maxkeiser.com/2010/04/20/kr35-keiser-report-markets-finance-scandal-and-joe-weisenthal/

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  14. Yes, and Max as per usual did a lovely job of eating a banana and then having an empty banana skin as Stacy told the story. :) Love it.

    The idea that it was worse before the new deal is only evidence that the bankers trust has been in control a Looooooooonnnnnnngggggg time.

    I'm with Max, put all of them in jail - and shut them all down.

    I have never commented here before but I read and share your posts often. Very excellent material and I really appreciate your work.

    Kudos

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  15. Meanwhile, John Roberts and William Rehnquist before him presided over corporate and industry PACs overtaking unions ability to raise all this political money for pimps and pimping. Lessig says only 1.2% in the game is union money now, a complete reversal since 1974 when unions out raised business. Now, any injustice that may have been back then against business owners has been reversed, with dangerous repercussions. John Roberts lets those "rules" ride despite Marbury vs Madison his obligation in that job to strike down unfair laws and rules. These guys are the real problem, since they set the rules by which the pimps became pimps!

    ReplyDelete

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