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EJ
08-02-11, 12:10 PM
The Big Bet revisited - Part I: Turkeys grounded


http://www.itulip.com/images2/turkeyslittleMEDwtmk.png
Photo Credit: Eric Janszen, Back yard, Summer 2011


"All these leaders understand, but never admit, that the motivation and incentive for Americans to resolve these critical problems—to improve our education, health care, and energy systems; to control our debts, live within our means, and so on—have been gradually reduced by the U.S.-dominated global speculative financial system that they themselves have helped create."

- The Big Bet (http://www.itulip.com/forums/showthread.php/608-The-Big-Bet), by Eric Janszen and an anonymous investment banker, January 2006

• A Show About Nothing
• Debt ceiling as official meme management
• Genius is a rising bond market
• Mining memes for money
• Gold gallops as silver stalls
• iTulip.com's 10-year gold purchase anniversary

A Show About Nothing

CI: Talk to me about this article in today’s Wall Street Journal:
T-Bills on the Brink
Holders of First Treasurys Due After Aug. 2 Face Uncertainty

When Mark F. Travis bought a handful of Treasury bills back in February, he figured he had just bought the safest, most boring investment on the Street.

Almost six months later, that T-bill is among the most volatile in the stock-picker's portfolio.

Mr. Travis, president and chief executive of Intrepid Capital Funds, holds $38 million worth of the Treasury bill that matures Aug. 4. It is the first Treasury to mature after the Aug. 2 deadline for Washington to approve an increase to the government debt ceiling. After that time, the Obama administration has said, the government may start defaulting on its debts.
EJ: The story includes a graphic luridly titled "Race Against Time." It supposedly reveals an enormous jump in T-bill yields produced by holders who are selling in anticipation of an impending US debt default.

Looks quite dramatic.


http://www.itulip.com/images2/tbillscareWSJ.png
Oh my god! T-bill rates to 0.16%!


The chart makes it appear that yields have shot up alarmingly in a few days to the February 2011 level. The article correlates this to fear of debt default. But if we zoom out to the start of 2010 we see that the recent move is tepid compared to early 2010.


http://www.itulip.com/images2/tbillscareCloseinwtmk.png
The Wall Street Journal selects a smaller jump in T-bill yields as politically motivated "news"


Did a larger spike in yields cause as much alarm in early 2010? Searching for WSJ articles about a fearful rout in T-bills then yields zero results. To see why, we zoom out further.


http://www.itulip.com/images2/tbillscareFarOutwtmk.png
T-bill panic? What T-bill panic?


Race against time? If this is the start of a bond crisis we're off to a slow start. Something was amiss in the imminent default story. They bond market wasn't buying it.

CI: So you did not think a US government debt default was ever imminent. The Wall Street Journal and every major US media outlet is blaring the message “Default looms as Congress haggles over debt limit.” Why?
EJ: The debt ceiling debate reminds me of that old Seinfeld episode, "A Show about Nothing." It was a manufactured crisis, right up there with weapons of mass destruction and the Iraq War. There is no question in my mind that the probability of a bond crisis over the debt ceiling was zero. The only question is, To what purpose?

CI: How can you be so sure?
EJ: I've studied sovereign debt defaults for 11 years since I watched the Argentina bond default come and go from 2000 to 2001, two years after founding this site. The Greek bond market crisis is classic for its banal conformity to the sovereign default playbook, although the actual default hasn't happened yet. The euro is a glorified currency peg. For Greece it's a peg of the drachma to the euro, much like Argentina's peg of the peso to the dollar from 1991 to 2001 but with a broader set of "rules" governing the execution of the peg. Like Argentina's peso-dollar peg in 1999 and 2000, the euro drachma-euro peg has been hiding the plunging drachma under the monetary covers while spiking Greek bond yields reflect actual default risk. That said, Greece won't go the way the Argentina default, with a currency crisis, unless Germany and France throw Greece out of the union, which strikes me as unlikely at least at this time, but is not an impossibility in the future if Greece creates more political problems for the union than it's worth.

CI: When does the Greek default happen?
EJ: I still think the fireworks come this fall, maybe as soon as September, after the European vacation season is over. The point is the process is long and drawn out, and driven by the creditors not the debtor. The two year long Greece bond default process shows us what a real default looks like versus the fake US version that is being pushed as a meme here for political purposes.

A long series of generally predictable events occur leading up to a government bond default. The first rumors of trouble arrive soon after a major election that produces a change of control, versus a status quo election. The practice is the same as new management taking over from the previous management of a badly run corporation. The new leadership puts everything out there that might reflect poorly on the new administration down the road and works to correct the mistakes within the first two years. Often the new leadership miscalculates and thinks that by hanging the previous administrations' dirty fiscal mismanagement laundry out for all to see that they are buying themselves time to fix the resulting damage. They do this not realizing that they are effectively lighting a fuse that they cannot put out. Happens over and over again. Some day that will happen in the US. I'll let you know when it does. But the thing to understand is that for the US, the process has not yet begun. All we have so far is the risk and the political theater, and the true nature of the risk is still understood by only a tiny minority of market participants.

CI: Once the government debt default fuse is lit, what's next?
EJ: Greece is a good example. After the first carefully placed rumors, next come the official denials. Then the stepped up campaign by creditors to expose the true extent of the problem. The belated official admission of a problem but tempered with official denial that default is even possible. The first attempts by the government at negotiation with creditors. The rumors of impasse. The announcement of a deal. The announcement of the collapse of the deal. The announcement of a second deal. The announcement of the collapse of the second deal. And on and on, for several years. Bond yields ratchet up and up as the risk of default ratchets up. Eventually the government defaults and blames the catastrophe on the previous administration, but for naught because by this time -- typically two years or more after the process started -- the fallout from the crisis falls squarely on the shoulders of the standing administration.

The process looks like this.


http://www.itulip.com/images2/greekbonds2007-June2011NOTESwtmk.png
This is what a real sovereign default process looks like


CI: Why wasn't the US debt ceiling crisis relevant in this scenario?
EJ: Not a single government bond default has ever resulted from a debtor government’s self-imposed debt limit. The US business media is popularizing a fiction that one day a country hits a self-imposed debt limit set by the legislature and the next day it defaults on its debt, that a debt limit has some bearing on creditworthiness and interest rates.

Creditors decide default and inflation risk, not borrowers. The credit limit imposed by creditors on a debtor country is what matters, not some arbitrary debt limit that a debtor country imposes on itself.

Nothing in the default playbook is happening to the US -- yet. Even if the wrangling about the debt ceiling is creatively construed as a kind of first step in the debt default process, we have a long, long way to go before an actual default.


http://www.itulip.com/images2/treasurybondsyields2007-072711NOTESwtmk.png
A dozen as-yet uncompleted US default steps


CI: But isn’t a missed payment a default?
EJ: First of all, Tim Geithner has said that no way, no how even one debt payment will be missed. It's not like all revenue stops flowing if the debt ceiling isn't raised, just the part of revenue that comes from new debt issuance. If the debt ceiling isn’t raised, most of the government's bills get paid but some do not. That poses real risks to the economy and thus the bond markets, but so does a deal on the debt ceiling that promises to reduce government spending. That explains why the stock market didn't do much today after the deal was cut. Creditors are on the top of the list of obligations that get paid. The least politically influential and most vulnerable will take the hit, as usual. But let’s say for the sake of argument that for some reason one debt payment to a foreign creditor is missed. That is technically a default. But it's not a default in the sense of Argentina's in 2001 or Greece's impending default. For a nation with foreign debt liabilities there’s still a world of difference between a technical default -- one missed payment -- and a “holy cow, the bastards aren't going to pay us” default, the kind that Argentina succumbed to and that is looming over Greece, Italy, Spain, Portugal, and Ireland.

It's the difference between "won't pay" and "can't pay." A government that fails to make one debt payment as a result of a domestic political decision to not make payments on all certain obligations--payroll, electricity bills, and so on -- is a completely different animal from the one that says, “Sorry, we don't have money to pay our foreign bond holders because we've decided to pay our politically significant constituency -- our domestic bond holders, our bureaucrats, our pensioners, our soldiers, our unemployed, and last but not least our hungry masses -- instead." If there was even the slightest worry among foreign or domestic US Treasury bond holders that payments could not be met because the US economy cannot generate enough tax revenue to meet its obligations, even with the US balance sheet is leveraged as it is, or that Congress was making a decision to pay Congress and friends of Congress before bond holders, you would not see bonds trading as they did before the fake crisis ended and since.

CI: You say when a US bond crisis is truly imminent that yields will price in default risk. But you said in early articles that Argentine bonds, Russian bonds and others traded at a premium to global bonds before each country went through a bond crisis.
EJ: Let’s close out the last point first then I'll get to the Ka-Poom Theory default and currency crisis process you are alluding to.

The notion of a US debt default is absurd. As I’ve said here since 2001 when we first started to discuss the likely outcome of America's accelerating rate of dependence on debt growth for economic growth and money supply growth -- and bought gold -- the US will never miss a debt payment. (http://www.itulip.com/bankrupt.htm)
"Of course, the U.S.A. is not going to go bankrupt. The point of this piece is to make the inevitable alternative obvious. The U.S. will repay its debts, backed with the full credit of the government. Debts will be paid in full... with itty, bitty little dollars."
The US has and will continue to repay outstanding debt in a gradually depreciating currency. The trick is to depreciate the dollar ever so slowly so that the frogs in the pot of water -- the bond holders and tax payers -- don’t notice.

There was and is no possibility of a US debt default. Not ten years ago, not today, not in ten years. Not going to happen. The US will make every debt payment, foreign and domestic. The US Treasury bond market correctly reflected this zero default risk level before and after the fake debt crisis that just "ended." When -- some day -- Treasury bond yields do rise it will be due to inflation risk not default risk.

Now, the Ka-Poom Theory process is a sudden-stop sovereign bond crisis that involves capital flight and a failure of monetary policy to produce money supply growth. The economy crashes due to catastrophic event, such as the collapse of the securitized debt market in the US 2007. We came close in 2008. If monetary and fiscal reflation measures had failed, the Ka-Poom process would have continued. Again, this is the opposite of the case today. The political theater of a debtor arguing about limits on future bond issuance can only make existing bond holders more not less happy to be holding bonds.

Debt ceiling as official meme management

CI: I don’t get it. If a default on debt is not in the cards then why the fear mongering about it?
EJ: My theory is that it’s about using meme management -- a modern form of propaganda -- to shift the cost burden of post-financial crisis stimulus off of the actors who caused the financial crisis and the resulting recession and output gap (Recession + Output Gap = Depression (http://www.itulip.com/forums/showthread.php/19599-The-Next-Ten-Years-%C2%96-Part-I-There-will-be-blood-Eric-Janszen?p=200282#post200282)) and onto the victims of the crisis.

CI: Meme management?
EJ: It's also known by the term meme-jacking. Here's an example of what I mean by meme management, getting the term "global warming" dropped and "climate change" substituted. I'm not offering an opinion here on climate issues -- way too emotional a subject for rational discussion. I'm using it only as an example of how effective meme management can be.

Remember, when shaping public policy, it's not about who has the best argument. That's for public policy debate amateurs. He who frames the debate wins the debate.

In the case of the debate is about warming of the climate by human activity and damage done by it, the proponents of that position put competing interest groups on the defensive by the act of raised the warning. The competing groups, the producers of greenhouse gasses and the politicians who represent them, wanted to change the debate to get out of a defensive position. Consider this memo from 2002:
"The phrase 'global warming' should be abandoned in favor of 'climate change,' Mr Luntz says, and the party should describe its policies as 'conservationist' instead of 'environmentalist,' because 'most people' think environmentalists are 'extremists' who indulge in 'some pretty bizarre behavior… that turns off many voters'."

- Whitehouse memo by the leading Republican consultant Frank Luntz, 2002
The program to get the term "global warming" replaced by the term "climate change" succeeded. Nine years later both the proponents and detractors of the idea of anthropomorphic climate impact universally use the new phrase "climate change." A small minority are even aware that the issue started off as a debate about "global warming" and that interest groups in opposition to the idea of global warming intentionally re-framed the debate. Today the debate isn't about warming at all. The climate change debate is about a range of impacts from warming to nothing to cooling as a result of human activity. The debate went from being about the dangers posed by human activity that heats up the climate to a debate about the possible negative, neutral, or positive impact of climate changes caused by human activity, if any. Anyone who continues to use the term global warming instead of climate change identifies themselves as "biased" whereas those who adopted the new neutral language are accepted as independent-minded. This subtle shift in language via meme management turned the original proponents of the idea of global warming into agents of the opposition by forcing them to adopt the new debate framework. Some fought back by inventing the term "climate change deniers" but even that term accedes to the new language regime. A google search for "global warming deniers" produces as the first link the wikipedia entry http://en.wikipedia.org/wiki/Climate_change_denial. The latest date of a story that uses the term global warming is 2008, the year that the term mostly disappeared from the debate.

CI: I hope your thread doesn't turn into a rant-fest about climate change -- I mean -- global warming.
EJ: It won't. FRED will see to that. Again, the topic is the way that public policy debates are shaped. Let me give you another example of meme management that's not so subtle. What if I told you that the Defense Department is now using Facebook and other social media sites to manage certain memes that it deems detrimental to the State, without any due process of law.

CI: I'd say you're scaring me.
EJ: Here's the Wired story:
On Thursday, Defense Department extreme technology arm Darpa unveiled its Social Media in Strategic Communication (https://www.fbo.gov/index?s=opportunity&mode=form&id=6ef12558b44258382452fcf02942396a&tab=core&_cview=0) (SMISC) program. It’s an attempt to get better at both detecting and conducting propaganda campaigns on social media. SMISC has two goals. First, the program needs to help the military better understand what’s going on in social media in real time — particularly in areas where troops are deployed. Second, Darpa wants SMISC to help the military play the social media propaganda game itself.

This is more than just checking the trending topics on Twitter. The Defense Department wants to deeply grok social media dynamics. So SMISC algorithms will be aimed at discovering and tracking the “formation, development and spread of ideas and concepts (memes)” on social media, according to Darpa’s announcement.

More specifically, SMISC needs to be able to seek out “persuasion campaign structures and influence operations” developing across the social sphere. SMISC is supposed to quickly flag rumors and emerging themes on social media, figure out who’s behind it and what. Moreover, Darpa wants SMISC to be able to actually figure out whether this is a random product of the hivemind or a propaganda operation by an adversary nation or group.

- Pentagon Wants a Social Media Propaganda Machine, Wired, July 28, 2011
The Pentagon is openly stating that it is influencing the way our beliefs are shaped in social media. It positions this activity as a defense against hostile foreign influences but of course there is no way to determine the origin of a meme, whether domestic or foreign. Given this fact, is it a stretch to think that a highly concentrated media is pushing a fake debt crisis meme to further the political aims of the main interest groups behind those media?

CI: What about all of the guys we see on TV every day exposing...
EJ: Exposing what? The deficit crisis? A friend introduced me to a term today to describe them: presstitutes. Guys selling books. Guys selling funds. Guys selling product -- gold, stocks, whatever -- in return for not talking about the FIRE Economy and other topics we have covered here for 13 years.

CI: If the debt ceiling crisis is a managed meme to divert reflation costs from the perpetrators to the victims, how does the "replacement meme" operate?
EJ: By diverting public discussion toward the emotionally charged government spending and taxing problem and away from the root of the public debt problem, the mountain of private sector debt, especially financial sector private debt, that was produced during the FIRE Economy era.

Genius is a Rising Bond Market

CI: I take it that raising the debt ceiling isn't the answer to the private debt crisis?
EJ: The stimulative effect of three decades of falling bond yields have made politicians look like economic policy geniuses. The era of falling interest rates is over and it isn't coming back to save us. For politicians, genius is a rising bond market.

CI: That's your take-off on the JK Galbraith phrase...
EJ: Right. John Kenneth Galbraith said "Genius is a rising stock market" to describe the mass of equity investors who feel brilliant during bull markets. A related phrase that comes to mind is "When the wind blows hard enough, even turkeys fly" that came into favor during the stock market bubble when the New Economy hype kept pet.com and other Internet stocks aloft.

The same principle applies to politicians during extended bull markets in bonds. The decline in interest rates from over 14% in 1981 to under 4% in 2011 let the economy to refinance debt -- corporate, household, and government -- with the same kinds of benefits that accrue to homeowners as a group when mortgage rates drop. Money that was previously spent on interest is freed up for other expenditures. New borrowing demands ever smaller interest expense. The opposite occurs in the early stages of an inflationary period before interest rates begin to rise and the wind stops blowing. The genius politicians who took credit for the booming economy get grounded. Like now.


http://www.itulip.com/images2/geniusrisingbondmarket1962-2011MEDwtmk.png
A economy-wide, 30-year refinancing boom spurred the economy but left behind trillions in unsupportable corporate,
especially financial corporate, and household debt. The trend peaked in 2008. Now the Federal government is
on the hook to keep the economy afloat.


This is not how the key challenge facing the US economy is discussed, as a FIRE Economy crisis. The debt ceiling debate focused on public debt as a percent of GDP. A more revealing statistic is public debt as a percentage of total debt in the economy and the role that public debt plays in our highly levered economy.

Let's start with the total debt versus GDP picture.


http://www.itulip.com/images2/totaldebttoGDP1952-2011MEDwtmk.png
Total public and private debt is a nearly three times larger as a portion of GDP today than 50 years ago. But is public debt the key issue?


The paradox here is that the fake debate has exacerbated the underlying economic growth rate problem by slowing the productive economy, which was already in trouble even before uncertainty was heightened by the prospect of a cutoff of payments to government contractors and other economic participants. And I expect the economy to tank and later the stock market, too, in response to the debt ceiling deal when it closes, for reasons that should be apparent if you examine where the debt growth is in the economy and the role of public versus private debt in a highly levered economy.

The emotional argument behind the debt ceiling meme is that out-of-control, big government growth has ballooned public debt and endangered the US economy and the nation. That's the story line that's being used to build the debt ceiling propaganda. Like all good propaganda programs, this one is grown from a kernel of truth. It's true that government spending as a percent of GDP shot up after the FIRE Economy crisis that started in 2008, from less than 2% to more than 9% of GDP. But the missing back-story is the FIRE Economy itself, that is, the true nature of our predicament, how we got into it, and how we might get out of it.


http://www.itulip.com/images2/whogotdebtbycategory1952-2011MEDwtmk.png

The true debt crisis buried in the debt ceiling debate is that public debt has for decades been steadily declining as a portion of total debt in the economy while private sector debt, especially in the financial sector, has ballooned. The worry that the economy has become overly dependent on deficit spending -- on public sector borrowing -- has subsumed the root problem that the economy has become too dependent on private sector debt growth. The government borrowing that results in the extreme public sector debt levels that are alarming most Americans has become a do-or-die economic and money supply growth backstop needed to prevent economic collapse when the private credit markets peak in an economic cycle can no longer keep up the unsustainable growth pace. Securitization gave the 30 plus year-old system its last short in the arm in the early 2000s. Since it collapsed the government has been filling in both directly by spending on programs that generate demand, by acting as consumer of last resort in the military sector, and by purchasing private sector loans that private lenders won't touch. If the debt ceiling isn't raised and deficit spending is cut, the government will have to keep doing all but the last task and will likely defer it to the Fed.

CI: In the chart above the total debt line looks toppy...
EJ: Your sense is correct. Looking back over 50-year period depicted in the chart there are no similar periods when total debt declined and leveled off as is has since 2008.

The system has been pushed to the precipice and is teetering back and forth like a boulder that's been pushed to the top of a mountain range and is being held from falling into a deflationary ravine on the one side by government spending and a hyper-inflationary ravine on the other by the occasional crash.

Debating the debt ceiling and the deficit in the context of the chart above is like arguing about the cost of sandwiches on an overloaded and under-fueled jetliner that's heading into a mountain. The urgent discussion is how and where to dump heavy cargo and take on more fuel mid-flight. Otherwise, as the mountain comes more clearly into view the conversation will get even more heated. It will be about dumping all of the cargo and a some of the passengers, too.

CI: Haven't we already dumped the older passengers and the ones in manufacturing, journalism, construction trades, etc?
EJ: Manufacturing, sure. Technology and markets are responsible for job losses in journalism and the housing bubble for losses in construction. I'm talking about also dumping grandma, veterans, widows and orphans, small business owners -- anyone without an effective political action committee or high paid lobbying firm in Washington to aggregate campaign finance funds to protect them.

Let's ask the right questions to get to the right answers. Our future is not about the fiscal deficit, at least not directly.

What are we going to do about the private sector debt left over from the FIRE Economy era?

How can the economy be restructured to reduce dependence on debt growth?

Now that the primary engine of growth for the past 40 years, falling interest rates, has come to a grinding halt, how can productive enterprises be encouraged to drive the economy forward fast enough to allow the economy to exit the Output Gap Trap (http://www.itulip.com/forums/showthread.php/19599-The-Next-Ten-Years-%C2%96-Part-I-There-will-be-blood-Eric-Janszen?p=200282#post200282)?

To me, the key learning from the fake debt default crisis is about the power -- and also the limitations -- of meme management. Some day it will be widely understand that a tool of public opinion shaping that can be used to sell legislation and to start wars needs to be regulated by constitutional amendment. In the hands of a tight group of interested parties with broadly similar political interests that are not also in the interests of the nation, it's beer and chain saws -- there's going to be an accident and it's not going to be pretty. Until then, let's see how we can put this concept to a constructive purpose as investors.

The Big Bet revisited - Part II: Mining memes for money (http://www.itulip.com/forums/showthread.php/19950-The-Big-Bet-revisited-Part-II-Mining-memes-for-money-Eric-Janszen?p=203791#post203791)


http://www.itulip.com/images2/birdseye.jpg
A pigeon at a restaurant on the French Riviera watches our table hopefully


• Mining memes for money
• Gold gallops as silver stalls
• iTulip.com's 10-year gold purchase anniversary

CI: Take us back to the deficit and public debt and total debt. Are you saying don't deficits matter?
EJ: Of course they matter, but "as if" remedies will only make the patient worse off. We will see that trying to moderate deficit spending at this time is crazy, given the dependence of the financial sector and thus the economy overall on government lending. Cut deficit spending now and even less money will be available to finance productive activity to increase the economic surplus. More public funds than ever will get diverted to keep the FIRE sector alive and existing government creditors paid. This will very likely reduce the total economic surplus of the US economy, making debt repayment even more difficult. By analogy it's like telling an man who developed heart disease from 30 years of bad diet and exercise habits that he should not only reduce his intake of calories and saturated fats but immediately start a regimen of long distance running. Bad idea. (more... $ubscription (http://www.itulip.com/forums/showthread.php/19950-The-Big-Bet-revisited-Part-II-Mining-memes-for-money-Eric-Janszen?p=203791#post203791))

__________________________________________________ __________________________________________________ ________________

For a concise, readable summary of iTulip concepts read Eric Janszen's 2010 book The Postcatastrophe Economy: Rebuilding America and Avoiding the Next Bubble (http://www.amazon.com/gp/product/1591842638?ie=UTF8&tag=wwwitulipcom-20&link_code=as3&camp=211189&creative=373489&creativeASIN=1591842638)http://www.assoc-amazon.com/e/ir?t=wwwitulipcom-20&l=as2&o=1&a=1591842638.

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cjppjc
08-02-11, 03:08 PM
I enjoyed reading that. I assume the federal debt at 9.6 trillion is reflective of the obligations to social security. I'm no literary expert, but sometimes your writing is not as clear as this was. It might just be me. This one told a story.

jk
08-02-11, 05:43 PM
I enjoyed reading that. I assume the federal debt at 9.6 trillion is reflective of the obligations to social security. I'm no literary expert, but sometimes your writing is not as clear as this was. It might just be me. This one told a story.

iirc, the current debt includes money in the so-called "trust fund." but it does not reflect unfunded future obligation to medicare, medicaid, or - for that matter- social security beyond what is in the "trust fund."

FRED
08-02-11, 05:56 PM
iirc, the current debt includes money in the so-called "trust fund." but it does not reflect unfunded future obligation to medicare, medicaid, or - for that matter- social security beyond what is in the "trust fund."

You are correct. The $52 trillion is the debt currently on the books of governments, businesses -- financial and non-financial -- and households.


http://research.stlouisfed.org/fredgraph.png?g=1nw

Social security, medicaid, and so on are not technically "debts" from an accounting standpoint, although they are political liabilities as voters expect to receive these benefits.

Rockchuck
08-02-11, 06:02 PM
Your claim that Bush's pollster invented the phrase "Climate Change" in 2002 in some scheme to reframe the Global Warming debate to their evil ends has one obvious problem--the UN body studying Global Warming is called the Intergovernment Panel on Climate Change--the IPCC...and it's been called that since 1988.

The phrase "Climate Change" actually originated with the enviro types because it's easier to find "change" than something specific like "warming".

Frank Luntz is a pollster and was simply telling his employer that the phrase "Climate Change" polled better than "Global Warming"--probably with Bush's Conservative base.

All politicans do this. That's why we've been listening to Obama drone on for the last few months about "Corporate Jet Owners" and "Millionaires and Billionaires" while the Republicans repeated "Obama's Blank Check" ad nauseum.

You're better than this EJ. There is no conspiracy here. Your claim is Denninger tin-foil quality stuff.

c1ue
08-02-11, 07:12 PM
There is no conspiracy here.

You didn't answer the point on why Global Warming was all the rage in the Gore 'Inconvenient Truth' era of 2006, but has now completely disappeared.

www.climatecrisis.net (http://www.climatecrisis.net)

We all contribute to global warming every day. The carbon dioxide you produce by driving your car and leaving the lights on adds up quickly. You may be surprised by how much Co2 you are emitting each year. <canvas style="width: 13px; height: 14px; top: -2px; left: -1px;" height="14" width="13"></canvas> <canvas style="width: 13px; height: 14px; top: -2px; left: -1px;" height="14" width="13"></canvas> (http://www.climatecrisis.net/take_action/become_carbon_neutral.php)

http://www.climatecrisis.net/files/jpg2/ait_key_art11.jpg An Inconvenient Truth

The Oscar® winning documentary that made global warming the number one topic of conversation.


Perhaps because the globe hasn't been warming for some dozen years?

cjppjc
08-02-11, 08:03 PM
We were promised Fred would deal with this loss of momentum. Or as it is commonly known; The Law of Descent.

nathanhulick
08-02-11, 08:12 PM
Great article. Janszen/Warren 2012!

I'm not sure I understand what exactly a constitutional amendment would be able to control though. The media? Social media? Journalism? The internet?

FRED
08-02-11, 08:18 PM
We were promised Fred would deal with this loss of momentum. Or as it is commonly known; The Law of Descent.

Debt ceiling deal passes. Fake "debt default" risk averted.

Stocks lose 2% and gold gains 2%.


http://www.itulip.com/images2/DJIAvsGLD080211.png

The meme management succeeds in its goal of pressuring the White House into signing a public debt reduction bill. But the deal was supposed to boost the stock market and cause a drop in gold as markets reacted with "relief" that a deal was reached and debt default avoided. The markets were not so easily fooled. The debt deal means even more public spending to compensate for weakness in the bloated financial sector.


http://www.itulip.com/images2/memjackingbackfires.png

Oops!

Thailandnotes
08-03-11, 08:48 AM
It's Thailand's fault.

"(Reuters) - Central banks of emerging market countries such as Korea and Thailand have added more than $10 billion of gold to their reserves this year in a sign of waning faith in the West's benchmark bonds and currencies like the dollar and the euro."

Revert2Mean
08-03-11, 10:01 AM
Central banks have pretty much abandoned the notion of inflation targeting (those that had targets to begin with). Here in Australia, all the readings pointed to a need for the RBA to lift interest rates yesterday - inflation is well outside their comfort zone, the housing bubble is still fully inflated, unemployment is low, and the mining boom is funnelling huge amounts of money into the economy. But the RBA chose to sit on their hands and allow inflation to continue bursting outside their 2-3% target range.

Slimprofits
08-03-11, 10:07 AM
Debt ceiling deal passes. Fake "debt default" risk averted.

Stocks lose 2% and gold gains 2%.

The new (8/3/2011 - sun rises over Washington and New York) spin is that the markets are tanking because of the deal, not because of a lack of a deal, as was the spin last week.

doom&gloom
08-03-11, 02:50 PM
Okay, so the $64 Trillion dollar question is:

When do you expect interest rates to reverse?

Plain english answer appreciated! :D

Chris Coles
08-03-11, 03:26 PM
Let's ask the right questions to get to the right answers. Our future is not about the fiscal deficit, at least not directly.

What are we going to do about the private sector debt left over from the FIRE Economy era?

How can the economy be restructured to reduce dependence on debt growth?

I look forward to reading EJ's answer to his own question.

Mega
08-03-11, 06:27 PM
Why do "They" hate Silver so much?..............what is it that worries them so much they feel the need to naked short it?
Mike

bart
08-03-11, 06:36 PM
Your claim that Bush's pollster invented the phrase "Climate Change" in 2002 in some scheme to reframe the Global Warming debate to their evil ends has one obvious problem--the UN body studying Global Warming is called the Intergovernment Panel on Climate Change--the IPCC...and it's been called that since 1988.

The phrase "Climate Change" actually originated with the enviro types because it's easier to find "change" than something specific like "warming".

Frank Luntz is a pollster and was simply telling his employer that the phrase "Climate Change" polled better than "Global Warming"--probably with Bush's Conservative base.

All politicans do this. That's why we've been listening to Obama drone on for the last few months about "Corporate Jet Owners" and "Millionaires and Billionaires" while the Republicans repeated "Obama's Blank Check" ad nauseum.

You're better than this EJ. There is no conspiracy here. Your claim is Denninger tin-foil quality stuff.


I think you may have inadvertently made one of EJ's main points for him - not about climate change, but about the incredibly pervasive influence of P.R... that is almost invisible, or so taken for granted that its not recognized as such.

For anyone interested in some history, I recommend some research on Edward Bernays. Its not conspiracy, it's a real live subject that has been taught for many decades and is also part of advertising and marketing "technology".



"The conscious and intelligent manipulation of the organized habits and opinions of the [public] is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country."
-- Edward Bernays (1891-1995) "Father" of modern public relations (PR) and director of the U.S. Committee on Public Information during World War I, on government propaganda. Source: writing in "Propaganda" from "Food & Water Journal'' (1928)
"It is not necessary for the politician to be the slave of the public's group prejudices, if he can learn how to mold the mind of the voters in conformity with his own ideas of public welfare and public service. The important thing for the statesman of our age is not so much to know how to please the public, but to know how to sway the public.
Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country."
-- Edward Bernays (1891-1995)
"If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it."
-- Edward Bernays



Edward Bernays - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Edward_Bernays)


http://www.youtube.com/watch?v=V0OrT-8gXMs








I found this quite worthwhile too:
A very good short essay on "Unconscious Conspiracies". (http://viridia.org/2007/08/16/unconscious-conspiracies/)

necron99
08-03-11, 06:42 PM
Well, I for one am rankled a bit by EJ's kinda selective use of the history of "Global Warming"/"Climate Change" as a meme. But I won't dispute it. I think he gets his point across, if we all can just curb our knee-jerk political responses. I don't wish to negate EJ's "Climate Change" meme example, but I submit that there are a lot of other memes we could discuss. And the sheer quantity of those changing memes bolsters EJ's case that they are a dangerous political tool in the hands of short-sighted carnies and sharpsters.
The re-branding of the Inheritance Tax from a penalty on the "idle rich", into a "Death Tax" punishment against mom-'n'-pop convenience store owners, for example, strikes me as meme management.
Over a period of many decades, the re-branding of "War" into "Defense" so that we can pretend we were forced unwillingly into it and it's harder to oppose.
The conflation of "Medicine" and "Insurance" into the term "Health Care", so that it appears like insurance and administration is a biological requirement to keep people well.
The name change from "Advertising" into "Marketing" to likewise pretend that Madison Avenue and image management personnel are an essential part of any monetary transaction.
The change from "News" and "Reporting" into "Media" in order to make journalism seem more neutral: it's not even there, it's just the agar, the 'media' that we're all swimming in... in the face of a growing 'media' trend towards bias and editorializing or even outright inaccuracy, error and falsehood.
And so on, and so forth.

One may have preferred the meme before or after the management; but I think the speed with which those memes changed, without corresponding changes in the fundamentals of each situation, argues for the existence of heavy-handed, deliberate management. What the remedy is, though, I really have no idea. A Constitutional amendment seems impractical and unworkable -- I wonder if EJ just tossed that comment out as metaphorical, illustrating the severity -- I would prefer to see people individually educated to resist meme manipulation, but obviously our education system isn't up to the task.

Meanwhile, I am struck with kind-of a larger philosophical question: is it possible to make money morally in such an economic climate? When investment, for the most part today, basically means buying up somebody else's debt, institutionally becoming a robber baron and joining those who use political clout to shift the risks of speculation onto the powerless. When market-based value creation is almost certianly foredoomed by the death of the consumer economy and looming resource scarcity, no matter how clever your idea is. And when even hoarding money under your mattress is futile, as the money shrinks and evaporates away due to poor fiscal policy. It just seems to me like one's choices are either to abandon morals, community and citizenship and go for the quick buck in the few moments remaining before the guillotine falls; or else to withdraw, spend that money to buy real things like land and gold and water and security, and just try to survive. At what point does the fiat money system itself become tainted from all the atrocities committed in its name?

Thailandnotes
08-03-11, 08:34 PM
And so on, and so forth.

1.) You left out the switch from "citizen" to "consumer."

2.) Your question of whether it's possible to make (invest) money morally should be something everyone wrestles with. Once upon a time, it was possible to know the owners of local banks who in turn knew and loved the communities they lived in and lent money to get good stuff done. You could buy shares of the bank, watch them grow, and feel pretty good about it.

necron99
08-03-11, 08:56 PM
Bingo on both counts!!

Even apart from the moral hazard, the complexity and high-tech, speed-of-light nature of modern financial scams makes it seem to me like it is inadvisable bordering on impossible these days, to make money from something you can't see and touch right in front of you. A completely solid, honest investment these days might get bought out by a Gordon Gecko liquidator start to finish in-between two issues of your quarterly prospectus. I think that smart investors these days will need to reverse another one from my list of meme changes -- from "profit" back down into "wealth" -- and focus on things that are intrinsically valuable, understandable, and tangibly beneficial again, rather than just numbers on paper outsourced to some distant land. And not from any sense of altruism. It's that, or die off.

To use a fanciful metaphor, the plains are filled with badass, hungry dinosaurs these days. No matter how quick of tooth and claw, how savvy you think you are, there's a bigger, faster dinosaur out there somewhere slavering to bite a chunk off of you. The ones who survived the Age of the Dinosaurs turned out to be, not the most aggressive or sharp-toothed beast, nor the best armored, but rather the small, timid mammals. The environment changed and the biggest, meanest creatures could no longer support themselves. Our Chicxulub meteor may have hit in late 2008. It probably took many years afterwards for the Tyrannosaurs to finally die off, but it happened.

c1ue
08-03-11, 09:11 PM
Even apart from the moral hazard, the complexity and high-tech, speed-of-light nature of modern financial scams makes it seem to me like it is inadvisable bordering on impossible these days, to make money from something you can't see and touch right in front of you.

None of these scams are new. All of them existed with the same mechanical principles, only in a different environment, in the past - sometimes very recent past.

The other item you're perhaps not addressing is that all those financial predators - their fangs and claws (toolbox) didn't arise spontaneously.

While I am not a conspiracy theorist, at the same time it is abundantly clear that the last 2 decades have seen a concerted rollback of protections passed in the Great Depression era combined with perhaps ideological, perhaps cynical cutbacks in regulatory powers and agencies.

Slimprofits
08-03-11, 10:49 PM
Propaganda The Formation of Men's Attitudes (excerpts) By Jacques Ellul (1965) (http://www.icdc.com/~paulwolf/oss/propaganda.htm)
worldcat library listing (http://www.worldcat.org/title/propaganda-the-formation-of-mens-attitudes/oclc/257031?referer=list_view)

worldcat library listing for 2004 reprint of Bernay's Propaganda (http://www.worldcat.org/title/propaganda/oclc/55887532?referer=list_view)
Bernay's The engineering of consent (http://www.worldcat.org/title/engineering-of-consent/oclc/550584&referer=brief_results)
Bernay's Crystallizing public opinion (http://www.worldcat.org/title/crystallizing-public-opinion/oclc/255476?referer=list_view)

lakedaemonian
08-03-11, 11:00 PM
EJ Quote: "I'm talking about also dumping grandma, veterans, widows and orphans, small business owners -- anyone without an effective political action committee or high paid lobbying firm in Washington to aggregate campaign finance funds to protect them."

"Some day it will be widely understand that a tool of public opinion shaping that can be used to sell legislation and to start wars needs to be regulated by constitutional amendment."

I'm confused EJ...seriously confused.

Why would we need a constitutional ammendment to regulate the shaping of public opinion(which in my eye would require differentiating advertising/marketing focused on making me buy laundry detergent from marketing/advertising focused on making me support a conflict) when it would appear to me that if we had a constitutional ammendment outlawing private campaign contributions(or at least anything short of 100% donor blind contributions) to cut special interest groups off at the bloody knees would be simpler to develop and regulate as a piece of legislation(if not implement due to overwhelming special interest opposition).

After spending time in the 3rd and 4th world and seeing the terrible destruction tribal politics plays on their economies(get what you can for your tribe without any remorse before you are removed from power), how are we any different if we exchange their corrupt tribal politics for our corrupt special interest politics?

How exactly can a constitutional ammendment, acting as "Mom and Dad" to monitor and regulate what cartoons and advertising Little Billy constituent/consumer watches, fix what I believe to be the far more serious problem of the special interest sand undermining the foundation of the house.

I certainly don't dispute the incredible power of malignant, immoral, and unethical societal perception shaping....but isn't it a bit further down on the list compared with cutting special interests off at their political knees to allow constituents to take back the political process?

nathanhulick
08-03-11, 11:18 PM
The re-branding of the Inheritance Tax from a penalty on the "idle rich", into a "Death Tax" punishment against mom-'n'-pop convenience store owners, for example, strikes me as meme management.
Over a period of many decades, the re-branding of "War" into "Defense" so that we can pretend we were forced unwillingly into it and it's harder to oppose.
The conflation of "Medicine" and "Insurance" into the term "Health Care", so that it appears like insurance and administration is a biological requirement to keep people well.
The name change from "Advertising" into "Marketing" to likewise pretend that Madison Avenue and image management personnel are an essential part of any monetary transaction.
The change from "News" and "Reporting" into "Media" in order to make journalism seem more neutral: it's not even there, it's just the agar, the 'media' that we're all swimming in... in the face of a growing 'media' trend towards bias and editorializing or even outright inaccuracy, error and falsehood.
And so on, and so forth.



But that's been going on for a long time, hasn't? Years ago when markets collapsed it was a panic, then in 1929, government assured that this would be no panic, it was merely a depression in the economy. It turned out so badly, that decades later there were so many negative connotations associated with that word, it had to be changed again, to recession.

Decades from now, perhaps, our grandchildren will hear stories about the great recession, and be happy their current economic crisis is only an inverted recovery, or some other term to signify the same thing, but lacking the same negative connotation.

It just seems that no matter what laws you pass, how can you stop people with an agenda from avoiding a term with negative connotation in favor of a new term?

nedtheguy
08-04-11, 12:17 AM
In terms of searching for memes and themes, I've found Google to have a couple of interesting resources:

http://www.google.com/trends- Google Trends to see what people are searching for on the web. It's interesting to plug in "Global Warming", "Climate Change", "Housing Bubble", "JP Morgan Silver Manipulation" or whatever trends you want to search on and see how many times these terms have been searched over time.

http://www.google.com/insights/search/ - Google Insights. Similar to Google Trends, but you can narrow category searches, look for different types of searches, and even add stock quote searches.

Data only goes back to 2004, but it's interesting to see how search trends rise and fall. Of course, companies have known tricks about manipulating Google search results for years, so I'm sure they are busy working on ways to make sure their (or their clients') interests appear in the list of the latest trends for Google, Twitter and other social media, as EJ has pointed out with the Wired story. One can only imagine the Terabytes of data that Facebook is amassing every day.

metalman
08-04-11, 12:28 AM
In terms of searching for memes and themes, I've found Google to have a couple of interesting resources:

http://www.google.com/trends- Google Trends to see what people are searching for on the web. It's interesting to plug in "Global Warming", "Climate Change", "Housing Bubble", "JP Morgan Silver Manipulation" or whatever trends you want to search on and see how many times these terms have been searched over time.

http://www.google.com/insights/search/ - Google Insights. Similar to Google Trends, but you can narrow category searches, look for different types of searches, and even add stock quote searches.

Data only goes back to 2004, but it's interesting to see how search trends rise and fall. Of course, companies have known tricks about manipulating Google search results for years, so I'm sure they are busy working on ways to make sure their (or their clients') interests appear in the list of the latest trends for Google, Twitter and other social media, as EJ has pointed out with the Wired story. One can only imagine the Terabytes of data that Facebook is amassing every day.

itulip = fin-oligarchy false meme dis-assembly... truth reconstruction... profit... $$$

<embed src="http://c.brightcove.com/services/viewer/federated_f8/271552597" bgcolor="#FFFFFF" flashVars="videoId=1426313245&playerId=271552597&viewerSecureGatewayURL=https://console.brightcove.com/services/amfgateway&servicesURL=http://services.brightcove.com/services&cdnURL=http://admin.brightcove.com&domain=embed&autoStart=false&" base="http://admin.brightcove.com" name="flashObj" width="486" height="412" seamlesstabbing="false" type="application/x-shockwave-flash" swLiveConnect="true" pluginspage="http://www.macromedia.com/shockwave/download/index.cgi?P1_Prod_Version=ShockwaveFlash"></embed>

Chris Coles
08-04-11, 01:43 AM
Well, I for one am rankled a bit by EJ's kinda selective use of the history of "Global Warming"/"Climate Change" as a meme. But I won't dispute it. I think he gets his point across, if we all can just curb our knee-jerk political responses. I don't wish to negate EJ's "Climate Change" meme example, but I submit that there are a lot of other memes we could discuss. And the sheer quantity of those changing memes bolsters EJ's case that they are a dangerous political tool in the hands of short-sighted carnies and sharpsters.
The re-branding of the Inheritance Tax from a penalty on the "idle rich", into a "Death Tax" punishment against mom-'n'-pop convenience store owners, for example, strikes me as meme management.
Over a period of many decades, the re-branding of "War" into "Defense" so that we can pretend we were forced unwillingly into it and it's harder to oppose.
The conflation of "Medicine" and "Insurance" into the term "Health Care", so that it appears like insurance and administration is a biological requirement to keep people well.
The name change from "Advertising" into "Marketing" to likewise pretend that Madison Avenue and image management personnel are an essential part of any monetary transaction.
The change from "News" and "Reporting" into "Media" in order to make journalism seem more neutral: it's not even there, it's just the agar, the 'media' that we're all swimming in... in the face of a growing 'media' trend towards bias and editorializing or even outright inaccuracy, error and falsehood.
And so on, and so forth.

One may have preferred the meme before or after the management; but I think the speed with which those memes changed, without corresponding changes in the fundamentals of each situation, argues for the existence of heavy-handed, deliberate management. What the remedy is, though, I really have no idea. A Constitutional amendment seems impractical and unworkable -- I wonder if EJ just tossed that comment out as metaphorical, illustrating the severity -- I would prefer to see people individually educated to resist meme manipulation, but obviously our education system isn't up to the task.

Meanwhile, I am struck with kind-of a larger philosophical question: is it possible to make money morally in such an economic climate? When investment, for the most part today, basically means buying up somebody else's debt, institutionally becoming a robber baron and joining those who use political clout to shift the risks of speculation onto the powerless. When market-based value creation is almost certianly foredoomed by the death of the consumer economy and looming resource scarcity, no matter how clever your idea is. And when even hoarding money under your mattress is futile, as the money shrinks and evaporates away due to poor fiscal policy. It just seems to me like one's choices are either to abandon morals, community and citizenship and go for the quick buck in the few moments remaining before the guillotine falls; or else to withdraw, spend that money to buy real things like land and gold and water and security, and just try to survive. At what point does the fiat money system itself become tainted from all the atrocities committed in its name?

Very good questions; perhaps the answer is to look at what is happening with the Arab Spring where ordinary people have reached their limits and have decided to say; STOP!

We should never discount our instincts where they tell us that something is wrong. That in turn leads to:



Originally Posted by necron99

And so on, and so forth.



1.) You left out the switch from "citizen" to "consumer."

2.) Your question of whether it's possible to make (invest) money morally should be something everyone wrestles with. Once upon a time, it was possible to know the owners of local banks who in turn knew and loved the communities they lived in and lent money to get good stuff done. You could buy shares of the bank, watch them grow, and feel pretty good about it.

That is a description of what we once knew worked well in every community. It is also the underlying concept of local community investment that I incorporated into my thinking on a set of rules for such investment which formed the basis for The Capital Spillway Trust during my conversations with the Bank of England in 1994. So in a very real way, the debate is at last returning to the fundamental basics and the instinctive reaction is to, at long last; believe that there must be a better way forward than what we have today.

jk
08-04-11, 09:08 AM
itulip = fin-oligarchy false meme dis-assembly... truth reconstruction... profit... $$$

<embed src="http://c.brightcove.com/services/viewer/federated_f8/271552597" bgcolor="#FFFFFF" flashVars="videoId=1426313245&playerId=271552597&viewerSecureGatewayURL=https://console.brightcove.com/services/amfgateway&servicesURL=http://services.brightcove.com/services&cdnURL=http://admin.brightcove.com&domain=embed&autoStart=false&" base="http://admin.brightcove.com" name="flashObj" width="486" height="412" seamlesstabbing="false" type="application/x-shockwave-flash" swLiveConnect="true" pluginspage="http://www.macromedia.com/shockwave/download/index.cgi?P1_Prod_Version=ShockwaveFlash"></embed>

re eric's interview: eric says the blog provides an ongoing analytic framework - he uses the word "context"- that allow for understanding, and more importantly predicting, economic processes. he uses the example of the housing bubble. this he contrasts to the regular financial media who report isolated "events" and, by the way, continually deny that anything abnormal or dangerous or devastating is going on.

i question this "amotivational" model of the regular media. my first thought was about fox news: can anyone deny that fox news has an analytic framework or "context" in which it reports? one difference, of course, that fox news' context is implicit, and not subject to analysis by fox news itself. similarly, the financial news' constant astonishment at the occurrence of events long predicted here, itself represents a "context" being communicated to the readers. stuff happens. it's not that, for example, tbtf banks are deliberately distorting and exploiting their economic ecosystem. no, it's just that stuff happens and continually "surprises" the media. that "context" of ignorance is part of what the financial media is paid to promulgate.

Slimprofits
08-04-11, 10:19 AM
i question this "amotivational" model of the regular media. my first thought was about fox news: can anyone deny that fox news has an analytic framework or "context" in which it reports? one difference, of course, that fox news' context is implicit, and not subject to analysis by fox news itself. similarly, the financial news' constant astonishment at the occurrence of events long predicted here, itself represents a "context" being communicated to the readers. stuff happens. it's not that, for example, tbtf banks are deliberately distorting and exploiting their economic ecosystem. no, it's just that stuff happens and continually "surprises" the media. that "context" of ignorance is part of what the financial media is paid to promulgate.

excellent

Slimprofits
08-04-11, 11:07 AM
This is what's making the rounds on facebook today. People have a sense that something is amiss with the mass-media, but they can't quite put their finger on it.


Last week Amy Winehouse died, but so did Justin Allen 23, Brett Linley 29, Matthew Weikert 29, Justus Bartett 27, Dave Santos 21, Jesse Reed 26, Matthew Johnson 21, Zachary Fisher 24, Brandon King 23, Christopher Goeke 23 and Sheldon Tate 27. They are Marines who made the ultimate sacrifice last week for US. There is NO media for them and NOT ONE mention of their names. Please help honor THEM by reposting this..

Fiat Currency
08-04-11, 12:15 PM
Last week Amy Winehouse died, but so did Justin Allen 23, Brett Linley 29, Matthew Weikert 29, Justus Bartett 27, Dave Santos 21, Jesse Reed 26, Matthew Johnson 21, Zachary Fisher 24, Brandon King 23, Christopher Goeke 23 and Sheldon Tate 27. They are Marines who made the ultimate sacrifice last week for US. There is NO media for them and NOT ONE mention of their names. Please help honor THEM by reposting this..

People like to make fun of Canada's "colourful" hockey commentator Don Cherry on Hockey Night in Canada. However, for every fallen Canadian soldier in Afghanistan since 2002 - he shows their picture, tells their story, and names the fallen's loved-ones, while sending his condolences for "their ultimate sacrifice". All 157 of them. Politics-of-war aside ... a class act if you ask me. As in your list above - I am often saddened by their average age. Fight meme control.

necron99
08-04-11, 12:46 PM
It just seems that no matter what laws you pass, how can you stop people with an agenda from avoiding a term with negative connotation in favor of a new term?

That's a great question. Yes, it has been going on for decades -- or probably centuries. But I wasn't suggesting this could be stopped, just pointing it out. I agree that laws would be useless to stop this process (you'll note I disagreed with EJ's offhand remark about a Constitutional amendment). As I wrote above, I would prefer to see everybody educated to recognize and understand the use of memes and PR. But our current educational system is obviously failing in this regard. I don't have any answers and I don't think the process is going to stop.

So, at the very least it's incumbent upon people like us -- everybody in these iTulip forums seems savvy and educated -- to point out and expose these memes and PR, to everybody else. Even if, as I do, I quibble with EJ's analysis of the "Climate Change" meme... the mere fact of identifying it as a managed meme, helps me and others to gain the necessary intellectual distance from it in order to evaluate such things more dispassionately.

RebbePete
08-04-11, 12:54 PM
I think you may have inadvertently made one of EJ's main points for him - not
about climate change, but about the incredibly pervasive influence of P.R...
that is almost invisible, or so taken for granted that its not recognized as
such.

For anyone interested in some history, I recommend some research on
Edward Bernays. Its not conspiracy, it's a real live subject that has been
taught for many decades and is also part of advertising and marketing
"technology".



"The conscious and intelligent manipulation of the organized habits and
opinions of the [public] is an important element in democratic society. Those
who manipulate this unseen mechanism of society constitute an invisible
government which is the true ruling power of our country."
-- Edward Bernays
(1891-1995) "Father" of modern public relations (PR) and director of the U.S.
Committee on Public Information during World War I, on government propaganda.
Source: writing in "Propaganda" from "Food & Water Journal'' (1928)
"It is not necessary for the politician to be the slave of the public's
group prejudices, if he can learn how to mold the mind of the voters in
conformity with his own ideas of public welfare and public service. The
important thing for the statesman of our age is not so much to know how to
please the public, but to know how to sway the public.
Those who manipulate
this unseen mechanism of society constitute an invisible government which is
the true ruling power of our country."
-- Edward Bernays (1891-1995)
"If we understand the mechanism and motives of the group mind, it is now
possible to control and regiment the masses according to our will without them
knowing it."
-- Edward Bernays


Thanks! Excellent articles and video. I had read about the influence of psychology on marketing, but had never known who the pioneer was. Terrifying.

necron99
08-04-11, 01:29 PM
For once, c1ue, we're on the same page! You raise a great point that the principles arent' new. And the financial predation didn't arise spontaneously, true. But it seems like we've reached the point of prominens ad absurdium. Everything's been so honed, exaggerated and refined that there's nowhere else left to go besides blowing up.

Humans and human values have effectively been priced out of the market, when you can't make a simple investment trade without monolithic computer servers fighting for the closest physical proximity to the Wall Street fiber optic lines (http://www.nytimes.com/2009/07/24/business/24trading.html?partner=rss&emc=rss), in order to skew your price (http://www.nytimes.com/imagepages/2009/07/24/business/0724-webBIZ-trading.ready.html).

Columbia Journalism Review (http://www.cjr.org/the_audit/goldman_sachs_to_the_forefront.php)

Two weeks after RS published it, Reuters broke a fascinating story that a Goldman computer programmer had left the firm, absconding with a huge piece of the code for its super-secret automated-trading platform.
The programmer was arrested in seemingly record time, but not before he uploaded it to a German server, leading the prosecutor to say this in arguing for a high bail:
> "The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."
Which we and others have noted is a pretty astonishing statement. If “somebody” can use the program to “manipulate markets in unfair ways,” then Goldman can, too. And how would we know if it was? That stuff is a black box and I doubt regulators have ever been under the hood—or would know what to look for if they have.

Henry Blodget (http://finance.yahoo.com/tech-ticker/massive-insider-trading-investigation-could-nail-wall-street's-biggest-names-535640.html)

The REAL lesson most investors should take away from the largest institutional insider-trading investigation in history is that competition in the global financial markets is so intense that it's basically idiotic to trade. ... What they miss is that their competition has all this information, too -- so it doesn't give anyone an edge. They also don't understand that, in addition to all this information, the folks they are competing with have millions and millions of dollars to spend gathering information that will never be published anywhere or appear on an screen or chart or graph.
One glance from a CEO in response to a pointed question can contain more information than 500 pages of SEC filings. One nugget of scuttlebutt about the status of an important contract can make you more money than 500 hours of studying charts and graphs. Most small investors don't understand that their competition gets this sort of information all day long.
In short, it doesn't matter whether the trading game is played on "a level playing field" (and of course it isn't.) The New York Jets will still destroy any high-school football team, no matter what field the game is played on.
...Blodget goes on to say that the only sane strategy is quiet, unassuming, long-term investments -- but the sharks keep invading those pools too. Besides, if you're chasing only the low-percentage, stolid returns, then poor national fiscal policy quickly swallows up your gains with its stealth taxes and inflation.

You mention, c1ue, that these age-old scams are now taking place "only in a different environment", but that changed environment -- especially the electronic environment, where you're only as good as the T1 connection you can afford -- makes the difference between survival and death. Hence my example with the dinosaurs.

c1ue
08-04-11, 01:57 PM
You mention, c1ue, that these age-old scams are now taking place "only in a different environment", but that changed environment -- especially the electronic environment, where you're only as good as the T1 connection you can afford -- makes the difference between survival and death. Hence my example with the dinosaurs.

The point of the age-old scams is you simply avoid those areas.

Rather than attempt to out-scam the scammer, you choose areas in which the age old scams don't work - or at least are different. Having a T1 or not makes no difference if the actual behavior is dependent on information you cannot have access to - like the whole "Trading Places" scam.

Passive investing is very much a classic playground of the unscrupulous and inventive.

metalman
08-04-11, 02:28 PM
That's a great question. Yes, it has been going on for decades -- or probably centuries. But I wasn't suggesting this could be stopped, just pointing it out. I agree that laws would be useless to stop this process (you'll note I disagreed with EJ's offhand remark about a Constitutional amendment). As I wrote above, I would prefer to see everybody educated to recognize and understand the use of memes and PR. But our current educational system is obviously failing in this regard. I don't have any answers and I don't think the process is going to stop.

So, at the very least it's incumbent upon people like us -- everybody in these iTulip forums seems savvy and educated -- to point out and expose these memes and PR, to everybody else. Even if, as I do, I quibble with EJ's analysis of the "Climate Change" meme... the mere fact of identifying it as a managed meme, helps me and others to gain the necessary intellectual distance from it in order to evaluate such things more dispassionately.

An Interview with Wendell Potter, Insurance Company Whistleblower (http://www.chelseagreen.com/content/an-interview-with-wendell-potter-insurance-company-whistleblower/)

When the former mouthpiece for two of the country’s largest health insurers starts spilling the beans on the secrets health insurance companies don’t want you to know, it’s time to start listening.
Private health insurers are completely beholden to Wall Street. Wall Street cares about one thing only: money. Not quality of care, not life expectancy, not access to medical treatment. Wall Street cares about money. And insurance companies care about Wall Street. This system is broken.
In this candid interview with Guernica, Wendell Potter reveals the deceptive tactics used by an industry that is totally devoted to defeating health care reform.
Guernica: During your time in the industry, you created health insurance front groups to mislead the public. Can you give me an example of one of these front groups?
Wendell Potter: When the Clinton plan collapsed , there was an effort to pass legislation that would give enrollees in managed care more protections. The industry saw this as anti-managed care legislation, so they established a group called the Health Benefits Coalition. The Health Benefits Coalition, with the funding it got from the insurance industry, killed off the effort to get a Patient’s Bill of Rights passed. A more recent example of a front group I was involved with was trying to blunt the effect of [Michael Moore’s documentary] [I]Sicko. Through a PR firm, the industry created a front group to disseminate misleading information about the healthcare systems featured in Sicko—particularly in Canada, the U.K., and France. This front group was set up specifically to try to counter [Moore’s positive depiction of them].
Guernica: What were your duties with these front groups?
Wendell Potter: To help form messaging and develop strategy with public relations firms. PR firms help create the front groups and serve as the back offices to get the work done. The insurance industry contributes advice and counsel and feedback, but the real work gets done by the PR firms that the insurance industry hires.
Guernica: Was it difficult for you to discredit a movie you felt was accurate?
Wendell Potter: It was very difficult. I was beginning to hate my job. I’d look in the mirror and say, “Who is this? How did this happen to you?” But I had a job to do and was being paid quite a bit, so I soldiered on. I wouldn’t have stayed as long as I did if I didn’t believe that the company I worked for was honest and trying to meet the needs of people. I believed I was making some kind of positive contribution. As I was climbing up the corporate ladder, I got to understand more about how the companies make money and how they are so beholden to Wall Street—both investors and Wall Street analysts—and the things that they do to meet Wall Street’s expectations.
Guernica: You worked in the industry for twenty years. It doesn’t seem like it should have taken so long.
Wendell Potter: You don’t really focus on it or understand the significance of it. I’ll admit I knew that Wall Street looked at the medical-loss ratio. I knew it was an important measure. I didn’t know until, frankly, very recently how important it was. As recently as fifteen years ago, the medical-loss ratio in this country was 95 percent. Since then, there’s been great industry consolidation to the point that now there are seven companies that dominate. They’re all for-profit. During the time that this consolidation, this shift to for-profit occurred, the medical-loss ratio has continued to drop. Now it’s around 80 percent. That means twenty cents of every dollar goes to something other than paying medical claims. Just fifteen years ago, ninety-five cents of every dollar went to paying medical claims. This trend is due to pressure from Wall Street. If a company misses Wall Street’s expectations—if the medical-loss ratio starts to inch up—the company will suffer. I’ve seen companies lose 20 percent of their stock value in one day by disappointing Wall Street with their medical-loss ratio.
Read the whole interview here. (http://www.guernicamag.com/spotlight/1207/the_last_temptation_of_wendell/?utm_medium=email&utm_source=Email%20marketing%20software&utm_content=357400770&utm_campaign=Guernica+Magazine%3a+August%3a+Health +Insurance+Blues%2c+White+Canvas+House+_+ktduut&utm_term=The+%0D%0A++++++++++++++Last+Temptation+o f+Wendell+Potter)

necron99
08-04-11, 03:52 PM
An Interview with Wendell Potter, Insurance Company Whistleblower (http://www.chelseagreen.com/content/an-interview-with-wendell-potter-insurance-company-whistleblower/)

Beautiful example. Maybe we could pass a law to snip at this or that specific practice, but it wouldn't stem the gigantic tide of abuse of memes. Laws aren't useless, but they're not a viable answer in-and-of themselves.

jk
08-04-11, 04:10 PM
Beautiful example. Maybe we could pass a law to snip at this or that specific practice, but it wouldn't stem the gigantic tide of abuse of memes. Laws aren't useless, but they're not a viable answer in-and-of themselves.

imo calling this "abuse of memes" obscures rather than illuminates. it's just abuse. period. or perhaps "financial abuse," reflecting the financialization of our whole political economy.

Chris Coles
08-04-11, 06:48 PM
Beautiful example. Maybe we could pass a law to snip at this or that specific practice, but it wouldn't stem the gigantic tide of abuse of memes. Laws aren't useless, but they're not a viable answer in-and-of themselves.

We once had a perfectly adequate mechanism; competition. But today the investor is Wall Street, or as here, the "City" and they do not permit competition.

The answer is to accept that their model has completely failed and must now be replaced by something new; but, ultimately, exactly the same as once worked well. Good old fashioned arms length investment into a fully competitive industrial economy.

That will require everyone to stop placing their money in the existing institutions.

necron99
08-04-11, 06:57 PM
imo calling this "abuse of memes" obscures rather than illuminates. it's just abuse. period. or perhaps "financial abuse," reflecting the financialization of our whole political economy.

It is just abuse. Period. I'm with you there. Memes are just the toolkit.

But "abuse" is about as hard to judge as the word "memes". It'd be nice if we could just pass a law against "abuse" in general, but it'd be impossible to implement or for people to plan their business models around. The anti-abuse law would inevitably be abused!

I often used to say that people would be equally happy under a Communist system as they would under a Capitalist system -- if only nobody would abuse the system. Unfortunately that's not realistic. Abuse is the root problem.

Slimprofits
08-05-11, 09:40 AM
occassionaly the truth slips out

This is what Cynthia Tucker said on MSNBC this morning about the Ames, Iowa straw poll. "Ames is inconsequential (re: the GOP nomination), but it helps the media create a narrative."

KGW
08-05-11, 10:58 AM
They can't quite put their finger on the fact that, while the deaths of these young men are sad, they are simply soldiers of the legions of Rome. They did not make the "ultimate sacrifice" for US. Honoring them simply continues the "meme," if you will, that the U.S is pursuing an honorable path.

The only path the U.S. is on is one of desperation.

SamAdams
08-05-11, 03:24 PM
[SIZE=4]The Big Bet revisited - Part I: Turkeys
Now that the primary engine of growth for the past 40 years, falling interest rates, has come to a grinding halt, how can productive enterprises be encouraged to drive the economy forward fast enough to allow the economy to exit the Output Gap Trap?
Full Disclaimer (http://www.itulip.com/GeneralDisclaimer.htm)[/B]

Frankly, as a so-called "American citizen", I don't care about this question any more. Just tell me what I need to do to as-best-as-possible avoid the damage done by the people trying to "fix the economy". I and others like me will be off living within more self-sufficient communities, and ask that the fixers leave us alone! As the past few years have shown us, chasing the illusion of aggregate economic growth does not necessarily improve the lives of most and justifies all kinds of criminality under the tyranny of the majority. I wish EJ would stop trying to tell TPTB how to correct their policy mistakes and start telling us how to keep our wealth safe! Did I miss that advice? Policy pontification is a losing battle and assumes good intentions from those making the policies. My $0.02.

cjppjc
08-05-11, 04:24 PM
Frankly, as a so-called "American citizen", I don't care about this question any more. Just tell me what I need to do to as-best-as-possible avoid the damage done by the people trying to "fix the economy". I and others like me will be off living within more self-sufficient communities, and ask that the fixers leave us alone! As the past few years have shown us, chasing the illusion of aggregate economic growth does not necessarily improve the lives of most and justifies all kinds of criminality under the tyranny of the majority. I wish EJ would stop trying to tell TPTB how to correct their policy mistakes and start telling us how to keep our wealth safe! Did I miss that advice? Policy pontification is a losing battle and assumes good intentions from those making the policies. My $0.02.

EJ has given much advice. Even more I'm sure in the paid area. If you haven't figured out what it is, you have not been paying attention. Once again I am sure Metalman can help here.

jk
08-05-11, 04:36 PM
Frankly, as a so-called "American citizen", I don't care about this question any more. Just tell me what I need to do to as-best-as-possible avoid the damage done by the people trying to "fix the economy". I and others like me will be off living within more self-sufficient communities, and ask that the fixers leave us alone! As the past few years have shown us, chasing the illusion of aggregate economic growth does not necessarily improve the lives of most and justifies all kinds of criminality under the tyranny of the majority. I wish EJ would stop trying to tell TPTB how to correct their policy mistakes and start telling us how to keep our wealth safe! Did I miss that advice? Policy pontification is a losing battle and assumes good intentions from those making the policies. My $0.02.
itulip is not, imo, a give-a-man-a-fish site. it's a teach-a-man-to-fish site. there is a lot advice flying around in these pages. think it over and do what you think is best. but in the meantime, there are millions of our countrymen enduring hard times. over 1 in 7 americans is now on foodstamps. it can't hurt to have some discussion of policy, if only to shed light on the disasters being perpetrated upon us by the powers that be.

thriftyandboringinohio
08-05-11, 04:44 PM
itulip is not, imo, a give-a-man-a-fish site. it's a teach-a-man-to-fish site. there is a lot advice flying around in these pages. think it over and do what you think is best. but in the meantime, there are millions of our countrymen enduring hard times. over 1 in 7 americans is now on foodstamps. it can't hurt to have some discussion of policy, if only to shed light on the disasters being perpetrated upon us by the powers that be.

Yup. As I follow and participate in the policy discussions I think about it deeply, giving me a basis for my decisions as I watch policies go better or worse towards my financial situation.

SamAdams
08-05-11, 04:48 PM
EJ has given much advice. Even more I'm sure in the paid area. If you haven't figured out what it is, you have not been paying attention. Once again I am sure Metalman can help here.

You are correct, he has given advice before. Let me rephrase. I am asking to stop the policy advice and stick to advice for the rest of us.

Chris Coles
08-05-11, 04:54 PM
There is another aspect to take account of; this is not the moment for advice; but rather, for taking the time to watch and learn. So much SH one T is going to hit the fan over the next two years, there will not be anyone that can, for certainty, tell anyone else EXACTLY what will occur. We know roughly what is in process, the complete collapse of the FIRE economy. Our job is to hold our powder dry, keep our cards close to our chest and wait. When the dust settles, which it will, eventually, then there will be ample opportunity for everyone. MY 2c

bpr
08-06-11, 05:11 AM
Interesting piece, interesting comments. Turns out, not everyone gets it.

For me, this piece only reinforces my position, which includes not subscribing as a "select premium member." EJ doesn't seem to care to invest in either copyeditors or graphic designers to ensure comprehension. Seriously, some of these charts are so obtuse that they wouldn't even make it on the refrigerators of their creators' mothers.

And some of the most powerful assertions can only be understood via great leaps of syntactic faith.

Here's a really important sentence, I think:


The government borrowing that results in the extreme public sector debt levels that are alarming most Americans has become a do-or-die economic and money supply growth backstop needed to prevent economic collapse when the private credit markets peak in an economic cycle can no longer keep up the unsustainable growth pace.

I have no doubt that EJ knows what he's talking about and what he means, but I defy anyone else proficient in the English language to discern exactly what he means.

There may be a missing "that" between "cycle" and "can." That would solve the problem.

Maybe the "when" between "collapse" and "the private credit…" should be an "as."

Or the "in" between "peak" and "an economic cycle" should be "during."

Or "in an economic cycle" should be "when the economic cycle..."

As written, this sentence makes no sense, and, technically it doesn't even qualify as a sentence. In any interpretation, you're making a leap of faith as a reader.

One can rail on and on about the bullhorn and the mass media, but this kind of writing and (lack of) editing is going to NULLIFY everything he says about the mass media bastards. At least they can produce coherent sentences (usually, even if they're wrong you can understand them).

Also, this whole talk about cultural memes gets to me a bit. They've been around since at least Aristotle, who called them commonplaces.

A '90s venture capitalist and his editorial team should get these things right, or at least the name pets.com (anyone ever heard of pet.com before reading this article?).

I'm not even going to comment on the graphics, since most are so poorly constructed, and that is my area of expertise.

Seems to me that the problem is that the private sector won't invest in human resources, EJ/Itulip included.

Physician, heal thyself.

ps. graphic designer for hire.

EDIT: Oh yeah, I'll edit your stuff, too. But I have feeling you hate editors. :)

Ellen Z
08-06-11, 11:45 AM
And some of the most powerful assertions can only be understood via great leaps of syntactic faith.



It’s true that readers sometimes have difficulty understanding exactly what EJ (and the other heavy hitters) intend to say. But I don’t think that’s primarily due to a lack of copy editing.
*** this is an ongoing conversation, and often folks refer to previous discussions in a kind of shorthand. They’ve already discussed a subject to death .... relative newcomers might benefit from a quick synopsis.

*** many of the people on the web site have significant financial and/or investing experience, and they use lots of professional jargon.
I’ve been a select subscriber since 2009, and I still feel very much a newbie. In spite of that, I find a great deal of value in the iTulip conversations. They’ve broadened my view of what investing can be, and introduced me to new tools. They’ve deepened my understanding of underlying social and economic processes, and offer a basic framework within which I can make my own decisions.

iTulip, like many financial websites, carries a disclaimer, "All information provided ‘as is’ for informational purposes only, not intended for trading purposes or advice." Unlike some of them, iTulip really means it. Oh yes, people do discuss their current investment strategies... it sort of leaks in around the edges. But iTulip is not your typical investment advisory service, and if that’s what someone expects, they will be disappointed.

A more basic function of iTulip is these "big picture" essays and comments that look at the entire economy and related social structures. Policy discussions take up significant space, and I find them valuable and interesting, but I don’t think that policy discussions are at the core.

My perception is, at the core of iTulip there’s an inquisitive six-year-old saying "gosh, this is a complicated world. What’s really going here?"

Given the difficult times we're living through, I appreciate having a better understanding of what’s really going on, and what possible options and choices lie ahead of us.

My current mantra for functioning on the iTulip website is: "I’m a bright person, I can understand 85% of this."

c1ue
08-06-11, 03:39 PM
For me, this piece only reinforces my position, which includes not subscribing as a "select premium member." EJ doesn't seem to care to invest in either copyeditors or graphic designers to ensure comprehension. Seriously, some of these charts are so obtuse that they wouldn't even make it on the refrigerators of their creators' mothers.

Wow, this seems a prime example of not posting while drunk.


I have no doubt that EJ knows what he's talking about and what he means, but I defy anyone else proficient in the English language to discern exactly what he means.

The sentence in question is definitely overly long, but the whole point about iTulip is that you can ask for clarification from both EJ himself and others.

aaron
08-07-11, 03:35 AM
I think you are being hard on EJ, but I agree with your basic premise. He definitely needs an editor. It distracts from the essays. His book was pretty 'clean', so he is capable of it. I find typos and missing words to be a huge distraction when reading. I hope he gives you the job.

Chris Coles
08-07-11, 04:05 AM
I think you are being hard on EJ, but I agree with your basic premise. He definitely needs an editor. It distracts from the essays. His book was pretty 'clean', so he is capable of it. I find typos and missing words to be a huge distraction when reading. I hope he gives you the job.

Being confrontational and rude is hardly a starting point for a long term relationship built on mutual trust and respect. EJ simply needs a secretary that is both masterful with words and that he can work with and trust. As the language is English, I suggest he find someone from the UK.

Slimprofits
08-08-11, 09:04 PM
Propaganda The Formation of Men's Attitudes (excerpts) By Jacques Ellul (1965) (http://www.icdc.com/~paulwolf/oss/propaganda.htm)
worldcat library listing (http://www.worldcat.org/title/propaganda-the-formation-of-mens-attitudes/oclc/257031?referer=list_view)

worldcat library listing for 2004 reprint of Bernay's Propaganda (http://www.worldcat.org/title/propaganda/oclc/55887532?referer=list_view)
Bernay's The engineering of consent (http://www.worldcat.org/title/engineering-of-consent/oclc/550584&referer=brief_results)
Bernay's Crystallizing public opinion (http://www.worldcat.org/title/crystallizing-public-opinion/oclc/255476?referer=list_view)

EJ posted these links to the chatbox - Propaganda, by Edward Bernays. full text: http://www.historyisaweapon.com/defcon1/bernprop.html

and PDF here: http://sandiego.indymedia.org/media/2006/10/119695.pdf

Slimprofits
08-18-11, 08:42 AM
AUGUST 15, 2011, 10:42 AM ET
Survey: Small-Business Demand for Credit Still Soft (http://blogs.wsj.com/in-charge/2011/08/15/survey-small-business-demand-for-credit-still-soft/?mod=google_news_blog)


Only one third of small businesses in the New York region applied for credit in the first quarter, according to data released Thursday by the Federal Reserve Bank of New York.

The New York Fed’s quarterly Small Business Borrowers Poll suggests small firms still face hurdles to getting credit, and many companies are foregoing new borrowing until their balance sheets improve.

According to the survey, most applicants sought $250,000 or less in credit and applied for working capital rather than investment financing.

More applicants sought new credit products rather than renewing existing credit lines, but renewals had greater success. Overall, bank products were harder to obtain than non-bank financing, the New York Fed found.

The remaining two-thirds of small companies didn’t apply for credit. Among those not applying, 19% said they were paying down existing debt, 21% didn’t need financing and 27% thought they would be turned down.