How To Restore Clintonomics?

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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Clintonomics is seminally characterized by two features: first, a steady rise in domestic U.S financial and housing asset prices and second, rapid financial globalization around the world. And these two features were intimately connected to enable each other until the financial and economic crisis began to creep in in the late summer of 2007 beginning with the fall of Bear Stearns.

The U.S Federal Reserve promotes every private entity, from the investment banks it does not regulate but trades bonds with on Wall Street, the private corporations established by revolving door political appointees out of the US Treasury to outsource the management of financial instruments it does not understand, to the World Economic Forum (WEF). Rampant corruption is being institutionalized in neo-Rome, including permitting the incursion of private entities such as the Nobel Foundation into the lives of private citizens across sovereign national boundaries using the apparatus of governments to create a global republic of plutocracy. Pluto may no longer be a planet, but its orbit is palpable in picking winner and choosers.

But the fall by the banks of the East River in New York is being incubated akin to the floating battery fetuses in The Matrix at the WEF in a secretive neutral European non-European part of the world ― in Davos, Switzerland  ― where risky behavior is employed to insulate the wealthy from risk forever, compromising governments and corporations worldwide.

The WEF at Davos subscribes to an ideology of creating a global meritocratic class, educated in the top 10 global educational institutions in management and economics, 8 of these top 10 being American and 2 being British and almost all of them private and wealthy, for the rich countries in the G6 (G7 less Japan) to consume and for production to shift to the emerging markets while being managed out of the G6. The rate of growth of standard of living in the emerging markets, or foreign levels of consumption of the scarce global resources, are managed by the G6. Foreign factors of production are put to use for the G6 to keep prices stable even as the United States, thanks to the “geniuses” incubated by Davos from the elite Anglo-Saxon educational institutions, has slipped in corruption rankings from the top 10 least corrupt countries.

These global meritocratic elites typically make up the senior cadre in multinational corporations (MNCs), government institutions such as the central banks and international organizations such as the IMF and the World Bank Group. This is how the British had built an empire. Davos is, therefore, economic neocolonialism in the post-colonial sovereign world after the end of the Cold War. This ideology has led to every economic crisis since the European currency crises in the ’90s to the most recent and ongoing crisis in the United States.

They benefit enormously from cycles in money supply or because of inflating financial market bubbles and by collapsing them, on both sides of the cycle: upturn and downturn. Wages for all income levels below the top 5% in the G6 and elsewhere are regulated by debt instruments and credit availability (credit or money illusion) to keep up consumption through borrowing due to a phenomenon known as wealth effect or wealth on paper.

This cabalistic behavior has roots in civilizational ideology and Anglo-European secret societies: to let global cultures converge on the Anglo-American, Greco-Roman, Judeo-Christian cultural and behavioral attributes. And this ideology drives decisions to keep dictators in power, for example, in the Middle East, because the shadow elites gathering at Davos have determined that oil cannot yet be traded for the liberation of these peoples. Elections in wealthy democracies are influenced and so are the justice systems and the major global media. Obama is an example. Clinton invented it. It is a rigged game.

Clintonomics or “It’s the Economy, Stupid” had become operational with the Mexican peso crisis of 1994. And it continued for more than the next decade with rising American prosperity punctuated by a series of crises, all abroad and around the globe from Latin America to Eurasia (the Committee that Saved the World had really saved America from the Liar’s Poker of Long Term Capital Management). Only two countries had withstood the onslaught of the Clinton White House’s economic policies: China and India because they had restrictions over the inflows and outflows of the US dollar.

Inside the United States, former President Bill Clinton was a beneficiary of the Reagan-Bush tax reforms and deregulation. The information technology (IT) industry boomed with little intervention from the government and had created countless number of jobs. Expectations of initial public offerings (IPOs) propelled IT innovation as IT became a standalone industry in itself while attempting to raise productivity across other industries and sectors in the economy.

The North American Free Trade Agreement (NAFTA) with Canada and Mexico and the Most Favored Nation (MFN) status of China shifted production of US corporations abroad to these countries, mostly from the industrial sector. American agriculture remained protected just as it was elsewhere around the world, and the share of the services sector of US national output (or Gross Domestic Product, GDP) began to steadily rise to eventually become one-half of the US GDP by the end of the last century and millennium.

The legions of American households who had shifted their employment into the services sector began to buy cheap foreign industrial goods made by foreign companies as well as US companies producing them abroad with cheap foreign labor. Financial crises elsewhere in the world recycled American consumer dollars back into US capital markets raising the values of US financial assets and lowering oil prices to nearly $10/barrel, making America the hub of global consumption and low levels of global inflation.

As Americans consumed more, first draining their savings and later borrowing to spend, the economy kept growing making people feel wealthy on paper and feeling good by living well every day by borrowing against their household balance sheet assets because their incomes did not increase to keep pace with their consumption.

The financial markets were deregulated in 1999 with the signing of the Gramm-Leach-Bliley (GLB) Act into law to help American global financial corporations become more competitive abroad. This deregulation then began to elevate housing prices because of financial innovation associated with housing debt. However, regulation of the financial markets was not changed to keep pace with the emerging financial innovation which was taking place largely outside the confines of post-Great Depression banking regulation: after GLB banks could engage in a wide range of financial activities because the Glass-Stegall wall was torn down between commercial banking and other financial activities, but the new fangled financial activities that resulted were not subject to new regulations until the current financial regulatory reform law was passed hoping to address it.

The borrowing and spending habits of Americans along with those of their government had forever altered the culture of thrift and hard work that had been the country’s ethic since its inception. Then came the hard fall in 2008. And the people’s representatives from both parties had decided that the best course of action was to first come to the aid of the financial institutions that had failed, because, the reasoning went, saving them would save jobs, restore incomes, reduce consumer debt burdens for people to start spending again. As we all know all too well now, that has not happened in the last 36 months since the economic slow down began and unemployment began to rise.

The primary cause, as much as professional economists are wary about pinning down the causes of economic outcomes, is that the rest of the world that had begun to save during the Clinton and Bush years has become far too attractive for Wall Street. Saving American financial institutions is helping the emerging economies recover faster than the United States. Moreover, having learned from the crises in the ‘90s, foreigners have become cautious of American money, saving plenty for a rainy day in US dollars until they can make their own lives better off in the long run with their own money.

Mainstream economics is finding it difficult to tell the markets what to do other than giving them more money only to wait for the economy to become robust whenever it does. It is finding it even more difficult to expand the public sector as FDR had done during the Great Depression. This economic knife-edge has become unnerving for the country because of the rising debt burdens of the governments of the wealthy countries worldwide.

Then how is America to restore the “prosperity” of the Clinton years? Or more precisely to sound the music to the ears of the Clinton-era economic policy makers, how can the Clintonomics of consumer borrowing and spending be restored?

It could have been far easier to pay down the debt of the American consumer to restore their capacity to borrow and spend once again. And perhaps, it could even be formulaic to focus on bailing out the consumer to bail out Wall Street in future crises, because, after all, Wall Street bailouts have become necessary due to consumer failures to pay back their debts upon the collapse of the bubbles Wall Street had created with the incomes of the multitude of Americans. The moral hazard in bailing out Wall Street to revive Main Street could be less effective than the moral hazard of bailing out honest, playing by the rules, average Americans to bail out Wall Street.

This way, Clintonomics can continue beyond the horizon, to keep raising the standards of living of foreigners while raising them at home with America, at the center of the wheel, carefully calibrating how quickly the rest of the world should better itself.

Indeed, there could have been surpluses, once again, as far as the eye can see, but the time for it is past, leaving no choice but to invest in the United States to create jobs, raise incomes and savings, even if it means risking higher inflation in the short to medium run.

When America is restored, then perhaps the American consumer will have the appetite to trickle up wealth once again waiting for the mirage of debt-reduction on the next cycle to pass before the oasis of investment can trickle down surgically by transferring risk down the income ladder calling it uncertainty (obfuscating definitions), locally and globally, though the degree of control the United States will have on the standards of living of others may diminish along with the time America has to maintain its standard of living gradient over the emerging markets and the rest of the world.

Better globalization, however, is an inexorable inevitability the United States can no longer modulate.


About Chandrashekar (Chandra) Tamirisa
This entry was posted in Economics, Finance, Financial Regulation, Foreign Policy, Politics, Transformations LLC, World and tagged . Bookmark the permalink.

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