What's a Fabian socialist?

The following essay was written by Jerry Bowyer for Forbes in 2008. We were warned. -- Gary DeMar

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Barack Obama is a Fabian socialist. I should know; I was raised by one. My Grandfather worked as a union machinist for Ingersoll Rand during the day. In the evenings he tended bar and read books. After his funeral, I went back home and started working my way through his library, starting with T.W. Arnold’s The Folklore of Capitalism. This was my introduction to the Fabian socialists.

Fabians believed in gradual nationalization of the economy through manipulation of the democratic process. Breaking away from the violent revolutionary socialists of their day, they thought that the only real way to effect “fundamental change” and “social justice” was through a mass movement of the working classes presided over by intellectual and cultural elites. Before TV it was stage plays, written by George Bernard Shaw and thousands of inferior “realist” playwrights dedicated to social change. John Cusack’s character in Woody Allen’s “Bullets Over Broadway” captures the movement rather well.

Arnold taught me to question everyone–my president, my priest and my parents. Well, almost everyone. I wasn’t supposed to question the Fabian intellectuals themselves. That’s the Fabian MO, relentless cultural and journalistic attacks on everything that is, and then a hard pitch for the hope of what might be.

That’s Obama’s world.

He’s telling the truth when he says that he doesn’t agree with Bill Ayers’ violent bombing tactics, but it’s a tactical disagreement. Why use dynamite when mass media and community organizing work so much better? Who needs Molotov when you’ve got Saul Alinski?

So here is the playbook: The left will identify, freeze, personalize and polarize an industry, probably health care. It will attempt to nationalize one-fifth of the U.S. economy through legislative action. They will focus, as Lenin did, on the “commanding heights” of the economy, not the little guy.

image: http://cdn1.godfatherpolitics.com/wp-content/uploads/2015/02/Obama_fabian.jpg

As Obama said, “the smallest” businesses will be exempt from fines for not “doing the right thing” in offering employer-based health care coverage. Health will not be nationalized in one fell swoop; they have been studying the failures of Hillary Care. Instead, a parallel system will be created, funded by surcharges on business payroll, which will be superior to many private plans.

The old system will be forced to subsidize the new system and there will be a gradual shift from the former to the latter. The only coercion will be the fines, not the participation. A middle-class entitlement will have been created.

It may not be health care first; it might be energy, though I suspect that energy will be nationalized much more gradually. The offshore drilling ban that was allowed to lapse legislatively will be reinstated through executive means. It may be an executive order, but might just as well be a permit reviewing system that theoretically allows drilling but with endless levels of objection and appeal from anti-growth groups. Wind and solar, on the other hand, will have no permitting problems at all, and a heavy taxpayer subsidy at their backs.

The banking system has already been partially nationalized. Bush and Paulson intend for their share purchases to be only non-voting preferred shares, but the law does not specify that. How hard will it be for Obama, new holder of $700 billion in bank equity, to demand “accountability” and a “voice” for the taxpayers?

The capital markets are not freezing up now, mostly because of what has happened, although community organizers’ multidecade push for affirmative-action mortgages has done enormous harm to the credit system. Markets are forward looking.

A quick review of the socialist takeovers in Venezuela in 1999, Spain in 2004 and Italy in 2006 show the same pattern–equity markets do most of their plummeting before the Chavez’s of the world take power. Investors anticipate the policy shift in advance; that’s their job.

It’s not just equity markets, though; debt markets do the same thing. Everywhere I turn I hear complaints about bankers “hoarding” capital. “Hoarding” is a word we’ve heard often from violent socialists like Lenin and Mao. We also hear it from the democratic left as we did during the 1930s in America. The banks, we’re told, are greedy and miserly, holding onto capital that should be deployed into the marketplace.

Well, which is it, miserly or greedy? They’re not the same thing. Banks make money borrowing low and lending high. In fact, they can borrow very, very low right now, as they could during the Great Depression.

So why don’t they lend? Because socialism is a very unkind environment for lenders. Some of the most powerful members of Congress are speaking openly about repudiating mortgage covenants. Local officials have already done so by simply refusing to foreclose on highly delinquent borrowers. Then, there’s the oldest form of debt repudiation, inflation. Even if you get your money back, it will not be worth anything. Who would want to lend in an environment like this?

Will Obama’s be the strong-man socialism of a Chavez, or the soft socialism that Clement Atlee used to defeat Churchill after WWII? I don’t know, but I suspect something kind of in between. Despite right-wing predictions that we won’t see Rush shut down by Fairness Doctrine fascists. We won’t see Baptist ministers hauled off in handcuffs for anti-sodomy sermons. It will more likely be a matter of paperwork. Strong worded letters from powerful lawyers in and out of government to program directors and general mangers of radio stations. Ominous references to license renewal.

The psychic propaganda assault will be powerful. The cyber-brown-shirts will spew hate, the union guys will flood talk shows with switchboard-collapsing swarms of complaint calls aimed at those hosts who “go beyond the pale” in their criticisms of Obama. In concert with pop culture outlets like The Daily Show and SNL, Obama will use his podium to humiliate and demonize those of us who don’t want to come together and heal the planet.

You’ve heard of the bully pulpit, right? Well, then get ready, because you’re about to see the bully part.

Read more at http://godfatherpolitics.com/20609/barack-obama-fabian-socialist/#fzBHPtvm75muSQ9h.99

France: "Soak-the-Rich" s'enfoncer dans la boues et DEEPpardDu.

Income tax -- France 75% max;  Russia 13% flat.

Major Loser

France admits their 75% "super-tax" on top earners was a failure and quietly lets it expire. http://t.co/dVs9Fw3Be8

— Arthur Brooks (@arthurbrooks) January 2, 2015

France waves discreet goodbye to 75 percent super-tax

(Reuters) - When President Francois Hollande unveiled a "super-tax" on the rich in 2012, some feared an exodus of business, sporting and artistic talent. One adviser warned it was a Socialist step too far that would turn France into "Cuba without sun"....
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Winner Mucho Grande Hugee Hero

[F]ormer French president Nicolas Sarkozy, his wife Carla Bruni, and Bernard Arnault—“France’s Richest Man”—are reportedly also considering leaving their homeland in response to the country’s proposed “millionaire’s tax.” The Times of London reports that Sarkozy is “sounding out investors” for a private-equity fund he would like to establish in Britain. Sarkozy has previously revealed that after his political career, he’d like to concentrate on personal-wealth building. “I’m going to do this for five years and afterwards I’m going off to make dosh like Clinton,” the former French leader said in 2008. According to Forbes, taxes in London may be 50 percent, compared with a proposed 75 percent tax for the wealthy in France. While a spokesman for Sarkozy has denied that the former president is moving to London, she would not comment on the report that Sarkozy is attempting to establish a private-equity fund there. In other France-fleeing rumors, the Guardian reports that French business magnate Bernard Arnault—who is estimated to be the world’s 14th richest person with a $29.5 billion net worth—has applied for Belgian nationality. The head of the luxury-goods company Louis Vuitton Moët Hennessy, Arnault is also believed to have transferred his stake in the family group that controls L.V.M.H “to a firm set up for the purpose in Belgium, where taxes are lower.” A spokesman for the 63-year-old billionaire claims that Arnault was not trying to evade the potential tax but simply wanted to “preserve the company in case he died suddenly.”
[Source:   Vanity Fair http://www.vanityfair.com/online/oscars/2013/01/gerard-depardieu-tax-evasion-france-nicolas-sarkozy-bernard-arnault     Message to LEFT:  You can't make this stuff up.]

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UP NEXT: THE WORLD’S GREATEST CREDIT COLLAPSE This chart (a similar version was originally produced by Comstock Partners) shows the age-old story of easy credit. Once rates rise and growth slows, key sectors that took the full advantage of the readily available easy money find the debt they’ve accumulated impossible to pay back. A credit crisis ensues, and financial markets falter. The reliability of this sequence over the last half century allowed The Elliott Wave Financial Forecast to envision key elements of the last crisis well ahead of time. In April 2007, EWFF re-published the above chart from our May 2005 issue, noting a 70% rise in rates that was comparable to prior crisis-inducing spikes. By August 2007, EWFF cited a “succession of climactic credit events, from the bludgeoning of the subprime mortgage market to a booming demand for ‘covenant lite’ commercial loans” and stated that this blend was the “set-up to the onset of a new conservatism that would drive the greatest credit crisis in history.” The yellow highlights on the chart show our forecast for the ensuing months. Over the next two years, the subprime crisis expanded into the biggest real estate crash since The Great Depression; derivatives imploded, which led to the bankruptcy of Lehman Brothers and the forced bailout of financial giants ranging from AIG to Merrill Lynch; GM and Chrysler went under, and 11 airlines became insolvent. With the help of a historically accommodative Fed, record fiscal stimulus and the decline of U.S. Treasury rates to their lowest level in history, some of the losses have been recouped. But our June 2012 Special Report on the bond market identified a key set-up for the next crisis. The first-ever combined issue of The Elliott Wave Theorist and EWFF called for a “Major Top in the Bond Market” that would lead to outright deflation and an even more devastating credit crisis than that of 2008/2009. U.S. Treasury bonds made a historic top within weeks. Now, a year later, the next crisis is fast approaching. Through the first half of 2013, EWFF has observed the same climactic credit events that we cited in early 2007. In some ways, the conditions are more extreme, as the demand for junk bonds continued to push yields to a new all-time low in May and covenant lite loans account for twice the percentage of leveraged loans that they did in 2007 (see discussion in the June issue). The broader scope of the unfolding crisis is already evident in a more pronounced interest-rate spike. The 10-year U.S. Treasury yield jumped 97% from its low in July 2012, a one-year percentage increase that is already the largest since interest rates peaked back in 1981. As rates continue higher, trouble will ensue. Many of the borrowers that managed to survive or were bailed out during the last credit crisis are barely hanging on despite the rate relief and economic recovery. For example, since 2009, 46% (306,000) of the homeowners that received help from the U.S. government’s main foreclosure prevention program have “re-defaulted.” In the resuming crisis, credit stress will reappear in all of the areas that EWFF cited in 2007. Additionally, whole new areas of default will become focal points, as the orange highlighted list on this next chart shows. Let’s look at some of the upcoming attractions: Emerging Markets Emerging market debt is assuming the lead role played by subprime debt in 2007. Just as the market for subprime debt buckled ahead of the stock market top of in July 2007, emerging market rates, particularly in China, came unhinged in June (see discussion in Global Rap section of last month’s issue), ahead of what should be an imminent peak in the Dow Industrials. In 2007, EWFF observed that investors initially dismissed the subprime threat, citing “‘no clear signs’ of rising trouble in the debt market.” Here again, investors are unfazed. Some even insist that the initial scare creates “a lot of opportunities” (“Goldman Sachs Likes Emerging Market Bonds,” WSJ, July 11). The lack of concern is particularly pronounced when it comes to China. “If You Think China Is Facing a Credit Crunch, You’re CRAZY!” exclaims a Business Insider headline. Still, some areas of easy money continue to flow even as prior spigots run dry. A July 18 Bloomberg article notes that while China’s cash squeeze is claiming domestic victims “across the nation,” Chinese money remains “cheap and plentiful” in distant markets such as Nigeria, Sudan, Russia and the Ivory Coast. In “some of the world’s riskiest” markets, Chinese banks are lending at “hundreds of basis points below the cheapest commercial loans available.” “It’s almost free money,” says a Nigerian aviation minister who just borrowed $500 million to build four airports at an interest rate of 2%. The cheap foreign lending is done through “policy banks” and is intended to facilitate Chinese business interests. In our book, it is just another example of how government is taking a lead role in the last vestige of the old trend. Because government is driven by consensus, it commits most fully to financial trends when they are over or nearly so.

the Cyprus heist is really important

Cyprus and the Death of Deposit Insurance

By Robert Tracinski - March 19, 2013

From the beginning, the European crisis has been a story of small countries on the Eurozone's "periphery" revealing fundamental problems at the heart of the system. Now a very small country on the outer edges of the periphery—the tiny Mediterranean island of Cyprus, with about a million inhabitants and 0.02% of Europe's GDP—is triggering the latest wave of the crisis.

This is not really about Cyprus, of course, but about the precedent that is being set there. In exchange for an infusion of capital into the nation's banks, Cyprus is being asked to impose a "special bank levy" that would take 6.75% out of all bank deposits up to 100,000 euros, and 9.9% above that.

This is described as a "wealth tax," except that it's not a tax. A tax is a regular rule that operates uniformly according to a pre-determine formula. A one-time, ad hoc seizure of money isn't a tax. It is confiscation. Or we can use a plainer word for it: theft.

The big news isn't this bank heist, but who is pulling it off. The plan was imposed, not by some wild-eyed revanchist Communists, but by the finance ministers of respectable European countries, who thought up the idea and imposed it on Cyprus. Like Willie Sutton, they know where the money is.

There are special circumstances that made them think they might get away with it. Cyprus is a small island with a large banking center that holds deposits many times larger than the local economy. A lot of this money comes from Russia, and Cyprus is reputedly a tax haven for Russian "oligarchs" (politically connected billionaires) and mobsters. In an American context, you might compare Cyprus to the Cayman Islands, which have been so vilified just having a bank account there is enough to end a politician's career. Just ask Mitt Romney.

But in showing us what they'll do to an unsympathetic target, Europe's leaders are showing us what they would like to do everywhere: dig themselves and the crony banks out of a tight spot through the mass confiscation of wealth. It's the ultimate bailout plan: they just take whatever they need.

And there is more to it than that. This is confiscation, but it a particular kind of confiscation with particular implications. It is the end of deposit insurance. Depositors, particularly small depositors, are supposed to have an ironclad guarantee that their money will always be there, no matter what—that they won't wake up one Monday morning to find that 6.75% of it is gone.

That's why the Cyprus heist is really important. It is a warning that the whole system of deposit insurance is coming unglued.

Deposit insurance is central to modern banking—or rather, it is central to the contemporary system of government-guaranteed, government-regulated, too-big-to-fail banking. Here is how the deal is supposed to work. The government guarantees ordinary bank deposits, but in exchange it imposes regulations meant to prevent banks from failing so that they will rarely have to call on the government guarantees. But then there's a complication. While the government's deposit insurance raises enough money to handle the failure of a limited number of smaller banks, there are some institutions that grow so big that the government doesn't have enough money to cover their losses if things go wrong. That's one of the reasons why these banks become "too big to fail," which necessitates even more government support, in exchange for which they are supposed to be placed under an even heavier layer of regulation.

Cyprus is a signal that this whole system is failing. Government regulation doesn't actually guarantee solvency; in fact, it is the insolvency of the governments themselves that triggered the Euro crisis. Moreover, when things really go wrong, the government can't actually guarantee all of the deposits—and now we're starting to wonder whether they're still interested in trying.

When this system starts to come apart, its consequences are worse than an ordinary bank panic. In the bad old days, when individual banks and their depositors were on their own, if one bank failed—and if it was not bought out or rescued by another bank—its depositors might take a haircut, but only after shareholders and bondholders were wiped out. This gave all of the parties a strong incentive to make sure the bank was solvent and wasn't taking too many risks. Under the current system, all of these parties are absolved from such a responsibility, but we pay a heavy price for it. When things go wrong, every depositor at every bank gets a haircut, while politics decides who gets hit worse. In the Cyprus deal, European bondholders will be protected, but Russian oligarchs will be looted, and small Cypriot depositors will get caught in the middle. Remember, also, that all of this is being done to avoid a run on the banks—but that is precisely what has been happening in Cyprus, with depositors emptying the nation's cash machines in an attempt to withdraw their money before it could be seized.

Combine this news with Gretchen Morgenson's summary of a Senate inquiry into huge trading losses at JPMorgan Chase, one of our too-big-to-fail megabanks. The bottom line is that big banks are still too big to fail and they are still taking undeclared risks backed by taxpayer money. Across the board, the general sense is that the system is failing and government leaders aren't really trying to reform it. They're just trying to restore the status quo ante, setting us up for a whole new round of financial crisis.

Can Cyprus happen here? Well, some on the left are already floating plans to rescind the tax exemptions on retirement accounts, making a grab for a big pile of your savings.

But will they do what Cyprus is doing with our bank deposits? Probably not. If history is any guide, our political czars wouldn't attempt something so crude as to just grab money from our accounts. No, they'll do what they have always done: siphon it gradually by printing lots of money and inflating away our savings.

I understand if you don't find that very reassuring. 

//

Robert Tracinski is editor of The Tracinski Letter and a contributor to RealClearMarkets.

Page Printed from: http://www.realclearpolitics.com/articles/2013/03/19/cyprus_and_the_death_of_deposit_insurance_117513.html at March 20, 2013 - 05:52:47 PM PDT

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