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Constantinople falls to Ottoman Ruler Mehmet II, 1453

Constantinople falls to Ottoman Ruler Mehmet II, 1453

For hundreds of years alum was mined in Smyrna, in Asia Minor, which back then went by the name of Anatolia. Anatolia was the breadbasket of Constantinople, the Queen of Cities, and was under the control of the Byzantine Emperors for nearly a millennium.

Alum was an essential commodity for the makers of fabrics and tapestries in Flanders and other cloth-making centers in northwest Europe. They used it to set the colors and make sure they did not run or fade too quickly. (The saying “These colors don’t run” might have been coined back then.)

In 1453, Constantinople fell to the Ottoman Turks. Then in 1455 the Ottomans occupied Smyrna and took control of its alum mines. Needless to say, this put quite a strain on the tapestry industries, cloth makers and dyers of Western Europe, who now had to pay through the nose to obtain this irreplaceable substance.

We in the contemporary United States get rather frosted when we consider that we have to buy petroleum from some countries who absolutely hate us, and who undoubtedly use some of that money to finance overseas terrorism in the West. We may question whether we’re financing a war against ourselves.

Western Europe had a similar problem. Having to pay the Ottomans for alum was particularly galling because there was a continuing low-intensity war between Christendom in the West and the Ottoman Empire in the East. The Ottomans continually probed into the Balkans and the Mediterranean. Think of Malta around 1565 or the gates of Vienna in the 1680’s. (Vienna had (and may still have) a residential district called the Turkenschanze, or Turkish Redoubt, which was where part of the old city’s walls faced the Turkish armies. It was Sigmund Freud’s neighborhood, until he left.) So, after the fall of Constantinople, Western Europe was in effect financing the war against itself.

Then, in the 1480s alum deposits were discovered in one of the Papal States in Italy. The Pope moved quickly to establish a monopoly on the alum trade. A papal bull (which doesn’t mean what you think it means) was issued prohibiting the purchase or importation of any Turkish alum under pain of excommunication and eternal damnation. In fact, the written text of the indulgences that were being sold to finance the Vatican’s wars (mostly against other Italian city-states like Florence) and its construction of St. Peter’s was revised to carve out the purchase of Turkish alum and make it a mortal sin that could not be absolved by any indulgence. These were the same indulgences which, a few decades later, really upset an Augustinian friar named Martin Luther.

Try to imagine what it must have been like for some cardinal or canon lawyer laboring in the bowels of the Vatican to come up with the theological underpinning for making the purchase of Turkish alum (but not the Pope’s alum) an unforgivable mortal sin.

Nowadays, there are threats to slap 35% or 50% tariffs on some goods manufactured overseas. Could we try a threat of eternal damnation for buying a Ford Escort assembled in Ciudad Juarez? The more things change….

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trump

The factors that went into the Hillary loss/Trump win will keep historians and political scientists busy writing books for a decade, if not more. Some will adopt a monocausal theory and blame the emails, or the combination of Comey and the emails. Others will view it as a more a generalized phenomenon of how dysfunctional our politics have become. My own view, as I said in my last post, is that his success owes to the lingering effects of the 2007-09 Great Recession, which for anyone not living in the Wall Street-Washington corridor or the West Coast, is really the 2007-2016 Continuing Great Recession. And while the Iraq War began a long time ago, even its erstwhile supporters (other than Dick Cheney) view it as perhaps the biggest foreign policy blunder in the history of the United States. The “elites” of both left and right have shown conclusively that they’re about as competent as Laurel and Hardy trying to move a piano up a flight of stairs.

DNC Leadership deciding the best way to get Hillary up all those steps.

DNC Leadership deciding the best way to get Hillary up all those steps.

Trump’s problem will begin not with his opposition from the left, but rather with his supporters on the far right. That may sound counter-intuitive, but the left at least has some idea of what to expect from a Trump Administration. The right, on the other hand, is in for some major disappointments. Though I don’t like to predict the future, I will make three predictions right now. First, there will never be a wall with Mexico. Second, there will never be a ban on entry of Muslims into the United States because they happen to be Muslim. Third, there will never be a deportation force running from house to house rounding up some 11 million undocumented (or illegal, if you prefer) immigrants. (And, by the way, Trump will not be locking up Hillary.)

The net effect of these and other unfulfilled promises will be to disappoint the neo-Nazi, KKK and alt-right types who supported Trump. Steve Bannon, an alt-right mouthpiece, will likewise lose a lot of support among his ilk. Economist Paul Krugman said that, during this election cycle, the problem with the left and the media was that they took Trump literally, but not seriously. A large majority of white voters, the “lost white voters,” many of whom are not racists, took him seriously but not literally. But to complete Krugman’s logic is to understand where Trump’s difficulties will begin: namely, with the people of the alt-right/white supremacist persuasion who took him both literally and seriously. That group comprises the racist element of the Republican right. When they learn, as they soon will, that there will be no wall, no deportation force, no ban on Muslims, etc., they will turn on him in a New York second. Everything costs something, and soon Trump will learn the high cost of the rhetoric that got him into the Oval Office.

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2016-election

Well, there it is. The candidate that no one would give credence to has won the Oval Office, and in about two months he’ll take the helm on the bridge on the S.S. United States. There are lots of things that can be said about the view off the bow, but we’ll limit this post to the view from the stern. There will be no reaching for apocalyptic metaphors from Bronze Age Biblical passages.

The roots of Trump’s victory date back to the major events of the 2007-09 Great Recession. The people have rejected, decisively, the power of the Wall Street-Washington Axis. Until last night, the United States was not a democracy; it was a corporatist state, one in which the unproductive financial capitalists of Wall Street ventriloquized Washington, D.C. and ran the country by themselves, for themselves.

Just look at the wake our ship of state has made. The U.S. Gov’t. made sure that all the AIG executives got their bonuses, even though it was they who almost drove the global economy into a bottomless abyss. The megabanks all got bailed out on the taxpayers’ dime, even though they had to be bailed out because they’d spent years packaging and selling trillions of dollars of collateralized debt obligations that they themselves didn’t understand, and knew were worthless. Meanwhile, those same taxpayers who bailed out Wall Street lost their jobs, then lost their homes, and, of course, lost their health care coverage.

For decades, the Wall Street-Washington Axis preached the gospel of Rugged Individualism and The Free Market, which was all a lie. Goldman Sachs perfectly exemplifies why: when the market turned on Goldman Sachs during the Great Recession, Lloyd Blankfein, its CEO, called his good old buddy, old chum, old fellow alumni Hank Paulson, who just happened to be U.S. Treasury Secretary. And, presto change-o, Goldman Sachs became a bank holding company with access to the Federal Reserve cash window before the weekend was over.

See? It pays to have friends in high places.

The Americans who voted yesterday don’t have friends in high places, and they’re sick and tired of seeing the country run for the exclusive benefit of those who do. Washington in 2007-09 refused to countenance an economic reckoning for Wall Street because that would have affected their compatriots (and the campaign donor class) in the banks. But in economics, one link forges the next, and the reckoning that should have happened in the markets was translated to the political sphere. Think Tea Party. Think Occupy Wall Street.

And not one banker ever went to prison. In fact, the best thing that happened to Wall Street during the Great Recession, the guy who did the world’s biggest favor for the banksters, was Bernie Madoff. Bernie may be the Platonic Form of Ponzi Schemer, but he had no connection whatsoever to the Wall Street madness that brought on the Great Recession. Still, he became the face of it.

Places like Westchester County, NY, and Fairfax County, VA, came out of the crisis more prosperous than they’d ever been. But it you were not within that Charmed Circle because you lived, say, in a place the Wall Street-Washington Axis labeled “Flyover Country,” you were financially doomed. The elites were not affected by the downturn. Out of sight, out of mind.

The Wall Street-Washington Axis sold themselves on the basis of merit, they convinced the country that they knew best. “If you let us bail out the banksters, we’ll be back to the boom times in no time!” But that didn’t happen. They were wrong. Take Alan Greenspan, once viewed as the Grand Poohbah of All Economics, given to cryptic utterances that verged on the unintelligible. Turns out that he was just an old Ayn Rand fanatic, a rooster claiming credit for the dawn.

These examples could be multiplied. The mistake of Establishment politicians was to think that people would just forget about all that. The political legitimacy of the Wall Street-Washington Axis is based on alleged merit. When that merit is shown to be a complete falsehood, their political legitimacy dissolves.

More than anything else, the Great Recession and how it was handled threw a decisive advantage into the scale on the populist side. Whatever faults Trump may have, he was sharp enough to see this when everyone in the Wall Street-Washington Axis did not. Sanders saw it too, which accounted for his relatively successful campaign, which also surprised the media.

I don’t attribute Hill’s loss to the private email server business, which most people didn’t understand, much less follow. Nor to Benghazi, a word that practically became a Republican mantra. Nor is it the trust/distrust factor.

No, the real issue is that, no matter how hard she tried, Hillary could never portray herself as an “agent of change,” to use an overused term. Forget exit polls, forget college-educated or not. All that’s just trivia and beside the point. She represented continuity with the unacceptable status quo, continuity with a way of governing that the American people want smashed into atom-sized pieces and rebuilt from the ground up.

Ergo Trump.

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Coal mine, early 20th century

Coal mine, early 20th century.

There are mines and there are trenches, but they’re not the same. The so-called war on coal is a great story, but it’s a complete fiction. If there’s a war on steam coal, then there has to be a war on nuclear generation as well because they’re both in the same wholesale electricity market. You don’t have to look far to see Exelon and other nuke operators begging their state legislatures for additional subsidies for their plants. When wholesale electricity market prices are favorable, then coal mines and coal-fired plants (and nukes) extol the survival of the fittest in the Free Market, where only the most efficient competitors survive. But when that market turns on them, all of a sudden “the market is flawed,” and customers are no longer just customers; they’re “stakeholders.”

Be very afraid when anyone in the energy business starts calling you a “stakeholder.” It’s code for “we need you to pay us more money, but our reasons are really bad, so we have to fool you into believing that we’re all in this together.”

Coal mines are not being shuttered by the EPA or Hillary Clinton. The straight-up fact is that shale play natural gas has brought power prices down to levels not seen in years. Allied to this is the continued weak demand in what the feds tell us is our country’s longest (and slowest) economic recovery. The consequence is that low market electricity prices have persisted for an extremely long time.

The mines are being closed, and coal companies are declaring bankruptcy, not because politicians are waging some sort of trench warfare, but simply because of the price of coal, which varies directly with the price of natural gas.

Without doubt, new environmental rules have played a part in reducing coal-fired generation. But if you kick in the door on a house that’s in the process of falling down, don’t expect to be paid for the demolition job. A small decrease in the price of natural gas has a disproportionately large impact on demand for steam coal, and thus on the question of whether to shut a coal-fired station.

There’s no war on coal, and Don Blankenship, contrary to his claim, is not a political prisoner.

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Guillotine

Artist’s conception of a traditional annual performance review at a French investment bank

Even Willie Mays missed a fly ball every once in a while.

Reuters reports that investment banking firm Lazard Ltd, which advised SolarCity on its $2.6 billion sale to Tesla Motors Inc, made an error in its calculations that discounted the value of Solar City by $400 million.

But the headline is worse than the actual story, so one might question whether there’s some “clickbait” sensationalism involved. There was a miscalculation according to a regulatory filing made by Solar City, but the miscalculation related to a range of minimum-maximum share prices, rather than to a definite acquisition price.

Using its discounted cash flow model, Lazard came up with an equity value range of between $14.75 and $34.00 per share for Solar City. After closing, Lazard realized that it had double-counted some of Solar City’s projected debt. After corrections to the DCF calculations, the valuation range was adjusted to $18.75 to $37.75 per share.

The $400 million figure sounds bad, and of course it is. But the purchase price the parties ultimately agreed to, which was paid in Tesla stock, came out to $25.37 per share. So regardless of the error, the price paid was still within the range originally provided by Lazard.

I’m sure there are lawyers out there who would, if asked, take the case and file against Lazard, but I would not count myself among them. Lazard and Tesla will probably dust themselves off and move on. No harm, no foul.

What’s really interesting about this case is not that an error was made, but rather how Lazard might handle its repercussions internally. Who made the error? Who checked the figures? While I wouldn’t take the suit, I would certainly place money on heads rolling across the office floors at Lazard’s headquarters.

[Attention carpet cleaning companies: send your brochures to Lazard now.]

Lazard, originally a French merchant company that grew into a major investment banking house in the New World via New Orleans, might just keep an old Rasoir National (see artist’s conception, above) in storage somewhere in a New Jersey warehouse for just this type of occasion.

When the Great Recession occurred, the Wall Street chorus was that it was nobody’s fault, they never saw it coming, and nobody could have seen it coming.

Right.

The rapidity with which Wall Street bankers transitioned from omniscient Masters of the Universe to a collection of Sargent Schultz clones was the closest mankind has yet come to attaining the speed of light. Despite precipitating the worst financial crisis since the Great Depression and imposing on the U.S. taxpayer bailout costs rivaling those of a world war, no one was held accountable. Wall Street was grateful for Bernie Madoff because his Ponzi scheme story was simpler and took the spotlight off them.

But if you are the unfortunate person at Lazard on the Solar City-Tesla deal who’s tagged with responsibility for this DCF error, whether you’re a first-year analyst or a managing director, you can expect a career ending scene such as that depicted above.

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Elizabeth II

The Real QE2

By a margin of around 2 million votes the people of Britain gave a giant collective middle finger to the so-called elites of both their island and the EU. Recall that those elites have been warning for months that there would be a skyfall (and not the James Bond movie type) if Leave won and Remain lost.

The clueless American commentariat have trotted out their usual question when anything supposedly bad happens overseas: could it happen HERE? Since we’re not members of the EU, the media portray the Trump phenomenon as a yardstick to measure whether the popular will in England reflects the same type of popular will in the U.S.

The basic parallel between the Brexit vote and the Trump phenomenon is a rejection of the elitist, or corporatist, form of government that has been in effect in the United States as well as in Europe for more than a generation now.

The NRA is a perfect example of our corporatist form of government. The NRA funnels boatloads of money to U.S. senators and representatives, who then do the NRA’s bidding to ensure that people on the no-fly list can still buy assault rifles. Only in the past few days, with a sit-in by Democrats on the floor of the House, have the timbers of the gun lobby begun to shake a little bit.

While the NRA draws more press, Goldman Sachs is far more important. Goldman is not simply an example of the Wall Street-Washington Axis of elites, it is the Motherlode of corporatism/elitism. It’s the most important primary dealer in U.S. Treasury securities (i.e., buying direct from the government and then reselling). With alumni like Hank Paulson serving as Treasury Secretary and many others in prominent and important offices in the financial and regulatory side of the Washington, Goldman Sachs doesn’t just influence the U.S. Government’s financial policies; it is embedded in them. They flow from Goldman, whose word is swallowed whole by Treasury apparatchiks like Tim Geithner. In times of crisis, like the Great Financial Meltdown and Recession of 2008-09, a small group of Goldman executives, alums and acolytes exerted a decisive influence in deciding what steps the United States Government should, and would take in response to the financial crisis. No one dared dissent from the self-interested Goldman Sachs directives, and one way or another Goldman made a lot of money out of the crisis.

Elizabeth II

The Real QE2

Funny how that works. In Britain, they’ve said “enough.” And here?

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Goldman Sachs

Full disclosure: I am not a Trump supporter. I find his views on Mexicans, Muslims, women and others abhorrent. The Trump (and Rubio) organ size comparison during a nationally televised debate for our highest political office can only be described as an international and historical embarrassment for the United States. With that caveat in hand, let’s look at why the public still supports Trump despite his playing fast and loose the truth.

But first, an old joke or, rather, a little parable.

Two teenager fish are swimming along in the ocean. They pass by an elderly fish sitting on a fish-park bench.

The elderly fish says: “Morning boys. Enjoying the water today?”

The two teenager fish look at each other and quickly swim away without answering.

When they’re well away from the old fish, one of them says to the other: “Man, that old guy was frikkin’ weird.”

The other one replies: “Yeah, say that again. And what the f#$k is water?”

The sheer idiocy of pundits in the mainstream media (MSM), the Right Wing Entertainment Complex, and both Democratic and Republican political establishments has been on full display ever since The Donald announced his candidacy last summer. Now he’s Heir Apparent to the Republican Presidential Nomination. Yet the elites continually wonder why, even though Trump spews half-truths, misstatements and outright lies, his popularity increases rather than decreases.

Can’t the public tell Donald is full of it?

Well, the short answer is yes, they certainly can. And they do. But it doesn’t deter them from either supporting him or voting for him.

So why doesn’t it matter to them?

That is the question that neither the elites, nor the MSM, nor the Right-Wing Entertainment Complex, has been able to answer. The answer is right in their face, but, like the two teenager fish in our parable, they’ve been swimming in it, breathing it, eating it, excreting it and regurgitating it to audiences for so long that they’ve lost all ability to recognize it.

It is the Bull$hit Culture of America.

The American public has been subjected to a culture of pure, homogenized, unadulterated bull$hit for almost 60 years. That’s twice the practical equivalent of eternity. The American people have not had a straight, honest answer or statement from a politician on any important question or issue since Eisenhower gave his Military-Industrial Complex warning in January 1960.

Did anyone notice this trend? Consider NBC’s Meet the Press show back when Tim Russert was host. Russert was one of the very few media types who would press a politician to answer a question. More and more, though, they wouldn’t answer his questions at all. They would give whatever spiel they had in mind, regardless of how remote it was from Russert’s question. Tim Russert, like other media types, was constrained. He had to “make nice” with non-responsive politicians so that they would agree to come on the show again in a few months, or else risk angering his producer. After Russert’s death, David Gregory took over Meet the Press. He was not as talented as Russert, and Meet the Press market share declined. Gregory was replaced.

But the failure of Meet the Press as a meaningful broadcast on political matters is not entirely the fault of Russert, Gregory or others in their shoes. Rather, it’s a reflection of the unwillingness of politicians to say anything of substance at any time because they may want to move away from a particular position later. Or they may be worried about a gaffe that goes viral. In any case, the politician’s objective is to say something and make it sound intelligent; better yet, make it sound patriotic or tough-on-crime. But no matter what the politician says, it is almost always irrelevant to the question being asked as well as completely meaningless.

And network honchos wonder why the audience is shrinking.

The MSM are no longer journalists, as that term was understood during the first half of the 20th century. They either can’t afford to hire, or aren’t interested in hiring, real live reporters to investigate things. The MSM’s idea of gathering the news is to wait around for public officials to make statements, or for lobbyists and political campaigns to send in press releases. Then they report that as “news.” The network’s pundits sit around an authentic Cronkite-looking conference table and interview…other pundits. The MSM functions as a giant copying machine for the American Culture of Bull$hit.

Let’s take a few examples of that culture:

Back when the economy tanked in 2008, and for nearly every recession before that, the government (either the Federal Reserve or the Bureau of Labor Statistics, or some other agency) would announce that we were not in a recession. Millions of people would lose their jobs, businesses and factories closed, but at every opportunity our government would remind us that (according to the GDP numbers, or the like) we were not in a recession. Then the GDP numbers would be revised (Hallelulia!), and government’s line would switch to: “Well, remember when we were telling you that we were not in a recession? Okay, we were wrong. It was a recession. But the good news is, it’s over now!”

The jobs, businesses and factories have never returned. But GDP is up, and that’s what counts in Washington and Wall Street.

They guy who used to earn $22/hour at a factory job, with benefits and a retirement plan, now works part-time at Wal-Mart’s for $7.25 an hour (unchanged since 2009), with no health insurance, no other benefits, and no pension plan. (Go get an IRA!) He probably works a second job at the same rate of pay, also without health insurance, benefits or a pension plan. “But we’re no longer in a recession!” says the Chairperson of the Federal Reserve Board. Why doesn’t that make this guy feel better?

Here’s another one. Inflation has been low for a decade or more, so that has not been too great an issue (except to the Fed, which still fears it even though deflation should be a bigger concern). But for those old enough to remember the heavy inflation days of the ‘70s and ‘80s, inflation was so punishing to everyday Americans that the government had to invent a new piece of Bull$hit Culture called called “core inflation.” In a nutshell, “core inflation” is the same thing as inflation but it excludes food and energy inflation from the index. This allowed the government to give the public a lower inflation number so that the news would not look as bad. And lets not forget that if incumbent politicians can report better economic news, they will have a marginally higher chance of being re-elected. “Core inflation” is a wonderful concept. As long as you don’t have to eat, fill your car’s tank with gasoline so that you can get to work every day (assuming you have a job, that is), or heat or cool your house, inflation was under control.

Here’s yet another example. Back during the Great Bank Bailout of 2008-09, AIG, which as an institution was one of the leading causes of the Great Recession, was bailed out by the Feds. Then, after a $170 Billion federal bailout saved them, the same cohort of AIG execs who had very nearly destroyed the world’s economy all got multi-million dollar bonuses … for their achievements in the preceding year, of course. The public was outraged.

The likes of Tim Geithner and Hank Paulson (himself a former CEO of (yikes!) Goldman Sachs) told the American people, with a straight face, that those AIG execs had to get bonuses to stay at their desks and handle the disaster they’d created. Really? If AIG execs didn’t get multi-million dollar bonuses in 2008-09, they’d leave? Where, exactly, would they have gone to? Lehman Brothers? Maybe Bear Stearns? Far from hiring new talent, at that point investment banks were telling their employees to gather their personal items and clear out. The government’s explanation and defense of these AIG bonuses was so stupid it was embarrassing. Far from deserving bonuses, AIG’s execs should have been grateful for their mere continued employment.

And who could forget Goldman Sachs? This institution, which bestrides the World of Free Market Capitalism like a Colossus (with colossus-sized cojones, in case Trump or Rubio want to compare the size of those things as well) ran into trouble, which it later denied. One Friday Lloyd Blankfein, taking a break from doing God’s work, ran crying to comrade Hank Paulson for a bailout. By Sunday morning Goldman Sachs was a bank holding company with access to the Federal Reserve window for cash in virtually unlimited supply. Presto change-o.

All of these instances can be multiplied, not quite to infinity, but close.

The Bull$hitters of our political elites tell the American people to beware of, and media elites wonder why the American people don’t recoil from, Trump’s Bull$hit. They have no idea how inadvertently hilarious they look and sound.

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