Foreclosuregate has focused attention yet again on the scams and frauds of the banks. And with it has come a revisiting of all the other scams and frauds the banks ran, and in most cases are still running, in the housing bubble and its aftermath, in CDOs and CDSs, in the greater world of derivatives, and in markets and the economy generally. But will it last? Will it lead to effective action? I don't think so. For there to be an effective response there needs to be a reasonably complete understanding of the problem. And I don't see that happening.
Everyday there are new articles about fresh ways the banks were and are scamming us. You just have to wander over to a place like Naked Capitalism today to see articles about how loan servicers weren't just screwing borrowers but investors or how banks took a cut on profits from pension fund investments but shared none of their losses. There are dozens of scams out there run thousands, even millions, of times, but they are presented to us piecemeal. There is no overarching synthesis of what they represent.
We, of course, know it as kleptocracy. Kleptocracy is not a sometime thing. It is about looting anything that can be looted, as much as it can be looted, anywhere it can be looted. It is a serious, and very criminal, undertaking. And it has real victims. People's lives are ruined by it. People die from it.
Kleptocracy thrives because virtually all of our society's official apparatus promotes it and benefits from it. You have only to look at the Obama Administration's casting foreclosuregate as nothing more than a technical glitch in the paperwork, hardly worth bothering about, certainly nothing to justify a national foreclosure moratorium. Immediately taking the side of the banksters against distressed homeowners, and these are the Democrats, you know the party that is supposed to care about ordinary Americans.
As I said, kleptocracy is not a sometime thing. It is the lens through which we must view all public acts and events. We need to understand kleptocracy better. We need a politics of kleptocracy. We need an economics of kleptocracy.
This last was brought home to me recently by a couple of articles, one by Roubini on the balance of payments issue and one by Krugman on the mortgage morass. Fairly schizophrenically, Roubini argued that the US, meaning the middle class, needed to engage in austerity over and above what it currently is suffering and industries needed to export more, and that this wouldn't work. What was missing in Roubini's piece was any awareness of how kleptocracy and the massive inequality in wealth it has spawned play into the whole international trade scenario: transfer of wealth from the middle class, use of said wealth to finance outsourcing overseas, increased indebtedness and disappearance of the middle class. It is the proverbial 800 lb. gorilla in the room and Roubini either doesn't see it or ignores it.
The same thing with Krugman. Lots of problems in the mortgage industry. But no synthesis. It is like looking at a car but seeing it only as an assemblage of car parts without ever acknowledging that it is a car and what a car is used for.
Neither Roubini nor Krugman can ever accept that what we have in this country is kleptocracy because it totally negates every economic position they have ever taken and sets at nothing the high social status they have acquired in the kleptocratic hierarchy.
Still it is important to realize that our country is being run on kleptocratic principles, that the goal of kleptocracy is economic feudalism, but that it is inherently unstable and unsustainable. It has not off switch. It goes until the kleptocrats crash so badly they can't maintain their power to lie and steal by lying and stealing.
This is where all economic and political analysis should be focused, and where almost none of it is. But to understand what is going on and how it will play out, such a focus is absolutely necessary.