Bernie Sanders for President? Tackling America’s Big Problem

The Money

These are fascinating times in this United States of America! Who will be elected president in 2016 to lead this country across the troubled waters which lie ahead? The story of this election campaign is materializing as I write these very words. Chapter two of the narrative begins after the election results from New Hampshire’s primaries this week which saw Donald Trump and Bernie Sanders emerge as clear winners.

There is much to be said about this election campaign and the amazing, atypical roster of candidates who have emerged, but I focus on three salient points:

Point one: That the current front-runners (yes, it is early), Trump and Sanders are most improbable/unusual candidates. On the one hand, Donald Trump is an outspoken, high-profile, multi-billionaire capitalist with a show-biz flair but no political experience, whatsoever. On the other hand, Senator Bernie Sanders characterizes himself as a Democratic Socialist – hardly the historical caricature of your viable presidential candidate!

Point two: The American electorate is desperately disgusted with Washington politics and politicians who perpetuate the “art” of procrastination and indecisiveness. It is clear that Trump and Sanders are where they are because they present voters with radical departures from the status-quo.

Point three: Both of these candidates have taken the plunge into the deep, treacherous waters of America’s most serious problem – especially Sanders.

What is the greatest threat to the United States of America?

Answer: The fact that Abraham Lincoln’s government “of the people, by the people, and for the people” has been hijacked by wealthy, special interests from industry and Wall Street. I have long been convinced that the situation poses a dangerous threat to the viability of our American democracy. It would seem that Senator Sanders has reached a similar conclusion along with many of our citizens who look askance at the gross wealth inequality which reigns supreme in America.

I recall a trip to Disneyland’s Tomorrowland when I was a young man: My family was listening to a speech by Abraham Lincoln realistically delivered by Disney’s “Lincoln automaton” (programmed robot). In the speech, Lincoln declared that, should the United States ever fail, its demise will come from forces within, not from outside the country. It was abundantly clear to me that Lincoln was warning about both citizen apathy/polarization, and the corrosiveness of internal corruption.

Donald Trump’s willingness to “damn the torpedoes” and say whatever is really on his mind was on full display in the first Republican debate when he wagged his finger disapprovingly at the influence special interests have on the decisions and functioning of our government. He insisted that he should know as well as anyone how the system works for the wealthy, because he, as a developer/capitalist, has taken advantage of the opportunities that the law allows! How refreshing was that honest admission and his subsequent stand that special interests have too much sway on our government by way of campaign contributions?

The Bernie Sanders Solution: Rein-in the Special Interests

 For anyone like me who is well aware of Wall Street’s recklessness, Sanders’ contention that our government is being steered by special interests is a resonating bell-tone. Few serious people will forget the near collapse of this country’s entire financial system back in 2007/2008 (yes, it almost happened!) and the role played by the greed and influence of Wall Street banks and investment houses. Hundreds of billions of dollars were lost, much of that by middle-class Americans, during the recovery process and the bail-out of Wall Street. Countless lives were changed forever thanks to the reckless, greedy actions of Wall Street and the banks as they parlayed their securitized and scrubbed, sub-prime home mortgage con game into huge profits…and, yet, not one of the well-documented protagonists ever spent a day in jail for it.

For anyone who needs to be convinced just how close this country came to financial/global Armageddon, I recommend the Frontline documentary, Inside the Meltdown. Michael Lewis, in his book (and the current popular movie) titled The Big Short reveals just how corrupt and/or ignorant were the people in both government and the private sector who allowed all this to happen. And make no mistake: Nothing has changed enough since that narrow escape to prevent a worse, future financial calamity from happening again.

When asked how he intends to change the ways of Congress and Wall Street should he gain the White House, Sanders cites his “popular revolution” as the vehicle. Indeed, he has touched a sensitive nerve in the populace as evidenced by the response received by his message about wealth inequality and the people’s government being increasingly controlled by wealthy special interests. Is Sanders a head-in-the-clouds liberal who does not know what he is tackling? After listening carefully to him, I think not!

 Just How Will This Work, Senator Sanders?

 A media political pundit (there are a lot of them) asked Sanders just the other day, “How will you possibly get an often self-serving Congress to wean themselves from the campaign contributions which fuel their constant drive for re-election? Who, in a position to matter, would shun the money? Do you think YOU can change their minds and enact laws which eliminate campaign contributions?”

At that point, Sanders proved to me his mettle with his quiet but firm answer (paraphrased): “No, the public will change their minds.” He reiterated and emphasized that his strategy involves a “popular revolution.” He did not have the opportunity to elaborate further, but I can imagine what his strategy might be. I envision a successful attempt to ban outside money and influence from our government process proceeding in two steps:

Step 1: Establish a generous election campaign fund (including network time) paid for by taxpayers and equally divided among all “qualified” candidates for major office. I am certain that an acceptable winnowing process can be established to narrow the field, initially.

Step 2: The executive branch (the president) drafts a written oath of office whereby major Washington office-holders and seekers can choose to swear to abstain from all moneys collected from special interests – under penalty of perjury. Any incumbent or candidate who does not sign the oath will be listed in the “nay” column of a listing which is readily available for all the public to see. Given the current mood of the electorate, I would hope that those who resisted signing the pledge to forego private campaign finance would see future voter support at the polls seriously dinged. That approach would, indeed, represent the public changing the minds of Congress – as Sanders intimated! Sanders must surely have something similar in mind in order to give his popular revolution some teeth!.

 Have You Ever Wondered Why Our Tax Code Is So Complicated?

 Here is the answer to the question. The intricate loop-holes and deductions in today’s huge tax code are symbolic footprints left behind by special-interest lobbyists and their lawyers who have, over many decades, chiseled away at tax code simplicity, creating special exceptions (loop-holes) in order to benefit their wealthy clients. Such clients are heavily represented in the top 0.1% of the population who now owns more wealth than the bottom 90% of Americans. Funny how that happens, isn’t it? By the way, I am in favor of raising marginal tax brackets up to at least 50% (with no loop-holes) for those making over ten million dollars a year, rising to 80% for incomes over fifty million – not to exact revenge on successful people, but to discourage the rampant greed and speculation which today’s 39% bracket (complete with loop-holes) encourages. I wonder how the rich ever got the marginal rate reduced from the 90% level it had reached during the Eisenhower administration….I wonder.

One of the worst Decisions Washington Ever Made!

 I agree with Bernie Sanders that the 1999 repeal of the Glass-Steagall Act was a terrible move. Glass-Steagall was enacted in 1932/33 to separate savings and loan banks from Wall Street investment banks. The great depression made clear the need for such legislation. Most people with their precious savings held by a bank do not want that bank making risky Wall Street investments with their hard-earned money – never mind what the FDIC says it guarantees. Greed-induced gambling with the money of America nearly resulted in Washington’s inability to contain the financial chain-reaction which began in 2007. Back in 2008, other than Bear Stearns and Lehman Brothers which did go under, it was clear that without a taxpayer bail-out, systemic failure of the system could destroy this country’s entire economy. Call it “taking one” by the taxpayer for the greedy and incompetent.

Why was Glass-Steagall repealed in 1999 during the Clinton administration? I do not know the answer to that one, but I would wager that lobbyist’s footprints were prevalent along the paths leading to Congressional offices – wouldn’t you?

 Where Does Hillary Clinton Stand?

 Hillary Clinton insists that she is serious about the lobbyist problem, yet I have not heard her call for the reinstatement of Glass-Steagall. I wonder specifically what her plan would be (beyond invoking the reactionary legislation of Dodd-Frank) to proactively restore the full attention of Congress to the business of the people?

At one point in last night’s democratic debate between Sanders and Clinton, she took personal umbrage at Sanders’ insinuation that her $600,000 speaker’s fee received from Goldman Sachs over the past year is unacceptable. Clinton said she would never be swayed in her vote by campaign favors. Sanders missed his chance by not retorting that not everyone in government might possess such high personal standards – a safe bet, I will wager.

Sanders did groan, “Let’s not insult the intelligence of the American people” (my paraphrase) – a remark surely made not to refute her personal integrity in the matter, but to demonstrate the absurdity of blithely dismissing the corrosive power of lobbying on our over-all system of governance. In many crumbling parts of the world, they call it bribery – the need to pay money for a favor…or even for a fair shake. Sanders sarcastically asked (paraphrased), “Why would the wealthy do that with their money? Do they enjoy throwing their money around?”

Lincoln_1I hardly believe that Abraham Lincoln, politically savvy as he was, could countenance the form of bribery present in America today. At the time, Lincoln was correct when he ventured that America had more to fear from within than from without. In all fairness, he could little imagine that other immense threat to us all that has since materialized – an unstable nuclear world. May divine providence provide “we the people” with the leadership we so desperately need along with the popular will and good sense to vigilantly guard our democracy and our freedoms.

Why Small Investors Are Avoiding Wall Street

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Wall Street, banking, economics, and finance…not exactly “rocket science,” but, often, more obtuse, and decidedly, more obnoxious. Let’s start with Wall Street. A few years ago, I viewed a documentary about the hundreds of millions of dollars which were being spent on super/high-speed computer networks by certain factions of the Wall Street crowd. At the time, I wondered why shaving fractions of a millisecond (a millisecond is one-thousandth of a second) from computerized stock transaction-times could justify such huge expenditures. Last Sunday, the CBS program, 60 Minutes, showed how fractions of a thousandth of a second can be utilized to accumulate billions of dollars on Wall Street.

The 60 Minutes program focused on a new book by Michael Lewis titled Flash Boys. In the book, Lewis details the methodology whereby state-of-the-art, high-speed networks are used by certain factions of the money-grubbers on Wall Street to make billions of dollars by beating their competition “to the punch” on equity trades. According to Lewis, the market is therefore “rigged” against other traders, and certainly against mom and pop investors. Here is how it works.

Speed Is Very Expensive, Yet Disturbingly Profitable
The Rich Get Richer…at Whose Expense?

 The Money

When an equity (say, stocks) buyer in Manhattan sees a price on a particular stock that is favorable and initiates a routine purchase, he or she hits the “buy button” on their computer. That sends a computerized “buy” signal speeding through computer networks to an equities exchange on the New Jersey side of the Hudson River. Some portion of the buy-order shares may be executed there, often with the remainder of the shares to be supplied by other exchanges somewhat farther away geographically. In essence, the buy-order is executed and completed, daisy-chain style, down a network of exchanges, each progressively farther away from the buyer in Manhattan.

The boys with the super-fast toys (high-speed computer networks) “see” the buy-order on the trading networks as it arrives at the very first exchange, the closest one – just across the Hudson River. They proceed, in much less time than it takes to blink, to buy shares in that same equity – which serves to very slightly raise the market price of that equity. Then, virtually simultaneously, they sell those shares back, at the higher price, to the original buyer whose buy order is still loping along its daisy-chain path toward completion. The original buyer ends up with his equities, but not at the original price which prompted him to buy. In order to complete the purchase, he must now pay a slightly higher price for the balance of shares which were not available at the first exchange …and you can guess who reaps the profit!

The arrival of the original buy-order at the first equities exchange across the Hudson River ostensibly provides the first opportunity for the HFT boys, the so-called “high-frequency traders” to observe and instantaneously “intercept” the buy order; at that point, their computers spring into action before the original buy-order goes any further down the line.

Although each individual transaction may only net the high-speed, high-frequency traders a penny or two, multiply that by thousands of such trade transactions per second, and it adds up to a handsome profit in a six and one-half hour trading day. A penny of profit per transaction at 10,000 profitable transactions per second during six and one-half hours of trading nets a daily profit of $2,340,000! This structured example and its huge profitability is likely far more conservative than the reality happening on Wall Street.

Not bad at all for the high-speed, high-frequency traders who can afford this capability, but not so good for the average buyer whose “intentions to buy” are anticipated by what might be termed “virtual mind-reading” using high-speed networks. What chance does the little guy have who sits at home in front of his desktop computer trying to make money in the stock market? Can a minnow swallow a shark?

The practice described is termed “front-running” by virtue of the fact that the high-speed nets allow the speed-guys to get in front of the buy-transaction and alter the playing field before all the shares are actually purchased. The practice has not been deemed illegal by government regulators up to this point, but the FBI is now investigating as are other regulatory agencies now that the public is beginning to see and understand a quintessential example of how “it takes money to make money.” Many of us knew this all along – that politics and financial markets are rigged in favor of the rich. I believe the popular phrase is “income/wealth disparity.”

For non-techies: The speed of data along computer networks, even the slower ones, is still blazingly fast – close to 186,000 miles per second which is the speed of light in vacuum and represents the fastest speed possible in the universe; Einstein’s physics says so.

At the speed of light, it takes 5.4 microseconds (millionths of a second) to travel one mile. The difference between a standard, cabled data network and a high-speed fiber-optic cable network in terms of the time it takes to transport data one mile is very tiny, a fraction of a microsecond, and yet that seemingly innocuous margin of improvement is enough to make certain folks on Wall Street billions of dollars.

If the Hardware Chapter of this Story Seems Unbelievable,
Consider the Following Chapter: “Software on Wall Street”

 Data 1's and 0's

Yes, it is true: Computers are dumb slaves! They only do what they are instructed to do via software/firmware programming. Those “marching orders” in the form of data 1’s and 0’s, those computer “algorithms” as they are called in the tech world, are what direct and empower computers to do complex evaluations and calculations in much less than the blink of an eye. The computer programming which implements high-frequency trading on Wall Street and the complex calculations used in banking is among the most sophisticated, anywhere.

Do you recall hearing about financial “derivatives?” These are the shadowy and extremely complex financial transactions that ran amuck and, along with sub-prime mortgages, almost sank our economy back in 2008. Very few people completely understand derivatives – even high-flyers on Wall Street who profit from them. Very few bankers understand them, even at the highest echelons of financial responsibility in the banking world.

If not these folks, who does understand derivatives? In a real sense, only the people who have written the computer code, the programs which execute derivative transactions. Who are these guys? Very often, they hold Phd degrees in mathematics or physics, but they initially had little or no background in finance. Many were educated elsewhere, including Russia and the Ukraine. Among the ranks are folks who could accurately be described as “colorful characters,” non-conformists with different viewpoints and interesting motivations. After the 2008 financial collapse, many of these Phd types were called upon to help the financial world unravel the tangle caused by derivatives and their complex nature.

It is all just a bit scary, don’t you think? What kind of a world has man created for himself? The fact that we have all of this incredible technology gives fitting and glorious testimony to man’s tremendous resourcefulness and accrued knowledge. I am in awe when such technology is used to good purpose, as exemplified by further scientific research about man and his universe. I am grateful for the improved life we all lead thanks to technology’s role in advancing medicine.

Frankly, I am saddened that so much money and technology supports the non-productive, selfish money-grubbing that occurs on Wall Street and in our financial system. Please note that I carefully separate from my criticism the key role computers play in keeping accurate records within our financial system.

My Assessment of Today’s Stock Market

Lately, the market has been rather stuck for some time at the same optimistically high level, but with significant and frequent ups and downs. Although mom and pop investors made good money riding the coat-tails of the big boys during the recent, extended bull market (the only way for the little guy to prosper, these days), anyone’s small investment in today’s market is currently going nowhere but up and down. In contrast to mom and pop, you can bet that the big boys make money every time the market goes through one of its short-term cycles. The current, frequent ups and downs of the market are giving mom and pop investors a headache. The fat-cats are getting richer with every cycle.

As proven by history, it is only a matter of time until the financial system has another significant crash, once again, most likely self-inflicted by excessive greed and over-leveraging on the part of the people in its ranks. In today’s world, any number of events could suddenly knock Wall Street for a loop. At that point, much will be lost, but the big losers are usually the little guys who do not have the visibility to see it coming and can’t sell on a dime in time to get out. The next major crisis will likely not be followed by another extended bull market in which the losers can fairly quickly recover their lost capital.

It is no wonder that so many small investors have given Wall Street the cold shoulder in recent years. Small investor participation in the market is way down, while high-frequency trading is way up…surprise! The man on the street is getting smarter and wiser. If one still likes to gamble, the odds and the entertainment are better in Vegas.

Dice_2

I have always maintained that technology is a two-edged sword which cuts both ways. Use it wisely and it will germinate flowers in the garden of life. Use it unwisely, and it will grow a weed-patch and become the root of much evil.

The Best Government Money Can Buy? Follow the Money!

For a very long time now, I have asked myself, “What is the biggest threat to the United States of America and our way of life?” From the beginning the answer seemed very clear, at least to my way of thinking, and the answer remains the same throughout the years that have passed since I first posed the question.

The Money

We already have the best government that money can buy, and the situation grows worse, particularly in Washington.

This has been the case under numerous administrations, and the situation knows no political party lines. Rather, it seems that such a dilemma is inevitable, somewhat akin to a perpetual law of nature – human nature. History has shown that while technology continues its explosive, exponential growth, human nature changes little as generations come and go; the problems inherent in a people attempting to wisely govern themselves stem from the biologically hard-wired nature of our mental make-ups. Self-preservation, self-interest, and just plain greed are always obvious and abundant in any society. Acting in one’s self-interest can be excused to a certain degree, but what is the proper label for a situation where wealthy and powerful factions “legally” influence (or control?) a society’s government along the lines of their best interests, often to the disadvantage of the middle classes and to the detriment of the society as a whole? Let’s face it, such a situation transcends the label of “political influence”; it is more properly called “corruption.”

 From the middle-class vantage point here in the trenches, it seems that Wall Street and corporate interests, along with labor unions have had a significant effect on the legislation which affects us all – often to our overall detriment. This happens when highly-paid lobbyists representing those interests bestow “legal” favors and political campaign contributions to candidates running for political office, candidates who are desperate to be elected or who face a tough re-election campaign. Why do lobbyists do this? The best answer to that comes from the well-worn advice which is so often relevant, “Follow the money!”

The U.S. Tax Code

Take the U.S. tax code, for instance – please! We are reminded every April how ridiculously complex it is, yet it should not be. Why not simplify it then? It will never happen under current conditions, because moneyed interests will always be on the backs of legislative committees to insure loopholes and myriad exemptions favorable to their particular business or interest. It is precisely the ongoing tinkering – no, make that meddling – by influence-peddlers acting through Congress which results in a ridiculously complex tax code. In fact, many of the bills which emerge from Congress are unduly long and unwieldy for precisely the same reason. Why are so many corporations “incorporated” in obscure places like the Cayman Islands even though their businesses operate primarily within the U.S., Europe and Asia? Follow the money – a more favorable tax base, of course.

Unsustainable Pension Obligations

Have you been hearing about the huge pension-obligation problems in bankrupt Detroit, in Stockton, California, and in many small communities across the country? We see only the tip of the iceberg on this one. The culprits: Labor unions and the politicians friendly to labor’s often excessive demands regarding benefits for their rank and file. Unions clearly have political and financial clout in political campaigns, and that is not without its long-term financial consequences – as we now understand. And then there are those political incumbents facing no imminent election challenges who just do not wish to deal with labor unrest during their tenure, so they readily cave to excessive union demands, “kicking the can down the road” and into the next person’s term of office. And the beat goes on.

A Second, Related Concern: Public Complacency

Nature has endowed humans not only with certain inalienable rights, but also with certain biological “defense mechanisms” – one of which is the tendency to put problems away for another day as long as a crisis is not imminent. This helps prevent ulcers, I suppose! We Americans it seems, have been “kicking the can down the road” for some time, now, while lobbyists have increasingly diverted governments, especially our Congress, away from truly representing “the people.” Politicians are too often focused on satisfying the wealthy and powerful who grant numerous “legal” favors to them and their office.

 And, by the way, did you know that currently something like 42% of legislators who leave Congress become paid lobbyists in Washington? I wonder why they do that? Again, follow the money! I believe that percentage was less than 12% just a few decades ago. Why did the Roman Empire collapse after centuries of world dominance? The experts tell us that corruption and public complacency were the primary causes. Does anything ever really change?

But It’s All Legal!

Some would claim that the lobbying industry operates perfectly legally, within legitimate guidelines regulating such things as political campaign contributions, etc. The rest of us would point to the fact that many of the laws and regulation guidelines as established by Congress and interpreted by the courts have long been unduly influenced by powerful interests. This calls to mind the old adage of “the fox guarding the henhouse.”

At what point do laws which clearly benefit the wealthy and powerful to the detriment of the common citizen and the overall good of the country become recognized as symbols and agents of corruption? I believe “bribery” is another way of expressing the current situation.

Abraham Lincoln’s “Take” on America

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I recall many, many years ago, the moving, talking automaton (robot) of Lincoln at Anaheim’s Disneyland. At that time, such computer-controlled realism was quite a new thing. The convincing figure of Lincoln recited a number of his prescient thoughts and memorable utterances. I recall vividly the central idea that struck me the most, but I must paraphrase very liberally here: “This country, with all its resources and potential, will never be conquered by outside forces. Rather, it has more to fear from decay and forces within, than from foreign foes.” Amen.

 Was it not Lincoln who said “something” to the effect that we should resolve that…..“government of the people, by the people, and for the people, shall not perish from the earth?”