Tag: India (page 1 of 8)

Chris Hedges On The Silencing Of Dissent

Authored by Chris Hedges via TruthDig.com,

The ruling elites, who grasp that the reigning ideology of global corporate capitalism and imperial expansion no longer has moral or intellectual credibility, have mounted a campaign to shut down the platforms given to their critics. The attacks within this campaign include blacklisting, censorship and slandering dissidents as foreign agents for Russia and purveyors of “fake news.”

No dominant class can long retain control when the credibility of the ideas that justify its existence evaporates. It is forced, at that point, to resort to crude forms of coercion, intimidation and censorship. This ideological collapse in the United States has transformed those of us who attack the corporate state into a potent threat, not because we reach large numbers of people, and certainly not because we spread Russian propaganda, but because the elites no longer have a plausible counterargument.

The elites face an unpleasant choice. They could impose harsh controls to protect the status quo or veer leftward toward socialism to ameliorate the mounting economic and political injustices endured by most of the population. But a move leftward, essentially reinstating and expanding the New Deal programs they have destroyed, would impede corporate power and corporate profits. So instead the elites, including the Democratic Party leadership, have decided to quash public debate. The tactic they are using is as old as the nation-state—smearing critics as traitors who are in the service of a hostile foreign power. Tens of thousands of people of conscience were blacklisted in this way during the Red Scares of the 1920s and 1950s. The current hyperbolic and relentless focus on Russia, embraced with gusto by “liberal” media outlets such as The New York Times and MSNBC, has unleashed what some have called a virulent “New McCarthyism.”

The corporate elites do not fear Russia. There is no publicly disclosed evidence that Russia swung the election to Donald Trump. Nor does Russia appear to be intent on a military confrontation with the United States. I am certain Russia tries to meddle in U.S. affairs to its advantage, as we do and did in Russia—including our clandestine bankrolling of Boris Yeltsin, whose successful 1996 campaign for re-election as president is estimated to have cost up to $2.5 billion, much of that money coming indirectly from the American government. In today’s media environment Russia is the foil. The corporate state is unnerved by the media outlets that give a voice to critics of corporate capitalism, the security and surveillance state and imperialism, including the network RT America.

My show on RT America, “On Contact,” like my columns at Truthdig, amplifies the voices of these dissidents—Tariq Ali, Kshama Sawant, Mumia Abu-Jamal, Medea Benjamin, Ajamu Baraka, Noam Chomsky, Dr. Margaret Flowers, Rania Khalek, Amira Hass, Miko Peled, Abby Martin, Glen Ford, Max Blumenthal, Pam Africa, Linh Dinh, Ben Norton, Eugene Puryear, Allan Nairn, Jill Stein, Kevin Zeese and others. These dissidents, if we had a functioning public broadcasting system or a commercial press free of corporate control, would be included in the mainstream discourse. They are not bought and paid for. They have integrity, courage and often brilliance. They are honest. For these reasons, in the eyes of the corporate state, they are very dangerous.

The first and deadliest salvo in the war on dissent came in 1971 when Lewis Powell, a corporate attorney and later a Supreme Court justice, wrote and circulated a memo among business leaders called “Attack on American Free Enterprise System.” It became the blueprint for the corporate coup d’état. Corporations, as Powell recommended in the document, poured hundreds of millions of dollars into the assault, financing pro-business political candidates, mounting campaigns against the liberal wing of the Democratic Party and the press and creating institutions such as the Business Roundtable, The Heritage Foundation, the Manhattan Institute, the Cato Institute, Citizens for a Sound Economy, the Federalist Society and Accuracy in Academia. The memo argued that corporations had to fund sustained campaigns to marginalize or silence those who in “the college campus, the pulpit, the media, and the intellectual and literary journals” were hostile to corporate interests.

Powell attacked Ralph Nader by name. Lobbyists flooded Washington and state capitals. Regulatory controls were abolished. Massive tax cuts for corporations and the wealthy were implemented, culminating in a de facto tax boycott. Trade barriers were lifted and the country’s manufacturing base was destroyed. Social programs were slashed and funds for infrastructure, from roads and bridges to public libraries and schools, were cut. Protections for workers were gutted. Wages declined or stagnated. The military budget, along with the organs of internal security, became ever more bloated. A de facto blacklist, especially in universities and the press, was used to discredit intellectuals, radicals and activists who decried the idea of the nation prostrating itself before the dictates of the marketplace and condemned the crimes of imperialism, some of the best known being Howard Zinn, Noam Chomsky, Sheldon Wolin, Ward Churchill, Nader, Angela Davis and Edward Said. These critics were permitted to exist only on the margins of society, often outside of institutions, and many had trouble making a living.

The financial meltdown of 2008 not only devastated the global economy, it exposed the lies propagated by those advocating globalization. Among these lies: that salaries of workers would rise, democracy would spread across the globe, the tech industry would replace manufacturing as a source of worker income, the middle class would flourish, and global communities would prosper. After 2008 it became clear that the “free market” is a scam, a zombie ideology by which workers and communities are ravaged by predatory capitalists and assets are funneled upward into the hands of the global 1 percent. The endless wars, fought largely to enrich the arms industry and swell the power of the military, are futile and counterproductive to national interests. Deindustrialization and austerity programs have impoverished the working class and fatally damaged the economy.

The establishment politicians in the two leading parties, each in service to corporate power and responsible for the assault on civil liberties and impoverishment of the country, are no longer able to use identity politics and the culture wars to whip up support. This led in the last presidential campaign to an insurgency by Bernie Sanders, which the Democratic Party crushed, and the election of Donald Trump.

Barack Obama rode a wave of bipartisan resentment into office in 2008, then spent eight years betraying the public. Obama’s assault on civil liberties, including his use of the Espionage Act to prosecute whistleblowers, was worse than those carried out by George W. Bush. He accelerated the war on public education by privatizing schools, expanded the wars in the Middle East, including the use of militarized drone attacks, provided little meaningful environmental reform, ignored the plight of the working class, deported more undocumented people than any other president, imposed a corporate-sponsored health care program that was the brainchild of the right-wing Heritage Foundation, and prohibited the Justice Department from prosecuting the bankers and financial firms that carried out derivatives scams and inflated the housing and real estate market, a condition that led to the 2008 financial meltdown. He epitomized, like Bill Clinton, the bankruptcy of the Democratic Party. Clinton, outdoing Obama’s later actions, gave us the North American Free Trade Agreement (NAFTA), the dismantling of the welfare system, the deregulation of the financial services industry and the huge expansion of mass incarceration. Clinton also oversaw deregulation of the Federal Communications Commission, a change that allowed a handful of corporations to buy up the airwaves.

The corporate state was in crisis at the end of the Obama presidency. It was widely hated. It became vulnerable to attacks by the critics it had pushed to the fringes. Most vulnerable was the Democratic Party establishment, which claims to defend the rights of working men and women and protect civil liberties. This is why the Democratic Party is so zealous in its efforts to discredit its critics as stooges for Moscow and to charge that Russian interference caused its election defeat.

In January there was a report on Russia by the Office of the Director of National Intelligence. The report devoted seven of its 25 pages to RT America and its influence on the presidential election. It claimed “Russian media made increasingly favorable comments about President-elect Trump as the 2016 US general and primary election campaigns progressed while consistently offering negative coverage of Secretary [Hillary] Clinton.” This might seem true if you did not watch my RT broadcasts, which relentlessly attacked Trump as well as Clinton, or watch Ed Schultz, who now has a program on RT after having been the host of an MSNBC commentary program. The report also attempted to present RT America as having a vast media footprint and influence it does not possess.

“In an effort to highlight the alleged ‘lack of democracy’ in the United States, RT broadcast, hosted, and advertised third party candidate debates and ran reporting supportive of the political agenda of these candidates,” the report read, correctly summing up themes on my show.

 

“The RT hosts asserted that the US two-party system does not represent the views of at least one-third of the population and is a ‘sham.’ ”

It went on:

RT’s reports often characterize the United States as a ‘surveillance state’ and allege widespread infringements of civil liberties, police brutality, and drone use.

 

RT has also focused on criticism of the US economic system, US currency policy, alleged Wall Street greed, and the US national debt. Some of RT’s hosts have compared the United States to Imperial Rome and have predicted that government corruption and “corporate greed” will lead to US financial collapse.

Is the corporate state so obtuse it thinks the American public has not, on its own, reached these conclusions about the condition of the nation? Is this what it defines as “fake news”? But most important, isn’t this the truth that the courtiers in the mainstream press and public broadcasting, dependent on their funding from sources such as the Koch brothers, refuse to present? And isn’t it, in the end, the truth that frightens them the most? Abby Martin and Ben Norton ripped apart the mendacity of the report and the complicity of the corporate media in my “On Contact” show titled “Real purpose of intel report on Russian hacking with Abby Martin & Ben Norton.”

In November 2016, The Washington Post reported on a blacklist published by the shadowy and anonymous site PropOrNot. The blacklist was composed of 199 sites PropOrNot alleged, with no evidence, “reliably echo Russian propaganda.” More than half of those sites were far-right, conspiracy-driven ones. But about 20 of the sites were major left-wing outlets including AlterNet, Black Agenda Report, Democracy Now!, Naked Capitalism, Truthdig, Truthout, CounterPunch and the World Socialist Web Site. The blacklist and the spurious accusations that these sites disseminated “fake news” on behalf of Russia were given prominent play in the Post in a story headlined “Russian propaganda effort helped spread ‘fake news’ during the election, experts say.” The reporter, Craig Timberg, wrote that the goal of the Russian propaganda effort, according to “independent researchers who have tracked the operation,” was “punishing Democrat Hillary Clinton, helping Republican Donald Trump and undermining faith in American democracy.” Last December, Truthdig columnist Bill Boyarsky wrote a good piece about PropOrNot, which to this day remains essentially a secret organization.

The owner of The Washington Post, Jeff Bezos, also the founder and CEO of Amazon, has a $600 million contract with the CIA. Google, likewise, is deeply embedded within the security and surveillance state and aligned with the ruling elites. Amazon recently purged over 1,000 negative reviews of Hillary Clinton’s new book, “What Happened.” The effect was that the book’s Amazon rating jumped from 2 1/2 stars to five stars. Do corporations such as Google and Amazon carry out such censorship on behalf of the U.S. government? Or is this censorship their independent contribution to protect the corporate state?

In the name of combating Russia-inspired “fake news,” Google, Facebook, Twitter, The New York Times, The Washington Post, BuzzFeed News, Agence France-Presse and CNN in April imposed algorithms or filters, overseen by “evaluators,” that hunt for key words such as “U.S. military,” “inequality” and “socialism,” along with personal names such as Julian Assange and Laura Poitras, the filmmaker. Ben Gomes, Google’s vice president for search engineering, says Google has amassed some 10,000 “evaluators” to determine the “quality” and veracity of websites. Internet users doing searches on Google, since the algorithms were put in place, are diverted from sites such as Truthdig and directed to mainstream publications such as The New York Times. The news organizations and corporations that are imposing this censorship have strong links to the Democratic Party. They are cheerleaders for American imperial projects and global capitalism. Because they are struggling in the new media environment for profitability, they have an economic incentive to be part of the witch hunt.

The World Socialist Web Site reported in July that its aggregate volume, or “impressions”—links displayed by Google in response to search requests—fell dramatically over a short period after the new algorithms were imposed. It also wrote that a number of sites “declared to be ‘fake news’ by the Washington Post’s discredited [PropOrNot] blacklist … had their global ranking fall. The average decline of the global reach of all of these sites is 25 percent. …”

Another article, “Google rigs searches to block access to World Socialist Web Site,” by the same website that month said:

During the month of May, Google searches including the word “war” produced 61,795 WSWS impressions. In July, WSWS impressions fell by approximately 90 percent, to 6,613.

 

Searches for the term “Korean war” produced 20,392 impressions in May. In July, searches using the same words produced zero WSWS impressions. Searches for “North Korea war” produced 4,626 impressions in May. In July, the result of the same search produced zero WSWS impressions. “India Pakistan war” produced 4,394 impressions in May. In July, the result, again, was zero. And “Nuclear war 2017” produced 2,319 impressions in May, and zero in July.

 

To cite some other searches: “WikiLeaks,” fell from 6,576 impressions to zero, “Julian Assange” fell from 3,701 impressions to zero, and “Laura Poitras” fell from 4,499 impressions to zero. A search for “Michael Hastings”—the reporter who died in 2013 under suspicious circumstances—produced 33,464 impressions in May, but only 5,227 impressions in July.

 

In addition to geopolitics, the WSWS regularly covers a broad range of social issues, many of which have seen precipitous drops in search results. Searches for “food stamps,” “Ford layoffs,” “Amazon warehouse,” and “secretary of education” all went down from more than 5,000 impressions in May to zero impressions in July.

The accusation that left-wing sites collude with Russia has made them theoretically subject, along with those who write for them, to the Espionage Act and the Foreign Agent Registration Act, which requires Americans who work on behalf of a foreign party to register as foreign agents.

The latest salvo came last week. It is the most ominous. The Department of Justice called on RT America and its “associates”—which may mean people like me—to register under the Foreign Agent Registration Act. No doubt, the corporate state knows that most of us will not register as foreign agents, meaning we will be banished from the airwaves. This, I expect, is the intent. The government will not stop with RT. The FBI has been handed the authority to determine who is a “legitimate” journalist and who is not. It will use this authority to decimate the left.

This is a war of ideas.

The corporate state cannot compete honestly in this contest. It will do what all despotic regimes do – govern through wholesale surveillance, lies, blacklists, false accusations of treason, heavy-handed censorship and, eventually, violence.

http://WarMachines.com

If Amazon Takes Over The World…

Authored by Scott Galloway op-ed via The Wall Street Journal,

Four tech giants – Amazon, Apple, Facebook and Google – have added $2 trillion to their combined market capitalization since the 2007-09 recession, a sum that approaches the GDP of India. The concentrated wealth and power of these companies has alarmed many observers, who see their growth as a threat not just to consumers and other businesses but to American society itself.

After spending most of the past decade researching these companies, I’ve come to the conclusion that our fears are misplaced in focusing on what I call the Four. We should instead be worrying about the One: one firm that will come to dominate search, hardware and cloud computing, that will control a vast network of far-flung businesses, that can ravage entire sectors of the economy simply by announcing its interest in them.

That firm is Amazon. Jeff Bezos has been disciplined and single-minded in his vision of investing in the most enduring consumer wants—price, convenience and selection. Coupled with deft execution, it has made Amazon the most impressive and feared firm in business.

As for the other three, don’t be misled by their current successes. They are falling behind as the One marches ahead.

Google seems to have a commanding market position when it comes to search functions. As European Union regulators pointed out in their recent antitrust finding, Google has an astonishing 90% share in the category in Europe. Its share in the U.S. is 64%. But it’s a very different story in the narrower, and more lucrative, domain of product search. In 2015, more product searches in the U.S. began on Amazon than on search engines, including Google (44% vs. 34%), according to BloomReach. A year later, Amazon’s share grew to 55%. Amazon could reasonably be described as a search engine with a warehouse attached to it.

For years, Apple has been the undisputed king of hardware innovation. But the prize for the most disruptive recent device goes to the hands-free, voice-controlled Amazon Echo speaker and its buttery voice, Alexa. Research firm Gartner predicts that 30% of computing will be screenless by 2020. So far, Apple looks to have blown an early lead in the great voice race: With 700 million iPhones in use world-wide, Apple’s Siri still has the most share in voice overall. But Amazon’s share of voice on home devices—the next frontier—is 70%.

Today’s fastest-growing sector in tech is cloud computing. There are several big players in the field, including old and new tech: IBM , Microsoft , Google. The dominant player again is Amazon, with a business launched originally to support its internal computing needs. According to Synergy Research Group, Amazon’s cloud offering (called Amazon Web Services) enjoys more than 30% of the market, triple the share of the No. 2, Microsoft’s Azure, and will register $16 billion in revenue in 2017. Financial pundits, looking for something negative to say about Amazon’s recent quarterly earnings, highlighted that growth in the company’s cloud business had slowed to 43%. “Slowed to 43%” is not a phrase you read in any other equity analyst’s write-up of a large company in 2017.

Amazon’s consistent outperformance of the other three tech giants is distinct from its continued dominance of old-economy firms. With the acquisition of Whole Foods, Amazon will likely become the fastest-growing online and bricks-and-mortar retailer. The whole grocery sector—with $612 billion in U.S. sales in 2016—has been disrupted overnight by Amazon. In the months between the announcement and closing of Amazon’s acquisition of Whole Foods this year, the largest pure-play grocer, Kroger , lost nearly a third of its market value.

The late business professor C.K. Prahalad of the University of Michigan famously argued that the most successful firms focus not on one market but on one “core competence.” Amazon has proved otherwise. What Amazon has accomplished across industries is unprecedented, even among the most successful businesses. Nike does not have a cloud business; Starbucks is not developing original TV content; Wal-Mart has not filed patents for warehouses in the sky. Amazon has recently been granted patents for a floating warehouse and small drones that can self-assemble into bigger drones capable of transporting larger packages, reflecting the ability, one day, to operate intricate networks of fulfillment by air. Other firms are punished for straying from their familiar areas of strength; Amazon sucks value from sectors in which it has had no previous involvement just by glancing at them.

At New York University’s business school, where I teach, I have for years kept a close watch on which firms are winning the competition for the most talented students. A decade ago, the top recruiter was American Express , with investment banks vying for second position. Now the clear winner is Amazon: 12 students from my most recent class have opted for a life of rain and overrated coffee in the Pacific Northwest.

Why does Amazon’s ascent matter? Aren’t lower prices and greater efficiencies better for everyone? They are, in all the obvious ways, but that’s not a complete picture. Amazon’s seemingly boundless growth forces us to wrestle with difficult questions about the reasons for its dominance.

For one, Amazon, unlike any other firm its size, has changed the basic compact with financial markets.

It has replaced the expectation for profits with a focus on vision and growth, managing its business to break even while investors bid up its stock price.

This radical approach has provided the company with a staggering advantage in free-flowing capital. Google, Facebook, Wal-Mart and most Fortune 500 companies are saddled with expectations of profits. Many firms would be much more innovative if they were given a license to operate without the nuisance of profitability. Amazon has thus had enormous capital on hand to invest in delivery networks, especially the crucial last link for getting goods to the doorsteps of consumers, without having to worry that they don’t yield immediate profits.

Amazon’s strategy of break-even operations also means that it has virtually no profits to tax. Since 2008, Wal-Mart has paid $64 billion in federal income taxes, while Amazon has paid just $1.4 billion. Yet, while paying low taxes, Amazon has added $220 billion in value to the stock held by its shareholders over the past 24 months—equivalent to the entire market capitalization of Wal-Mart.

Something is deeply amiss when a company can ascend to almost a half trillion dollars in market value—becoming the fifth most valuable firm in the world—without paying any meaningful income tax. Does Amazon really owe so little to support public revenue and public needs? If a giant firm pays less than the average 24% in income taxes that the companies of the S&P 500 pay, it logically means that less-successful firms pay more. In this way, Amazon further adds to the winner-take-all tendencies plaguing our economy.

Because Amazon is more efficient than other retailers, it is able to transact the same amount of business with half the employees. If Amazon continues to grow its business by $20 billion a year, the annual toll of lost jobs for merchants, buyers and cashiers will be in the tens of thousands by my calculations. Disruption in the U.S. labor force is nothing new—we have just never dealt with a company that is so ruthless and single-minded about it.

I recently spoke at a conference the day after Jeff Bezos. During his talk, he made the case for a universal guaranteed income for all Americans. It is tempting to admire his progressive values and concern for the public welfare, but there is a dark implication here too. It appears that the most insightful mind in the business world has given up on the notion that our economy, or his firm, can support that pillar of American identity: a well-paying job.

Amazon has brought us many benefits, but we all must recognize that the rise of the One brings with it much more than free two-day delivery. “Alexa, is this a good thing?”

http://WarMachines.com

Bitcoin Slides After Dimon Doubles Down On Cryptocurrency Concerns: “It Will End Badly”

Just a week after Jamie Dimon first attacked Bitcoin for being a "fraud," the self-interested JPMorgan CEO has doubled down on his anti-crypto-currency tirade, somewhat exposing just how concerned he is at the potential for disruption within his industry.

To paraphrase, here's what Dimon said last week…

"It’s a fraud. It’s making stupid people, such as my daughter, feel like they’re geniuses. It’s going to get somebody killed. I’ll fire anyone who touches it."

And now, as CNBC reports, JPMorgan Chief Executive Jamie Dimon has laid into bitcoin and digital currencies once again, labeling it a "novelty" that is likely to end badly.

Eventually governments will close down cryptocurrencies: JPMorgan CEO from CNBC.

 

"Right now these crypto things are kind of a novelty. People think they're kind of neat. But the bigger they get, the more governments are going to close them down," Dimon said during an interview with CNBC-TV18 in New Delhi, India, on Friday.

 

Dimon was concerned that with bitcoin, ethereum and various Initial Coin Offerings (ICOs), there are now cryptocurrencies everywhere.

 

"It's creating something out of nothing that to me is worth nothing," he said. "It will end badly."

 

Dimon warned that governments will eventually crack down on cryptocurrencies and will attempt to control it by threatening anyone who buys or sells bitcoin with imprisonment, which would force digital currencies into becoming a black market.

And this has pushed Bitcoin lower (extending losses from BTC China liquidations ahead of its closure)…

Dimon's comments came under criticism from several bitcoin investors and experts.

"Comments like Jamie's show a failure to grasp the significance of the blockchain and the power of brand in a fundamental sea of change," said Scott Nelson, CEO and chairman of blockchain firm Sweetbridge, in an email to CNBC last week.

And as we reported previously, a company called Blockswater has filed a market abuse complaint in Sweden against Dimon and JPMorgan.

Blockswater claims Dimon deliberately spread false and misleading information, according to a report by City A.M.

And perhaps even more interesting, as we detailed before, JPMorgan Securities continues to allow clients to trade this 'fraudulent' security through its platform…

Source

In fact JPMorgan has transacted 87 million Swedish Kroner's worth of Bitcoin ETF transcations in the past year for clients…

Source

As we asked rhetorically previously, does the bank not have a fiduciary duty not to transact on clients' behalf in a security it defines as fraud? (like Subprime CDOs?)

http://WarMachines.com

Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms

Pensions and Debt Time Bomb In UK:  £1 Trillion Crisis Looms

– £1 trillion crisis looms as pensions deficit and consumer loans snowball out of control
– UK pensions deficit soared by £100B to £710B, last month
– £200B unsecured consumer credit “time bomb” warn FCA
– 8.3 million people in UK with debt problems
– 2.2 million people in UK are in financial distress
– ‘President Trump land’ there is a savings gap of $70 trillion
– Global problem as pensions gap of developed countries growing by $28B per day

Editor: Mark O’Byrne

There is a £1 trillion debt time bomb hanging over the United Kingdom. We are nearing the end of the timebomb’s long fuse and it looks set to explode in the coming months.

No one knows how to diffuse the £1 trillion bomb and who should be taking responsibility. It is made up of two major components.

  • £710 billion is the terrifying size of the UK pensions deficit
  • £200 billion is the amount of dynamite in the consumer credit time bomb

How did the sovereign nation that is the United Kingdom of Great Britain and Northern Ireland get itself so deep in the red?

This is not a problem that is bore only by the Brits. In the rest of the developed world a $70 trillion pensions deficit hangs heavy.

We are all in this boat because we apparently didn’t learn from the massive man made crisis that was the 2008 financial crisis.

The ‘we’ is referring to UK individuals who are on average holding £14,367 of debt. It refers to the pension fund managers who are ignoring the fact they hold more liabilities than assets. It refers to banks and mortgage and loan providers who give loans to people who are already indebted and who will struggle to pay the debt back. It refers to a compliant media who do not have ask hard questions about irresponsible lending practices and cheer lead property bubbles due to getting significant revenues from the banking and property sectors.

And,  ultimately the ‘we’ is the government who peddled such terrible monetary policy that it has brought us as close to nuclear financial disaster as we have been since 2008.

In the red, everywhere

In the United Kingdom we are running a deficit not only in our day-to-day lives but also in our future lives.

Unsecured consumer credit is now at 2008 levels. There is £200 billion of unsecured credit. The FCA’s Andrew Bailey has put this dangerous issue at the top of the regulator’s agenda.

unsecured consumer credit

However it is not just for the FCA to be dealing with. There is no one organisation responsible for the huge levels of personal debt that will eventually cause this financial system to implode.

There are 8.3 million people in the UK with debt problems. The number of debtors falling behind on payments increased by 40% in the first half of this year.

The problem shows no sign of improving: 45% of the £65 billion of credit card debt is managed using the 0% transfer balance offers. But with half of those that transfer, the balance remains the same at the end of the period.

Earlier this year the Bank of England’s director for Financial Stability  warned lending standards were at risk of going ‘from responsible to reckless very quickly’. This comes to mind when you consider that 86% of cars are now bought on PCP (personal contract purchase).

So concerned are financial observers with the UK’s personal debt crisis that in July this year Moody’s downgraded the outlook on bonds backed by credit card customers, buy-to-let mortgages and car loans.

Greg Davies, Moody’s assistant vice president warned:

“Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher inflation, weaker wage growth and levels of indebtedness leaves those in lower-income brackets the most exposed.”

So in our day-to-day lives we are over £200bn in debt. How on earth could we possibly save for our futures?

Sadly, this is a struggle as well. Not just because of our debt but thanks to the rising cost of inflation and stagnant wages and underfunded pension pots in both public and private sectors.

Nest egg isn’t looking so cosy

Ageing populations, low birth rates and dire monetary policy means that over 27 million people in the UK will not be receiving adequate pensions once they retire.

These 27 million are those relying on a a defined-benefit (DB) pension – such as a proportion of final salary, index-linked to inflation for life.

Those who aren’t relying on a DB pension are in just as dire straits.

Savers in modern defined-contribution (DC) plans – where there are no guarantees about what the pension will ultimately pay out – are at risk of not saving enough to avoid poverty in old age.

This is particularly bad when you consider that  listed companies may need to meet their increased DB obligations and so DC investors will see their own investments grow more slowly.

In the UK it is estimated that more than one-in-five people are not saving for their pensions. Even more are  uninformed about how much they will need in retirement.

Low interest rates are clearly greatly exacerbating this crisis as pensions dependent on yields from bonds have seen yields fall to near zero and sometimes go to zero.

Sadly there is little sign of a let-up. In the United Kingdom the pensions deficit grew by £190bn last year. In the last month it has jumped by another £100bn to £710bn.

This is leading to lower-than-expected returns on both corporate and government bonds. The low corporate bond yield has significantly contributed to the growing pension deficit.

Interest rates have been at record lows for over ten years thanks to easy monetary policy.

Thank you Bank of England, ECB and Federal Reserve.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, told the Express:

“Current monetary policy may have kept the economy going but it is killing pension schemes, with disastrous consequences, both for any employers sponsoring a final salary scheme and for any individuals looking to buy an annuity.”

Developed nations with underdeveloped pensions

This is not a problem unique to the UK. Currently the world’s leading economies are dealing with a $70 trillion deficit. The World Economic Forum (WEF) was that this could increase to $224 trillion by 2050.

If you add in India and China then this gap hits $400 trillion in 2050.

Size of retirement savings gap

The United States has the largest shortfall of the countries measured, followed closely by the United Kingdom. In the land of President Trump there is a savings gap of $70 trillion. It is growing at a rate of $3 trillion per year (5 times the annual defence budget).

The overall savings gap, of the eight countries assessed, is predicted to grow at a rate of $28 billion per day. Unsurprisingly it is in India and China where the gaps will widen the quickest. 10% and 7% respectively.

The global situation is so bad that the WEF has referred to the pensions deficit as ‘the financial equivalent of climate change.’

The OECD recommends pensioners have a retirement income of 70% of their earnings. This is a ‘crude’ assessment according to the WEF who argue low-income workers need closer to 100%.

This is also a sex issue. According to a report in 2014, 50% more women than men cannot afford to contribute to their pensions. It is so bad for the female of the species that 30-40% of global retirement balances are lower for women than men.

Where is the deficit coming from? The WEF’s report looked both public and corporate pensions. It was the government and public pensions that were the most unhealthy looking, accounting for 75% of the under funding.

Breakdown of pensions gap

The WEF seemed little concerned that the largest corporate pension markets were in the UK and US, where there are over $4 trillion in liabilities. The organisation reassures itself that the market is highly regulated and the deficit ‘is modest compared to other components of the pension system’.

Corporates and individuals should not rest on their laurels

No matter what the WEF thinks, the corporate pension market in both the U.S. and Europe is in serious bother.

A report by MSCI found North American and European companies have the largest pension underfunding levels compared with revenues.

This is not surprising. Corporations are struggling to maintain pension pots for the very same reasons the WEF believe there is a major pensions shortfall:

  • Rapidly ageing populations
  • Falling birth rates
  • Poor access to pension products & poorly performing products with high charges

The final one is a huge one and the one which the majority of pension fund managers are unlikely to have foreseen. Individual savers even less so.

According to OECD measures the UK’s shortfall is higher than £6.2 trillion, set to increase by 4% per year. This will be over £25 trillion in 2050.

Take responsibility

The final reason the WEF gave for the current pensions disaster was ‘High degree of individual responsibility to manage pension’.

The WEF argue that the information given to individuals was not enough to expect them to understand how their pensions would work in the future and what was required of them now.

It is vital that individuals take responsibility for their pensions. You must ask questions about it as soon as possible.

Particularly, you should ask if you can invest in gold as part of your pension.

The traditional mix of equities and bonds that make up pension funds has under performed in the last 15 to 20 years.

Stock and bond markets have done well in the short term and they are artificially overvalued thanks to the easy monetary policy of central banks.

It is clear that pension funds’ overexposure to bonds and stocks has impacted pension investors returns over the long term.

With that in mind it’s sensible to allocate some of your pension to gold. Internationally, the trend for doing this is extremely low which is surprising given the role it has played in preserving and growing pension wealth.

Dr. Constantin Gurdgiev, formerly an adviser to GoldCore, says the following about the importance of having gold in your pension:

“Gold is a long-term risk management asset, not a speculative one.

As such it should be analysed and treated predominantly in the context of its role as a part of a properly structured, risk-balanced and diversified portfolio spanning the full life-cycle of the investment and pension horizon for individual investors and those with pensions.

Whether they be SIPPs in the UK or IRAs in the USA.”

Investors in the UK and Ireland, the US, the EU can invest in gold bullion in their pension, through self-administered pension funds.

UK investors can invest in gold bullion through their Self-Invested Personal Pensions (SIPPs), Irish investors can invest in gold in  Small Self Administered Schemes (SSAS) and US investors can invest in gold in their Individual Retirement Accounts (IRAs).

Adding gold to your pension is a time-proven way to protect your retirement from the pensions time bomb. There is little we can do to stop it, investors should act now and take responsibility for their retirement nest egg by investing in the ultimate form of financial insurance – gold bullion.

The ‘pensions timebomb’ looms. UK pension funds’ lack of diversification and overexposure to traditional paper assets may cost pension holders dearly.

Pensions allocations to gold are very low in the UK and yet gold has an important role to play over the long term in preserving and growing pension wealth. You can read our guide about how to invest in gold in a pension in the UK here.

News and Commentary

Metals Morning View: Gold’s Correction Runs Into Haven Buyin (BullionDesk.com)

Gold prices inch up amid North Korea concerns (Reuters.com)

Stocks Drop, Yen Rises on Renewed N. Korea Tension (Bloomberg.com)

Asia stocks fall, yen and franc gain as North Korea moots H-bomb test (Reuters.com)

Kim Jong Un will tame ‘mentally deranged U.S. dotard’ Trump with fire (MarketWatch.com)

 Robert Shiller warns US stocks overvalued. Source: Marketwatch

U.S. stock market looks like it did before most of the previous 13 bear markets (MarketWatch.com)

UK property transactions fell again last month (CityAM.com)

Bitcoin is not a fraud – it’s dotcom 3.0 (MoneyWeek.com)

Bitcoin Under Fire – Profit for Gold? (CoinTelegraph.com)

Fed’s long walk to normalisation might have to turn into a jog (MoneyWeek.com)

Gold Prices (LBMA AM)

22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce
20 Sep: USD 1,314.90, GBP 970.53 & EUR 1,094.79 per ounce
19 Sep: USD 1,308.45, GBP 969.30 & EUR 1,091.25 per ounce
18 Sep: USD 1,314.40, GBP 970.16 & EUR 1,100.68 per ounce
15 Sep: USD 1,325.00, GBP 977.32 & EUR 1,109.16 per ounce
14 Sep: USD 1,323.00, GBP 1,002.44 & EUR 1,111.58 per ounce

Silver Prices (LBMA)

22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce
20 Sep: USD 17.38, GBP 12.84 & EUR 14.48 per ounce
19 Sep: USD 17.15, GBP 12.70 & EUR 14.31 per ounce
18 Sep: USD 17.53, GBP 12.94 & EUR 14.66 per ounce
15 Sep: USD 17.70, GBP 13.03 & EUR 14.81 per ounce
14 Sep: USD 17.75, GBP 13.40 & EUR 14.91 per ounce


Recent Market Updates

– Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
– “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
– Global Debt Bubble Understated By $13 Trillion Warn BIS
– Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
– Gold Up, Markets Fatigued As War Talk Boils Over
– Oil Rich Venezuela Stops Accepting Dollars
– Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
– British People Suddenly Stopped Buying Cars
– Buy Gold for Long Term as “Fiat Money Is Doomed”
– Conor McGregor – Worth His Weight In Gold?
– Gold Has 2% Weekly Gain,18% Higher YTD – Trump’s Debt Ceiling Deal Hurts Dollar
– ‘Things Have Been Going Up For Too Long’ – Goldman CEO
– Physical Gold In Vault Is “True Hedge of Last Resort” – Goldman Sachs

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

http://WarMachines.com

India Stack and Bitcoin (An Insider’s View)

By Chris at www.CapitalistExploits.at

Before the good stuff… the fun stuff.

Here’s a fan mail I received in response to this.

I guess he/she never made it as far as this part:

“Don’t get me wrong. I’m not against EVs, and I’m all for technological innovation.”

Though, in all fairness, it may be the collagen talking. Either way, definitely not an Insider member, otherwise he/she/it would be well aware of where we’re actually invested. Ha!

Dregs from the bottom of the barrel occasionally drift into my corner of cyberspace. That they respond like this must be due to this fascinating misconception that I give a damn.

Still, if we poke them hard enough in the chest, they’ll bugger off leaving us with the fine specimens that make up the overwhelming majority of our distinguished readership. Which brings me neatly to:

“Hi Chris,

 

I’m not sure if this gets to you or is stuck in the admin box.

 

Love your work, really enjoy it.

 

Your current one on the knock off effects of banning gasoline and diesel cars made me want to bring up another point that is seldom discussed when people talk about the future of EVs… the profitability of refineries when they don’t have a market for gasoline.

 

When a barrel of crude is refined, about half of its volume ends up as gasoline.  The other half ends up as diesel, jet fuel, bunker oil, chemical feedstocks, etc… Gasoline is great for running automobiles, but pretty lousy for any other industrial process.  Industrial processes such as mining, refining, transporting, and processing cobalt, lithium, and molybdenum into EV parts.  These processes depend on the other half of the barrel.

 

Driving away (pun intended) the demand for gasoline by mandating EVs means that refineries have half of their product become much less valuable.  I don’t have the research or know of who has done the research, but I wonder what such a move would mean for the price of diesel, jet fuel, bunker oil, chemical feedstocks, etc…?

Hope all is well, cheers!”

Fair points and worth thinking about.

For example. Do those industries taking up the “other half of a barrel” benefit? To what degree? For how long? And is the market pricing this?

All fun stuff which we spend all most of our time doing here.

Anyway, today I’ve got something special for you and it’s got nothing to do with EVs or gasoline.

Bitcoin and India Stack

It was Raoul Pal who first brought to my attention the incredible galactic sized project that is India Stack.

I’ve since spoken with quite a variety of people both in India and out in order to better understand the dynamics of what’s taking place in India. I think it provides a fascinating and illuminating view into how certain problems can be dealt with.

In particular (and I’ve not seen anyone mention this), the ability to recapitalise a banking system on the brink and to do so while transitioning over a billion citizens onto a digital system.

Pre-cash elimination, India’s banks were in a shocking state. What better way to “fix” them than to get the poor to bail them out.

Ever since man began forming communities, we’ve had a setup where those at the top manufacture ways and means to have those at the bottom pay for the things they want.

Kings told stories about their “divine rights”, people believed it, priests told stories about the church’s relationship with God, people believed it. And today politicians tell stories about “the greater good”… and people believe it. Some things never change.

Aside from the banking system being recapitalised…

It’s been fascinating to watch what was up until recently one of the world’s largest cash economies and where millions never even had a bank account suddenly goes digital.

So there were two steps here.

The first being the elimination of cash in the economy, and the second bringing online the digital platform otherwise known as IndiaStack, an open source platform where information is a utility.

The set of open API for developers includes:

  • The Aadhaar for authentication
  • The e-KYC documents that have been generated
  • Digital lockers
  • e-signatures (software based as against the present dongle based e-signs)
  • The Unified Payments Interface which rides on top of the National Payment Corporation of India’s Immediate Payment System.

You can check out a presentation which provides a decent overview of it here.

I’ve spoken with a lot of guys who see this as being a major boon for India’s economy, eliminating fraud, destroying swathes of bureaucracy, and bringing millions of people into the economy who previously never had access.

I don’t disagree with any of this, but what I wanted to do was to find someone who wasn’t very bullish, someone who would challenge some of these thoughts. And with that in mind, I found and spoke to Deepankar Kapoor.

Deepankar Kapoor – as you can probably infer from his name – is not only Indian but he’s also the founder of Bitcoinwiser, a well known face in the digital advertising industry in India with his most recent stint being as the Vice President & National Strategy Head at Ogilvy India.

He has 9+ years of full time recognised experience in digital business transformation of Fortune 500 brands and won many accolades throughout his career. Academically, he holds an MBA from University of Calcutta wherein he majored in Marketing [Forecasting & Econometrics], BMS from Symbiosis International University and a Diploma in Cyber Laws from the Government Law College, Mumbai. Additionally, he is a Google and Twitter Certified Professional.

You can listen to our conversation below. I apologise for the dodgy line at times – Kenyan Wi-Fi isn’t the best in the world.

And a Question for This Week

Wow Poll 21 Sep
Cast your vote here and also see what others think

– Chris

“Change is opportunity.” — Suresh Prabhu, Union Minister for Commerce

————————————–

Liked this article? Then you’ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

————————————–

http://WarMachines.com

India: The Genie Of Lawlessness Is Out Of The Bottle

Authored by Jayant Bhandari via Acting-Man.com,

Recapitulation (Part XVI, the Last)

Since the announcement of demonetization of Indian currency on 8th November 2016, I have written a large number of articles. The issue is not so much that the Indian Prime Minister, Narendra Modi, is a tyrant and extremely simplistic in his thinking (which he is), or that demonetization and the new sales tax system were horribly ill-conceived (which they were). Time erases all tyrants from the map, and eventually from people’s memory.

According to the Global Slavery Index, an estimated 18 million Indians, equivalent to half the total population of Canada, are bonded, modern slaves.

 

My interest has been mostly to use these events to document the underlying causes of such utter missteps, which technically must be called stupid, and to explain how the real disease runs much deeper and much wider, and that no solutions for this can be found in the next elections.

My interest has been to explore the socio-cultural foundations of India that keep it perennially poor, wretched, and diseased, a state from which it never seems able to escape. I have attempted to dissect the unwitting tendency of Indians to destroy any material or civilizational advantages, which in the last 300 years have all accrued as products of extraneous events: Free gifts of Western experience and civilization, management skills, and technology, all offered on a platter.

Vegetables being washed in sewage water. This gives shine and color to vegetables. But do you really want to eat vegetables washed in human excreta? Even for such basic commodities, one must look for a trustworthy seller. In a tribal society, big institutions simply do not work.

I have attempted to show that now that since the British left 70 years ago, Indian institutions have continued to fray, degenerate, degrade, and fall apart. The British left a robust judiciary, a university system, and parliament in place. Except for their facades, all these institutions are now soulless shells, something that politically correct intellectuals at the IMF, the World Bank, etc., completely fail to see.

The math is very simple: If Western institutions are to be imposed on India, such institutions must be run by Westerners as well. The corollary is also very simple: Without the British running India, India cannot continue to exist the way the British left it.

A minister in the government watering plants in heavy rain. This would be a joke, but knowing that these people rule India I consider it a tragedy. The photo shows C. P. Singh at a tree planting event on 17th July 2017 [your editor needs to chime in here: Indian politicians cannot claim sole ownership of the proud tradition of watering plants in the middle of a rainstorm. As we have reported in Drowning the Fir , the presidents of Turkmenistan and Belorussia have also not shirked their baby tree soaking duties just because there was a downpour. The plant in question was solemnly victimized near the Palace of Independence in Minsk last year [PT].

 

India’s institutions must over a period of time realign themselves to reflect the underlying character of India’s society. That character, alas, is tribal and irrational, which the British, missionaries and Western education were only able to   affect positively to a marginal extent over the 200-300 years of their influence. India must revert back to its medieval, tribal institutions, its violent, irrational way to “communicate” and deal with its problems, and never-ending internecine conflicts.

The future of India looks extremely grim,  Modi and the recent events are nothing but passing symptoms of this.  The British also left a certain way of thinking and social behavior among the middle class in India. One important aspect of this was the pride a minority in the middle class felt about freedom of speech. This is the last but rapidly crumbling pillar of the British heritage, which I want to address in this last article of this series.

Madhya Pradesh, a province with a population of 81 million, introduced compulsory flag hoisting in schools in January. From November 2017, when teachers take roll-calls in class rooms, students will be required to shout, “Jai Hind” (Victory to India, a battle cry, but also carrying strong Hindu religious connotations). All Western institutions implanted in India are mutating to cater to the underlying tribalism. “Nationalism” is not underpinned by any values in the Indian mind, but relates merely to an arrogant, geographical concept. Western-style schools are mere indoctrination centers. What India needs is critical thinking, not the mindless recitation of slogans and sound-bites. Such slogans and religious indoctrination numb the minds of these kids, making them worse than the uneducated masses. The weight of indoctrinated beliefs is such that after a certain age they are totally incapable of any individuality or capacity to think. They merely parrot what they are told. Adults incapacitated to think react with anger when reasoned with, and become tools of demagogues. Indian demography is a major liability, and very likely cause of the next international humanitarian crisis.

 

Demonetization: Now Officially a Failure

On 8th November 2016, India’s prime minister Modi appeared on TV to announce that a few hours later 86% of the monetary value of currency in circulation (Rs 1,000 and Rs 500 bills, about US$15 and US$7.50 respectively) would no longer be legal tender. This sent hundreds of millions lining up upside the banks to convert their unusable cash into legal tender. The government had made absolutely no preparation. The replacement currency bills had not been printed yet, in a country where 95% of consumer transactions happened in cash.

The knee-jerk move was a rather childish decision taken by a few senior politicians with little consultation with banks or economists. The problem was not just that they took a wrong decision it was also that they thought they could take such a decision without appropriate checks and balances. These are the same people who control the nuclear button and rule a population of 1.35 billion people.

Without a “monetary” system, the economy rapidly went into a state of trauma. Tens of millions were rendered jobless, as neither employers had the cash to pay salaries and input costs, nor did buyers have the cash to buy their products. Scared of the turmoil, even those who had cash avoided all unnecessary expenses.

A memorable “don’t panic” moment on the road to fully digitized Nirvana… [PT]

 

Factory and shop workers preferred to line up outside the banks to convert other people’s money for a lucrative commission. Wealth-creating activities came to a standstill. Vegetable prices crashed by as much as 50% as poor people who had lost their jobs were buying less. Farmers had to destroy their produce. Factories closed. A vicious cycle was set into motion.

People were given until the end of December 2016 to deposit their banknotes. They were required to use the banking system, which was clogged by then. The banks were also acting as extended arms of the tax office. Digital payment systems were run very unprofessionally and banks suddenly started to charge unapproved commissions and fees.

While the government wanted its largely illiterate population to go digital, it took the central bank another eight months to report how much of the demonetized currency had been deposited. While this number will be updated and increase in the next report, they have admitted that more than 99% of the currency has been returned. This figure is quite ironical, as a lot of people — in tribal and rural areas with no access to banks and those holding cash outside of India — failed to deposit their cash.

It is easy to conclude that effectively more than 100% of the extant cash was deposited with banks. On 9th November 2016, when I went to convert a part of my cash into legal tender, the person in front of me was found to have counterfeit cash. He managed to get his cash back by applying his influence on the manager. He very likely deposited his cash later in a rural bank where machines to check counterfeit currency do not exist.

In short, demonetization failed, it caught no black money, and quite hilariously, it actually helped to launder counterfeit currency by transforming it into legal tender. This was on top of the massive assault that the economy had to bear.

 

A sad moment: holders of “black” and counterfeit money receive the terrible news of imminent demonetization… [PT]

 

None of the Objectives Achieved

Despite the fact that government expenses – largely unproductive and often counter-productive – are up hugely, and statistics are being manipulated, India’s official GDP growth rate has fallen significantly, to 5.7%. In due time this will worsen significantly, for India is stagnating and very likely regressing.

Absolutely none of the claimed objectives behind demonetization have been achieved. As soon as people got hold of cash, they went back to their old ways of transacting. People are now storing more cash under the carpet than they did ever before. Corruption has increased hugely. The situation in Kashmir is extremely unstable. Terrorism is up; and India narrowly avoided a war with China.

Goons destroying shops with Chinese (or what they think to be Chinese) products as the tension builds up at the border. Ironically, as in the West, Chinese products are everywhere in India — the tools used by goons are likely made in China as well. For almost a month, Indian and Chinese troops stood face to face, and in at least one case fought with bare arms and rocks. China’s GDP is more than five times that of India. Both countries have nuclear capabilities. I am not in a position to know which side was in error, but Modi desperately needs to distract Indians and the international media from economic stagnation. Was he looking for a scapegoat?

 

One must revisit the fundamentals of Indian culture. Indian society is tribal and irrational. It simply cannot plan and undertake big projects, unless they are heavily subsidized. There is a reason why more than 50% of Indians still use  open spaces as toilets. There is a reason why in virtually all of India, sidewalks, ambulances, fire-brigades, and roadside garbage cans — things that are considered elementary services in any society — are conspicuous by their absence.

Tribal and irrational people also lack moral instincts, empathy and compassion. Members of the so-called educated Indian middle class have no interest in the suffering of poor people. Even after they have emigrated, they soon forget how desperately they wanted to leave India. They strive to make India look good in the eyes of foreigners, not for the sake of India, but in the hope of vicariously making themselves look good.

Those who have gravely suffered due to demonetization still — and ironically, increasingly — support Modi. India lacks the history of revolting against tyranny, as people merely adjust themselves to the new ecology. India’s kind of drudgery and wretched poverty, which makes it worse than some of the poorest countries on the planet, does not come easy in this modern age of technology.

Nothing fazes the common man in India… a R.K. Laxman cartoon (see also further below) [PT]

 

As any person with a basic understanding of probability, data security and the realities of India would have seen, India’s centralized ID system, Aadhaar, was going to turn into a disaster. About eight million fake ID cards are known to have been issued. They cloned fingerprints, etc. There simply isn’t such a thing as “fraud-proof” in the real world. The card is used for all kinds of tyrannical intrusions, although the benefits are yet to be discovered, for the poorest are still running from post to pillar to get a few rupees promised to them.

 

The new GST system has been an unmitigated disaster. There is a plethora of rates. There is a minimum of two filing requirements per month, and a requirement to upload invoice details to a server, which keeps crashing. Two months after GST was imposed in an unplanned way, no one — not even those in the government — knows what the rules really are, which keep changing to boot [ed. note: India’s GST rules are simply impossible to interpret in some cases; the chaos businesses are faced with is described in this Reuters article – for instance, the different parts making up a personal computer are taxed at different rates. What to charge for a laptop, which is a single unit? No-one seems to know. In the meantime the government has been forced to cut its planned infrastructure spending, as tax revenues have come in almost 50 percent (!) below plan. [PT].

 

The Genie of Violence is Out

What terrorism and corruption mean in the Indian context requires one to dig deeper. India’s governing principle is fear, delivered by irrational representatives, who are elected by an uneducated and superstitious populace, all driven by their tribal affiliations, unanchored to reason or morals. In this predicament, no solution to what looks like terrorism and violence to the rational eye can work.

Corruption is another curious issue. What looks like corruption to the West can hardly be called corruption in the Indian context. India’s society is not based on moral calculations, but on expediency. What is good for the tribe is what is considered right. Western institutions based on the rule of law simply do not work under such conditions.

People support “anti-corruption” drives as long as they are beneficiaries of them, but will refuse to honor them when they can be “corrupt” for their own gains. It is virtually impossible to find an Indian— both in the public and the private sector —who will forgo gains from corruption when he can get away with it.

Anyone who thinks that violence and “corruption” can end in India lives in a fool’s paradise. As the institutions the British left behind continue to fray in India, corruption and violence will actually get much worse over time, regardless of short-term noise.

According to Indian laws this is illegal. But so what? Constitutions and laws are mere ink on parchment. For a culturally tribal society, there is no escape from such a medieval existence, and in India’s case, regression towards it. Stricter laws will not help. Democracy certainly does not help, for this case is indeed a case of democracy in action.

 

Violence is an inherent part of the Indian psyche and social arrangement. In an irrational society, violence and might is the deciding factor. Honor killings, misogyny, misandry, the caste system, and incest have forever been a part and parcel of Indian life. These things happen mainly because the perpetrator does not even know that what he is doing is wrong. His perceptions are based on his tribalism, not any concept of morality.

Gauri Lankesh, a journalist, was shot dead on September 5, 2017. While no motive is known, Hindu nationalists have increasingly targeted journalists and writers for voicing their views. Even anti-superstition activists have been murdered. Fanatics have created convenient sound-bites, which are now well-accepted by the irrational populace (particularly the so-called educated): “pseudo-secular” (read, pro-Islamic terrorism), “presstitude” (read, prostituting press), “anti-national” (read, does not go along with Hindu-fanaticism), “libturds” (read, leftists; in the Indian context right-wing is about religious fanaticism or ultra-nationalism), etc.  Contrary to the popular perception in the West, India is a violent society. Reporters Without Borders ranks India among the three most dangerous countries for journalists in the world, below Pakistan and Afghanistan.

 

Freedom of Speech

When the British left India, it was assumed to be a democracy. What people hardly noticed was that those left in political positions had been mostly selected by the British. Those the British left in power, their children, and now even their grandchildren, are gone by now. Modi represents a complete break from the British legacy.

India’s tribalism is now in full force. The concepts of individual liberty and freedom of speech were completely alien to the societies of South Asia. They still are. Might is right was and is the ruling principle.

During colonial times, elite Indians were trained and educated in the UK. English rapidly became the language of those who wanted to be seen as sophisticated. British mannerisms were rapidly accepted by the who’s who crowd.

Even the most uneducated tried their best to drop as many English words into their local languages as possible. Today, local languages spoken in India are heavily larded with English words. Close relatives talk to each other in English, even if their mother-tongue is a local language. Even when their English is rather weak, they still use it as much as they can.

Indian dresses have mostly gone out of fashion, particularly in urban areas. Every middle class Indian aspires to go to least one foreign country if he wants a place in his social circle. He must have English music blasting away in his car. He must watch English movies. And he should never ever be seen reading a non-English book — although reading habits are virtually non-existent in India. If you speak your local language without larding it with English words, you are seen as a backward slob.

Apposite cartoons by the late R.K. Laxman, a famous Indian cartoonist (the unperturbed “common man” on his bed of nails further above was also drawn by him; he invented the “common man” cartoon figure in 1957, which became a highly popular staple of his work). [PT]

 

Indians never understood that it was not the form, the facade or the clothing that gave massive success and superiority to the British. It was the British frame of mind, which was anchored to reason, which allowed them to navigate the world, optimize their position, and benefit from it.  Indians have adopted the packaging, but they have not only forgotten the substance, but lacking the concept of reason, they could not even see the substance.

One very important aspect of British social behaviorism that was accepted as a sign of sophistication in India was freedom of speech. At least among the formally educated, even if they had no comprehension why freedom of speech was important, some learned to approve of it. You could find flaws in a person’s religion and not have to worry about giving voice to your finding.

Contrary to Pakistan, Sri Lanka or Bangladesh, freedom of speech managed to survive much longer in India. India wasn’t much better in other human indicators, but its massive ethnic, lingual, regional, etc. diversity meant that there were far too many inner conflicts for the any single dogma to become powerful enough to take a position against a small minority that held on to its views.

India’s respect for freedom of speech — as was the case in Pakistan and Bangladesh — lacked the foundations of reason, respect for the individual, or craving for liberty. With time, as the distance from British rule has grown, this once deeply inculcated social behavior has slowly but surely begun to dissipate.

Over the last few years, suppression of freedom of speech has picked up pace. Western media portray India as the place of Gandhi and yoga. This is quite erroneous, particularly when the last classical liberties are now waning in India.

 

Conclusion

In this series of articles that started with my expose on what was happening on the ground during the demonetization of 86% of monetary value of Indian currency, my key interest has not only been to show what was happening but most importantly to explain why it was happening.

My interest has been to show that without the British to run them, Indian institutions are now rapidly regressing to their pre-colonial, quasi-medieval, tribal past. Indian culture is tribal and irrational. It simply cannot maintain, let alone create, institutions of the type the British left behind.

Freedom of speech is one of the last surviving major pillars of the British legacy, but it has weakened significantly and is rapidly crumbling further, with Modi as a major catalyst.

R.K. Laxman gets the final word – the Indian space program decided to take advantage of the common man’s resilience… [PT]

http://WarMachines.com

Pepe Escobar Unmasks Trump Doctrine: Carnage For New Axis Of Evil

Authored by Pepe Escobar via The Asia Times,

North Korea, Iran, Venezuela are targets in "compassionate" America's war on the "wicked few." It's almost as though Washington felt its hegemony threatened

Paul Delaroche, Napoléon à Fontainebleau, 1840. With other global powers increasingly at odds with US foreign policy under Donald Trump, the nation's hegemony on the world stage may soon face its own crisis point.

This was no “deeply philosophical address”. And hardly a show of  “principled realism” – as spun by the White House. President Trump at the UN was “American carnage,” to borrow a phrase previously deployed by his nativist speechwriter Stephen Miller.

One should allow the enormity of what just happened to sink in, slowly. The president of the United States, facing the bloated bureaucracy that passes for the “international community,” threatened to “wipe off the map” the whole of the Democratic People’s Republic of Korea (25 million people). And may however many millions of South Koreans who perish as collateral damage be damned.

Multiple attempts have been made to connect Trump’s threats to the madman theory cooked up by “Tricky Dicky” Nixon in cahoots with Henry Kissinger, according to which the USSR must always be under the impression the then-US president was crazy enough to, literally, go nuclear. But the DPRK will not be much impressed with this madman remix.

That leaves, on the table, a way more terrifying upgrade of Hiroshima and Nagasaki (Trump repeatedly invoked Truman in his speech). Frantic gaming will now be in effect in both Moscow and Beijing: Russia and China have their own stability / connectivity strategy under development to contain Pyongyang.

The Trump Doctrine has finally been enounced and a new axis of evil delineated. The winners are North Korea, Iran and Venezuela. Syria under Assad is a sort of mini-evil, and so is Cuba. Crucially, Ukraine and the South China Sea only got a fleeting mention from Trump, with no blunt accusations against Russia and China. That may reflect at least some degree of realpolitik; without “RC” – the Russia-China strategic partnership at the heart of the BRICS bloc and the Shanghai Cooperation Organization (SCO) – there’s no possible solution to the Korean Peninsula stand-off.

In this epic battle of the “righteous many” against the “wicked few,” with the US described as a “compassionate nation” that wants “harmony and friendship, not conflict and strife,” it’s a bit of a stretch to have Islamic State – portrayed as being not remotely as “evil” as North Korea or Iran – get only a few paragraphs.

The art of unraveling a deal

According to the Trump Doctrine, Iran is “an economically depleted rogue state whose chief exports are violence, bloodshed and chaos,” a “murderous regime” profiting from a nuclear deal that is “an embarrassment to the United States.”

Iranian Foreign Minister Mohammad Javad Zarif tweeted: “Trump’s ignorant hate speech belongs in medieval times – not the 21st century UN – unworthy of a reply.” Russian Foreign Minister Sergey Lavrov once again stressed full support for the nuclear deal ahead of a P5+1 ministers’ meeting scheduled for Wednesday, when Zarif was due to be seated at the same table as US Secretary of State Rex Tillerson. Under review: compliance with the deal. Tillerson is the only one who wants a renegotiation.

Iran’s President Hassan Rouhani has, in fact, developed an unassailable argument on the nuclear negotiations. He says the deal – which the P5+1 and the IAEA all agree is working – could be used as a model elsewhere. German chancellor Angela Merkel concurs. But, Rouhani says, if the US suddenly decides to unilaterally pull out, how could the North Koreans possibly be convinced it’s worth their while to sit down to negotiate anything with the Americans ?

What the Trump Doctrine is aiming at is, in fact, a favourite old neo-con play, reverting back to the dynamics of the Dick Cheney-driven Washington-Tehran Cold War years.

This script runs as follows: Iran must be isolated (by the West, only now that won’t fly with the Europeans); Iran is “destabilizing” the Middle East (Saudi Arabia, the ideological foundry of all strands of Salafi-jihadism, gets a free pass); and Iran, because it’s developing ballistic that could – allegedly – carry nuclear warheads, is the new North Korea.

That lays the groundwork for Trump to decertify the deal on October 15. Such a dangerous geopolitical outcome would then pit Washington, Tel Aviv, Riyadh and Abu Dhabi against Tehran, Moscow and Beijing, with European capitals non-aligned. That’s hardly compatible with a “compassionate nation” which wants “harmony and friendship, not conflict and strife.”

Afghanistan comes to South America

The Trump Doctrine, as enounced, privileges the absolute sovereignty of the nation-state. But then there are those pesky “rogue regimes” which must be, well, regime-changed. Enter Venezuela, now on “the brink of total collapse,” and run by a “dictator”; thus, America “cannot stand by and watch.”

No standing by, indeed. On Monday, Trump had dinner in New York with the presidents of Colombia, Peru and Brazil (the last indicted by the country’s Attorney General as the leader of a criminal organization and enjoying an inverted Kim dynasty rating of 95% unpopularity). On the menu: regime change in Venezuela.

Venezuelan “dictator” Maduro happens to be supported by Moscow and, most crucially, Beijing, which buys oil and has invested widely in infrastructure in the country with Brazilian construction giant Odebrecht crippled by the Car Wash investigation.

The stakes in Venezuela are extremely high. In early November, Brazilian and American forces will be deployed in a joint military exercise in the Amazon rainforest, at the Tri-Border between Peru, Brazil and Colombia. Call it a rehearsal for regime change in Venezuela. South America could well turn into the new Afghanistan, a consequence that flows from Trump’s assertion that “major portions of the world are in conflict and some, in fact, are going to hell.”

For all the lofty spin about “sovereignty”, the new axis of evil is all about, once again, regime change.

Russia-China aim to defuse the nuclear stand-off, then seduce North Korea into sharing in the interpenetration of the Belt and Road Initiative (BRI) and the Eurasia Economic Union (EAEU), via a new Trans-Korea Railway and investments in DPRK ports. The name of the game is Eurasian integration.

Iran is a key node of BRI. It’s also a future full member of the SCO, it’s connected – via the North-South Transport Corridor – with India and Russia, and is a possible future supplier of natural gas to Europe. The name of the game, once again, is Eurasian integration.

Venezuela, meanwhile, holds the largest unexplored oil reserves on the planet, and is targeted by Beijing as a sort of advanced BRI node in South America.

The Trump Doctrine introduces a new set of problems for Russia-China. Putin and Xi do dream of reenacting a balance of power similar to that of the Concert of Europe, which lasted from 1815 (after Napoleon’s defeat) until the brink of World War I in 1914. That’s when Britain, Austria, Russia and Prussia decided that no European nation should be able to emulate the hegemony of France under Napoleon.

In sitting as judge and executioner, Trump’s “compassionate” America certainly seems intent on echoing such hegemony.

http://WarMachines.com

Government By Goldman

Authored by Gary Rivlin and Michael Hudson via The Intercept, in partnership with The Investigative Fund,

Steve Bannon was in the room the day Donald Trump first fell for Gary Cohn. So were Reince Priebus, Jared Kushner, and Trump’s pick for secretary of Treasury, Steve Mnuchin. It was the end of November, three weeks after Trump’s improbable victory, and Cohn, then still the president of Goldman Sachs, was at Trump Tower presumably at the invitation of Kushner, with whom he was friendly. Cohn was there to offer his views about jobs and the economy. But, like the man he was there to meet, he was at heart a salesman.

On the campaign trail, Trump had spoken often about the importance of investing in infrastructure. Yet the president-elect had apparently failed to appreciate that the government would need to come up with hundreds of billions of dollars to fund his plans. Cohn, brash and bold, wired to attack any moneymaking opportunity, pitched a fix that would put Wall Street firms at the center: Private-industry partners could help infrastructure get fixed, saving the federal government from going deeper into debt. The way the moment was captured by the New York Times, among other publications, Trump was dumbfounded. “Is this true?” he asked. Was a trillion-dollar infrastructure plan likely to increase the deficit by a trillion dollars? Confronted by nodding heads, an unhappy president-elect said, “Why did I have to wait to have this guy tell me?”

Within two weeks, the transition team announced that Cohn would take over as director of the president’s National Economic Council.

Goldman Sachs President Gary Cohn arrives for a meeting with President-elect Donald Trump at Trump Tower in New York,  Nov. 29, 2016.

Photo: Bryan R. Smith/AFP/Getty Images

1. GOLDMAN ALWAYS WINS

Goldman Sachs had been a favorite cudgel for candidate Trump – the symbol of a government that favors Wall Street over its citizenry. Trump proclaimed that Hillary Clinton was in the firm’s pockets, as was Ted Cruz. It was Goldman Sachs that Trump singled out when he railed against a system rigged in favor of the global elite — one that “robbed our working class, stripped our country of wealth, and put money into the pockets of a handful of large corporations and political entities.” Cohn, as president and chief operating officer of Goldman Sachs, had been at the heart of it all. Aggressive and relentless, a former aluminum siding salesman and commodities broker with a nose for making money, Cohn had turned Goldman’s sleepy home loan unit into what a Senate staffer called “one of the largest mortgage trading desks in the world.” There, he aggressively pushed his sales team to sell mortgage-backed securities to unaware investors even as he watched over “the big short,” Goldman’s decision to bet billions of dollars that the market would collapse.

Now Cohn would be coordinating economic policy for the populist president.

The conflicts between the two men were striking. Cohn ran a giant investment bank with offices in financial capitals around the globe, one deeply committed to a world with few economic borders. Trump’s nationalist campaign contradicted everything Goldman Sachs and its top executives represented on the global stage.

Trump raged against “offshoring” by American companies during the 2016 campaign. He even threatened “retribution,”­ a 35 percent tariff on any goods imported into the United States by a company that had moved jobs overseas. But Cohn laid out Goldman’s very different view of offshoring at an investor conference in Naples, Florida, in November. There, Cohn explained unapologetically that Goldman had offshored its back-office staff, including payroll and IT, to Bangalore, India, now home to the firm’s largest office outside New York City: “We hire people there because they work for cents on the dollar versus what people work for in the United States.”

Candidate Trump promised to create millions of new jobs, vowing to be “the greatest jobs president that God ever created.” Cohn, as Goldman Sachs’s president and COO, oversaw the firm’s mergers and acquisitions business that had, over the previous three years, led to the loss of at least 22,000 U.S. jobs, according to a study by two advocacy groups. Early in his candidacy, Trump described as “disgusting” Pfizer’s decision to buy a smaller Irish competitor in order to execute a “corporate inversion,” a maneuver in which a U.S. company moves its headquarters overseas to reduce its tax burden. The Pfizer deal ultimately fell through. But in 2016, in the heat of the campaign, Goldman advised on a megadeal that saw Johnson Controls, a Fortune 500 company based in Milwaukee, buy the Ireland-based Tyco International with the same goal. A few months later, with Goldman’s help, Johnson Controls had executed its inversion.

With Cohn’s appointment, Trump now had three Goldman Sachs alums in top positions inside his administration: Steve Bannon, who was a vice president at Goldman when he left the firm in 1990, as chief strategist, and Steve Mnuchin, who had spent 17 years at Goldman, as Treasury secretary. And there were more to come. A few weeks later, another Goldman partner, Dina Powell, joined the White House as a senior counselor for economic initiatives. Goldman was a longtime client of Jay Clayton, Trump’s choice to chair the Securities and Exchange Commission; Clayton had represented Goldman after the 2008 financial crisis, and his wife Gretchen worked there as a wealth management adviser. And there was the brief, colorful tenure of Anthony Scaramucci as White House communications director: Scaramucci had been a vice president at Goldman Sachs before leaving to co-found his own investment company.

Even before Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough Goldman alum were working for the Trump administration to open a branch office in the White House.

“There was a devastating financial crisis just over eight years ago,” Warren said. “Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country’s economic policy to a senior Goldman executive turns my stomach.” Prior administrations often had one or two people from Goldman serving in top positions. George W. Bush at one point had three. At its peak, the Trump administration effectively had six.

Earlier this summer, Trump boasted about his team of economic advisers at a rally in Cedar Rapids, Iowa. “This is the president of Goldman Sachs. Smart,” Trump said. “Having him represent us! He went from massive paydays to peanuts.”

Trump waved off anyone who might question his decision to rely on the very people he had demonized. “Somebody said, ‘Why did you appoint a rich person to be in charge of the economy?’ … I said: ‘Because that’s the kind of thinking we want.’” He needed “great, brilliant business minds … so the world doesn’t take advantage of us.” How else could he get the job done? “I love all people, rich or poor, but in those particular positions, I just don’t want a poor person.”

“Does that make sense?” Trump asked. The crowd cheered.

Director of the National Economic Council Gary Cohn (L) listens to President Donald Trump deliver opening remarks during a meeting with business leaders in the Roosevelt Room at the White House on Jan. 23, 2017 in Washington, D.C.

Photo: Chip Somodevilla/Getty Images

Years of financial disclosure forms confirm that Cohn is indeed very rich. At the end of 2016, he owned some 900,000 shares of Goldman Sachs stock, a stake worth around $220 million on the day Trump announced his appointment. Plus, he’d sold a million more Goldman shares over the previous half-dozen years. In 2007 alone, the year of the big short, Goldman Sachs paid him nearly $73 million — more than the firm paid CEO Lloyd Blankfein. The disclosure forms Cohn filled out to join the administration indicate he owned assets valued at $252 million to $611 million. That may or may not include the $65 million parting gift Goldman’s board of directors gave him for “outstanding leadership” just days before Trump was sworn in.

Like anyone taking a top job in the Trump administration, Cohn was required to sign a pledge vowing not to participate for the next two years in any matter “that is directly and substantially related to my former employer or former clients, including regulations and contracts.” But presidents have sometimes issued waivers to these requirements, and it is unclear whether the Trump administration is making such waivers public.

Sens. Warren and Tammy Baldwin, a Democrat from Wisconsin, sent Cohn a letter a few days later. They brought up the $65 million bonus and asked him to publicly recuse himself from any issue that could have a direct or “significant indirect” impact on his old firm. Cohn never responded to the letter, and if he has ever received a waiver, it has not been made available to the public or the Office of Government Ethics.

“Consistent with the Trump administration’s stringent ethics rules, Mr. Cohn will recuse himself from participating in any matter directly involving his former employer, Goldman Sachs,” White House spokesperson Natalie Strom said. “The White House will not comment further.”

The White House declined requests to make Cohn available for an interview and declined to answer a detailed set of questions.

Cohn shared the podium with fellow Goldman alum Mnuchin (the two made partner there the same year) when the administration unveiled its new tax plan, one that, if the past is prelude, had the potential to save Goldman more than $1 billion a year in corporate taxes. The president had promised to “do a number” on financial reforms implemented after the 2008 subprime crisis, including one that threatened to cost Goldman several billion dollars a year in revenues. Under Cohn, the administration has introduced new rules easing initial public offerings — a Goldman Sachs specialty dating back to the start of the last century, when the firm handled the IPOs of Sears, Roebuck; F. W. Woolworth; and Studebaker. As Trump’s top economic policy adviser, Cohn can exert influence over regulatory agencies that have shaken billions in penalties and settlements out of Goldman Sachs in recent years. And his former colleagues inside Goldman’s Public Sector and Infrastructure group likely appreciate the Trump administration’s infrastructure plan, which is more or less exactly as Cohn first pitched it inside Trump Tower in November.

“It’s hard to see how Gary Cohn recusing himself would solve a lot of these conflicts because nearly every major decision of his job would have a significant impact, likely billions of dollars, on Goldman Sachs and its executives,” said Tyler Gellasch, an attorney and former Senate staffer who helped draft Dodd-Frank, the landmark financial reform law passed in the wake of the financial meltdown. “Goldman touches nearly every aspect of the economy, from selling U.S. treasuries to helping companies go public, and the National Economic Council advises on all of that.”

In the wake of last month’s white supremacist rally in Charlottesville, Virginia, Cohn confessed to the Financial Times that he has “come under enormous pressure both to resign and to remain.” But the man who the Washington Post has dubbed Trump’s “moderate voice” declared that neo-Nazis would not force “this Jew” to leave his job. “As a patriotic American, I am reluctant to leave my post as director of the National Economic Council,” Cohn told FT. “I feel a duty to fulfill my commitment to work on behalf of the American people.”

Or at least a few of them. The Trump economic agenda, it turns out, is largely the Goldman agenda, one with the potential to deliver any number of gifts to the firm that made Cohn colossally rich. If Cohn stays, it will be to pursue an agenda of aggressive financial deregulation and massive corporate tax cuts — he seeks to slash rates by 57 percent — that would dramatically increase profits for large financial players like Goldman. It is an agenda as radical in its scope and impact as Bannon’s was.

Republican presidential candidate Donald Trump holds up a copy of his book “The Art of the Deal,” given to him by a fan as he speaks during a campaign stop on Saturday, Nov. 21, 2015 in Birmingham, Ala.

Photo: Eric Schultz/AP

2. ALPHA MALES

Donald Trump, the “blue-collar billionaire,” has taken great pains to write grit and toughness into his privileged biography. He talks of military schools and visits to construction sites with his father and wrote in “The Art of the Deal” that in the second grade, “I actually gave a teacher a black eye. I punched my music teacher because I didn’t think he knew anything about music and I almost got expelled.” Yet when the authors of the book “Trump Revealed: An American Journey of Ambition, Ego, Money, and Power” spoke to several of his childhood friends, none of them recalled the incident. Trump himself crumpled when asked about the incident during the 2016 campaign: “When I say ‘punch,’ when you’re that age, nobody punches very hard.”

Gary Cohn, however, is the middle-class kid and self-made millionaire Trump imagines himself to be. It appears that Cohn actually did slug a grade-school teacher in the face. “I was being abused,” Cohn told author Malcolm Gladwell, who interviewed him for his book, “David and Goliath: Underdogs, Misfits, and the Art of Battling Giants,” back when Cohn was still president of Goldman Sachs. As a child, Cohn struggled with dyslexia, a reading disorder people didn’t understand much about when Cohn attended school in the 1970s in a suburb outside Cleveland. “You’re a 6- or 7- or 8-year-old-kid, and you’re in a public-school setting, and everyone thinks you’re an idiot,” Cohn confessed to Gladwell. “You’d try to get up every morning and say, today is going to be better, but after you do that a couple of years, you realize that today is going to be no different than yesterday.” One time when he was in the fourth grade, a teacher put him under her desk, rolled her chair close, and started kicking him, Cohn said. “I pushed the chair back, hit her in the face, and walked out.”

While Trump’s father was a wealthy real estate developer, Cohn’s father was an electrician. When Trump sought to get into the casino business, his father loaned him $14 million. When Cohn couldn’t find a job after graduating from college, all his father could do was find him one selling aluminum siding. While Trump has the instincts of a reality show producer and an eye for spectacle, Cohn prefers to operate in the shadows.

But they likely recognize much of themselves in the other. Both Cohn and Trump are alpha males — men of action unlikely to be found holed up in an office reading through stacks of policy reports. In fact, neither seems to be much of a reader. Cohn told Gladwell it would take him roughly six hours to read just 22 pages; he ended his time with the author by wishing him luck on “your book I’m not going to read.” Both have a transactional view of politics. Trump switched his voter registration between Democratic, Republican, and independent seven times between 1999 and 2012. In the 2000s, his foundation gave $100,000 to the Clinton Foundation, and he contributed $4,700 to Hillary Clinton’s senatorial campaigns. He even bought and refurbished a golf course in Westchester County a few miles from the Clinton home, in part, Trump once admitted, to ingratiate himself with the Clintons. Cohn is a registered Democrat who has given at least $275,000 to Democrats over the years, including to the campaigns of Hillary Clinton and Barack Obama, but also around $250,000 to Republicans, including Senate Majority Leader Mitch McConnell and Florida Sen. Marco Rubio.

There are also striking similarities in their business histories. Both have a knack for weathering scandals and setbacks and coming out on top. Trump has filed for bankruptcy four times, started a long list of failed businesses (casinos, an airline, a football team, a steak company), but managed, through his best-selling books and highly rated reality TV show, to recast himself as the world’s greatest businessman. During Cohn’s tenure as president, Goldman Sachs faced lawsuits and federal investigations that resulted in $9 billion in fines for misconduct in the run-up to the subprime meltdown. Goldman not only survived but thrived, posting record profits — and Cohn was rewarded with handsome bonuses and a position at the top of the new administration.

Cohn’s path to the White House started with a tale of brass and bluster that would make Trump the salesman proud. Still in his 20s and stuck selling aluminum siding, Cohn made a play that would change his life. In the fall of 1982, while visiting the company’s home office on Long Island, he stole a day from work and headed to the U.S. commodities exchange in Manhattan, hoping to talk himself into a job. He overheard an important-looking man say he was heading to LaGuardia Airport; Cohn blurted out that he was headed there, too. He jumped into a cab with the man and, Cohn told Gladwell, who devoted six pages of “David and Goliath” to Cohn’s underdog rise, “I lied all the way to the airport.” The man confided to Cohn that his firm had just put him in charge of a market, options, that he knew little about. Cohn likely knew even less, but he assured his backseat companion that he could get him up to speed. Cohn then spent the weekend reading and re-reading a book called “Options as a Strategic Investment.” Within the week, he’d been hired as the man’s assistant.

Cohn soon learned enough to venture off on his own and established himself as an independent silver trader on the floor of the New York Commodities Exchange. In 1990, Goldman Sachs, arguably the most elite firm on Wall Street, offered him a job.

The Goldman Sachs & Co. logo at the company’s booth on the floor of the New York Stock Exchange in New York City, on Friday, July 19, 2013.

Photo: Scott Eells/Bloomberg/Getty Images

Goldman Sachs was founded in the years just after the American Civil War. Marcus Goldman, a Jewish immigrant from Germany, leased a cellar office next to a coal chute in 1869. There, in an office one block from Wall Street, he bought the bad debt of local businesses that needed quick cash. His son-in-law, Samuel Sachs, joined the firm in 1882. A generation later, in 1906, the firm made its first mark, arranging for the public sale of shares in Sears, Roebuck. Goldman Sachs’s influence over politics dates back at least to 1914. That year, Henry Goldman, the founder’s son, was invited to advise Woodrow Wilson’s administration about the creation of a central bank, mandated by the Federal Reserve Act, which had passed the previous year. Goldman Sachs men have played important roles in U.S. government ever since.

There was the occasional scandal, such as Goldman Sachs’s role in the 1970 collapse of Penn Central railroad, then the largest corporate bankruptcy in U.S. history. Still, the firm built a reputation as a sober, elite partnership that served its clients ably. In 1979, when John Whitehead, a senior partner and co-chairman, set to paper what he called Goldman’s “Business Principles,” he began with the firm’s most cherished belief: The client’s interests come before all else.

Two years later, Goldman took a step that signaled the beginning of the end of that culture. In the fall of 1981, Goldman purchased J. Aron & Co., a commodities trading firm. Some within the partnership were against the acquisition, worried over how profane, often crude, trading culture would mix with Goldman’s restrained, well-mannered way of doing business. “We were street fighters,” one former J. Aron partner told Fortune magazine in 2008.

The J. Aron team moved into the Goldman Sachs offices in lower Manhattan, but didn’t adopt its culture. Within a few years, it was producing well over $1 billion a year in profits. They were 300 employees inside a firm of 6,000, but were posting one-third of Goldman’s total profits. The cultural shift, it turned out, was moving in the other direction. J. Aron, according to a book by Charles D. Ellis, a former Goldman consultant, brought to Goldman “a trading culture that would become dominant in the firm.”

Lloyd Blankfein, who ascended to chairman and CEO in in 2006, started his Goldman career at J. Aron, a year after Goldman acquired the firm. “We didn’t have the word ‘client’ or ‘customer’ at the old J. Aron,” Blankfein told Fortune magazine two years after taking over as CEO. “We had counter-parties.” Cohn joined J. Aron eight years after Blankfein did, in 1990. Four years later, Blankfein was put in charge of the firm’s Fixed Income, Currency, and Commodities division, which included J. Aron. Cohn, loyal and hard-working, with an instinct for connecting with people who can help him, became Blankfein’s “corporate problem solver.”

The emergence of “Bad Goldman” — and Cohn’s central role in that drama — is really the story of the rise of the traders inside the firm. “As trading came to be a bigger part of Wall Street, I noticed that the vision changed,” said Robert Kaplan, a former Goldman Sachs vice chairman, who left in 2006 after working at the firm for 23 years. “The leaders were saying the same words, but they started to change incentives away from the value-added vision and tilt more to making money first. If making money is your vision, what lengths will you not go?”

At the height of the dot-com years, a debate raged within the firm. The firm underwrote dozens of technology IPOs, including Microsoft and Yahoo, in the 1980s and 1990s, minting an untold number of multimillionaires and the occasional billionaire. Some of the companies they were bringing public generated no profits at all, while Goldman was generating up to $3 billion in profits a year. It seemed inevitable that some within Goldman Sachs began to dream of jettisoning the Goldman’s century-old partnership structure and taking their firm public, too. Jon Corzine was running the firm then — he would later go into politics in the Goldman tradition, first as a U.S. senator and then as New Jersey governor — and was four-square in favor of going public. Corzine’s second in command, Henry Paulson — who would go on to serve as Treasury secretary — was against the idea. But Corzine ordered up a study that supported his view that remaining private stifled Goldman’s competitive opportunities and promoted Paulson to co-senior partner. Paulson soon got on board. In May 1999, Goldman sold $3.7 billion worth of shares in the company. At the end of the first day of trading, Corzine’s and Paulson’s stakes in the firm were each worth $205 million. Cohn’s and Mnuchin’s shares were each worth $112 million. And Blankfein ended up with $168 million in company stock.

Like any publicly traded company, there would now be pressure on Goldman Sachs to make its quarterly numbers and “maximize shareholder value.” Discarding the partner model also meant the loss of a valuable restraint on risk-taking and bad behavior. Under the old system, any losses or fines came out of the partners’ pockets. In the early 1990s, for example, the firm was involved in transactions with Robert Maxwell, a London-based media mogul who was accused of stealing hundreds of millions of pounds from his companies’ pension funds. The $253 million that Goldman Sachs paid to settle lawsuits brought by pension funds over its involvement was split among the firm’s 84 limited partners. Now any losses are paid by a publicly traded entity owned by shareholders, with no direct financial liability for the decision-makers themselves. In theory, Goldman could claw back bonuses in response to executives’ bad behavior. But in 2016, when Goldman paid over $5 billion to settle charges brought by the Justice Department that the firm misled customers in the sale of a subprime mortgage product during Cohn’s time overseeing that unit, the Goldman board declined to dock Cohn’s pay. Instead, the company awarded him a $5.5 million cash bonus and another $12.6 million in company stock.

The Goldman Sachs Group Inc. executives, from right, Gary Cohn, president and co-chief operating officer, Lloyd Blankfein, chairman and chief executive officer, and Jon Winkelreid, president and co-chief operating officer, appear in a 2006 annual report arranged for a photograph in New York, on June 16, 2008.

Photo: Daniel Acker/Bloomberg/Getty Images

As Blankfein moved up the corporate hierarchy, Cohn rose along with him. When Blankfein was made vice chairman in charge of the firm’s multibillion-dollar global commodities business and its equities division, Cohn took over as co-head of FICC, Blankfein’s previous position. That meant Cohn was overseeing not just J. Aron and the firm’s commodities business, but also its currency trades and bond sales. By the start of 2004, Blankfein was promoted to president and COO, and Cohn was named co-head of global securities. At that point, Cohn had authority over the mortgage-trading desk. Under Cohn, the firm aggressively moved into the subprime mortgage market, using Goldman’s own money and that of its customers to help stoke the housing bubble.

Goldman was already enabling subprime predators, such as Ameriquest and New Century Financial, by providing them with the cash infusions they needed to scale up their lending to individual home buyers. Cohn would steer the firm deeper into the subprime frenzy by setting up Goldman as a patron of some of these same mortgage originators. During his tenure, Goldman snapped up loans from New Century, Countrywide, and other notorious mortgage originators and bundled them into deals with opaque names, such as ABACUS and GSAMP. Under Cohn’s watchful eye, Goldman’s brokers then funneled slices to customers they sold on the wisdom of holding mortgage-backed securities in their portfolios.

One such creation, GSAA Home Equity Trust 2006-2, illustrates Goldman’s disregard for the quality of loans it was buying and packaging into security deals. Created in early 2006, the investment vehicle was made up of more than $1 billion in home loans Goldman had bought from Ameriquest, one of the nation’s largest and most aggressive subprime lenders. By that point, the lender already had set aside $325 million to settle a probe by attorneys general and banking regulators in 49 states, who accused Ameriquest of misleading thousands of borrowers about the costs of their loans and falsifying home appraisals and other key documents. Yet GSAA Home Equity Trust 2006-2 was filled with Ameriquest loans made to more than 3,000 homeowners in Arizona, Illinois, Florida, and elsewhere. By the end of 2008, 65 percent of the roughly 1,400 borrowers whose loans remained in the deal were in default, had filed for bankruptcy, or had been targeted for foreclosure.

In just three years, Goldman Sachs had increased its trading volume by a factor of 50, which the Wall Street Journal attributed to “Cohn’s successful push to rev up risk-taking and use of Goldman’s own capital to make a profit” — what the industry calls proprietary trading, or prop trading. The 2010 Journal article quoted Justin Gmelich, then the firm’s mortgage chief, who said of Cohn, “He reshaped the culture of the mortgage department into more of a trading environment.” In 2005, with Cohn overseeing the firm’s home loan desk, Goldman underwrote $103 billion in mortgage-backed securities and other more esoteric products, such as collateralized debt obligations, which often were priced based on giant pools of home loans. The following year, the firm underwrote deals worth $131 billion.

In 2006, CEO Henry Paulson left the firm to join George W. Bush’s cabinet as Treasury secretary. Blankfein, Cohn’s mentor and friend, took Paulson’s place. By tradition, Blankfein, a trader, should have elevated someone from the investment banking side to serve as his No. 2, so both sides of the firm would be represented in the top leadership. Instead he named Cohn, his long-time loyalist, and Jon Winkelried, who also had history on the trading side, as co-presidents and co-COOs. Winkelried, who had started at Goldman eight years before Cohn, had probably earned the right to hold those titles by himself. But Cohn had the advantage of his relationship with the CEO. Blankfein and Cohn vacationed together in the Caribbean and Mexico, owned homes near each other in the Hamptons, and their children attended the same school. Winkelreid was out in two years. The bromance between his fellow No. 2 and the top boss may have proved too much.

With Blankfein and Cohn at the top, the transformation of Goldman Sachs was complete. By 2009, investment banking had shrunk to barely 10 percent of the firm’s revenues. Richard Marin, a former executive at Bear Stearns, a Goldman competitor that wouldn’t survive the mortgage meltdown, saw Cohn as “the root of the problem.” Explained Marin, “When you become arrogant in a trading sense, you begin to think that everybody’s a counterparty, not a customer, not a client. And as a counterparty, you’re allowed to rip their face off.”

Weeds grow in the driveway of a foreclosed home May 7, 2009 in Antioch, Calif.

Photo: Justin Sullivan/Getty Images

3. THE BIG SHORT

People inside Goldman Sachs were growing nervous. It was the fall of 2006 and, as Daniel Sparks, the Goldman partner overseeing the firm’s 400-person mortgage trading department, wrote in an email to several colleagues, “Subprime market getting hit hard.” The firm had lent millions to New Century, a mortgage lender dealing in the higher-risk subprime market. And now New Century was late on payments. Sparks could see that the wobbly housing market was having an impact on his department. For 10 consecutive trading days, his people had lost money. The dollar amounts were small to a behemoth like Goldman: between $5 million and $30 million a day. But the trend made Sparks jittery enough to share his concerns with the Goldman’s top executives: President Gary Cohn; David Viniar, the firm’s chief financial officer; and CEO Lloyd Blankfein.

Sparks, a Cohn protégé, was running the mortgage desk that his mentor, only a few years earlier, had built into a major profit center for the bank. In 2006 and 2007, a report by the Senate Permanent Subcommittee on Investigations found, the two “maintained frequent, direct contact” as Goldman worked to jettison the billions in subprime loans it had on its book. “One of my jobs at the time was to make sure Gary and David and Lloyd knew what was going on,” Sparks told William Cohan, author of the 2011 book “Money and Power: How Goldman Sachs Came to Rule the World.” “They don’t like surprises.” Viniar summoned around 20 traders and managers to a 30th floor conference room inside Goldman headquarters in lower Manhattan. It was there, on an unseasonably warm Thursday in December 2006, that the firm decided to initiate what people inside Goldman would eventually dub “the big short.”

One name tossed around during the three-hour meeting was that of John Paulson. Paulson (no relation to Goldman’s former CEO) would later attain infamy when it was revealed that his firm, Paulson & Co., made roughly $15 billion betting against the mortgage market. (His personal take was nearly $4 billion.) At that point, though, Paulson was a little-known hedge fund manager who crossed Goldman’s radar when he asked the firm to create a product that would allow him to take a “short position” on the real estate market — laying down bets that a large number of mortgage investments were going to plummet in value. Goldman sold Paulson what’s called a credit-default swap, essentially an insurance policy that would pay off if homeowners defaulted on their mortgages in large enough numbers. The firm would create several more swaps on his behalf in the intervening months. Eventually, as mortgage defaults began to mount, people inside Goldman Sachs came to see Paulson as more of a prophet than a patsy. Some sitting around the conference table that December day wanted to follow his lead.

“There will be big opportunities the next several months,” one Goldman manager at the meeting wrote enthusiastically in an email sent shortly after it ended. Sparks weighed in by email later that night. He wanted to make sure Goldman had enough “dry powder” — cash on hand — to be “ready for the good opportunities that are coming.” That Sunday, Sparks copied Cohn on an email reporting the firm’s progress on laying down short positions against mortgage-backed securities it had put together. The trading desk had already made $1.5 billion in short bets, “but still more work to do.”

Cohn was a member of Goldman’s board of directors during this critical time and second in command of the bank. At that point, Cohn and Blankfein, along with the board and other top executives, had several options. They might have shared their concerns about the mortgage market in a filing with the SEC, which requires publicly traded companies to reveal “triggering events that accelerate or increase a direct financial obligation” or might cause “impairments” to the bottom line. They might have warned clients who had invested in mortgage-backed securities to consider extracting themselves before they suffered too much financial damage. At the very least, Goldman could have stopped peddling mortgage-backed securities that its own mortgage trading desk suspected might soon collapse in value.

Instead, Cohn and his colleagues decided to take care of Goldman Sachs.

Goldman would not have suffered the reputational damage that it did — or paid multiple billions in federal fines — if the firm, anticipating the impending crisis, had merely shorted the housing market in the hopes of making billions. That is what investment banks do: spot ways to make money that others don’t see. The money managers and traders featured in the film “The Big Short” did the same — and they were cast as brave contrarians. Yet unlike the investors featured in the film, Goldman had itself helped inflate the housing bubble — buying tens of billions of dollars in subprime mortgages over the previous several years for bundling into bonds they sold to investors. And unlike these investors, Goldman’s people were not warning anyone who would listen about the disaster about to hit. As federal investigations found, the firm, which still claims “our clients’ interests always come first” as a core principle, failed to disclose that its top people saw disaster in the very products its salespeople were continuing to hawk.

Goldman still held billions of mortgages on its books in December 2006 — mortgages that Cohn and other Goldman executives suspected would soon be worth much less than the firm had paid for them. So, while Cohn was overseeing one team inside Goldman Sachs preoccupied with implementing the big short, he was in regular contact with others scrambling to offload its subprime inventory. One Goldman trader described the mortgage-backed securities they were selling as “shitty.” Another complained in an email that they were being asked to “distribute junk that nobody was dumb enough to take first time around.” A December 28 email from Fabrice “Fabulous Fab” Tourre, a Goldman vice president later convicted of fraud, instructed traders to focus on less astute, “buy and hold” investors rather than “sophisticated hedge funds” that “will be on the same side of the trade as we will.”

Gary Cohn, president and chief operating officer of Goldman Sachs Group Inc. (R) and Craig Broderick, managing director and head of credit, market and operational risk with Goldman Sachs, during a Financial Crisis Inquiry Commission hearing on the role of derivatives in the financial crisis, on June 30, 2010.

Photo: Andrew Harrer/Bloomberg/Getty Images

At Goldman Sachs, Cohn was known as a hands-on boss who made it his business to walk the floors, talking directly with traders and risk managers scattered throughout the firm. “Blankfein’s role has always been the salesperson and big-thinker conceptualizer,” said Dick Bove, a veteran Wall Street analyst who has covered Goldman Sachs for decades. “Gary was the guy dealing with the day-to-day operations. Gary was running the company.” While making his rounds, Cohn would sometimes hike a leg up on a trader’s desk, his crotch practically in the person’s face.

At 6-foot- 2, bullet-headed and bald with a heavy jaw and a fighter’s face, Cohn cut a large figure inside Goldman. Profiles over the years would describe him as aggressive, abrasive, gruff, domineering — the firm’s “attack dog.” He was the missile Blankfein launched when he needed to deliver bad news or enforce discipline. Cohn embodied the new Goldman: the man who would run through a brick wall if it meant a big payoff for the bank.

A Bloomberg profile described his typical day as 11 or 12 hours in the office, a bank-related dinner, then phone calls and emails until midnight. “The old adage that hard work will get you what you want is 100 percent true,” Cohn said in a 2009 commencement address at American University. “Work hard, ask questions, and take risk.”

There’s no record of how often Cohn visited his stomping grounds after hours in the early months of 2007, but emails reveal an executive demanding — and getting — regular updates. On February 7, one of the largest originators of subprime loans, HSBC, reported a greater than anticipated rise in troubled loans in its portfolio, and another, New Century, restated its earnings for the previous three quarters to “correct errors.” Sparks wrote an email to Cohn and others the next morning to reassure them that his team was closely monitoring the pricing of the company’s “scratch-and-dent book” and already had a handle on which loans were defaults and which could still be securitized and offloaded onto customers. An impatient Cohn sent a two-word email at 5 o’clock that evening: “Any update?” The next day, an internal memo circulated that listed dozens of mortgage-backed securities with the exhortation, “Let all of the respective desks know how we can be helpful in moving these bonds.” A week later, Sparks updated Cohn on the billions in shorts his firm had bought but warned that it was hurting sales of its “pipeline of CDOs,” the collateralized debt obligations the firm had created in order to sell the mortgages still on its books.

In early March, Cohn was among those who received an email spelling out the mortgage products the firm still held. The stockpile included $1.7 billion in mortgage-related securities, along with $1.3 billion in subprime home loans and $4.3 billion in “Alt-A” loans that fall between prime and subprime on the risk scale. Goldman was “net short,” according to that same email, with $13 billion in short positions, but its exposure to the mortgage market was still considerable. Sparks and others continued to update Cohn on their success offloading securities backed by subprime mortgages through the third quarter of 2007. One product Goldman priced at $94 a share on March 31, 2007 was worth just $15 five months later. Pension funds and insurance companies were among those losing billions of dollars on securities Goldman put together and endorsed as a safe, AAA-rated investments.

U.S. Treasury Secretary Henry M. Paulson steps off the stage Dec. 6, 2007 after a press conference on subprime mortgage loans at the Treasury Department in Washington, D.C.

Photo: Mandel Ngan/AFP/Getty Images

The third quarter of 2007 was ugly. A pair of Bear Stearns hedge funds failed. Merrill Lynch reported $2.2 billion in losses — its largest quarterly loss ever. Merrill’s CEO warned that the bank faced another $8 billion in potential losses due to the firm’s exposure to subprime mortgages and resigned several weeks later. The roiling credit crisis also took down the CEO of Citigroup, which reported $6.5 billion in losses and then weeks later, warned of $8 billion to $11 billion in additional subprime-related write-downs.

And then there was Goldman Sachs, which reported a $2.9 billion profit that quarter. For the moment, the financial press seemed in awe of Blankfein, Cohn, and the rest of the team running the firm. Fortune headlined an article “How Goldman Sachs Defies Gravity” that said Goldman’s “huge, shrewd bet” against the mortgage market “would seem to confirm the view Goldman is the nimblest, and perhaps the smartest, brokerage on Wall Street.” A Goldman press release drily noted that “significant losses” in some areas — the subprime mortgages it hadn’t managed to unload — had been “more than offset by gains on short mortgage products.” A Goldman trader who played a central role in the big short was not so demure when making the case for a big bonus that year. John Paulson was “definitely the man in this space,” he conceded, but he’d helped make Goldman “#1 on the street by a wide margin.”

Disaster struck nine months into 2008 with the collapse of Lehman Brothers, in large part the result of its exposure to subprime losses. Hank Paulson, the Treasury secretary and former Goldman CEO, spent a weekend meeting with would-be suitors willing to take over a storied bank that on paper was now worth virtually nothing. He couldn’t find a buyer. Nor could officials from the Federal Reserve, who were also working overtime to save the investment bank, founded in 1850, that was even older than Goldman Sachs. Shortly after midnight on Monday, September 15, 2008, Lehman announced that it would file for bankruptcy protection when the courts in New York opened that morning — the largest bankruptcy in U.S. history.

Goldman Sachs wasn’t immune from the crisis. The week before Lehman’s fall, Goldman’s stock had topped $161 a share. By Wednesday, it dropped to below $100. It had avoided some big losses by betting against the mortgage market, but the wider financial crisis was wreaking havoc on its other investments. On paper, Cohn had personally lost tens of millions of dollars. He hunkered down in an office with a view of Goldman’s trading floor and worked the phone, trying to change the minds of major investors who were pulling their money from Goldman, fearful of anything riskier than stashing their cash in a mattress.

The next week, Goldman converted from a free-standing investment bank to a bank holding company, which made it, in the eyes of regulators, no different from Wells Fargo, JPMorgan Chase, or any other retail bank. That gave the firm access to cheap capital through the Fed but would also bring increased scrutiny from regulators. The bank took a $10 billion bailout from the Troubled Asset Relief Program and another $5 billion from Warren Buffett, in return for an annual dividend of 10 percent and access to discounted company stock. The firm raised additional billions through a public stock offering.

The biggest threat to Goldman was the economic health of the American International Group. Among other products, AIG sold insurance to protect against defaults on mortgage assets, which had been central to Goldman’s big short. Of the $80 billion in U.S. mortgage assets that AIG insured during the housing bubble, Goldman bought protection from AIG on roughly $33 billion, according to the Wall Street Journal. When Lehman went into bankruptcy, its creditors received 11 cents on the dollar. Executives at AIG, in a frantic effort to avoid bankruptcy, had floated the idea of pushing its creditors to accept 40 to 60 cents on the dollar; there was speculation creditors like Goldman would receive as little as 25 percent. Goldman and its clients were looking at multibillion-dollar hits to their bottom line — a potentially fatal blow.

But as Goldman learned a century ago, it pays to have friends in high places. The day after Lehman went bankrupt, the Bush administration announced an $85 billion bailout of AIG in return for a majority stake in the company. The next day, Paulson obtained a waiver regarding interactions with his former firm because, the Treasury secretary said, “It became clear that we had some very significant issues with Goldman Sachs.” Paulson’s calendar, the New York Times reported, showed that the week of the AIG bailout, he and Blankfein spoke two dozen times. While creditors around the globe were being forced to settle for much less than they were owed, AIG paid its counterparties 100 cents on the dollar. AIG ended up being the single largest private recipient of TARP funding. It received additional billions in rescue funds from the New York Federal Reserve Bank, whose board chair Stephen Friedman was a former Goldman executive who still sat on the firm’s board. The U.S. Treasury ended up with greater than a 90 percent share of AIG, and the U.S. government, using taxpayer dollars, paid in full on the insurance policies financial institutions bought to protect themselves from steep declines in real estate prices — chief among them, Goldman Sachs. All told, Goldman received at least $22.9 billion in public bailouts, including $10 billion in TARP funds and $12.9 billion in taxpayer-funded payments from AIG.

Goldman, once again, had come out on top.

Goldman Sachs Group Inc. headquarters stands in New York City, on Oct. 12, 2016.

Photo: Mark Kauzlarich/Bloomberg/Getty Images

4. THE VAMPIRE SQUID

Goldman Sachs repaid repaid its $10 billion bailout partway through 2009, less than 12 months after the loan was made. Other banks in the U.S. and abroad were still struggling but not Goldman, which reported a record $19.8 billion in pre-tax profits that year, and $12.9 billion the next. Gary Cohn went without a bonus in 2008, left to scrape by on his $600,000 salary. Once free of government interference, the Goldman board (which included Cohn himself) paid him a $9 million bonus in 2009 and an $18 million bonus in 2010.

Yet the once venerated firm was now the subject of jokes on the late-night talk shows. David Letterman broadcast a “Goldman Sachs Top 10 Excuses” list (No. 9: “You’re saying ‘fraud’ like it’s a bad thing.”). Rolling Stone’s Matt Taibbi described the bank as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” a devastating moniker that followed Goldman into the business pages. After news leaked that the firm might pay its people a record $16.7 billion in bonuses in 2009, even President Barack Obama, for whom the firm had been a top campaign donor, began to turn against Goldman, telling “60 Minutes,” “I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street.”

“They’re still puzzled why is it that people are mad at the banks,” Obama said. “Well, let’s see. You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it’s gone through in decades, and you guys caused the problem.”

Goldman was also facing an onslaught of investigations and lawsuits over behavior that had helped precipitate the financial crisis. Class actions and other lawsuits filed by pension funds and other investors accused Goldman of abusing their trust, making “false and misleading statements,” and failing to conduct basic due diligence on the loans underlying the products it peddled. At least 25 of these suits named Cohn as a defendant.

State and federal regulators joined the fray. The SEC accused Goldman of deception in its marketing of opaque investments called “synthetic collateralized debt obligations,” the values of which were tied to bundles of actual mortgages. These were the deals Goldman had arranged in 2006 on behalf of John Paulson so he could short the U.S. housing market. Goldman, it turned out, had allowed Paulson to cherry-pick poor-quality loans at the greatest risk of defaulting — a fact Goldman did not share with potential investors. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio,” the SEC’s enforcement director at the time said, “telling other investors that the securities were selected by an independent, objective third party.”

Suddenly, Cohn and other Goldman officials were downplaying the big short. In June 2010, Cohn testified before the Financial Crisis Inquiry Commission, created by Congress to investigate the causes of the nation’s worst economic collapse since the Great Depression. Cohn asked the commissioners how anyone could claim the firm had bet against its clients when “during the two years of the financial crisis, Goldman Sachs lost $1.2 billion in its residential mortgage-related business”? His statement was technically true, but Cohn failed to mention the billions of dollars the firm pocketed by betting the mortgage market would collapse. Senate investigators later calculated that, at its peak, Goldman had $13.9 billion in short positions that would only pay off in the event of a steep drop in the mortgage market, positions that produced a record $3.7 billion in profits.

Two weeks after Cohn’s testimony, Goldman agreed to pay the SEC $550 million to settle charges of securities fraud — then the largest penalty assessed against a financial services firm in the agency’s history. Goldman admitted no wrongdoing, acknowledging only that its marketing materials “contained incomplete information.” Goldman paid $60 million in fines and restitution to settle an investigation by the Massachusetts attorney general into the financial backing the firm had offered to predatory mortgage lenders. The bank set aside another $330 million to assist people who lost their homes thanks to questionable foreclosure practices at a Goldman loan-servicing subsidiary. Goldman agreed to billions of dollars in additional settlements with state and federal agencies relating to its sale of dicey mortgage-backed securities. The firm finally acknowledged that it had failed to conduct basic due diligence on the loans its was selling customers and, once it became aware of the hazards, did not disclose them.

In the final report produced by the Senate’s Permanent Subcommittee on Investigations, Goldman Sachs was mentioned an extraordinary 2,495 times, and Gary Cohn 89 times. A Goldman Sachs representative declined to respond to queries on the record.

President Barack Obama with Sen. Christopher Dodd, D-Conn., (C) and Rep. Barney Frank, D-Mass., (C-R) after signing the Dodd-Frank Act in Washington, July 21, 2010.

Photo: Doug Mills/The New York Times/Redux

The investigations and fines were a blow to Goldman’s reputation and its bottom line, but the regulatory reforms being debated had the potential to threaten Goldman’s entire business model. Even before the 2008 crash, the firm’s lobbying spending had grown under Lloyd Blankfein and Cohn. By 2010, the year financial reforms were being drafted, Goldman spent $4.6 million for the services of 49 lobbyists. Their ranks included some of the most well-connected figures in Washington, including Democrat Richard Gephardt, a former House majority leader, and Republican Trent Lott, a former Senate majority leader, who had stepped down from the Senate two years earlier.

Despite all those lobbyists on the payroll, Goldman made its case primarily through proxies during the debate over financial reform. “The name Goldman Sachs was so radioactive it worked to their disadvantage to be tied to an issue,” said Marcus Stanley, then a staffer for Democratic Sen. Barbara Boxer and now policy director of Americans for Financial Reform. Instead, Goldman lobbied through industry groups.

Goldman’s people likely knew that all of Wall Street’s lobbying might could not stop the passage of the sprawling 2010 legislative package dubbed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Obama was putting his muscle behind reform — “We simply cannot accept a system in which hedge funds or private equity firms inside banks can place huge, risky bets that are subsidized by taxpayers,” he said in one speech — and the Democrats enjoyed majorities in both houses of Congress. “For Goldman Sachs, the battle was over the final language,” said Dennis Kelleher of Better Markets, a Washington, D.C., lobby group that pushes for tighter financial reforms. “That way they at least had a fighting chance in the next round, when everyone turned their attention to the regulators.”

There was a lot for Goldman Sachs to dislike about Dodd-Frank. There were small annoyances, such as “say on pay,” which ordered companies to give shareholders input on executive compensation, a source of potential embarrassment to a company that gave out $73 million in compensation for a single year’s work — as Goldman paid Cohn in 2007. There were large annoyances, such as the requirement that financial institutions deemed too big to fail, like Goldman, create a wind-down plan in case of disaster. There were the measures that would interfere with Goldman’s core businesses, such as a provision instructing the Commodity Futures Trading Commission to regulate the trading of derivatives. And yet nothing mattered to Goldman quite like the Volcker Rule, which would protect banks’ solvency by limiting their freedom to make speculative trades with their own money. Unless Goldman could initiate what Stanley called the “complexity two-step” — win a carve-out so a new rule wouldn’t interfere with legitimate business and then use that carve-out to render a rule toothless — Volcker would slam the door shut on the entire direction in which Blankfein and Cohn had taken Goldman.

It was 5:30 a.m. on Friday, June 25, 2010, when a joint House-Senate conference committee approved the final language of Dodd-Frank. By Sunday, an industry attorney named Annette Nazareth — a former top SEC official whose firm counts Goldman Sachs among its clients — had already sent off a heavily annotated copy of the 848-page bill to colleagues at her old agency. It was just the first salvo in a lobbying juggernaut.

Within a few months, Cohn himself was in Washington to meet with a governor of the Federal Reserve, one of the key agencies charged with implementing Volcker. The visitors log at the CFTC, the agency Dodd-Frank put in charge of derivatives reform, shows that Cohn traveled to D.C. to personally meet with CFTC staffers at least six times between 2010 and 2016. Cohn also came to the capital for meetings at the SEC, another agency responsible for the Volcker Rule. There, he met with SEC chair Mary Jo White and other commissioners. “I seem to be in Washington every week trying to explain to them the unintended consequences of overregulation,” Cohn said in a talk he gave to business students at Sacred Heart University in 2015.

“Gary was the tip of the spear for Goldman to beat back regulatory reform,” said Kelleher, the financial reform lobbyist. “I used to pass him going into different agencies. They brought him in when they wanted the big gun to finish off, to kill the wounded.”

Democrats lost their majority in the House that November, and Goldman threw its weight behind the spate of Republican bills that followed, aimed at taking apart Dodd-Frank piece by piece. Goldman spent more than $4 million for the services of 45 lobbyists in 2011 and $3.5 million a year in 2012 and 2013. Its lobbying spending was nearly as high in the years after passage of Dodd-Frank as it was the year the bill was introduced.

Goldman lobbyists dug in on a range of issues that would become top priorities for Republicans in the wake of Donald Trump’s electoral victory. Records from the Center for Responsive Politics show that Goldman lobbyists worked to promote corporate tax cuts, such as on the Tax Increase Prevention Act of 2014 and Senate legislation aimed at extending some $200 billion in tax cuts for individuals and businesses. Goldman lobbied for a bill to fund economically critical infrastructure projects, presumably on behalf of its Public Sector and Infrastructure group. Goldman had seven lobbyists working on the JOBS Act, which would make it easier for companies to go public, another bottom-line issue to a company that underwrote $27 billion in IPOs last year. In 2016, Goldman had eight lobbyists dedicated to the Financial CHOICE Act, which would have undone most of Dodd-Frank in one fell swoop — a bill the House revived in April.

Yet defanging the Volcker Rule remained the firm’s top priority. Promoted by former Fed Chair Paul Volcker, the rule would prohibit banks from committing more than 3 percent of their core assets to in-house private equity and hedge funds in the business of buying up properties and businesses with the goal of selling them at a profit. One harbinger of the financial crisis had been the collapse in the summer of 2007 of a pair of Bear Stearns hedge funds that had invested heavily in subprime loans. That 3 percent cap would have had a big impact on Goldman, which maintained a separate private equity group and operated its own internal hedge funds. But it was the restrictions Volcker placed on proprietary trading that most threatened Goldman.

Prop trading was a profit center inside many large banks, but nowhere was it as critical as at Goldman. A 2011 report by one Wall Street analyst revealed that prop trading accounted for an 8 percent share of JPMorgan Chase’s annual revenues, 9 percent of Bank of America’s, and 27 percent of Morgan Stanley’s. But prop trading made up 48 percent of Goldman’s. By one estimate, the Volcker Rule could cost Goldman Sachs $3.7 billion in revenue a year.

When regulators finalized a new Volcker Rule in 2013, Better Markets declared it a “major defeat for Wall Street.” Yet the victory for reformers was precarious. “Just changing a few words could dramatically change the scope of the rule — to the tune of billions of dollars for some firms,” said former Senate staffer Tyler Gellasch, who helped write the rule. Volcker gave banks until July 2015 — the five-year anniversary of Dodd-Frank — to bring themselves into compliance. Yet apparently the Volcker Rule had been written for other financial institutions, not elite firms like Goldman Sachs. “Goldman Sachs has been on a shopping spree with its own money,” began a New York Times article in January 2015. The bank used its own funds to buy a mall in Utah, apartments in Spain, and a European ink company. Paul Volcker expressed disappointment that banks were still making big proprietary bets, as did the two senators most responsible for writing the rule into law. That June, Cohn appeared to reassure investors that Goldman would find a workaround. Speaking at an investor conference, he said Goldman was “transforming our equity investing activities to continue to meet client needs while complying with Volcker.”

Goldman had five years to prepare for some version of a Volcker Rule. Yet a loophole granted banks sufficient time to dispose of “illiquid assets” without causing undue harm — a loophole that might even cover the assets Goldman had only recently purchased, despite the impending compliance deadline. The Fed nonetheless granted the firm additional time to sell illiquid investments worth billions of dollars. “Goldman is brilliant at exercising access and influence without fingerprints,” Kelleher said.

By mid-2016, Goldman, along with Morgan Stanley and JPMorgan Chase, was petitioning the Fed for an additional five years to comply with Volcker — which would take the banks well into a new administration. All Blankfein and Cohn had to do was wait for a new Congress and a new president who might back their efforts to flush all of Dodd-Frank. Then Goldman could continue the risky and lucrative habits it had adopted since traders like Cohn had taken over the firm — the financial crisis be damned — and continue raking in billions in profits each year.

Lloyd Blankfein, chair and CEO of Goldman Sachs, (L) stands on stage with former U.S. Secretary of State Hillary Clinton during the 2014 Clinton Global Initiative annual meeting in New York on Sept. 24, 2014.

Photo: Stephen Chernin/AFP/Getty Images

Goldman’s political giving changed in the wake of Dodd-Frank. Dating back to at least 1990, according to the Center for Responsive Politics, people associated with the firm and its political action committees contributed more to Democrats than Republicans. Yet in the years since financial reform, Goldman, once Obama’s second-largest political donor, shifted its campaign contributions to Republicans. During the 2008 election cycle, for instance, Goldman’s people and PACs contributed $4.8 million to Democrats and $1.7 million to Republicans. By the 2012 cycle, the opposite happened, with Goldman giving $5.6 million to Republicans and $1.8 million to Democrats. Cohn’s personal giving followed the same path. Cohn gave $26,700 to the Democratic Senatorial Campaign Committee in 2006 and $55,500 during the 2008 election cycle, and none to its GOP equivalent. But Cohn donated $30,800 to the National Republican Senatorial Committee in 2012 and another $33,400 to the National Republican Congressional Committee in 2015, without contributing a dime to the DSCC. Cohn gave $5,000 to Massachusetts Republican Scott Brown weeks after news broke that Elizabeth Warren — an outspoken critic of Goldman and other Wall Street players — might try to capture his U.S. Senate seat, which she did in 2012.

Goldman Sachs, under Cohn and Blankfein, was hardly chastened, continuing to play fast and loose with existing rules even as it plunged millions of dollars into fending off new ones. In 2010, the SEC ran a sting operation looking for banks willing to trade favorable assessments by its stock analysts for a piece of a Toys R Us IPO if the company went public. Goldman took the bait, for which they would pay a $5 million fine. An employee working out of Goldman’s Boston office drafted speeches, vetted a running mate, and negotiated campaign contracts for the state treasurer during his run for Massachusetts governor in 2010, despite a rule forbidding municipal bond dealers from making significant political contributions to officials who can award them business. According to the SEC, Goldman had underwritten $9 billion in bonds for Massachusetts in the previous two years, generating $7.5 million in fees. Goldman paid $12 million to settle the matter in 2012.

Just two years later, Goldman officials were again summoned by the Senate Permanent Subcommittee on Investigations to address charges that the bank under Cohn and Blankfein had boosted its profits by building a “virtual monopoly” in order to inflate aluminum prices by as much as $3 billion.

The last few years have brought more unwanted attention. In 2015, the U.S. Justice Department launched an investigation into Goldman’s role in the alleged theft of billions of dollars from a development fund the firm had helped create for the government of Malaysia. Federal regulators in New York state fined Goldman $50 million because its leaders failed to effectively supervise a banker who leaked stolen confidential government information from the Fed, which hit the firm with another $36.3 million in penalties. In December, the CFTC fined Goldman $120 million for trying to rig interest rates to profit the firm.

Politically, 2016 would prove a strange year for Goldman. Bernie Sanders clobbered Hillary Clinton for pocketing hundreds of thousands of dollars in speaking fees from Goldman, while Trump attacked Ted Cruz for being “in bed with” Goldman Sachs. (Cruz’s wife Heidi was a managing director in Goldman’s Houston office until she took leave to work on her husband’s presidential campaign.) Goldman would have “total control” over Clinton, Trump said at a February 2016 rally, a point his campaign reinforced in a two-minute ad that ran the weekend before Election Day. An image of Blankfein flashed across the screen as Trump warned about the global forces that “robbed our working class.”

Goldman’s giving in the presidential race appears to reflect polls predicting a Clinton win and the firm’s desire for a political restart on deregulation. People who identified themselves as Goldman Sachs employees gave less than $5,000 to the Trump campaign compared to the $341,000 that the firm’s people and PACs contributed to Clinton. Goldman Sachs is relatively small compared to retail banking giants.

Yet, according to the Center for Responsive Politics, no bank outspent Goldman Sachs during the 2016 political cycle. Its PACs and people associated with the firm made $5.6 million in political contributions in 2015 and 2016. Even including all donations to Clinton, 62 percent of Goldman’s giving ended up in the coffers of Republican candidates, parties, or conservative outside groups.

President Donald Trump speaks to community bankers as Director of the National Economic Council Gary Cohn (2nd R) and White House Chief of Staff Reince Priebus (R) listen during an event at the Kennedy Garden of the White House on May 1, 2017 in Washington, D.C.

Photo: Alex Wong/Getty Images

5. TROJAN HORSE

There’s ultimately no great mystery why Donald Trump selected Gary Cohn for a top post in his administration, despite his angry rhetoric about Goldman Sachs. There’s the high regard the president holds for anyone who is rich — and the instant legitimacy Cohn conferred upon the administration within business circles. Cohn’s appointment reassured bond markets about the unpredictable new president and lent his administration credibility it lacked among Fortune 100 CEOs, none of whom had donated to his campaign. Ego may also have played a role. Goldman Sachs would never do business with Trump, the developer who resorted to foreign banks and second-tier lenders to bankroll his projects. Now Goldman’s president would be among those serving in his royal court.

Who can say precisely why Cohn, a Democrat, said yes when Trump asked him to be his top economic aide? No doubt Cohn has been asking himself that question in recent weeks. But he’d hit a ceiling at Goldman Sachs. In September 2015, Goldman announced that Blankfein had lymphoma, ramping up speculation that Cohn would take over the firm. Yet four months later, after undergoing chemotherapy, Blankfein was back in his office and plainly not going anywhere. Cohn was 56 years old when he was invited to Trump Tower. An influential job inside the White House meant a face-saving exit — and one offering a huge financial advantage.

Trump spoke of the great financial price Cohn paid to join him in the White House during his speech in Cedar Rapids. But something like the opposite was true. A huge amount of Cohn’s wealth was tied up in Goldman stock. By entering government, he could sell his stake in the firm to comply with federal ethics laws. That way he could diversify his holdings and avoid roughly $50 million in capital gains taxes —  at least until he sold the replacement assets.

A job in the White House might also prove an outlet for his frustrations with politicians and regulators intent on reining in the worst impulses of Wall Street. Trump was Trump, but he had also vowed to dismantle financial reform. “Dodd-Frank has made it impossible for bankers to function,” Trump said during the campaign. The new president had the potential to serve as a vessel for Goldman’s corporate interests.

“Maybe the one thing that holds this administration together is a belief that markets know best, and the least regulation is the best regulation,” said Dennis Kelleher of Better Markets. “Goldman’s interests fit with that very nicely.”

U.S. Treasury Secretary Steven Mnuchin testifies before the House Appropriations Committee’s Financial Services and General Government Subcommittee in the Rayburn House Office Building on Capitol Hill on June 12, 2017 in Washington, D.C.

Photo: Chip Somodevilla/Getty Images

Trump had given Steve Mnuchin, his campaign finance chair, the grander title. But taking over as Treasury secretary meant being confirmed by the Senate. Mnuchin’s confirmation vote was delayed after it was revealed that he’d neglected to list $95 million in assets (including homes in New York, Los Angeles, and the Hamptons) on his Senate Finance Committee disclosure forms and failed to disclose his ties to an offshore hedge fund registered in the Cayman Islands. Mnuchin was not confirmed until mid-February. The president’s pick for commerce secretary, Wilbur Ross, a financier who had bailed out several of Trump’s casinos a few decades earlier, was not confirmed until the end of February.

As a presidential aide, Cohn did not need Senate approval. He was part of the skeletal crew that arrived at the White House on day one, giving him a critical head start on wielding his clout and cultivating his relationship with the new president. At that point, Trump was summoning Cohn to the Oval Office for impromptu meetings as many as five times a day.

In early February, Trump signed an executive order giving his Treasury secretary 120 days to give him a hit list of regulations the administration could eliminate. But with Mnuchin yet to be confirmed, the task appeared to land in Cohn’s eager hands. He was standing at the president’s shoulder when Trump said, “We expect to be cutting a lot out of Dodd-Frank.” Shares in Goldman Sachs, which had jumped by 28 percent after the election, rose another $6 a share that day. Soon Cohn was coordinating Trump’s plans not only for rolling back regulations, but also for creating jobs and slashing taxes. He met with a health care specialist, along with House Speaker Paul Ryan and other Republican leaders, to discuss alternatives to the Affordable Care Act.

Proximity is power inside any White House, especially in this one, where policy often seems shaped by Trump’s last conversation. Treasury is several blocks away, while Cohn’s office was in the West Wing, directly across the hall from Bannon’s. Operating within a chaotic administration, Cohn was reportedly energized and focused, working around the clock. Cohn is a tenacious practitioner who, after ascending to the heights of Goldman Sachs, could teach a master class on the art of seizing a leadership vacuum and building alliances. On day 39 of the new administration, the White House sent out a press release introducing the “best-in-class team” Cohn had assembled “to drive President Trump’s bold plan for job creation and economic growth.” The 13 advisers included familiar figures who had worked for George W. Bush or his father, but they also included at least three former lobbyists so conflicted they would need an ethics waiver to work in the White House. For instance, Michael Catanzaro, the man Cohn chose to oversee energy policy, was until last year a lobbyist for such oil, gas, and coal companies as Devon Energy and Talen Energy. Shahira Knight had been a lobbyist for Fidelity, the mutual fund giant, before joining Cohn’s team.

Cohn’s strategy in those early months was to make himself indispensable to the new president. Cohn emerged as one of the few people around Trump comfortable interrupting him during a meeting or openly disagreeing on points of policy. The New York Times reported that Trump often turned to Cohn during a meeting and asked him directly, “What do you want to do?” Early on, Trump referred to Cohn as “one of my geniuses” — a quote Reuters attributed to a “source close to Cohn.”

Soon, major media were painting Cohn as a leading centrist inside the Trump White House because he had staked out positions on immigration, international alliances, and global warming at odds with Bannon’s hard-right nationalism. Bannon and his allies only bolstered this narrative by characterizing “Carbon Tax Cohn” and his allies, Jared Kushner and Ivanka Trump, as interlopers — “the Democrats,” as some inside the White House called them. “Within Trump’s Inner Circle, a Moderate Voice Captures the President’s Ear,” read the headline of a Cohn profile in the Washington Post.

“Led by Gary Cohn and Dina Powell — two former Goldman Sachs executives often aligned with Trump’s elder daughter and his son-in-law — the group and its broad network of allies are the targets of suspicion, loathing and jealousy from their more ideological West Wing colleagues,” the Washington Post reported. Fueling the rage of the ideologues, Cohn and his allies were largely winning. Trump dropped Bannon from the National Security Council and elevated Powell to deputy national security adviser. When, after Charlottesville, false reports leaked that Cohn was so disgusted with the president he was resigning, blue-chip stocks slid down. Instead, Bannon was out. Cohn, despite reports that he invoked Trump’s wrath for critical remarks to the Financial Times, was still in and expected to deliver the president a win on corporate taxes.

National Economic Council Director Gary Cohn arrives at a Wall Street heliport while traveling with President Donald Trump on May 4, 2017 in New York City.

Photo: Brendan Smialowski/AFP/Getty Images

On the day it was announced that he was joining the Trump administration, Cohn said on a goodbye podcast for Goldman Sachs, “You look at the size of our capital. You look at the size of our balance sheet. You look at the size of our people — it’s just enormous.” More than $40 billion had flowed into the bank in 2016, bringing the bank’s assets under management to a record $1.38 trillion. That meant pressure to find ways to put that money to work — an enormous challenge if regulators finally shut down Goldman’s prop trading arm.

How exactly could Cohn recuse himself from matters involving Goldman when almost every aspect of his job has the potential to either grow Goldman’s profits and inflate its stock price — or tank them both?

“To the extent Goldman Sachs is a direct party in a matter, Gary will recuse himself,” a source familiar with the situation said. But, the source added, “As NEC director, Gary is going to touch on matters on the day-to-day economy as a whole and Goldman Sachs is a participant in the economy, thus Gary will indirectly touch on things that affect Goldman Sachs along with other banks and institutions.”

Yet rather than publicly recuse himself on attempts to undo Dodd-Frank, Cohn has led the charge from inside the White House. On that matter, Cohn is a walking, talking conflict of interest.

While at Goldman, Cohn had personally met with officials at the Commodity Futures Trading Commission to discuss the derivatives reform plank of Dodd-Frank, an arena in which Goldman is a dominant player. He had taken issue with rules imposed by Dodd-Frank that require banks to keep more capital on hand. Requiring banks to hold more money in reserve made them “unequivocally” safer than before 2008, he said in a 2015 interview while still Goldman’s president, but he complained that Goldman was now able to lend less money, hurting profits. And then there’s the Volcker Rule. Cohn, while still president of the firm, had traveled to D.C. at least twice to personally lobby regulators about its implementation.

These days, it can be hard to tell whether Cohn is speaking as a high-ranking White House official or a former Goldman Sachs executive.

In the wake of Trump’s February call for a rollback in financial regulations, Cohn vowed in an interview with Bloomberg TV, “We’re going to attack all aspects of Dodd-Frank.” The first example he gave: the Volcker Rule, which he cast as harmful to the country’s competitive advantage. In an interview that same day with Fox Business, he homed in on another Goldman obsession: Dodd-Frank’s capital requirements. “Banks are forced to hoard money because they are forced to hoard capital, and they can’t take any risks,” he said. Mortgage, auto, credit card lending, and commercial lending are all up since 2010. Yet Cohn told Fox viewers, “We need to get banks back in the lending business, that’s our No. 1 objective.”

Roy Smith, a former Goldman partner now teaching at the NYU Stern School of Business, argues that Cohn should avoid the administration’s effort to unwind Dodd-Frank altogether, but “at a very minimum he has to excuse himself whenever the discussion turns to Volcker.” But Smith said he has trouble imagining Cohn leaving the room when Volcker comes up. “The hard part for someone like Cohn is that he knows where all the pain points are with Volcker and other parts of Dodd-Frank,” Smith said. “His every instinct would be to get involved.”

Beyond deregulation, two other pillars of Trump’s economic plan — cutting taxes and investing in infrastructure — would have dramatic impacts on Goldman’s bottom line.

Thanks to loopholes, many Fortune 500 corporations pay little or no corporate income tax at all. By contrast, Goldman Sachs typically pays taxes near the official 35 percent federal tax rate. In 2014, for instance, Goldman paid $3.9 billion in taxes on profits of $12.4 billion, or 31 percent. Last year, the firm’s tax bill was $2.7 billion on profits of $10.3 billion, or 28 percent. In that same Fox Business interview, Cohn said that “lower corporate taxes” was the White House’s “starting point” on tax reform; cuts to personal income taxes were a secondary concern.

Under the plan Cohn and Mnuchin announced last spring, what Cohn called “one of the biggest tax cuts in the American history,” corporate taxes would be capped at 15 percent. If Cohn succeeds, Goldman will save massive sums: At that rate, Goldman would have paid $2 billion less in taxes in 2014, $1.4 billion less in 2015, and $1.4 billion less in 2016. The Koch brothers’ network of political groups has already spent millions of dollars to promote the proposal. Even Blankfein, who the Trump campaign singled out in the commercial it ran in the final days of the campaign, acknowledged in a voicemail to employees that Trump’s commitment to tax cuts, deregulation, and infrastructure “will be good for our clients and our firm.”

The details of the president’s “$1 trillion” infrastructure plan are similarly favorable to Goldman. As laid out in the administration’s 2018 budget, the government would spend only $200 billion on infrastructure over the coming decade. By structuring “that funding to incentivize additional non-Federal funding” — tax breaks and deals that privatize roads, bridges, and airports — the government could take credit for “at least $1 trillion in total infrastructure spending,” the budget reads.

It was as if Cohn were still channeling his role as a leader of Goldman Sachs when, at the White House in May, he offered this advice to executives: “We say, ‘Hey, take a project you have right now, sell it off, privatize it, we know it will get maintained, and we’ll reward you for privatizing it.’” “The bigger the thing you privatize, the more money we’ll give you,” continued Cohn. By “we,” he clearly meant the federal government; by “you,” he appeared to be speaking, at least in part, about Goldman Sachs, whose Public Sector and Infrastructure group arranges the financing on large-scale public sector deals. “Goldman Sachs is one of the largest infrastructure fund managers globally,” according to infrastructure advisory firm InfraPPP Partners, “having raised more than $10 billion of capital since the inception of the business in 2006.” Lost in the infamous press conference the president gave in the lobby of Trump Tower a few days after Charlottesville, with Cohn and Mnuchin visibly uncomfortable at his right flank, were Trump’s remarks on infrastructure, the ostensible purpose of the event. The thrust was that the president would grease the wheels for project approvals by signing an executive order rolling back environmental impact requirements and other elements of an “overregulated permitting process.”

In countless other ways, Cohn is positioned to help the firm that has been so good to him over the years. The country’s National Economic Council adviser might caution a president against running too large a deficit, especially amid a healthy economy. But Goldman Sachs is in the business of finding investors to underwrite government debt. An economic adviser might caution a populist president that corporate inversions often cost jobs and tax revenue. Instead, Trump has ordered a review of policies Obama put in place to discourage them — good news for Cohn’s former colleagues. Transparency has been a watchword of initial public offerings dating back at least to the Securities and Exchange Act of 1934, but easing those rules, a step Goldman has sought, could potentially generate hundreds of millions of dollars in fees for investment banks such as Goldman. The SEC announced in June that it would allow any company going public to withhold details of its finances and strategies, an exemption previously available only to firms with under $1 billion in revenue — more good tidings for Goldman. Just loosening the rules for IPOs, said Tyler Gellasch, the former Senate staffer, “could mean hundreds of millions of dollars more to Goldman.”

In June, the Treasury Department released a statement of principles about the administration’s approach to financial regulation focused on promoting “liquid and vibrant markets.” Not surprisingly, the report included a call to ease capital requirements and substantially amend the Volcker Rule.

It’s Cohn’s influence over the country’s regulators that worries Dennis Kelleher, the financial reform lobbyist. “To him, what’s good for Wall Street is good for the economy,” Kelleher said of Cohn. “Maybe that makes sense when a guy has spent 26 years at Goldman, a company who has repaid his loyalties and sweat with a net worth in the hundreds of millions.” Kelleher recalls those who lost a home or a chunk of their retirement savings during a financial crisis that Cohn helped precipitate. “They’re still suffering,” he said. “Yet now Cohn’s in charge of the economy and talking about eliminating financial reform and basically putting the country back to where it was in 2005, as if 2008 didn’t happen. I’ve started the countdown clock to the next financial crash, which will make the last one look mild.”

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There’s always a market in crisis… you just have to look!

Via The Daily Bell

“You never let a serious crisis go to waste. And what I mean by that is it’s an opportunity to do things you think you could not do before.” Rahm Emanuel, an American politician, was talking about politics when he said this. But he may as well have said it about investing in troubled financial markets.

If you’re looking to invest when the odds are in your favour then look for a crisis. When asset prices collapse it creates life-changing opportunities to buy (the right) assets on the (very) cheap.

But if you’re a victim of home market bias – and you’re over-invested in your “home” market – you might have to wait a long while for a nice ripe crisis. And even once it comes, chances are that you’ll be too caught up in it yourself, unless you were smart or lucky enough to sell early.

You might have cash to buy cheap assets… but you might have already been holding them on the way down.

Investing in markets or companies in crisis, then, requires leaving what you know, and running towards the fire. (That’s part of what I’ll be doing in our new investment research service… lifetime subscribers will have the opportunity to join me on investment research trips to off-the-radar – and big-upside – destinations around the globe. Find out more here.)

What follows are three of my favourite examples of markets in crisis that were fortune-making for savvy investors. The exciting thing is that the “before” part of each of these situations exists today – in some market or sector or company… it’s just a matter of finding it – before it becomes the “after” of the examples below.

Profiting from Spain’s “Return to Europe”

Today, it’s strange to think of Spain as a fascist dictatorship. However, from the 1930s through the 1970s, its markets and economy were largely isolated from the rest of the world. Europe effectively ended at the Pyrenees, the mountain range separating Spain and Portugal from France.

When Spain’s longtime dictator, Francisco Franco, died in November 1975, the country’s future was up in the air. For several years, civil war and chaos looked like a real possibility. (I lived in Spain at the time… and though as a pre-adolescent I didn’t realise it, the country was at a true crossroads.)

But Spain slowly evolved into a democracy. It adopted a new constitution in 1978, and the government put down a coup attempt in 1981.

The 1982 elections solidified Spain’s transition to democracy and its eventual position in the western military alliance, NATO.

In 1986, Spain joined the European Economic Community – now the European Union. (People rang in the new year, marking the official entry into the EEC, with the cry, “We’re Europeans!”) At the time, new EEC members received massive infrastructure investments in order to help lift their standard of living to be on par with the rest of the union. These funds fuelled a two-decade economic boom in Spain that only ended with the 2008-2009 global economic crisis.

Investors who saw the opportunity for enormous positive change in Spain in the 1970s could have made returns of 4,300 percent in subsequent years.

Profiting from the end of a 26-year civil war

In 1983, Sri Lanka, a small island nation south of India, entered a prolonged civil war. The conflict between the Sinhalese ethnic majority and the Tamil ethnic minority lasted 26 years. (It was one of history’s more brutal conflicts… the Tamil Tigers reportedly invented the suicide vest – and pioneered suicide bombing as a war tactic.)

The long war stunted the country’s economic growth and created political uncertainty. Suicide bombings and other terror tactics by the Tamils posed an ongoing threat to the rest of the island. This fueled a steady migration out of Sri Lanka and strongly deterred foreign investment.

Meanwhile, excessive government spending fostered high inflation and constant budget deficits (when governments spend more money than they take in). As a result, Sri Lanka’s stock market suffered low turnover and minimal foreign interest. Sentiment toward the country was overwhelmingly negative. In fact, to much of the rest of the world, Sri Lanka’s civil war is what they know of the country… I’ve often been asked, “Oh, are they still at war?” after I mention that I lived there for a few years.

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In 2002, Sri Lanka’s economy began to slowly improve, and the country made some progress toward political harmony. The turnaround was strong enough to trigger a sharp rally in the Sri Lankan market. In November 2005, the election of President Mahinda Rajapaksa, coupled with a strong public mandate to end the civil war, further fueled the rally.

Then the global economic crisis hit, along with the final and most ferocious chapter in Sri Lanka’s civil war, and in early 2009 the country’s stock market fell sharply.

The Sri Lankan stock market didn’t re-rate until the Tamils were definitively defeated in May 2009. The northern and eastern regions of the country – previously off-limits to investment and economic development because of the war – were gradually re-integrated into the economy, bolstering growth.

Investors who bought Sri Lankan stocks amidst negative sentiment could have made gains of 2,000 percent – though with plenty of volatility along the way.

Sugar prices rocket 45 times higher

The sugar industry experienced multiple price shocks throughout the 20th century. That’s not unusual for commodities, which tend to go through cyclical “boom and bust” periods.

Sugar boomed from 1962 to 1964, after the U.S. suspended imports of sugar from the Caribbean island of Cuba. (Socialist Fidel Castro led the Cuban Revolution that ousted President Fulgencio Batista in 1959, and the U.S. imposed a multi-decade economic blockade on the country, as part of its failed effort to undercut Castro.)

In 1964, the price of sugar started to fall. By 1966, the price had collapsed to close to a penny per pound. Finally, sugar was so cheap that demand started to rise. Then, in 1969, the U.S Food and Drug Administration banned cyclamate, a common sugar substitute, after researchers discovered it was carcinogenic. This pushed demand for sugar even higher.

Over the next four years, consumption outpaced supply, and inventories dwindled. This triggered a dramatic increase in sugar prices. Sugar hit a high of $0.64 per pound in October 1974.

Investors who got in at the 1966 low could have made just upwards of 5,000 percent through late 1974.

These types of markets…

Today, many markets are close to all-time highs. But there are plenty of assets that are in crisis… or – maybe even worse – are unloved and ignored, and as a result are trading at crisis-like levels. I’ll be looking for those types of markets, and companies, in our new service, International Capitalist, and the life-changing price gains that can go with them… find out more here.

Good investing,


Kim Iskyan
Publisher, Stansberry Churchouse Research

This was written by Stansberry Churchouse Research, an independent investment research company based in Singapore and Hong Kong that delivers investment insight on Asia and around the world. Click here to sign up to receive the Asia Wealth Investment Daily in your inbox every day, for free.

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Global Debt Bubble Understated By $13 Trillion Warn BIS

Global Debt  Bubble Understated By $13 Trillion Warn BIS

 – Global debt bubble may be understated by $13 trillion: BIS
– ‘Central banks central bank’ warns enormous liabilities have accrued in FX swaps, currency swaps & ‘forwards’
– Risk of new liquidity crunch and global debt crisis
– “The debt remains obscured from view…” warn BIS

Global debt may be under-reported by around $13 trillion because traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds, the BIS said on Sunday.

Bank for International Settlements researchers said it was hard to assess the risk this “missing” debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis.

The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.

The fact these FX derivatives do not appear on financial and non-financial institutions’ balance sheets under current accounting rules means little is known about where the debt lies.

“The debt remains obscured from view,” Claudio Borio, head of the BIS’s monetary and economic department, and two colleagues, Robert McCauley and Patrick McGuire, said in its latest quarterly report.

“Accounting conventions leave it mostly off-balance sheet, as a derivative, even though it is in effect a secured loan with principal to be repaid in full at maturity,” BIS said.

Explaining the risk they added: “In particular, the short maturity of most FX swaps and forwards can create big maturity mismatches and hence generate large liquidity demands, especially during times of stress.”

When buying a foreign asset, a domestic investor has three choices: buy a currency forward, undertake an FX swap or do a repurchase transaction.

But while the first two are recorded on balance sheets on a net basis without taking the notional amount into consideration, a repo transaction is recorded on a gross basis, when all these three types of trades are essentially similar – secured debt.

All these trades are used to remove the foreign exchange risk in a purchase of foreign securities.

In a swap, two parties exchange currencies and agree to reverse the swap later. In a forward contract the parties agree to exchange currencies at a fixed date and price in the future.

Swaps and forwards amounted to more than $3 trillion a day last year, equivalent to more than 60 percent of total FX turnover, the BIS said. More than 90 percent of the market was in dollars and FX swaps accounted for 75 percent of the total.

They are also overwhelmingly short-term. Three-quarters of positions had a maturity of less than a year at the end of 2016.

Though the outstanding amount of FX swaps and forward contracts has quadrupled since the early 2000s to $58 trillion – almost three times the $21 trillion value of world trade – it dropped after the financial crisis, reflecting a drop in hedging needs as both trade and investments collapsed.

The BIS said non-financial users employ FX forwards and currency swaps for speculation and to hedge international trade and foreign currency bonds.

Institutional investors, asset managers and hedge funds used forwards to hedge their holdings and take positions while financial firms used swaps to hedge international bonds.

While this debt is mostly secured as counterparties usually enter into forward transactions to reduce currency exposure, the make-up of these largely short-term transactions means they are often the most vulnerable to strains in the financial system.

For example, European banks increased their reliance on these money market instruments during the global financial crisis to secure their dollar funding while the collapse of the structured products markets during the crisis sent shockwaves rippling through the system.

“Markets calmed only after coordinated central bank swap lines to supply dollars to non-U.S. banks became unlimited in October 2008,” the BIS report said.

As for who is lending the dollars to non-U.S. banks, the BIS said the funding came from U.S. banks, central banks European agencies, supranational organizations and private non-banks.

“All of these appear to provide some funding, with U.S. banks and central banks together closing about half the gap,” it said.

Source: Global debt may be understated by $13 trillion: BIS – Reuters

Related Content

Gold Protect From $217 Trillion Global Debt Bubble

Global Debt Bubble Sees Wealthy Diversify Into Gold

World Is Now $199 Trillion In Debt

 

News and Commentary

Gold edges up as dollar eases; markets brace for Fed meeting (Reuters.com)

Gold ends at 3-week low as U.S. stock indexes tap record highs (MarketWatch.com)

Stocks in Asia Rise; Yen Steady After Two-Day Loss (Bloomberg.com)

World stocks reach new peak as Fed-focused week begins (Reuters.com)

Builder confidence slips in September on worries about labor, materials availability (MarketWatch.com)

Source: Bloomberg

Global debt may be underestimated by $13 trillion, BIS warns (Reuters.com)

Largest Gold ETF Highlights Bullion Traders’ Confusion (Bloomberg.com)

In “Warning To Pyongyang”, B-1B Bombers, F-35s Hold Mock Bombing Drills (ZeroHedge.com)

India Considers Issuing Its Own Bitcoin-Like Cryptocurrency as Legal Tender (Bitcoin.com)

Mexican Congress Debates the Monetization of the ‘Libertad’ Silver Ounce (Plata.com.mx)

Gold Prices (LBMA AM)

19 Sep: USD 1,308.45, GBP 969.30 & EUR 1,091.25 per ounce
18 Sep: USD 1,314.40, GBP 970.16 & EUR 1,100.68 per ounce
15 Sep: USD 1,325.00, GBP 977.32 & EUR 1,109.16 per ounce
14 Sep: USD 1,323.00, GBP 1,002.44 & EUR 1,111.58 per ounce
13 Sep: USD 1,332.25, GBP 1,003.85 & EUR 1,112.43 per ounce
12 Sep: USD 1,326.25, GBP 1,000.66 & EUR 1,109.41 per ounce
11 Sep: USD 1,338.75, GBP 1,015.31 & EUR 1,114.24 per ounce

Silver Prices (LBMA)

19 Sep: USD 17.15, GBP 12.70 & EUR 14.31 per ounce
18 Sep: USD 17.53, GBP 12.94 & EUR 14.66 per ounce
15 Sep: USD 17.70, GBP 13.03 & EUR 14.81 per ounce
14 Sep: USD 17.75, GBP 13.40 & EUR 14.91 per ounce
13 Sep: USD 17.91, GBP 13.50 & EUR 14.94 per ounce
12 Sep: USD 17.75, GBP 13.37 & EUR 14.87 per ounce
11 Sep: USD 17.85, GBP 13.51 & EUR 14.86 per ounce


Recent Market Updates

– Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
– Gold Up, Markets Fatigued As War Talk Boils Over
– Oil Rich Venezuela Stops Accepting Dollars
– Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
– British People Suddenly Stopped Buying Cars
– Buy Gold for Long Term as “Fiat Money Is Doomed”
– Conor McGregor – Worth His Weight In Gold?
– Gold Has 2% Weekly Gain,18% Higher YTD – Trump’s Debt Ceiling Deal Hurts Dollar
– ‘Things Have Been Going Up For Too Long’ – Goldman CEO
– Physical Gold In Vault Is “True Hedge of Last Resort” – Goldman Sachs
– Bitcoin Falls 20% as Mobius and Chinese Regulators Warn
– Gold Surges To $1338 as U.S. Warns of ‘Massive’ Military Response
– Precious Metals Outperform Markets In August – Gold +4%, Silver +5%

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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