Monday, January 08, 2018

How Far Can Those At The Top Push People Before Society Explodes?

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The very consequential Tax Scam that McConnell, Ryan and congressional Republicans got through Congress and onto Señor Trumpanzee’s for his paw print was the biggest legislative upward redistribution of wealth in American history. Hopefully voters will have their revenge in November, although I suspect this gentleman won’t:



On Thursday, the Saudi monarchy arrested 11 princes for opposing crown prince Mohammed bin Salman’s decision to redistribute a little in the other direction. CNN reported that the 11 princes staged a sit-in at the royal palace in Riyadh, protesting a recent royal order that "halted payments by the state to members of the royal family to cover their electricity and water utility bills,” according to the attorney general, Sheikh Saud Al Mojeb.

MBS seems to be extorting money from some of the royal family and some of the kingdom’s wealthiest citizens.
More than 200 people were questioned at one point, officials said then. One of the people who was questioned and released was son of the late King Abdullah, Prince Miteb. An undisclosed financial settlement was agreed upon. The government said at the time it expected to release more people as other settlements were reached.

Saudi officials estimate that corruption and embezzlement has cost the kingdom at least $100 billion over decades.

The crown prince has already introduced sweeping changes including subsidy cuts, new taxes and the lifting of a controversial ban on women driving.

Also this week, King Salman announced new cost-of-living allowances for military personnel, government employees and students, the state-run Saudi Press Agency reported.

Government employees will receive a monthly cost-of-living allowance of 1,000 riyals ($266) for one year. Military personnel serving in the Saudi-led coalition fighting in Yemen will receive a payout of 5,000 riyals ($1,333).

The decree also increases the stipend for students by 10% for one year and increases retirement allowances, the SPA reported.
Finances are at the root of the problems sweeping Iran across the Gulf as well. Although the numbskull American “president” has made a farce of it, the unrest in Iran could turn out to be a really big deal. The extremist former president, a Trumpian character himself, Mahmoud Ahmadinejad, was arrested for inciting unrest against the Rouhani government, according to London-based Al-Quds Al-Arabi. He’s under house arrest.
The newspaper said that Ahmadinejad, during a visit to the western city of Bushehr on December 28, said, “Some of the current leaders live detached from the problems and concerns of the people, and do not know anything about the reality of society.”

He supposedly added that Iran was suffering from “mismanagement” and that the government of President Hassan Rouhani “believes that they own the land and that the people are an ignorant society.”
The Ahmadinejad connection to the unrest goes deeper— and into the pockets of Iranians Faryar Gazanfari:
Recent protests in Iran were sparked when several credit institutions went bankrupt and their depositors lost their savings in an event that will affect thousands of people. Although on the surface this looks like a typical financial crisis, the failure of these institutions may strike a devastating blow-- one that may reach a tipping point this time and lead to a run on the banks. The strong words coming from Washington and President Donald Trump may be taken as a signal that America is pushing for a regime change, a tactic that could succeed or backfire.

I traveled to Iran to visit my ailing grandmother in September 2016. What caught my eye was the sheer number of credit institutions and banks offering double-digit returns on deposits. Virtually everyone I knew had a substantial deposit with one of these so-called banks. Called cooperatives, they are private institutions that use the capital invested by their members to engage in business activities.

The origins of the cooperatives (or Ta`avoni) go back to 1971 and were an effort by the government to privatize the economy. Over the years, their number grew rapidly and the scope of their activities widened. They even started to provide financial services to the extent that they morphed into shadow banks. Legally, the establishment of such an entity needs a permit from Iran’s Central Bank. However, some say many of them circumvented the rules and took advantage of rampant corruption during the presidency of Mahmood Ahmadinejad to set up shop and start receiving deposits.

Valiollah Seif, the president of Iran’s Central Bank, said in July that approximately 25 percent of the cash flow in Iran’s financial market was handled by such institutions in 2013. During my travels, I heard complaints about the government’s crackdown on these cooperatives. People I spoke with, not appreciating that this was just too good to be true, were foolishly concerned that the government was aiming to cap the interest these institutions were allowed to offer. I one day noticed seven different cooperatives located wall-to-wall on a street. Compared to my prior trips, their numbers had grown dramatically. I heard from someone that some of them even offer higher interest than what they advertise to attract high-net-worth individuals.

…Trump’s travel bans that affected the Iranians and the stance against the nuclear deal also left a bad taste for Iranian people, especially since the Nuclear deal had strong support of Iranians from all sides. But whether or not Trump’s tweets resonate on the streets of Tehran, they will have an impact of the economy. Iran’s rial exchange rate is directly affected by words coming from Washington. This exacerbates inflation, which is one of the main complaints of Iranian protesters.

That makes life harder for the Iranian government, which is still gasping for air after decades of economic sanctions and is slowly recovering from the damage done by Ahmadinejad. Tehran may not have the means to bail out a failed banking system. It took the “full faith and credit” of the United States, the most powerful economy in the world, to prevent the collapse of the banking system in 2008. However, for many developing countries, such a crisis will make their “full faith and credit” catch fire on the streets, as is happening in Iran currently. The Trump administration may be betting that the banking situation may prove insurmountable for the Iranian government, and all they have to do is to fuel the fire. They may be right.

So how could the government not prepare for the eventual collapse of this financial bubble? One answer may be that bulk of these cooperatives came to life during the presidency of Ahmadinejad. His cabinet is mainly responsible for allowing the emergence of a shadow banking system in Iran. And given that his policies and rhetoric brought about the worst conditions in many years and increased sanctions, the government of President Rohani was stretched too thin attending to urgent issues of the time, including the nuclear issue.

During my stay, I kept counseling friends to withdraw their deposits or at least limit their exposure. I met someone who liquidated his entire net worth, quit working, and started living on 18 percent interest on his money. Later I learned there are many people like him. It felt like a financial virus that was in its incubation period.

In Iran, modern standards of banking such as capital requirements and financial disclosures are not properly followed. Some of the official banks even have de facto authority to engage in quantitative easing. There are a substantial number of banknotes in circulation. These notes look very similar to the official currency and are used in everyday commerce. In fact, these notes are sometimes preferable over the official currency as they come in much higher denominations and allow for easier transport. Although this is not advertised as banks having the ability to engage in quantitative easing, it has exactly that effect. Simply put, some banks print money on their own. Imagine Bank of America gave you a $1,000 bill that they printed and you could use that as currency anywhere.

Iran’s economy has been improving under President Rohani but at a much slower rate than people were anticipating, and it is still weak and sensitive. Any sign of problem leads to a noticeable jump in inflation. It appears that the failure of these cooperatives sent a shockwave that resulted in an overnight rise in the costs of many essentials food items, and this was simply too much to take for people who have been suffering under debilitating sanctions for several years.

As for the Iranian government, they were just about to enjoy the lifting of some of the sanctions and increased business relations with foreign countries, especially in Europe. Any large-scale crackdown on street protests would put Tehran’s business relations with Europe at risk too, pushing the economy even close to the brink.
And how about this from the ugly orange monkey who doesn’t know there’s a time to keep his face shut?
Mohammed bin Salman, the 32-year old Saudi crown prince in the process of purging his blood-relation rivals for the throne, is an “inveterate player of video games,” in Michael Wolff’s explosive book Fire & Fury. A lesser-explored section of the book shows MBS throwing himself into owning Trump as a step toward consolidating his own power. His path was to ignore Secretary of State Rex Tillerson in favor of son-in-law Jared Kushner-- looking to family channels instead of formal ones is a characteristic of most authoritarian countries-- like “meeting someone nice at your first day of boarding school,” a Kushner friend observed. Leveraging Trump’s ignorance, Kushner’s inexperience, a shared hostility toward Iran and the administration’s allergy to Obama’s foreign policy, MBS dangled a shiny orb in front of the White House: Middle East peace, to satisfy Trump’s longing for a grand victory. It’s MBS who brokers Trump’s Louis XIV-like reception in Riyadh, a gaudy spectacle of adulation in which the Saudis assembled a host of Middle Eastern strongmen to seal a symbolic allegiance with Trump through touching a bizarre glowing sphere. “Jared’s gotten the Arabs on his side,” Wolff quotes Trump. When MBS moved in November to purge his opposition, Trump “would tell friends that he and Jared had engineered a Saudi coup,” Wolff writes, with Trump boasting: “We’ve put our man on top!”

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2 Comments:

At 5:58 AM, Anonymous Anonymous said...

The title has diddly to do with the article.

Americans have proved almost impervious to the self-awareness that is required for any explosion.

Reagan transferred a trillion from the bottom to the top and nothing except worship.
poppy bush tweaked/paused that transfer and got eaten by his own party.
Clinton gave the money nafta, wto, gatt, cfma, glba and various deregs and is still worshipped.
cheney and his sock puppet, junior bush, gave us arbitrary wars for oil, torture and transferred another trillion to the top before giving us the 2008 crash, and junior is now doing the late night teevee shtick for guffaws.
obamanation took a FDR congress and a FDR mandate, flushed it, laid 7.25 years of his 8 at the feet of the money and gave us mass murder by drone and HE is worshipped the way great statesmen are (Churchill, Mandela, FDR, George Washington...).

If any explosion occurs, it'll be because the Nazi demo sees their hero being mistreated. And it could mean another north-south white-nonwhite civil war.
I wonder if the military would obey their cic or not.

 
At 1:20 PM, Blogger Elizabeth Burton said...

According to every report I have read on the reason for the protests in Iran that came from sources actually there, as opposed to the US corporate media, the initial ones were caused by the application of the kind of neoliberal austerity programs that, as in this country, favor the rich over the poor. One of those programs was the elimination of the subsidy to the poor; another was to increase prices on basic necessities. There is great suspicion that intelligence agencies in both the US and the UK co-opted these protests in an effort to foment regime change.

What I just read is the very kind of propaganda the US public is treated to on an hourly basis. Only in a country totally corrupted by neoliberal economics would otherwise intelligent people accept that the root cause of the protests had to do with banks.

 

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