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America's Terminal Political Dysfunction

Charles Hugh Smith and Gordon T Long continue their discussion on Crony Capitalism in America.

How Crony Capitalism Works

  • Private interests influence government spending and regulations with lobbying and campaign contributions: Governance by the highest bidder.
  • The more successful the cronyism, the more money the corporations have to spend on lobbying, which serves to further protect their profits and share of government spending. This feedback loop rewards crony capitalism and limits classical capitalism's key features: transparent markets and competition.
  • An economy dominated by crony capitalism stagnates as competition is suppressed and government enriches those who are "more equal than others" (to borrow a phrase from Orwell)

Special Interest Veto Power

  • One key dynamic in America's political dysfunction is the veto power extended to special interests: any reform that costs them profits and/or impacts their share of Federal funds is vetoed.
  • Reform that doesn't carry political/financial pain is not real reform
  • When every politically potent entrenched interest can veto unfavorable legislation and regulation, real reform is impossible

Absence of Real Reform

  • Without real reform, the system stagnates and manageable problems become crises.
  • Since entrenched interests refuse to accept any pain, problems fester for years beneath the half-measures and toothless "reforms" passed for public-relations purposes.
  • The problems (unfunded liabilities, explosive financial risks buried in the shadow banking system, etc.) then blossom into full-blown crises that cannot be resolved.
  • Crisis management leads to politically expedient Band-Aids that mitigate the symptoms without addressing, much less solving, the underlying political/financial diseases.

The Crony Tribute System

Gordon argues that Crony Capitalism today closely resembles the Roman "Tribute" System also adopted by the Mafia.Crimes being created today are met with fines. Guilty parties do not go to jail but rather the corporation pays a fine. Billion dollar crimes are assessed Million dollar fines. A percentage that closely mirrors a Tribute System. The government makes money through enforcement but not prevention. Corporations make fortunes with confidence that the government will settle for a piece of the fleecing of the people - and the game continues.

The Crony Tribute System

Gordon believes, as the recent tapes released by Carmen Segarra indicate, the US regulatory system has effectively put the "Fox in charge of the Hen House"

Fox in charge of the Hen House


Video: America's Terminal Political Dysfunction - w/ Charles Hugh Smith

Charles Hugh Smith & Gordon T Long, 25 Minutes


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