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Demeter
Demeter's Journal
Demeter's Journal
September 30, 2014
In a rare move, a U.S. judge held Argentina in contempt on Monday, saying the country is taking "illegal" steps to evade his orders in a longstanding dispute with hedge funds over defaulted debt. A source at Argentina's central bank nevertheless said the country plans to deposit an interest payment at a local bank on Tuesday, in direct defiance of U.S. District Judge Thomas Griesa's admonitions.
Griesa, who has overseen the litigation in New York for years, put off a decision on whether to impose sanctions on the South American country, which defaulted in July for the second time in 12 years after failing to reach a deal with the hedge funds. But he issued a clear warning that Argentina must stop efforts to get around his rulings by making payments locally. "These proposed steps are illegal and cannot be carried out," Griesa said, his voice rising, during a court hearing in lower Manhattan. Those steps, he said, include legislation Argentina passed that would allow it to replace Bank of New York Mellon Corp (BK.N) as trustee for some restructured debt with Banco de la Nacion Fideicomiso while allowing a swap of that debt for bonds payable in Argentina under its local laws.
Despite his ruling, Argentina plans to deposit an interest payment of at least $200 million with Banco de la Nacion Fideicomiso on Tuesday, the central bank source said. The developments followed a familiar pattern in the litigation, in which Griesa criticizes Argentina for disobeying his orders and Argentine officials defiantly continue to do so. They also underscored the uncertain impact of a contempt ruling on a foreign government. Argentine Foreign Minister Hector Timerman said in a statement late on Monday that Griesa's decision was a "violation of international law" and would have no impact other than to further the fight of the "vulture funds" against Argentina. "The Argentine government reaffirms its decision to continue defending national sovereignty and asking the U.S. government to accept the jurisdiction of the International Court of Justice to resolve this controversy between both countries," he said.
Griesa has called on Argentina to reach a settlement with the holdouts, appointing a mediator to oversee talks that have thus far been unsuccessful.
.......................................................
Griesa's decision to hold a foreign government in civil contempt of court is a rare but not unprecedented move. In typical cases, U.S. judges can hold parties in contempt and issue sanctions in order to force compliance with their orders. The hedge funds had proposed a daily fine of $50,000. However, Argentina might simply ignore any monetary sanction, the hedge funds conceded in court. In that case, said Robert Cohen, a lawyer for the funds, Griesa could consider non-monetary sanctions that would coerce Argentina into compliance.
Cohen did not indicate what those sanctions could be. They might, for instance, include barring Argentina from doing business with U.S. banks, though such a ruling would likely engender fresh litigation over whether Griesa has the authority to do so.
MORE
U.S. judge holds Argentina in contempt over bond payment plan
http://www.reuters.com/article/2014/09/30/us-argentina-debt-idUSKCN0HO1S520140930In a rare move, a U.S. judge held Argentina in contempt on Monday, saying the country is taking "illegal" steps to evade his orders in a longstanding dispute with hedge funds over defaulted debt. A source at Argentina's central bank nevertheless said the country plans to deposit an interest payment at a local bank on Tuesday, in direct defiance of U.S. District Judge Thomas Griesa's admonitions.
Griesa, who has overseen the litigation in New York for years, put off a decision on whether to impose sanctions on the South American country, which defaulted in July for the second time in 12 years after failing to reach a deal with the hedge funds. But he issued a clear warning that Argentina must stop efforts to get around his rulings by making payments locally. "These proposed steps are illegal and cannot be carried out," Griesa said, his voice rising, during a court hearing in lower Manhattan. Those steps, he said, include legislation Argentina passed that would allow it to replace Bank of New York Mellon Corp (BK.N) as trustee for some restructured debt with Banco de la Nacion Fideicomiso while allowing a swap of that debt for bonds payable in Argentina under its local laws.
Despite his ruling, Argentina plans to deposit an interest payment of at least $200 million with Banco de la Nacion Fideicomiso on Tuesday, the central bank source said. The developments followed a familiar pattern in the litigation, in which Griesa criticizes Argentina for disobeying his orders and Argentine officials defiantly continue to do so. They also underscored the uncertain impact of a contempt ruling on a foreign government. Argentine Foreign Minister Hector Timerman said in a statement late on Monday that Griesa's decision was a "violation of international law" and would have no impact other than to further the fight of the "vulture funds" against Argentina. "The Argentine government reaffirms its decision to continue defending national sovereignty and asking the U.S. government to accept the jurisdiction of the International Court of Justice to resolve this controversy between both countries," he said.
Griesa has called on Argentina to reach a settlement with the holdouts, appointing a mediator to oversee talks that have thus far been unsuccessful.
.......................................................
Griesa's decision to hold a foreign government in civil contempt of court is a rare but not unprecedented move. In typical cases, U.S. judges can hold parties in contempt and issue sanctions in order to force compliance with their orders. The hedge funds had proposed a daily fine of $50,000. However, Argentina might simply ignore any monetary sanction, the hedge funds conceded in court. In that case, said Robert Cohen, a lawyer for the funds, Griesa could consider non-monetary sanctions that would coerce Argentina into compliance.
Cohen did not indicate what those sanctions could be. They might, for instance, include barring Argentina from doing business with U.S. banks, though such a ruling would likely engender fresh litigation over whether Griesa has the authority to do so.
MORE
September 29, 2014
http://detroit.cbslocal.com/2014/09/28/1-cop-for-every-3-residents-judge-will-consider-suit-that-challenges-police-force-grown-too-large/
OAKLEY, Mich. (AP) – A Saginaw County judge will consider a dispute next week over whether a small town did or didn’t abolish its police department after the chief let the force grow so large that it had one auxiliary officer for every three residents. The case follows the Oakley Village Council’s vote Sept. 9 to halt patrols after police lost their insurance. Days later, Chief Robert Reznick resumed patrols after obtaining a privately financed insurance policy.
The village is about 75 miles northwest of Detroit and had 290 residents in the 2010 U.S. Census. It has 12 sworn officers and about 100 reserve officers, who live around the state. As reserve police officers, they’re allowed under Michigan law to carry firearms into areas where the public is banned from doing so. Village Trustee Francis Koski has sued to block what he calls a “rogue police department” from operating. The case gets a hearing Oct. 7 in Saginaw County Circuit Court.
*********************************************
Needed or not to keep the peace, the auxiliary officers play a big role in funding police operations, the newspaper said. It said their donations cover the village’s $38,000 police budget and help fund other government operations. But the idea of such a large force for a small town raised concerns about liability at the Michigan Municipal League, which canceled the village’s insurance in July. Oakley obtained a new policy, apparently not realizing that it excluded police. After that fact became known, the council voted 5-1 to disband the department. That decision left the county sheriff and state police responsible for public safety.
Koski, who also sued over the legality of the replacement policy that the village obtained in July, said he hopes the court will end the confusion over who’s in charge in Oakley and whether the police chief and Dingo overreached their authority.
UNBELIEVABLE
1 Cop For Every 3 Residents
Judge Will Consider Suit That Challenges Police Force Grown Too Largehttp://detroit.cbslocal.com/2014/09/28/1-cop-for-every-3-residents-judge-will-consider-suit-that-challenges-police-force-grown-too-large/
OAKLEY, Mich. (AP) – A Saginaw County judge will consider a dispute next week over whether a small town did or didn’t abolish its police department after the chief let the force grow so large that it had one auxiliary officer for every three residents. The case follows the Oakley Village Council’s vote Sept. 9 to halt patrols after police lost their insurance. Days later, Chief Robert Reznick resumed patrols after obtaining a privately financed insurance policy.
The village is about 75 miles northwest of Detroit and had 290 residents in the 2010 U.S. Census. It has 12 sworn officers and about 100 reserve officers, who live around the state. As reserve police officers, they’re allowed under Michigan law to carry firearms into areas where the public is banned from doing so. Village Trustee Francis Koski has sued to block what he calls a “rogue police department” from operating. The case gets a hearing Oct. 7 in Saginaw County Circuit Court.
“They’re out of control,” Koski told The Detroit News . “They seem to think they don’t need to have any council approval.”
*********************************************
Needed or not to keep the peace, the auxiliary officers play a big role in funding police operations, the newspaper said. It said their donations cover the village’s $38,000 police budget and help fund other government operations. But the idea of such a large force for a small town raised concerns about liability at the Michigan Municipal League, which canceled the village’s insurance in July. Oakley obtained a new policy, apparently not realizing that it excluded police. After that fact became known, the council voted 5-1 to disband the department. That decision left the county sheriff and state police responsible for public safety.
Koski, who also sued over the legality of the replacement policy that the village obtained in July, said he hopes the court will end the confusion over who’s in charge in Oakley and whether the police chief and Dingo overreached their authority.
“I’m just at the point where I’d like the judge to make a decision: Does she run the town by herself?” said Koski. “Should the rest of the council just go home?”
UNBELIEVABLE
September 28, 2014
http://www.nakedcapitalism.com/2014/09/slimlandia-the-land-of-mexican-oligarchs.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29
Yves here. As Don Quijones explains, “In many ways, Mexico is the poster child of neoliberalism.” So take this as a cautionary tale of what rule by our modern oligarchs will look like.
By Don Quijones, a freelance writer and translator based in Barcelona, Spain, and editor at Wolf Street, where this article was originally published
Despite being Mexico’s second richest man and owning one of the world’s largest mining groups, German Larrea is an enigma. Until this month the only photo that existed of the media-shy recluse was a blurry black and white image. All that has now changed: his name and a new photo – one taken of him schmoozing with Mexican President Enrique Peña Nieto at a recent meeting of Citibank’s Mexican division, Banamex – are plastered across the front and financial pages of Mexico’s daily newspapers. This new wave of unwelcome public attention is the result of what many are describing as the worst ecological disaster in Mexican history. On August 6 the Buenavista del Cobre mine belonging to Larrea’s flagship company, Grupo Mexico, the country’s largest mining and infrastructure company, spewed 10 million gallons (40,000 cubic meters) of copper sulfate acid into the Sonora and Bacanuchi rivers, turning the waterways orange and poisoning the water supply of 24,000 people in seven communities along the rivers.
No Apologies
Authorities place the cost of the total cleanup in the hundreds of millions or even billions of Mexican pesos, yet so far the government has issued Grupo Mexico with a one-off sanction of just 40 million pesos (roughly $3 million). As for Larrea, he has quickly crawled back under the woodwork whence he came, having issued not a single public apology. It is not the first time that Larrea has shown such callous disregard for the occasionally destructive externalities of his particular line of business. In 2006 a methane explosion in the Grupo Mexico-owned Pasta de Conchos coal mine left 65 miners trapped underground. Only two of the 65 bodies were found before the decision was made to call off the search, just five days after the explosion. During that time neither then-Mexican president Vicente Fox, nor Larrea, visited the mine or interacted with the families. In fact, not a single Grupo Mexico shareholder bothered to show up. According to Forbes, Larrea is the 60th richest billionaire in the world, boasting a total wealth of $15 billion. Through the control of just over half of Grupo Mexico, he and his family own mining assets in Mexico (Minera México), Perú (Southern Copper) and the U.S. (Asarco). They also own Infraestructura y Transportes México (ITM), which runs two railroads, Ferrocarril Mexicano y Ferrosur, as well as a 30 percent stake in the Mexican airport operator Grupo Aeroportuario del Pacífico. Larrea is also the majority owner of Cinemex, Mexico’s second largest cinema chain. He sits on the boards of Citi-owned Banamex, the Mexican stock exchange, the Mexican Shareholders Group, and until recently the giant Mexican media group Televisa. In fact, rumours are that Larrea is poised to take advantage of the recent shake-up of Mexico’s telecommunications sector to launch his own media empire.
Like many of his fellow Mexican billionaires, Larrea owes much of his fortune to one man: Carlos Salinas de Gortari, who served as president of Mexico between 1988 and 1994. During his six-year presidency Salinas not only signed up to NAFTA, but he also embarked on a privatization spree, selling off mines, banks, railways, electricity networks and, of course, Telmex, the national telephone company. Salinas relied on a relatively small group of Mexico’s oligarchy to supply him with campaign (and perhaps personal) funds, in return for the sale of state assets at favorable rates and terms. For example, Salinas’ close friend Carlos Slim, now the richest billionaire on the planet, was essentially able to pay for Telmex out of the future profits of the company...
MORE: OUTLINE OF SLIM'S DOINGS......
In many ways, Mexico is the poster child of neoliberalism. For decades and under successive governments the country has followed the standardized rule book of 21st century economic governance to the letter. According to the economist Julián Castaño, Mexico is now Latin America’s second most privatized nation. It has also signed more bilateral and multilateral free trade agreements than just about any other nation under the sun. Yet the result, far from one of freer more open markets, is ever-increasing concentration of power and wealth, rising prices and dwindling choice for consumers – a trend that seems set to continue as Salinas’ disarmingly handsome apprentice, Enrique Peña Nieto, prepares to complete the project his master began 26 years ago.
COMMENTARY AT LINK ALSO INSTRUCTIVE
“Slimlandia,” The Land of Mexican Oligarchs NAKED CAPITALISM
http://www.nakedcapitalism.com/2014/09/slimlandia-the-land-of-mexican-oligarchs.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29
Yves here. As Don Quijones explains, “In many ways, Mexico is the poster child of neoliberalism.” So take this as a cautionary tale of what rule by our modern oligarchs will look like.
By Don Quijones, a freelance writer and translator based in Barcelona, Spain, and editor at Wolf Street, where this article was originally published
Despite being Mexico’s second richest man and owning one of the world’s largest mining groups, German Larrea is an enigma. Until this month the only photo that existed of the media-shy recluse was a blurry black and white image. All that has now changed: his name and a new photo – one taken of him schmoozing with Mexican President Enrique Peña Nieto at a recent meeting of Citibank’s Mexican division, Banamex – are plastered across the front and financial pages of Mexico’s daily newspapers. This new wave of unwelcome public attention is the result of what many are describing as the worst ecological disaster in Mexican history. On August 6 the Buenavista del Cobre mine belonging to Larrea’s flagship company, Grupo Mexico, the country’s largest mining and infrastructure company, spewed 10 million gallons (40,000 cubic meters) of copper sulfate acid into the Sonora and Bacanuchi rivers, turning the waterways orange and poisoning the water supply of 24,000 people in seven communities along the rivers.
No Apologies
Authorities place the cost of the total cleanup in the hundreds of millions or even billions of Mexican pesos, yet so far the government has issued Grupo Mexico with a one-off sanction of just 40 million pesos (roughly $3 million). As for Larrea, he has quickly crawled back under the woodwork whence he came, having issued not a single public apology. It is not the first time that Larrea has shown such callous disregard for the occasionally destructive externalities of his particular line of business. In 2006 a methane explosion in the Grupo Mexico-owned Pasta de Conchos coal mine left 65 miners trapped underground. Only two of the 65 bodies were found before the decision was made to call off the search, just five days after the explosion. During that time neither then-Mexican president Vicente Fox, nor Larrea, visited the mine or interacted with the families. In fact, not a single Grupo Mexico shareholder bothered to show up. According to Forbes, Larrea is the 60th richest billionaire in the world, boasting a total wealth of $15 billion. Through the control of just over half of Grupo Mexico, he and his family own mining assets in Mexico (Minera México), Perú (Southern Copper) and the U.S. (Asarco). They also own Infraestructura y Transportes México (ITM), which runs two railroads, Ferrocarril Mexicano y Ferrosur, as well as a 30 percent stake in the Mexican airport operator Grupo Aeroportuario del Pacífico. Larrea is also the majority owner of Cinemex, Mexico’s second largest cinema chain. He sits on the boards of Citi-owned Banamex, the Mexican stock exchange, the Mexican Shareholders Group, and until recently the giant Mexican media group Televisa. In fact, rumours are that Larrea is poised to take advantage of the recent shake-up of Mexico’s telecommunications sector to launch his own media empire.
Like many of his fellow Mexican billionaires, Larrea owes much of his fortune to one man: Carlos Salinas de Gortari, who served as president of Mexico between 1988 and 1994. During his six-year presidency Salinas not only signed up to NAFTA, but he also embarked on a privatization spree, selling off mines, banks, railways, electricity networks and, of course, Telmex, the national telephone company. Salinas relied on a relatively small group of Mexico’s oligarchy to supply him with campaign (and perhaps personal) funds, in return for the sale of state assets at favorable rates and terms. For example, Salinas’ close friend Carlos Slim, now the richest billionaire on the planet, was essentially able to pay for Telmex out of the future profits of the company...
MORE: OUTLINE OF SLIM'S DOINGS......
In many ways, Mexico is the poster child of neoliberalism. For decades and under successive governments the country has followed the standardized rule book of 21st century economic governance to the letter. According to the economist Julián Castaño, Mexico is now Latin America’s second most privatized nation. It has also signed more bilateral and multilateral free trade agreements than just about any other nation under the sun. Yet the result, far from one of freer more open markets, is ever-increasing concentration of power and wealth, rising prices and dwindling choice for consumers – a trend that seems set to continue as Salinas’ disarmingly handsome apprentice, Enrique Peña Nieto, prepares to complete the project his master began 26 years ago.
COMMENTARY AT LINK ALSO INSTRUCTIVE
September 28, 2014
Yves here. Martin Khor focuses on the alarm created by the ruling against Argentina that allowed a Paul Singer’s NML, a vulture fund with a small position in Argentina’s bonds, to vitiate a hard-fought bond restructuring. The particularly ugly part that don’t get the attention warranted is that it is widely believed that Singer took a much larger position in credit default swaps, meaning he was seeking to create and betting on an Argentine default. And another ugly wrinkle is the role of private law in these processes. ISDA, a private organization, determines what is an event of default for credit default swaps.
Singer was on the committee that voted whether Argentina was in default (recall it had made payment under the restructuring to the trustee, Bank of New York, but BONY was barred by the court from remitting payment to the bondholders). This gave him a direct say in an event in which he had a large economic interest. And that was no lucky accident.
Lisa Pollack of FT Alphaville described in 2011 how ISDA is set up to make sure CDS payouts take place, regardless of the merits of the case. Who will have CDS positions? Parties either buying insurance or betting on failure. Who gets to vote on whether an event of default has occurred? From her post (emphasis hers):
And her conclusion (emphasis ours):
In other words, aside from how inefficient this looting is (as in the very high economic costs to the economies involved relative to the returns the vulture funds make on their sovereign adventurism), there are separately serious issues about the legitimacy of the process by which they make their outsized returns.
This post describes how experts are very concerned about the precedent set by Judge Griesa’s ruling against Argentina. Bear in mind that some legal experts contend that it does not have broad implications, that Griesa’s ruling keyed off specific terms in Argentina’s bonds that are absent from most sovereign issues. Nevertheless, there is a troubling tendency in jurisprudence for ruling creep...SEE THE POST, AT LINK
THIS IS WHAT IS GOING ON, AND WHY AND HOW CORRUPT IT ALL IS. THE US JUDGE GRIESA SHOULD BE DISBARRED, IMO.
Battling to Curb “Vulture Funds” (ARGENTINA) YVES SMITH, NAKED CAPITALISM
http://www.nakedcapitalism.com/2014/09/battling-curb-vulture-funds.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29Yves here. Martin Khor focuses on the alarm created by the ruling against Argentina that allowed a Paul Singer’s NML, a vulture fund with a small position in Argentina’s bonds, to vitiate a hard-fought bond restructuring. The particularly ugly part that don’t get the attention warranted is that it is widely believed that Singer took a much larger position in credit default swaps, meaning he was seeking to create and betting on an Argentine default. And another ugly wrinkle is the role of private law in these processes. ISDA, a private organization, determines what is an event of default for credit default swaps.
Singer was on the committee that voted whether Argentina was in default (recall it had made payment under the restructuring to the trustee, Bank of New York, but BONY was barred by the court from remitting payment to the bondholders). This gave him a direct say in an event in which he had a large economic interest. And that was no lucky accident.
Lisa Pollack of FT Alphaville described in 2011 how ISDA is set up to make sure CDS payouts take place, regardless of the merits of the case. Who will have CDS positions? Parties either buying insurance or betting on failure. Who gets to vote on whether an event of default has occurred? From her post (emphasis hers):
Imagine playing a game where you bet on the outcome of a certain event. Most of the time the final outcome is unambiguous: you play, and afterwards, it’s clear whether you won or you lost. But every now and then, the result is hazy. Did the ball go into the goal? Was there a handball? Did he reach base?
This is usually where a referee steps in to decide.
So, it’s worth asking, how should referees be chosen?
Knowledge of the game is a sensible prerequisite. Also, the referee shouldn’t be conflicted. For example, anyone who has bet on the outcome of a match probably shouldn’t be the one who awards penalties.
And there’s no reason why what’s true of sports referees shouldn’t also be true of market referees, such as the International Swaps and Derivatives Association (Isda).
However, Isda picks the members of a committee that determines who has won and lost in the game of credit derivatives by selecting those who have the greatest potential to be conflicted. (And then it indemnifies them.)
This is usually where a referee steps in to decide.
So, it’s worth asking, how should referees be chosen?
Knowledge of the game is a sensible prerequisite. Also, the referee shouldn’t be conflicted. For example, anyone who has bet on the outcome of a match probably shouldn’t be the one who awards penalties.
And there’s no reason why what’s true of sports referees shouldn’t also be true of market referees, such as the International Swaps and Derivatives Association (Isda).
However, Isda picks the members of a committee that determines who has won and lost in the game of credit derivatives by selecting those who have the greatest potential to be conflicted. (And then it indemnifies them.)
And her conclusion (emphasis ours):
In summary, 10 out of the 15 members of the committee are picked because they are likely to have the biggest positions in any CDS contract under examination.
In other words, aside from how inefficient this looting is (as in the very high economic costs to the economies involved relative to the returns the vulture funds make on their sovereign adventurism), there are separately serious issues about the legitimacy of the process by which they make their outsized returns.
This post describes how experts are very concerned about the precedent set by Judge Griesa’s ruling against Argentina. Bear in mind that some legal experts contend that it does not have broad implications, that Griesa’s ruling keyed off specific terms in Argentina’s bonds that are absent from most sovereign issues. Nevertheless, there is a troubling tendency in jurisprudence for ruling creep...SEE THE POST, AT LINK
THIS IS WHAT IS GOING ON, AND WHY AND HOW CORRUPT IT ALL IS. THE US JUDGE GRIESA SHOULD BE DISBARRED, IMO.
September 26, 2014
Weekend Economists Salute the 99% September 26-28, 2014
Shall we first take a look at that plaything of the 1%?
Dow Jones Industrial Average
https://chart.finance.yahoo.com/t?s=%5eDJI&lang=en-US®ion=US&width=300&height=180
A 100 point rally at 2 PM brought the week to only HALF as big a loss as it otherwise would have been....yippee.
But what do the American People care? They (We) have no horses in the stock market, unless it hasn't managed to wipe out our pitiful retirement savings quite yet. the only market we care about is the job market, and it sucks. It's sucked since at least 2001, here in Michigan. And every day, the CEO corner office is trying to wrest back what little it pays for trained and dedicated workers.
We are going to ruminate on work, workers, and workers' struggles for rights and compensation.
Arlo Guthrie speaks the truth, before he sings:
September 24, 2014
READ IT AND WEEP, OR GET ANGRY...
The US is now involved in 134 wars or none, depending on your definition of 'war'
http://www.globalpost.com/dispatch/news/war/140911/the-us-either-134-wars-or-none-depending-your-definition-war?page=0,0READ IT AND WEEP, OR GET ANGRY...
September 24, 2014
...A country blowing itself up is quite a sight to behold, and it makes us wonder about lots of things. For instance, it makes us wonder whether the people who are doing the blowing up happen to be criminals. (NARCISSISTS!--DEMETER) (Sure, they may be in a manner of speaking—as a moral judgment passed on the powerful by the powerless—but since none of them are likely to see the inside of a jail cell or even a courtroom any time soon, the point is moot. Let's be sure to hunt them down once they try to run and hide, though.) But at a much more basic and fundamental level, a better question to ask is this one:
“Why are we being so fucking stupid?”
What do I mean when I use the term “fucking stupid”? I do not mean it as a term of abuse but as a precise, if unflattering, diagnosis. Here is as good a definition as any, excerpted from American Eulogy by Jim Quinn:
Well, the evidence is in, and that crazy doomster in his padded cell has turned out to be amazingly prescient, so perhaps we should listen to him. And what would that crazy doomster have to say now? I would venture to guess that it would be something along these lines:
Back to the question of stupidity: Why are we (as a country) being so fucking stupid? This question has puzzled me for some time. It appears that the problem of stupidity is quite pervasive: look at any large human organization, and you will find that it is ruled by stupidity. I was not the first to stumble across the conjecture that the intelligence of a hierarchically organized group of people is inversely proportional to its size, but so far the mechanism that makes it so has eluded me. Clearly, there is something amiss with hierarchically organized groups, something that causes all of them to eventually collapse, but what exactly is it? To try to get at this question, last year I spent quite a while researching anarchy, and wrote a series of articles on it. I discovered that vast hierarchies do not occur in nature, which is anarchic and self-organizing, with no chains of command and no entities in supreme command. I discovered that anarchic organizations can go on forever while hierarchical ones inevitably end in collapse. I examined some of the recent breakthroughs in complexity theory, which uncovered the laws governing the different scaling factors in natural (anarchically organized, efficient, stable) systems and unnatural (hierarchically organized, inefficient, collapse-prone) ones.
But nowhere did I find a principled, rigorous explanation for the fatal flaw embedded in the very nature of hierarchical systems. I did have a very strong hunch, though, backed by much anecdotal evidence, that it comes down to stupidity. In anarchic societies whose members cooperate freely, intelligence is additive; in hierarchical organizations structured around a chain of command, intelligence is subtractive. The lowest grunts or peons are expected to carry out orders unquestioningly. Their critical faculties are 100% impaired; if not, they are subjected to disciplinary action. The supreme chief executive officer may be of moderately impaired intelligence, since it is indicative of a significant character flaw to want such a job in the first place. (Kurt Vonnegut put it best: “Only nut cases want to be president.”) But beyond that, the supreme leader must act in such a way as to keep the grunts and peons in line, resulting in further intellectual impairment, which is compounded across all of the intervening ranks, with each link in the chain of command contributing a bit of its own stupidity to the organizational stupidity stack.
I never ascended the ranks of middle management, probably due to my tendency to speak out at meetings and throw around terms such as “nonsensical,” “idiotic,” “brainless,” “self-defeating” and “fucking stupid.” If shushed up by superiors, I would resort to cracking jokes, which were funny and even harder to ignore. Neither my critical faculties, nor my sense of humor, are easily repressed. I was thrown at a lot of special projects where the upside of being able to think independently was not negated by the downside of being unwilling to follow (stupid) orders. To me hierarchy = stupidity in an apparent, palpable way. But in explaining to others why this must be so, I had so far been unable to go beyond speaking in generalities and telling stories...so I was happy when I recently came across an article which goes beyond such “hand-waving analysis” and answers this question with some precision. Mats Alvesson and André Spicer, writing in Journal of Management Studies (49
November 2012) present “A Stupidity-Based Theory of Organizations” in which they define a key term: functional stupidity. It is functional in that it is required in order for hierarchically structured organizations to avoid disintegration or, at the very least, to function without a great deal of internal friction. It is stupid in that it is a form intellectual impairment: “Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications.” Alvesson and Spicer go on to define the various “...forms of stupidity management that repress or marginalize doubt and block communicative action” and to diagram the information flows which are instrumental to generating and maintaining sufficient levels stupidity within organizations.
MUCH MORE TO REFLECT UPON--HOW MUCH OF AN ANARCHIST ARE YOU?
Understanding Organizational Stupidity
http://cluborlov.blogspot.com/2014/09/understanding-organizational-stupidity.html#more...A country blowing itself up is quite a sight to behold, and it makes us wonder about lots of things. For instance, it makes us wonder whether the people who are doing the blowing up happen to be criminals. (NARCISSISTS!--DEMETER) (Sure, they may be in a manner of speaking—as a moral judgment passed on the powerful by the powerless—but since none of them are likely to see the inside of a jail cell or even a courtroom any time soon, the point is moot. Let's be sure to hunt them down once they try to run and hide, though.) But at a much more basic and fundamental level, a better question to ask is this one:
“Why are we being so fucking stupid?”
What do I mean when I use the term “fucking stupid”? I do not mean it as a term of abuse but as a precise, if unflattering, diagnosis. Here is as good a definition as any, excerpted from American Eulogy by Jim Quinn:
If you had told someone on September 10, 2001 that ten years later America would be running $1.5 trillion annual deficits, fighting two wars of choice in countries that despise our presence, and had not only not addressed the $100 [trillion] of unfunded welfare liabilities but added billions more with Medicare D and Obamacare, they would have thought you were a crazy doomster predicting the end of the world. They would have put you away in a padded cell if you had further predicted that politicians would cut taxes three separate times, that the Wall Street banks that leveraged themselves 40 to 1 and destroyed the financial system [would be] handed $2 trillion of taxpayer funds so they could pay themselves multi-million dollar bonuses, and that the Federal Reserve would triple its balance sheet to $2.45 trillion by running its printing presses at hyper-speed and handing the money to those same Wall Street Mega-Banks.
Well, the evidence is in, and that crazy doomster in his padded cell has turned out to be amazingly prescient, so perhaps we should listen to him. And what would that crazy doomster have to say now? I would venture to guess that it would be something along these lines:
There is no reason to think that those who failed to take corrective action up until now, but remain in control, will ever do so. But it should be perfectly obvious that this situation cannot continue ad infinitum. And, as a matter of general principle, things that can't go on forever—don't.
Back to the question of stupidity: Why are we (as a country) being so fucking stupid? This question has puzzled me for some time. It appears that the problem of stupidity is quite pervasive: look at any large human organization, and you will find that it is ruled by stupidity. I was not the first to stumble across the conjecture that the intelligence of a hierarchically organized group of people is inversely proportional to its size, but so far the mechanism that makes it so has eluded me. Clearly, there is something amiss with hierarchically organized groups, something that causes all of them to eventually collapse, but what exactly is it? To try to get at this question, last year I spent quite a while researching anarchy, and wrote a series of articles on it. I discovered that vast hierarchies do not occur in nature, which is anarchic and self-organizing, with no chains of command and no entities in supreme command. I discovered that anarchic organizations can go on forever while hierarchical ones inevitably end in collapse. I examined some of the recent breakthroughs in complexity theory, which uncovered the laws governing the different scaling factors in natural (anarchically organized, efficient, stable) systems and unnatural (hierarchically organized, inefficient, collapse-prone) ones.
But nowhere did I find a principled, rigorous explanation for the fatal flaw embedded in the very nature of hierarchical systems. I did have a very strong hunch, though, backed by much anecdotal evidence, that it comes down to stupidity. In anarchic societies whose members cooperate freely, intelligence is additive; in hierarchical organizations structured around a chain of command, intelligence is subtractive. The lowest grunts or peons are expected to carry out orders unquestioningly. Their critical faculties are 100% impaired; if not, they are subjected to disciplinary action. The supreme chief executive officer may be of moderately impaired intelligence, since it is indicative of a significant character flaw to want such a job in the first place. (Kurt Vonnegut put it best: “Only nut cases want to be president.”) But beyond that, the supreme leader must act in such a way as to keep the grunts and peons in line, resulting in further intellectual impairment, which is compounded across all of the intervening ranks, with each link in the chain of command contributing a bit of its own stupidity to the organizational stupidity stack.
I never ascended the ranks of middle management, probably due to my tendency to speak out at meetings and throw around terms such as “nonsensical,” “idiotic,” “brainless,” “self-defeating” and “fucking stupid.” If shushed up by superiors, I would resort to cracking jokes, which were funny and even harder to ignore. Neither my critical faculties, nor my sense of humor, are easily repressed. I was thrown at a lot of special projects where the upside of being able to think independently was not negated by the downside of being unwilling to follow (stupid) orders. To me hierarchy = stupidity in an apparent, palpable way. But in explaining to others why this must be so, I had so far been unable to go beyond speaking in generalities and telling stories...so I was happy when I recently came across an article which goes beyond such “hand-waving analysis” and answers this question with some precision. Mats Alvesson and André Spicer, writing in Journal of Management Studies (49
November 2012) present “A Stupidity-Based Theory of Organizations” in which they define a key term: functional stupidity. It is functional in that it is required in order for hierarchically structured organizations to avoid disintegration or, at the very least, to function without a great deal of internal friction. It is stupid in that it is a form intellectual impairment: “Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications.” Alvesson and Spicer go on to define the various “...forms of stupidity management that repress or marginalize doubt and block communicative action” and to diagram the information flows which are instrumental to generating and maintaining sufficient levels stupidity within organizations.
MUCH MORE TO REFLECT UPON--HOW MUCH OF AN ANARCHIST ARE YOU?
September 24, 2014
In Greco-Roman myth, Narcissus, a beautiful young man, catches sight of his reflection in a body of water and falls deeply in love with his own image. This is, of course, where we get the word “narcissism.” What many in today’s culture overlook when tossing around the term “narcissism,” explains Jeffrey Kluger, author of “The Narcissist Next Door,” is that it is actually a clinical personality disorder affecting 1 to 3 percent of the population. Kluger’s book goes beyond cautionary tales of narcissism — like that of Narcissus — and explores how the disorder affects daily life, relationships, government, Hollywood, sports and elsewhere...(Narcissism is a) very widely used word culturally, a bit of a shorthand to describe all kinds of behavioral phenomena...(being) far too self-absorbed, having far too much of a sense of entitlement, being far too uninterested in listening...
Is there a correct amount of narcissism?
There’s no sort of fever chart where, below (this level), you are a healthy narcissist, or above (this level) you are an unhealthy narcissist...there is a level of narcissism that energizes and motivates, that makes you creative, that makes you particularly value the reward of recognition, but not become drunk off that reward of recognition. And it can be very, very beneficial. The level of narcissism that helps you step forward with confidence and tell your ideas in an engaging and charismatic way can be really helpful...Whatever else people may like or dislike about Bill Clinton, the man can work a room like nobody’s business, because he wants to be recognized, he wants to make a difference. Even if we don’t necessarily respect the gratification he’s getting from that — the narcissistic gratification he’s getting from that — the fact is that he’s doing to make a difference, to make the word a better place. So, you know it depends on what your larger goal is and how you’re deploying those talents to achieve it.
What were some of the most interesting examples of extreme narcissism that you found when writing your book?
Well I certainly think you see it at almost epidemic levels in politicians. Richard Nixon was clearly suffering from mass-model narcissism, a level of grandiosity that conceals its direct opposite. It is often the case when you’re simultaneously trying to reconcile those two incompatible world views — I’m the best and I’m the worst — that you can generally engineer your own destruction that way...Clinton did that in a much smaller way. Good lord. He knew that if there was one thing his enemies were lying in wait for when he took office, it was the sex scandal. So he went right ahead and served it up to them, because he was incapable of controlling his own lack of narcissistic impulse control. Incapable of seeing something he wanted and denying himself that. So he’s a very good example of that...Lyndon Johnson is a terrific and terrible example of narcissism with his monomaniacal prosecution of the Vietnam war, and his inability to stand down from it because his point was peace with honor, and “I won’t be the first American president to lose a war.” You may have to sit with that historical fate, in order to save the lives of 58,000 Americans. So clearly Johnson was a terrible, quite literally bloody, example, even if that wasn’t his intention...We see it in less consequential ways with people like Justin Bieber. You can’t look away from Justin Bieber, because he’s an unfolding train-wreck.So you know we see these examples of people who do great damage to the world, or damage to themselves by not being able to keep their narcissistic demons under control.
...Do you think that there needs to be greater awareness that this is something that people should get treated in some way? Or at least recognize? Or is it even possible to recognize and treat?
...personality disorders like narcissism, paranoia, histrionic personality disorder and borderline personality disorders are what is called egosyntonic. You think you’re not narcissistic, you really are better. You’re not paranoid, there really are people who are after you. So until you get over that belief, until you can stop fighting on behalf of your disorder, you’re never going to get into a psychologist’s office in the first place. And I also think that for a lot of narcissists, they only get there under duress, and when they get there they still believe that they are smarter than the shrink, and they’re only there because nobody understands them. And they fire the doctor very quickly and go on and continue to make a mess of their lives and the lives of the people around them. So, I agree with you that greater awareness of this as a clinical personality disorder is necessary. But I fear that no amount of banging narcissists over the head with evidence of their issues is going to make a difference, as opposed to someone with OCD or anxiety.
...There’s narcissism of the individual and there’s narcissism of the group, and in both cases it’s essentially the same thing. We are better, we are more entitled, we are different or at least less interested in the people around us, or the tribes or nations around us, because we’re worthier than they are. Our people are the prettiest, our language is the most musical, our clothes are the most stylish. And these people are barbarians or at the very best civilized but crude. We are deserving of resources just as I, as the individual, am deserving of the raise, or deserving of the job or deserving of the hottest girl at the party because I’m better than the other guys around me. Now this has its benign expression in sport, except when people are killed, in soccer brawls or when a fan of the San Francisco Giants is beaten up in a parking lot by a Dodgers fan. Obviously it can get ugly sometimes...almost all that behavior comes from pain. Almost all of that behavior comes from some kind of internal suffering. So, I’d like to have Kanye West’s money and his fame and his privilege, but whatever drives those self-adoring demons can’t feel that great. The same is true of anyone. Anyone who is so tormented by internal doubt and a private personal history that affects the way you behave — I wouldn’t want to feel the pain the raging narcissist feels.
MORE---THE DISEASE OF THE AGES AND THE EMPIRES
This is your brain on narcissism: The truth about a disorder that nobody really understands
http://www.salon.com/2014/09/20/this_is_your_brain_about_narcissism_the_truth_about_a_disorder_that_nobody_really_understands/?source=newsletterIn Greco-Roman myth, Narcissus, a beautiful young man, catches sight of his reflection in a body of water and falls deeply in love with his own image. This is, of course, where we get the word “narcissism.” What many in today’s culture overlook when tossing around the term “narcissism,” explains Jeffrey Kluger, author of “The Narcissist Next Door,” is that it is actually a clinical personality disorder affecting 1 to 3 percent of the population. Kluger’s book goes beyond cautionary tales of narcissism — like that of Narcissus — and explores how the disorder affects daily life, relationships, government, Hollywood, sports and elsewhere...(Narcissism is a) very widely used word culturally, a bit of a shorthand to describe all kinds of behavioral phenomena...(being) far too self-absorbed, having far too much of a sense of entitlement, being far too uninterested in listening...
Is there a correct amount of narcissism?
There’s no sort of fever chart where, below (this level), you are a healthy narcissist, or above (this level) you are an unhealthy narcissist...there is a level of narcissism that energizes and motivates, that makes you creative, that makes you particularly value the reward of recognition, but not become drunk off that reward of recognition. And it can be very, very beneficial. The level of narcissism that helps you step forward with confidence and tell your ideas in an engaging and charismatic way can be really helpful...Whatever else people may like or dislike about Bill Clinton, the man can work a room like nobody’s business, because he wants to be recognized, he wants to make a difference. Even if we don’t necessarily respect the gratification he’s getting from that — the narcissistic gratification he’s getting from that — the fact is that he’s doing to make a difference, to make the word a better place. So, you know it depends on what your larger goal is and how you’re deploying those talents to achieve it.
What were some of the most interesting examples of extreme narcissism that you found when writing your book?
Well I certainly think you see it at almost epidemic levels in politicians. Richard Nixon was clearly suffering from mass-model narcissism, a level of grandiosity that conceals its direct opposite. It is often the case when you’re simultaneously trying to reconcile those two incompatible world views — I’m the best and I’m the worst — that you can generally engineer your own destruction that way...Clinton did that in a much smaller way. Good lord. He knew that if there was one thing his enemies were lying in wait for when he took office, it was the sex scandal. So he went right ahead and served it up to them, because he was incapable of controlling his own lack of narcissistic impulse control. Incapable of seeing something he wanted and denying himself that. So he’s a very good example of that...Lyndon Johnson is a terrific and terrible example of narcissism with his monomaniacal prosecution of the Vietnam war, and his inability to stand down from it because his point was peace with honor, and “I won’t be the first American president to lose a war.” You may have to sit with that historical fate, in order to save the lives of 58,000 Americans. So clearly Johnson was a terrible, quite literally bloody, example, even if that wasn’t his intention...We see it in less consequential ways with people like Justin Bieber. You can’t look away from Justin Bieber, because he’s an unfolding train-wreck.So you know we see these examples of people who do great damage to the world, or damage to themselves by not being able to keep their narcissistic demons under control.
...Do you think that there needs to be greater awareness that this is something that people should get treated in some way? Or at least recognize? Or is it even possible to recognize and treat?
...personality disorders like narcissism, paranoia, histrionic personality disorder and borderline personality disorders are what is called egosyntonic. You think you’re not narcissistic, you really are better. You’re not paranoid, there really are people who are after you. So until you get over that belief, until you can stop fighting on behalf of your disorder, you’re never going to get into a psychologist’s office in the first place. And I also think that for a lot of narcissists, they only get there under duress, and when they get there they still believe that they are smarter than the shrink, and they’re only there because nobody understands them. And they fire the doctor very quickly and go on and continue to make a mess of their lives and the lives of the people around them. So, I agree with you that greater awareness of this as a clinical personality disorder is necessary. But I fear that no amount of banging narcissists over the head with evidence of their issues is going to make a difference, as opposed to someone with OCD or anxiety.
...There’s narcissism of the individual and there’s narcissism of the group, and in both cases it’s essentially the same thing. We are better, we are more entitled, we are different or at least less interested in the people around us, or the tribes or nations around us, because we’re worthier than they are. Our people are the prettiest, our language is the most musical, our clothes are the most stylish. And these people are barbarians or at the very best civilized but crude. We are deserving of resources just as I, as the individual, am deserving of the raise, or deserving of the job or deserving of the hottest girl at the party because I’m better than the other guys around me. Now this has its benign expression in sport, except when people are killed, in soccer brawls or when a fan of the San Francisco Giants is beaten up in a parking lot by a Dodgers fan. Obviously it can get ugly sometimes...almost all that behavior comes from pain. Almost all of that behavior comes from some kind of internal suffering. So, I’d like to have Kanye West’s money and his fame and his privilege, but whatever drives those self-adoring demons can’t feel that great. The same is true of anyone. Anyone who is so tormented by internal doubt and a private personal history that affects the way you behave — I wouldn’t want to feel the pain the raging narcissist feels.
MORE---THE DISEASE OF THE AGES AND THE EMPIRES
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