Tag Archives: Oligarchs

Financial Criminality: Wall Street Manipulates Energy Prices, Gold … and Every Other Market

By Washington’s Blog
January 5, 2015
Global Research, January 04, 2015

 

wallstreetflagEnergy Prices Manipulated

The U.S. Federal Energy Regulatory Commission says that JP Morgan has massively manipulated energy markets in  California and the Midwest, obtaining tens of millions of dollars in overpayments from grid operators between September 2010 and June 2011.

Pulitzer prize-winning reporter David Cay Johnston notes today that Wall Street is trying to launch Enron 2.0:

The price of electricity would soar under the latest scheme by Wall Street financial engineers to game the electricity markets.

If regulators side with Wall Street — and indications are that they will — expect the cost of electricity to rise from Maine to California as others duplicate this scheme to manipulate the markets, as Enron did on the West Coast 14 years ago, before the electricity-trading company collapsed under allegations of accounting fraud and corruption.

The test case is playing out in New England. Energy Capital Partners, an investment group that uses tax-avoiding offshore investing techniques and has deep ties to Goldman Sachs, paid $650 million last year to acquire three generating plant complexes, including the second largest electric power plant in New England, Brayton Point in Massachusetts.

Five weeks after the deal closed, Energy partners moved to shutter Brayton Point. Why would anyone spend hundreds of millions of dollars to buy the second largest electric power plant in New England and then quickly take steps to shut it down?

Energy partners says in regulatory filings that the plant is so old and prone to breakdowns that it is not worth operating, raising the question of why such sophisticated energy-industry investors bought it.

The real answer is simple: Under the rules of the electricity markets, the best way to earn huge profits is by reducing the supply of power. That creates a shortage during peak demand periods, such as hot summer evenings and cold winter days, causing prices to rise. Under the rules of the electricity markets, even a tiny shortfall between the available supply of electricity and the demand from customers results in enormous price spikes.

With Brayton Point closed, New England consumers and businesses will spend as much as $2.6 billion more per year for electricity, critics of the deal suggest in documents filed with the Federal Energy Regulatory Commission.

That estimate will turn out to be conservative, I expect, based on what Enron traders did to California, Oregon and Washington electricity customers starting in 2000. In California alone the short-term market manipulations cost each resident more than $1,300, a total burden of about $45 billion.

***

Public Citizen characterized the Energy partners explanation for the shutdown as absurd:

In the world of business, a firm announcing that an asset purchased just 5 weeks ago is actually uneconomical to operate would be called incompetent, and such a firm would have difficulty attracting capital and staying in business. But the managing partners of Energy Capital Partners are a highly sophisticated all-star crew of former Wall Street financiers: four of the five managing partners are Goldman Sachs veterans, and the firm’s vice-presidents and principals are alumni of JP Morgan, Morgan Stanley, Bank of America, Credit Suisse and other financial powerhouses. These are not your run-of-the-mill owners and operators of power plants. They are Wall Streeters highly motivated to exploit the intricacies of power markets to make as much money as possible for their Cayman Islands-based affiliates.

The record is clear that artificially reducing supply to jack up prices was the plan of Energy partners from the get-go. The strategy is obvious from auction records, as explained by Robert Clark of the Utility Workers Union of America Local 464.

“Almost immediately after acquiring ownership of the Brayton Point Power Station late last year,” Clark said, “[Energy partners] intentionally withheld all of Brayton Point’s capacity from [auction] for the purpose of reducing capacity supply and intentionally raising the market prices” that Energy partners and its competitors could charge for other New England generating capacity they already owned.

 

As shown below, Wall Street has manipulated virtually every other market as well – both in the financial sector and the real economy – and broken virtually every law on the books.

Interest Rates Are Manipulated

Bloomberg reported in January:

Royal Bank of Scotland Group Plc was ordered to pay $50 million by a federal judge in Connecticut over claims that it rigged the London interbank offered rate.

RBS Securities Japan Ltd. in April pleaded guilty to wire frauda s part of a settlement of more than $600 million with U.S and U.K. regulators over Libor manipulation, according to court filings. U.S. District Judge Michael P. Shea in New Haventoday sentenced the Tokyo-based unit of RBS, Britain’s biggest publicly owned lender, to pay the agreed-upon fine, according to a Justice Department Justice Department.

Global investigations into banks’ attempts to manipulate the benchmarks for profit have led to fines and settlements for lenders including RBS, Barclays Plc, UBS AG and Rabobank Groep.

RBS was among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union last month for rigging interest rates linked to Libor. The combined fines for manipulating yen Libor and Euribor, the benchmark money-market rate for the euro, are the largest-ever EU cartel penalties.

Global fines for rate-rigging have reached $6 billion since June 2012 as authorities around the world probe whether traders worked together to fix Libor, meant to reflect the interest rate at which banks lend to each other, to benefit their own trading positions.

To put the Libor interest rate scandal in perspective:

  • Even though RBS and a handful of other banks have been fined for interest rate manipulation, Libor is still being manipulated. No wonder … the fines are pocket change – the cost of doing business – for the big banks

Indeed, the experts say that big banks will keep manipulating markets unless and until their executives are thrown in jail for fraud.

Why? Because the system is rigged to allow the big banks to commit continuous and massive fraud, and then to pay small fines as the “cost of doing business”. As Nobel prize winning economist Joseph Stiglitz noted years ago:

“The system is set so that even if you’re caught, the penalty is just a small number relative to what you walk home with.

The fine is just a cost of doing business. It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.”

Experts also say that we have to prosecute fraud or else the economy won’t ever really stabilize.

But the government is doing the exact opposite. Indeed, the Justice Department has announced it will go easy on big banks, and always settles prosecutions for pennies on the dollar (a form of stealth bailout. It is also arguably one of the main causes of the double dip in housing.)

Indeed, the government doesn’t even force the banks to admit any guilt as part of their settlements.

Because of this failure to prosecute, it’s not just interest rates. As shown below, big banks have manipulated virtually every market – both in the financial sector and the real economy – and broken virtually every law on the books.

And they will keep on doing so until the Department of Justice grows a pair.

Currency Markets Are Rigged

Currency markets are massively rigged. And see this and this.

Derivatives Are Manipulated

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed: through gamed self-reporting.

Oil Prices Are Manipulated

Oil prices are manipulated as well.

Gold and Silver Are Manipulated

Gold and silver prices are “fixed” in the same way as interest rates and derivatives – in daily conference calls by the powers-that-be.

Bloomberg reports:

It is the participating banks themselves that administer the gold and silver benchmarks.

So are prices being manipulated? Let’s take a look at the evidence. In his book “The Gold Cartel,” commodity analyst Dimitri Speck combines minute-by-minute data from most of 1993 through 2012 to show how gold prices move on an average day (see attached charts). He finds that the spot price of gold tends to drop sharply around the London evening fixing (10 a.m. New York time). A similar, if less pronounced, drop in price occurs around the London morning fixing. The same daily declines can be seen in silver prices from 1998 through 2012.

For both commodities there were, on average, no comparable price changes at any other time of the day. These patterns are consistent with manipulation in both markets.

Commodities Are Manipulated

The big banks and government agencies have been conspiring to manipulate commodities prices for decades.

The big banks are taking over important aspects of the physical economy, including uranium mining, petroleum products, aluminum, ownership and operation of airports, toll roads, ports, and electricity.

And they are using these physical assets to massively manipulate commodities prices … scalping consumers of many billions of dollars each year.  More from Matt Taibbi, FDL and Elizabeth Warren.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currencies and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

The criminality and blatant manipulation will grow and spread and metastasize – taking over and killing off more and more of the economy – until Wall Street executives are finally thrown in jail.It’s that simple …

History Lesson: America Is the Same Oligarchy It Was over a Century Ago

By Aaron Dykes and Melissa Melton
Global Research, January 2, 2015
Truthstream Media, January 1, 2015

 

oligarchyWhen Americans see charts like this one which illustrate that virtually all the food on grocery store shelves basically comes from no more than 10 megacompanies, or hear statements like this one from our own Attorney General Eric Holder who told the Senate Judiciary Committee that some banks are just too big to prosecute, or check out studies like this one out of Princeton which openly declare we are not a democracy but an oligarchy … it’s kinda hard to believe we aren’t an oligarchy (because we are).

Come on, even our Federal Reserve Chair Janet Yellen (you know, the lady that runs the place that prints our money and sells it to us with interest) has basically admitted it.

But are things really getting worse these days or is this just par for the course — the same course we’ve been on for over a century now?

Tinkering around in an old bookstore in a small Texas town, we came across a set of old books on democracy; we got the first seven volumes of a set entitled, The March of Democracy: A History of the United States written by James Truslow Adams — the guy who coined the term “The American Dream” — for a mere $20.

The first book’s copyright is 1932. The last book ends in 1958.

Fascinating stuff…

For example, in volume four America and World Power the book discusses how “Gradually and quite naturally, there grew up the belief in a great conspiracy on the part of the very rich to ruin the poor.”

Read this and tell me — does any of it sound even the least bit familiar to you?

Most strikingly in the public eye were the great Titans of the new business era, the coal and meat “barons” and the copper, railway, steel, and other “kings,” men of the type of the elder J.P. Morgan, of James J. Hill, William H. Vanderbilt, Carnegie, Frick, William H. Clark, and Rockefeller. Such men had certain broad traits in common, differ as they might from each other as individuals. They were men of wide economic but intensely narrow social vision, and of colossal driving power and iron wills. They could lay their economic plans with imperial vision in time and space, but for the effect of their acts on society they cared nothing whatever. They claimed the right to rule the economic destinies of the people in any way that would enure their own personal advantage. Illogically, they insisted upon the theory of laissez-faire for all except themselves, while they demanded and received every favor they wished in the way of special privileges from the government, as in the tariff and the silver purchase Act. The whole machinery of government must be at their disposal when desired — legislation, court decisions, and Federal troops. They combined their business units into “trusts” and combinations of almost unlimited power, yet they insisted on “freedom of contract” when dealing with labor, whose organization in any form they almost wholly refused to sanction.

They never taught you any of that back in school, did they?

That was written, by the way, in 1940; the author was discussing how America was run back in the late 1800s.

Not only is the emphasis on Democracy a distortion of the fact the nation was founded as a Constitutional Republic, where rights are preserved rather than subjected to the whims of the majority, but these passages demonstrate the familiar snow job surrounding the all-but-official banker’s oligarchy that has ruled this country and many others for some time.

In fact, in volume five, The Record of 1933–1941, Adams records the death of John D. Rockefeller, Sr., as the end of the era of this great wealth — never to occur again.

On May 23, John D. Rockefeller, Sr., died at the age of 97. Owner at one time of the largest fortune in the world, his lifespan had covered the entire history of American business from before the Civil War… Nearly $350,000,000 are handled by three of the Rockefeller Foundations for education, medical research and other uses. Whatever may be thought as to the methods of accumulating the beginnings of the fortune in a period of different business ethics and social outlook, no other man through his financial gifts has ever so widely benefitted mankind. With our income and inheritance taxes no other such fortune will ever again be accumulated, and his death marked the end of an era in American history.

And so that’s the end of the story, kids…

Everything ended happily ever after.

Well, not quite.

Despite appearances, the shift on the part of the Rockefellers and other Robber Barons of the day from outright monopoly to “philanthropic” “non-profit” charity work was not an end to the dominance by the super-rich of the early 2oth Century, but an intensification of their undue influence. The taxation of the wealthy as well as the anti-trust actions of the day, which included busting up megacorpses like Standard Oil and AT&T, were perhaps well meaning but fundamentally failed to rein in the disparity of power.

Instead, new tax laws, in reality, acted to restrict new wealth from reaching the heights of the oligarchy, allowing “the elite” to keep their own, and initiate new members as desired. The tax-free status of many institutions – including the Rockefeller Foundation, the Carnegie Endowment for International Peace and the Ford Foundation – allowed the incredibly wealthy to a) shield their fortunes from taxation, b) appear to do good works and boost public opinion of their principle members while c) influencing, writing and developing official public policy through the steering mechanisms of its own tax-free grant making, think tank and research powers. Much social engineering has taken place – with far too little public notice – through these bodies. Additionally, d) many of its directors and board members were in “respectable” positions to shift into official government positions through the revolving door without appearing to be acting on behalf of their corporate masters.

The Reece Committee Hearings, conducted in 1953, attempted to probe the role of tax-free foundations in public life and uncovered many outrageous and conspiratorial actions taking place, including very apparent agendas advancing a one-world corporate-dominated government. However, it did not succeed in a general public understanding of what was taking place, nor did it rein in their powers.

https://archive.org/stream/DoddReportToTheReeceCommitteeOnFoundations-1954-RobberBaron/Dodd-Report-to-the-Reece-Committee-on-Foundations-1954?ui=embed#mode/1up

Yesterday, the markets in gold, silver, oil, steel and other commodities were successfully cornered by the Rothschilds and other top bankers. Under Wall Street direction, and through the powers of the then newly-created Federal Reserve, these titans were able to officially dominate nearly all the important areas of public life, including great expansions in consumer spending and government agency powers. The icons of this magnificent and terrible wealth were John D. Rockefeller, J.P. Morgan, Andrew Carnegie, E.H. Harriman, Cornelius Vanderbilt and a handful of others. Today, those icons of wealth are the likes of Bill Gates, Warren Buffett, Carlos Slim, Larry Ellison, the Koch Brothers, Michael Bloomberg, Steve Jobs (now deceased), the Walton family descendants of Wal-Mart and, again, a handful of others who are largely known for their role in the age of computers, the Internet, telecommunications and electronic devices.

The real wealth, from older robber barons accumulated in land, resources, banking and investment and commodities are still there, but remain under reported on the Forbes’ list of the world’s richest, instead ruling largely from the shadows and influential but secretive groups such as Bilderberg.

The Bill & Melinda Gates Foundation, as well as the Gates-Buffett led billionaires’ “giving pledge” are keeping in stride with the groundwork laid and continued by the Rockefeller Foundation and Ford Foundation. Heavily funded initiatives to push vaccines, birth control, population control, Western-oriented “education,” GMO and corporate-dominated agriculture and the like remain some of the most consequential and troubling policies done in the name of “good” by tax-free entities wielding enormous, nearly incalculable wealth and power.

In short, the myth of “democracy” and freedom in the United States – the beacon around the world – perpetuates, despite a few blemishes. But in reality, the Oligarchy took hold some time ago, has not let up and perhaps never will.

Let that sink in, kids. Take a good look, and let it all sink in.

And don’t forget to read Charlotte Iserbyt’s revealing and TRUE work, loaded with documents and footnotes, The Deliberate Dumbing Down of America.

It helps to explain why you don’t know this stuff, why the reins of power have been stolen from us, and why things are not soon going to get better.

Unfortunately, the late comedic genius George Carlin was all-too-right when he explained the owners of America and why the education system is broken:

And like Carlin said of James Truslow Adams’ American Dream,

The reason they call it the American Dream is because you have to be asleep to believe it.

Aaron and Melissa created TruthstreamMedia.com, where this first appeared, as an outlet to examine the news, place it in a broader context, uncover the deceptions, pierce through the fabric of illusions, grasp the underlying factors, know the real enemy, unshackle from the system, and begin to imagine the path towards taking back our lives, one step at a time, so that one day we might truly be free…

Oil War on Russia: Ridiculous People and Unintended Consequences

By William Engdahl
December 16, 2014
New Eastern Outlook

 

2342421The once rather ordered world we knew even a decade ago is becoming more and more dis-ordered. That’s not to say it’s chaotic because chaos is merely the emergence of new patterns we do not yet understand. This is dis-order. And it is being fostered by ridiculous power-addicted people in the West who are flailing around to try to hold on to their eroding power over our world and over us. I say ridiculous because we need only look at the initiatives they have launched in recent months to advance their power agenda.

First these power-addicted very rich oligarchs through their neo-conservative networks in the US State Department and in the CIA initiated what was foolishly dubbed the Arab Spring. That was in Tunisia in December 2010. By all accounts an utter and complete flop, their Arab Spring caper, even by oligarch calculations.

They have largely lost Egypt by their stupid attempt to shove the Muslim Brotherhood death cult down the throats of Egypt’s citizens.

Then their war in Libya, where their fig leaf of “democracy” Color Revolution couldn’t work, they bombed Qaddafi and Africa’s most stable and most prosperous tribal monarchy back to the stone age and unleashed dis-order there that still is a disaster by all measures.

Then the same stupid oligarchs, advised by their ridiculous neo-con think-tankers and Obama Administration neo-cons such as the loveless National Security Adviser Susan Rice, Obama’s putative psychological “Rasputin,” rolled out of Libya directly into Syria in January 2012.

They did so to apparently run a repeat of the Qaddafi fiasco. Only in Syria the stakes were global and far different from Libya. It involved national security issues for Russia, for Iran and indirectly, for China. Today, nearly three years on, despite the CIA and Mossad efforts to use their creation, ISIS, or the self-proclaimed Islamic State (IS) to terrify the American war-weary public to agree to yet another war in the Middle East, after the fiasco of Iraq and Afghanistan the trillions of US tax dollars and destroyed lives of US servicemen and women, Bashar al Assad remains in power. Granted he presides over a land devastated by death and destruction, thanks to those loveless, ridiculous western Oligarchs. But the oligarchs and their partner-in-crime, Netanjahu, Brooklyn’s least-honorable son, have not got what they wanted in Syria.

More recently, they have tried to panic us into agreeing to mass vaccination with untested, likely toxic medications to try to justify Obama’s War on Ebola. Only no one seems to believe them. The increasingly ridiculous Dr Margaret Chan, the Director General of WHO, who was guilty of criminal mis-conduct five years ago when she bowed to Big Pharma wishes and declared a non-existent Swine Flu as global “Pandemic Level 6,” tries to utter terrifying statements about Ebola, but nobody much is paying attention.

They Oligarchs of destruction unleashed neo-con artist Victoria Nuland at the State Department along with documented liar, CIA Director John Brennan, to turn Ukraine over to a gaggle of criminals and self-styled neo-nazis, complete with Swastika tattoos and black ski masks. The hope was it would make Putin and the Russians go berserk and invade Ukraine as civil war against ethnic Russian-speakers in east Ukraine raged, targeting women, elderly, children, anyone who walked.

That Ukraine State Department coup too has blown up in their faces as Russia turns to her East and the South, making a dazzling array of strategic agreements with China for energy and military cooperation, with India, with Brazil and the list continues.

Then the same ridiculous Oligarchs unleashed the drones of their National Endowment for Democracy in Hong Kong in a vain effort to spread their dis-order to China, which was becoming far too independent of the Oligarchs’ New World Order agenda. That too has flopped.

Old Saudi Arabia vs New Saudi Arabia

Now the same ridiculous American Oligarchs hovering around such loveless characters as David Rockefeller, have come to the brilliant strategy of unleashing their “super-weapon” against Putin’s Russia—full-scale oil price war. Backed by The US Treasury’s neo-con David S. Cohen, whose title is aptly named as Under Secretary for Terrorism and Financial Intelligence, the John Kerry State Department in September came up with the bright idea to rerun the 1986 State Department-Saudi operation to collapse Russia by getting the Saudis to collapse oil prices.

The execution of the oil collapse has so far been technically flawless. Oil prices on average have plummeted almost 30% since September. The only problem is that the power-addicted Oligarchs and their ridiculous neo-con hired thinkers overlooked the fact that, in the process, they would bankrupt their very vulnerable shale oil bonanza.

For the past several years, the United States Government has bought on to the shale oil bonanza myth. It has shaped US foreign policy decisions, given people in Washington the false illusion they can risk blowing up much of the world’s Middle East without threatening global oil supplies, or Ukraine, because The United States of America is becoming the New Saudi Arabia.

But now the knife cuts the other way. John Kerry’s brilliant Saudi plan is being used by those same Saudis, not only to bring Russia to her knees, which it hasn’t managed to do. It is being used by the Old Saudi Arabia to cripple the shale oil basis of the New Saudi Arabia. The Saudis clearly, as was seen in the recent OPEC meeting, want to burst the US shale oil bubble in order to reassert control of the Old Saudi Arabia over world oil markets.

On November 27 following an indecisive OPEC meeting where the Saudis refused various pleas to reverse and stop the price fall, the traded price for the marker crude that US shale oil is priced at, West Texas Intermediate, fell below $66 a barrel, a five year low with no bottom in yet sight. The sharp rise in US shale oil output in the past three years has enabled the US to take over the decisive leverage role once held by the Saudis, that of Swing Producer. That means if the powers that be in Washington decide world oil prices are too high, it can cut supply one way or another. If too low, restrict supply.

That did not make the Saudi royals happy. Perhaps when Kerry proposed to the Saudi King, with Prince Bandar in the room last September, that Saudi Arabia help Washington break Russia by collapsing Russian oil revenues, King Abdullah and Bandar happily agreed. But now it seems the Saudi focus is less to hurt Russia and more to shoot down the US shale oil competition. Shale oil is unconventional and expensive to drill compared with conventional oil.

Only extraordinary, sustained prices above $100 a barrel the past five years made shale profitable. In 2014 and by present estimates 2015 shale oil will account for an extra 2 million barrels of US domestic oil output, the largest output since 1970. Now Wall Street banks with billions lent to US shale producers are re-examining their portfolio and considering calling in those loans or at the very least not lending further to a losing game. However, shale oil, unlike conventional, requires an escalating investment to drill ever new wells as the old deplete far faster than conventional. That is the Ponzi core of the shale oil mirage.

Unconventional shale oil costs from $50 to $100 a barrel just to produce. Conventional US oil by contrast costs from $10 upwards. By calculations of leading US shale oil bankers, “If prices go to $80 or lower, which I think is possible, then we are going to see a reduction in drilling activity.”ii That was said in October when prices hovered around $90. Come this spring, we can expect numerous US shale oil companies to hit the hard wall of bankruptcy or insolvency.

The Russians are apparently not as alarmed as they were in 1986, the previous time Washington and the Saudis ran such a price collapse operation. Lukoil part-owner Leonid Fedun told the press recently, “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.” According to a report on RT, Russian Economic Development Minister Aleksey Ulyukaev told a meeting of cabinet ministers after the OPEC decision that the government had cut its oil price estimate for its 2015 Budget from $100 to $80 a barrel. ö Low oil prices will not ruin the economy the Russian Economic Development Minister Aleksey Ulyukaev has said, adding that the oil price estimate for the 2015 budget has been slashed to $80 a barrel from $100 a barrel. “We aren’t going to collapse,” he said.

So much for the Oligarchs’ ridiculous plans to make USA into the New Saudi Arabia and bankrupt Russia in the process.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”

 

The Koch Brothers’ Governors: Butlers Selling the Public’s Silver

A Dress Rehearsal for Hillary?

By Jeffery Sommers and Michael Hudson
December 13, 2014
Counter Punch

 

Koch-brothers

The Koch Brothers are the closest thing the United States has to Russia’s oligarchs. They fuse ownership of the economy and state, using the latter to enrich themselves while making private gains through the public’s losses. Their idea of a “market economy” is to buy government officials and the assets they privatize at giveaway prices.

The top three butlers at the Koch’s nouveau riche ‘Downton Abbey’ are Governors Sam Brownback of Kansas, Wisconsin’s Scott Walker, and Chris Christie of New Jersey. All three ran elections based on the anti-Keynesian oxymoron of promoting job creation by balancing budgets with regressive tax plans. All declared that cutting taxes (chiefly on their wealthy campaign contributors) was the way to achieve their goal (more campaign contributions). All have served at least one term in office and the results are in: Their rates of job creation and income growth are way below the national average. Rather than closing budget deficits, tax cuts create them – providing more excuse to privatize state assets, post-Soviet style.

Brownback simply hopes to stay on the job as governor of the state where the Kochs’ corporate headquarters are located. Despite flagging poll numbers, he remained in office thanks to a mildly tawdry incident involving his Democratic opponent’s youthful visit to a strip club (in the era of talk radio and Fox News, anything can be manufactured into a scandal). Christie and Walker, by contrast, have presidential aspirations and are raising funding as the two top prospects from the Kochs’ political farm team.

The looming public danger ahead is how these Koch governors will ‘repair’ the fiscal potholes their tax policies are creating. Chanting the GOP refrain of ‘lower tax rates good, higher taxes bad’ as their stage-magic abracadabra, they proselytize Arthur Laffer’s cocktail napkin ‘Laffer Curve’ depicting lower tax rates delivering higher tax revenues as a sacred scroll – its inevitable failure leading to privatization of rent-extracting opportunities in a Yeltsin-like post-Soviet policy under the banner of free markets.

All three Koch Governors are following this fiscal folly of widening budget deficits. The effect is to force more cutbacks in public services, with sermons exhorting voters to tighten their belts while the Kochs gorge themselves on the tax cuts enacted by their pet governors.

Christie and Walker are the two governors with the most to lose by reciting the same tax-cutting catechism that Brownback parroted while driving Kansas into insolvency. Walker ran for re-election largely on having eliminated a $3.6 billion budget shortfall while cutting taxes and – more to the point – by cutting public employee benefits while holding most state wage increases below the rate of inflation. Christie likewise originally ran on closing deficits. Both now find themselves big budget deficits after serving a term with the policy they would like to impose on the nation at large.

Christie and Walker both sought to finance budget deficits and tax cuts (chiefly for the wealthy) by reducing living standards for public sector workers. But the deficits have re-appeared, while the cuts to public worker compensation have reduced consumer spending at local restaurants, taverns, car dealers and the innumerable goods and services tendered by New Jersey and Wisconsin businesses.

Christie and Walker pretended that cutting inflation-adjusted wages and benefits would not reduce consumer demand if the ‘savings’ were spent by the taxpayers enjoying lower tax bills. This argument ignored the obvious fact that the tax cuts go disproportionately to the wealthiest. As every economic textbook for the past century has taught, the rich typically spend and invest more of their money out of state, or simply buy more Wall Street stocks and bonds and foreign luxuries. The supposed savings thus escape Wisconsin, slowing economic growth – and hence, state tax revenue!

Christie and Walker are now facing deeper deficits after their tax cuts. Governor Walker no longer has a balanced budget. New Jersey’s shortfall for this year was close to $1.6 billion. Christie was counting on revenues from the state lottery to serve as income transfer from the poor and working class to pay for his tax cuts to the rich. But lottery revenues have fallen short. So he is trying to make up by cutting state payments to the pension system. As for Wisconsin’s state deficit, it is projected to widen to $2.2 billion.

Just as important as how much tax is collected, is how it is collected – who/whom? The aim should be to structure tax policies in ways that maximize wealth creation. But Governor Christie and Walker’s tax policies cut the bone, not the fat.

Their political dilemma is that their ‘tools’ of income and property tax cuts have not ‘repaired’ their respective budgets. The danger is that their pursuit of the 2016 GOP presidential nomination will lead them to use the next ‘tool’ in today’s class war arsenal: weaponizing fiscal policy to sell off the public domain.

Governor Walker has led the way by trying to sell state land and power plants in no-bid contracts. The idea is for privatization sell-offs to raise enough short-term revenue to allow the Koch Governors to wave the banner of fiscal rectitude, just in time for the 2016 presidential primaries.

But this will sell their states’ ‘family silver’ of land, power plants and other basic infrastructure that has been kept in the public domain to benefit taxpayers by keeping their basic infrastructure prices low. Selling off this public property, currently owned free of debt, would provide rent-extraction opportunities for the buyers. It would turn their taxpayers into rent payers for the services of the assets they formerly owned free and clear. The new prices for hitherto public services will include debt servicing charges, management charges, the cost stock dividends, and whatever rack-renting the new owners can squeeze out of the public.

To be sure, there is room for investigating whether a private vender could better manage our state-owned power plants, or if a private developer should construct and manage buildings on public land to maximize revenue. But this is different than selling the underlying assets owned by taxpayers.

Tax rates can be lowered or raised in response to budgetary needs – and to pay for errors by past political office holders. But once public assets are sold, they cannot easily be re-acquired. The long-term fiscal damage from their sale is permanent. That is what England learned from the devastating wave of Thatcherism. It raised the fees that taxpayers must now pay for transportation, water and other hitherto public services that have been privatized and financialized. They lose more paying such rents than they saved in the tax cuts (financed by much higher public debt levels).

The problem with New Jersey and Wisconsin is that unlike Britain, whose economy was saved by North Sea oil revenues coming online just when Thatcher’s policies were cutting demand in the economy, these states have no such natural resource windfall to save them from the short-term fixes to the budgetary shortfalls that have been created by tax cuts benefiting the most affluent.

Beyond New Jersey and Wisconsin, the whole country needs a more enlightened discourse on wealth creation. Blanket lowering or raising taxes will not balance our state budgets or deliver prosperity. The aim should be to make the tax structure more progressive, and to incentivize investment over speculation. What must be avoided at all costs is selling off public infrastructure. This Koch ‘tool’ will not ‘repair’ our budgets. It risks shattering budgets, and also the middle class. Selling off public property returns the public to their role as peasants on the Kochs plantation.

But here’s the real nightmare: President Obama has been giving speeches warning about the nation’s deteriorating bridges, roads and other infrastructure. This sounds like a Grand Bargain in the making by the Democratic ‘Rubinomics’ and Koch crowds to raise the funds to ‘fix’ America by privatizing bridges and other infrastructure that have been starved of maintenance as a means to balance local budgets in the face of cutting taxes for the rich. A Democratic Congress might block Koch tax cuts on the national level – but a Democratic presidential victory could restore Obama-Clinton style neoliberal policies to out-Koch the Koch brothers by engaging in privatizations as a means to both restore our infrastructure, while levying a de facto tax on the middle class in the form of tolls and fees going to private investors for infrastructure currently paid for by general government revenues.

In short, the 2016 presidential election could be another example of ‘heads you lose, tails you lose’ with either the Democrats or Republicans. The best chance of staving off this ‘casino fix is in’ is to focus on electing progressives to the Congress rather than ‘investing’ in a Hillary victory for 2016.

Jeffrey Sommers is an associate professor at the University of Wisconsin – Milwaukee and visiting faculty at the Stockholm School of Economics in Riga. His book with Charles Woolfson, The Contradictions of Austerity: The Socio-economic Costs of the Neoliberal Baltic Model  is available from Routledge.

Michael Hudson’s book summarizing his economic theories, “The Bubble and Beyond,” is available on Amazon. His latest book is Finance Capitalism and Its Discontents.  He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He can be reached via his website, mh@michael-hudson.com