Romney, Banks, Regulations and “Garage Loans”

If you’ve ever seen the Cheech & Chong “Con Talk” skit from Still Smokin’, you really didn’t need to watch the first Obama-Romney debate. A case in point was the presidential candidates’ exchange over banking regulations.

Obama opined, predictably, that the 2008 banking crisis was the result of under-regulation. And he was right — as far as it goes. The repeal of Glass-Steagall, for example, no doubt exacerbated the growth of the bubble economy over the past thirty years.

The problem is that for Obama — and for Romney as well — “regulation” refers only to secondary state interventions that stabilize or ameliorate the existing model of corporate capitalism, and prevent corporate power from becoming so great it destroys itself and takes everything down with it.

“Regulation” decidedly does not include the primary state interventions that created the power of big business, finance capital and the FIRE Economy in the first place. So the regulations Obama champions are really just a state restriction or qualification on the exercise of powers granted by the state in the first place.

If the bloated FIRE Economy and bubble-fueled demand didn’t exist, corporate capitalism would have to invent them in order to survive. It was the state itself, in the mid-19th century, which created a centralized, capital-intensive, overbuilt corporate economy prone to chronic overaccumulation of capital, stagnation and idle capacity. The tendency toward stagnation was exacerbated by the “maldistribution of purchasing power” resulting from state enforcement of rents on artificial scarcity and artificial property rights, which shifted income from those classes with a high propensity to consume to those with a high propensity to save and invest.

State capitalism’s chronic crisis tendencies almost destroyed it in the Great Depression — and would have, had not the state intervened to save it with a little stimulus package called World War II. WWII not only stimulated domestic war production — nearly half of all American plant and equipment in 1945 had been built in the previous three years — but it destroyed most industrial production in the world outside the United States. Between having bombed most of its competition flat and having greatly expanded aggregate demand from the permanent war economy, the U.S. had good economic times for a generation after WWII.

But by around 1970, Europe and Japan had more than rebuilt their industrial capacity, and America’s chronic tendencies toward overaccumulation and excess capacity resumed. Since then there’s been an increasing tendency toward declining profits and jobless recoveries, with profit in boom times increasingly fueled by speculative bubbles, the creation of new industries by the state and deficit spending far beyond the naughtiest of Keynes’ dreams.

When Obama and Romney debate “regulation,” they’re not talking about the primary regulations that define the structure of capitalism as we know it. They’re both entirely in favor of them. Their entire disagreement is over the amount of secondary regulation — of restraint on the rentier classes’ exercise of their state-created power — necessary to maximize long-term profit on a sustainable basis. Those two clowns, in other words, just represent the two major factions in the economic ruling class.

To the extent that the primary interventions were even hinted at, Romney let out a vigorous dog-whistle that he’s all fur ’em. “Regulation is essential. You can’t have a free-market work if you don’t have regulation, You couldn’t have people opening up banks in their garage and making loans. At the same time, regulation can become excessive.”

So Romney’s totally OK with regulation that protects the banksters from competition with garage loans. It’s just regulations that prevent them from becoming too big to fail, or restrict their participation in the casino economy, that he has a problem with.

It’s worth considering just how much of the alternative economy we free market anticapitalists promote centers on things like the “garage banks” to which Romney is so justifiably opposed. The real reason he (and the economic parasites both he and Obama represent) are so vehemently against such operations is that they represent the one thing above all of which the economic ruling class is opposed: Competition.

Legal tender laws and requirements that taxes be paid in legal tender hinder the operation of alternative currency systems, which provide much-needed liquidity for local exchange in conditions of economic downturn when there is “no money” in circulation. They’re growing rapidly right now in places like Greece and Spain thanks to Europe’s currency meltdown, for example. And bank licensing laws that mandate minimum capitalization levels for lending institutions further hinder the development of alternative money and credit systems.

Tom Greco‘s credit-clearing network, my favorite alternative currency, serves as a rough model for most of the digital, encrypted local currency systems around the world. The beauty of Greco’s system is that it serves as a denominator for exchanging existing values, rather than a store of past value. So members of the system can trade present against present, or present against future services, even when nobody has any money accumulated from past transactions. Greco’s system functions much like a checking account: When you sell a good or service within the “barter” network, your balance goes up. When you buy, it goes down. But most such systems let members run standing negative balances up to an amount equivalent to some selected period of average activity on their account. Which means that, even with everyone starting from zero, members of a community with “no money” have liquidity for trading their goods and services. Obviously, such advances of purchasing power by a barter network — which amount to free overdraft protection — risk falling afoul of government banking regulations.

Mutual banks, likewise — banking cooperatives which issue zero-interest secured loans against their members’ own collateral — are in clear violation of the state-enforced banking monopoly when they issue even secured credit without any capital reserves.

Obviously the economic ruling classes — which have lived off the rents on artificial scarcity since the rise of the state — cannot tolerate competition from such arrangements. The state is the instrument of armed force by which an economic ruling class extracts rents from the producing majority of a society. Since the beginning of history, rentier classes have interposed themselves between producers and consumers, setting up tollgates to collect tribute in return for not forcibly obstructing production, or allowing producers to trade their goods and services with others in return for a cut of the take.

The usurer, the landlord, the licensed monopolist, the holder of copyrights, patents and trademarks — are all comparable to the owner of a toll-gate erected on a bridge. On one side of the river is (say) a farmer who needs shoes, and on the other side a shoemaker who needs corn. The shoemaker and farmer can cross the bridge — so long as the owner of the toll-gate gets a share of the corn and shoes for allowing it.

The function of the state is to back up, with its guns, the right of these toll-gate owners to exact tribute from the rest of us for the privilege of feeding ourselves. And regardless of Obama’s talk about “working families” and “kitchen tables,” and Romney’s talk about “free enterprise” and “individualism,” both of them are good and faithful servants of the classes that own the Earth and everything in it, and live off our sweat and blood.

Two things to remember, though. First, it’s “garage banks” — credit clearing networks, LETS systems, and mutual banks — in conjunction with local micromanufacturers, permaculture, open-source information technology, and other horizontal and decentralized forms of production — that will keep us alive long after the state and corporations are smoldering in the garbage heaps of Gehenna. And second, thanks to such expedients as encryption and darknets, the state is losing its ability to stamp out such competition to the rentier classes at the very time it’s becoming most essential to our survival.

We will bury them.

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory