Pundita

1.  American Pensions

Following is from John Batchelor Show Schedule March 5, 2013. I don't know who wrote this  summary for a show segment but the remark at the end about "selfish Boomers" is silly. The rest is not.

Washington State’s Pensions in Crisis Too

Add Washington to the list of blue states with grossly underfunded public pension systems. A great new investigative piece in the Seattle Times finds that the state is using fanciful figures to provide teachers and taxpayers with misleading assurances about the safety of the pension system, one of the largest in the nation:

After consulting with several economists and pension experts, The Times decided to use discount rates derived from yields on long-term state general-obligation bonds, matched to each individual plan’s duration. The rates ranged from 3.48 percent to 6.26 percent. Those rates were used to compute present-day values of each plan’s projected future payments, using data provided by the state actuary’s office. The values were compared to the market value of each plan’s assets, as disclosed in their financial statements. Looked at this way, funding levels varied widely from plan to plan. Though none was fully funded, the two plans that cover local police and firefighters came closest: They were about 83 percent funded, generally considered a reasonably healthy level. On the other hand, the gap between assets and liabilities in the original (and now closed ) state workers’ plan grew from $3.7 billion to nearly $10 billion. The gap in the original teachers’ plan, also now closed, widened from $1.8 billion to $6.8?billion.

  The investigation found that the system as a whole was underfunded to the tune of almost $31 billion. Much like we’ve already seen in California, cash-strapped local governments will be asked to make up the difference by upping their contributions to the plans.

Take the time this Monday morning to read the whole thing. It’s as well-written a summary of a pension crisis story as you’re likely to get, [emphasis mine] and this is a story that’s being repeated all across the nation. Then, if you haven’t already, have a look at how much you or your loved ones are relying on generous promises made by state bureaucrats to fund your retirement—and start asking some hard questions.

  Then take a look at what’s coming, as all over America battles will erupt over whether to cut services to poor people and kids today to honor unrealistic promises made to retired workers. Will non-state workers who don’t have pension programs vote to slash the funding for their kids’ education? Will a generation that’s been systematically lied to and bilked by irresponsible Boomers tax itself to the eyeballs to give the Boomers a stress-free retirement that younger folks won’t be able to share? A world of ugly is coming in American retail politics, and the Democratic Party in particular is going to be split by conflicts among different wings of its large coalition

2. American savings accounts:
 September 17, 2011:
Bank deposits soar despite rock-bottom interest rates 
E. Scott Reckard
Los Angeles Times


Consumers worried about the economy are pumping cash into checking, savings and money market accounts. But the banks don't need their money and have slashed interest rates to discourage customers.

Americans are pumping money into bank accounts at a blistering pace this year, sending deposits to record levels near $10 trillion on escalating fears that the U.S. economy is on the verge of another implosion.There's no sign that the flood into checking, savings and money market accounts is slowing down. In the last three months, accounts at U.S. commercial banks have increased $429 billion, or 10%, almost double the increase for all of last year.

There's one big problem: Banks don't want your money."Banks and credit unions are doing everything they can to get rid of the cash except make loans," said Mike Moebs, a Lake Bluff, Ill., banking consultant.

He said banks are driving away deposits by refusing to renew CDs at higher rates and by imposing fees on checking accounts for depositors who don't use other, profitable financial services as well.

During the housing boom, banks gobbled up deposits — including plenty of "hot money" provided by brokers chasing high interest rates for their clients — to fuel binges of mortgage and construction lending. The collapse of home prices and the ensuing financial crisis caused nearly 400 banks to fail, more than at any time since the savings and loan meltdown in the 1980s.

The latest flood of deposits has occurred in spite of banks paying the lowest interest rates on record for money they know could flow back out if the economy improves. Similar "flights to safety" with huge deposit inflows occurred in late 2008, when the financial crisis struck, and in 1999, when fears of massive defaults on Russian debt panicked investors.

The large amount of cash only adds to expenses such as paying for deposit insurance premiums. With lending standards tight as a drum after the financial fiasco, and demand for loans growing only slightly, banks have been doing everything they can to demonstrate how little they need new cash.In the most obvious sign, they have slashed interest payments to discourage customers. Wells Fargo & Co., which has the most branches in California, halved its payments on one-year certificates of deposits to 0.1%; Citigroup, which paid 2% in 2009, dropped its payment to a paltry 0.3%.

And in a possible glimpse into the future, one New York banking giant is even charging big customers for the right to park money there. The Bank of New York Mellon is forcing institutional clients to pay fees if they deposit more than $50 million into an account.

For bankers like John Biggs, who runs Santa Rosa, Calif., thrift Luther Burbank Savings, the strategy was to always court deposits using high rates to enable growth while keeping costs down. Now he's not sure what to do.In 2007, Luther Burbank was offering a whopping 5.4% interest rate on a one-year CD. The Sonoma County bank used money from new customers to expand into Southern California by opening branches in Encino, Burbank, Pasadena and Beverly Hills.

Those days are definitely over. Biggs' savings bank now pays just 0.9% on the investment. That means for every $100 his customers lock up for a year, they'll get back just 90 cents extra — a difficult thing to explain, he says, to retirees accustomed to living off their interest checks.

Still, it beats the 35 cents that savers in Southern California would get from Bank of America, the 30 cents they'd get from Citibank and the 10 cents they'd get from Wells Fargo, according to researcher Bankrate.com.

"In all honesty, I'm not happy," said Biggs, who has been with the company since the mid-1980s. "Our philosophy is that we are a savings bank; we are rate payers. We will continue to pay you rates at the top of the market. That's just not very good right now."Part of the problem, he said, is that the "government has chosen to drive down rates to abnormally low levels" — a reference to the Federal Reserve slashing interest rates to the bone to encourage Americans to borrow money cheaply and spend it.

But the negligible bank rates have punished retirees and others who depend on interest income, which plunged 40% to $546 billion last year from $903 billion in 2008, according to the federal Bureau of Economic Analysis.

The Fed has pledged to hold short-term rates near zero through mid-2013 unless the economy improves as a way to combat the nation falling back into a recession. That's going to continue to cause pain to savers, and could force banks to become even more stringent about their intake of new deposits.

Bankers such as Robert H. Smith, former chairman of L.A.'s Security Pacific Corp., say the industry is being throttled by a combination of the weak economy and regulations that were tightened in the aftermath of the financial crisis.

"What little demand that is out there for loans is regarded very skeptically [by the banks] because of the pressures from the regulators," said Smith, who sold Security Pacific to Bank of America 20 years ago and is now a founding director of Commerce National Bank in Newport Beach.

The banks also have another problem: what to do with all the billions of dollars in temporary deposits being parked by giant corporations, institutional investors and retail customers.

Like Biggs' depositors, they are stashing it in a safe but unrewarding place: Federal Reserve banks, which are paying them an interest rate of just 0.25% to tend the funds. Such deposits rose to more than $1.6 trillion at the end of August from about $1 trillion a year earlier, according to the Fed.

And until new lending grows strong and depositors start pulling funds out to invest elsewhere, banks will have little reason to increase rates. They now are even lower than in 2003, when the Fed pushed rates down to then-record lows after the Internet bubble popped."I never imagined yields would get lower than what we saw in 2003," said Greg McBride, senior analyst with Bankrate.com. "Well, in Japan maybe. But not here."

MICHAEL WRIGHT: What happened in the gold market last week? Every gold expert has a different opinion about what caused the price crash.

PUNDITA: When you mix millions of unsophisticated investors with sophisticated ones, toss in high-speed computerized trading mechanisms, and shake this together with the monetary policy of major central banks and the bottom lines of mega-hedge funds and exchange-traded funds, then add the Twitter Knee-jerk method of news dissemination, anything can happen. And it can happen with blinding speed. If you pile on top of this sophisticated investors chewing their nails to the quick about the present state of the global economy and the Federal Reserve's dollar-creation spree, you're looking at chaos. That's what happened in the gold market last week.

MICHAEL: You're saying you know what happened to gold but because you know you're not going to say.

PUNDITA: The crystal ball is out for repairs again. I have a guess as to what toppled the first domino but my guess is as good as anyone's. The point is that this is the Age of the Masses, so whether it's war or money or gold, there's an awful lot people in the mix; they're generating an awful lot of factors that combine in an awful lot of ways. This situation is the real 'Black Swan' in this era. It's not any single catastrophic event; it's the Age of the Masses interwoven through all the large events that impact societies.

Recently a former FDIC official said it best: "We're drowning in a sea of complexity." She was referring to the huge number of hideously complex regulations strangling the U.S. banking industry, but the observation applies across the board.

What she didn't say is that it was the attempt by American banks to escape from drowning in the sea of complexity that fueled the expansion of the shadow banking system, which at that time was almost completely unregulated. At first the expansion was a good idea; it allowed money to flow to freely, which kept business expansion --

MICHAEL: Hold on; this isn't a criticism but you analyze so many factors that often when you talk I can't keep up.

PUNDITA: Okay; here's a way to understand fast. A portion of the illegal traffic from Mexico to the U.S. for decades wasn't really immigration; it was Mexicans fleeing their banking system. This was because it could take them years and huge bribes just to attempt to get a loan from their bank -- any kind of loan, small or large. This was killing legitimate business in Mexico. Business loans are the lifeblood of an economy and the blood couldn't flow freely through the arteries of Mexico's economy. So borrowers applied to American banks for loans. They had to do this in person, which meant crossing the border illegally in a lot cases. And they couldn't walk into an American bank and say, "Hi, I've just popped in from Mexico. Can you lend me a half million dollars?" It was a process that could involve staying in the USA until the loan came through.

However, something like that situation was also happening to American borrowers. This is the hidden part of the boom in offshoring U.S. manufacturing to China and other low-wage countries. Governments in those countries, through their banking system, were making instant, no questions asked loans to Americans who wanted to set up a manufacturing plant in the country. There was no way American banks could match that deal because they had to operate within the U.S. business-banking model, which includes a huge number of regulations.

Add to this, the banks in offshore tax havens were doing the same thing that banks in offshore manufacturing hubs were doing. If an American company had money in a small offshore tax haven, that was the company's ticket to getting fast loans from the banks in the country, and often bigger loans than an American bank might be able to provide given the regulations in the U.S.

MICHAEL: So the big flight of money from the USA wasn't all about getting tax breaks.

PUNDITA: Right. The upshot was massive capital outflows from the United States -- and from the U.S. banking system. The big U.S. banks took one look at all this and instead of doing a John Galt -- folding their arms and saying, 'We'll just wait for the house of cards to collapse,' they came up with an ingenious way to beat the dealer. The dealer being a combination of U.S. banking and business regulations and China's lack thereof.

Beating the dealer involved a lot of complicated paperwork, but the basic idea is simple: If a bank can't write the kind of loans a business asks for, it can do this in a roundabout way. How? Set up investment divisions and financial investment vehicles for corporate customers that allow them to quickly raise capital from financial markets. And because technically these money transfers aren't legally defined as loans but as investments, banks and their borrowers could circumvent masses of red tape.

That's how the shadow banking system, which had always existed in a small way for the banks' biggest customers, took off.

Expanding the shadow system was a great patch to the creaky machinery of the U.S. banking system. But it didn't factor in the Age of the Masses. When millions of individual and corporate investors and thousands of non-bank institutions from around the globe piled into the shadow system, this created huge markets in derivative paper -- basically, investment vehicles derived from nothing more than betting on the direction of various financial markets. These markets are now so various I wouldn't be surprised to learn there's one that trades on price moves in loans made to tea shop owners in Tahiti. So even if the bottom hadn't fallen out of the mortgage derivatives market, it would have eventually fallen out of another kind of market.

MICHAEL: By trying to get away from one house of cards American banks helped create another.

PUNDITA: That's one way to put it. If you drill down to bedrock that's what happened to gold. To really understand the gold story you need to see the gold market as getting tangled up with the shadow banking system. This led straight to the proliferation of what's called the paper gold market -- investment instruments based on the action of the gold market.

MICHAEL: Chasing its own tail.

PUNDITA: Pretty much. Now, in February, if I recall, there was an unsettling news story related to gold. The reaction to the news might have toppled the first domino, but this is getting into the weeds. The important concept is that trading in paper gold is just one part of the complexities of shadow banking.

The shadow system got so complex that only two people in the entire world were able to correctly estimate its size in the United States. These were two guys at the International Monetary Fund. They pointed out that no one -- no one, to include central bankers and government economists and the IMF -- had thought to figure rehypothecation into their calculations. Don't ask me what rehypothecation is because clearly only two people actually understand it -- those guys at the IMF.

Once they corrected everyone's math, this showed that the size of the shadow banking system, just in the USA, had been underestimated by roughly half. So instead of $5 trillion, it was about $10 trillion. When this corrected figure got into the London Financial Times, the ground shook. It wasn't an earthquake. It was American economists and bankers fainting in unison from shock.

That was in 2010. What the size of the American shadow banking system is today -- maybe only those two guys at the IMF have a good guess. But just to give you an idea, BlackRock currently manages $4 trillion. That's more money than the Federal Reserve manages. Think of it: a single Wall Street investment firm manages more money than the central bank of the United States of America.

MICHAEL: Then American monetary policy is a joke.

PUNDITA: Well the Fed policy of keeping the rate of borrowing money very low since the 2008 crash is a big factor in both the current size of the shadow banking system and BlackRock's portfolio. So while the Fed's current policy of easy money is questionable, it's not a joking matter. However, given the scope of the shadow system, it is a joke for anyone to claim that nationalizing the Federal Reserve, or abolishing it, would fix what's wrong with the U.S. economy and the banking system.

MICHAEL: From what you're telling me, fiscal policy is the caboose on a runaway train.

PUNDITA: Age of the Masses. Combine penicillin with democracy and this is what you get. Unimaginable amounts of money chasing any scheme that might return a profit. You just try putting fiscal or even monetary policy up against that tsunami.

Now just see, this is one benefit of tyrannies; people living under them are so scared they keep what money they can scrape together sewn into their clothing. Once government lightens up, they have money burning a hole in their pockets. There are uncounted millions of people who are very happy to help them invest it, and save it.

MICHAEL: And spend it.

PUNDITA: Oh they never say spend. They always say save. "Look! Save 60 percent if you act now!"

So there is a correlation between the rise of democracies and the rising waters in the sea of complexity.

MICHAEL: Nobody but the strongest can swim in that kind of sea. How are people supposed to live, to raise a family and build a career, when they're up against so much complexity just trying to manage their personal finances? There's a lot of fear right now; people are afraid they're going to be wiped out again when the next market bubble bursts. It's a vicious cycle and it keeps getting more violent.

PUNDITA: It's not called a vicious cycle for nothing. However, there might be a way to short out the cycle without crashing civilization as we know it. Doing this would allow American individuals to build and preserve wealth and without trying to navigate the sea of complexity.

MICHAEL: I'm all ears.

PUNDITA: Okay, we can talk about it the next time.

MICHAEL: Thank you. This conversation has been illuminating for me. I'm still chewing over the idea of using tax havens to scare up loans.

PUNDITA: Yup, that's the deal for many American businesspeople. Park your money in our bank in our glorious downtown banana republic, and we won't put you through a ringer to get a loan.

MICHAEL: People talk about drug lords doing money laundering by setting up businesses. Could the laundering also include writing a lot of loans? At least since the 2008 meltdown. American banks got stingy with loans after that.

PUNDITA: [laughing] Michael, anybody can be a shadow banker -- you, me, drug lords, anybody. That's what peer-to-peer lending is about, although technically it's too informal to be considered part of the shadow system, and such arrangements are confined to outright lending. But the rise of P2P, which can be done by anyone with money to loan, illustrates why attempts to regulate the shadow system are just piling more complexity on top of chaos.

MICHAEL: After tying up the banking system, the regulators want to bring on the same conditions that led to the huge shadow system?

PUNDITA: Not only that, they plan to actually enforce regulations on the shadow system. That will only create a bigger and more complex and diffuse shadow banking system than exists now -- a shadow-shadow system.

Try to imagine the enforcement mechanism at that point. Millions of employees from a global version of the Federal Deposit Insurance Corporation fanning out to interview the owner of every pizzeria, fast food stand, halal butcher shop and kosher bakery on the planet. "Hi, I'm from the Global Deposit Insurance Corporation. I need you to fill out these forms so we can see if your capitalization rate is sufficient to write loans."

[laughing] Welcome to the Three Stooges era of banking.

MICHAEL: You're having fun. After almost 12 years of being immersed in war maybe you needed a break.

PUNDITA: Heck, all I've done is switch from watching the Ghost of 1939 chase defense policymakers in circles to watching the Ghost of 1929 chase economists in circles.

Ben Bernanke won't stay in the Federal Reserve building in Washington after midnight because of the Ghost of 1929, which considers the Fed its personal domain. The ghost entertains itself in the wee hours by making a racket that sounds like 40,000 1930's-era bank teller windows slamming shut at the same time.

The Ghost of 1929 even put in appearance at Davos this year. A brainstorming session on how Big People can restore Little People's trust in the financial system was interrupted by mysterious squeaking noises. These were finally identified by a student of the French Revolution as the sound of a portable guillotine being wheeled into place. So much for the lore that the ghost won't hang out in Switzerland because it's scared of Swiss bankers.

MICHAEL: [laughing] You really are having fun.

PUNDITA: Jump in, the water here in the sea of simplification is nice and calm.

MICHAEL: Societies live with their ghosts.

PUNDITA: Yes they do. In the USA we live with the Ghost of 1939 and the Ghost of 1929. That's understandable when you consider the trauma that World War Two and the Great Depression visited on Americans. So it's only natural that policies were created in the attempt to insure that such horrific events never again happened to Americans. Yet when it gets to the point where policymakers are chased into vicious cycles by reactions to trauma, it's time to realize we don't need more policies. We need ghostbusters.

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For readers who feel in need of a little translation of yesterday's Pundita post; i.e., didn't spend 12 hours studying saturation cable news TV coverage of the Boston Marathan Bomber manhunt:

At least as early as 2011 an "unnamed" foreign government asked the FBI to check out Tamerlan Tsarnaev for ties to Chechen terrorist groups. CBS reporter Bob Orr dug up that information yesterday. According to this CBS report, at first the FBI denied they'd received any such request, which for some unfathomable reason John Miller pegged as coming from Moscow. By then, however, Tamerlan's mother was shooting off her mouth to a Russia Today reporter, so the FBI rolled over and admitted they'd investigated him.

Officially the Bureau found nothing alarming about Tamerlan's behavior (although that's not what his mother told RT about their opinion of him; see the CBS report). But given U.S. policy on Russia ("We don't care if it's a terrorist, anarchist or stalinist as long as it gives Putin grief"), he would have had to be firing live rounds on K Street before the FBI could have officially designated him a security threat. He was, from their conversations with him, officially a typical American. So what if he hung out at a few extremist websites? So did millions of other typical Americans.

The 'Typical American' theme popped up several times yesterday on all national American TV stations covering the manhunt, which means only reporters for the Weather Channel weren't trying to discover why two seemingly well-adjusted brothers would want to blow up Americans. With big brother Tamerlan by then dead from numerous gunshot wounds and shrapnel and maybe also a Mercedes SUV being driven over him by little brother in the haste to run a police barricade, energetic reporters scared up former classmates and acquaintances of the manhunt's objective in an effort to get inside his head.

The reporters learned that by all accounts little brother was a completely typical American -- smoked a little pot and got along with everybody, as one former classmate put it.

Have a nice day!

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It's because of me that the Department of Homeland Security will need to install closed-circuit television cameras in your home and the Department of Education is educating your children not to bully typical Americans or exclude us from their prom parties. Not to worry, these measures are just to insure that untypical Americans don't say or do anything to upset typical Americans.

Have a nice day!

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Regarding John Batchelor's January 28 report Fordo Underground Explosion Confirmed:

Because the Fordo site doesn't exist nobody should worry about the fate of the North Korean military brass who were inspecting it at the time of the explosion. As to how much radiation was leaked from the blast, this is one of the nice things about an explosion at a place that doesn't exist. Reza Khahlili has his sources and I have mine and I can report with authority that any road closures near a place that's a figment of the imagination were due to a parade to celebrate International Carpet Weaving Day.

As to Batchelor's observation, "The event at Fordo is profound and may well change the calculus of the United Nations Security Council in negotiation with Tehran" -- he needs to stop and think: has he ever seen the UNSC and the Flying Dutchman at the same time in the same place? There you go.

Now let's be clear. The only way I'll accept that any part of this fantasy actually happened is if the New York Times reports the explosion was due to the efforts of Barack Obama and the U.S. Department of State under the leadership of Hillary Clinton.

President Obama's attempt to shut up everyone by making an example of David Petraeus is flagging due to the sheer number of people who are singing about the Benghazi Incident behind closed doors in Washington, the problem being that there is actually no such thing as a tightly closed door in this town. So before the leakers have another field day, on Wednesday the New York Times dutifully threw together a narrative that while explaining the Obama "administration" was somehow in some peripheral way involved in the arming of Libyan terrorist groups, fingers the Emir of Qatar for the lion's share of the blame.

Which is to say that if not for concern in many quarters that Obama has already repeated in Syria the worst mistakes of his Libyan adventure, the Times report would be a nonstory to be filed under 'White House CYA.' Bob Baer spells out the peril in his December 7 column for TIME, If You Thought Benghazi Was Bad, Watch Syria.

Time was, Americans worried that the death of the Republic would be violent and sudden, in the manner of the Weimar Republic waking up one morning and finding itself the Third Reich. These days we know better; the death is a slow bleed from a thousand small cuts delivered not by goons but by educated sleight-of-hand artists who are paid to conjure a plausible explanation for anything at the expense of the inherent logic of language.  So one troubling aspect of Bapa Rao's August 3 writing for Outlook India magazine is that Americans don't need to know Indian politics to understand his observations.

He notes that in India politicians rarely write for the public. But that's because Indian politicians rarely have to field a challenge from the public about the massive corruption that afflicts government there. Now that a sustained challenge has been mounted Indians are set to experience what's happened in America since the 2009 Tea Party rebellion, which has been government officials fighting each other for space in editorial pages in order to defend the indefensible in the most confusing arguments they can think up.

Yet even Americans can gain insights from Bapa Rao's analysis of the labyrinthian arguments of the Oxford-educated Salman Khurshid, who was serving as Minister of Law and Justice at the time of the writing and was appointed Minister of External Affairs on October 28 by the ruling Congress Party.

Another development since August is that Khurshid became upset last month about a public accusation that he and his wife had embezzled from a trust their family set up to aid the physically handicapped. The BBC reported on October 17:

India's Law Minister Salman Khurshid has warned anti-corruption activist Arvind Kejriwal against visiting his constituency.

"He can come to Farrukhabad but should keep in mind that he has to return too," he was filmed telling a meeting.

Mr Khurshid said as the law minister, he had to "work with the pen. But I will also work with blood," he added.

Work with the pen he does, as you will see shortly. And considering he will also have to work with the U.S. Department of State in the course of his new duties he was hastily given an image makeover after his outburst.

Before turning over the floor to Bapa Rao, I'll thank him and Outlook India for giving me permission to republish his essay. I added a few additional links; this for readers who don't know about Anna Hazare ("Anna" is a Marathi word for father or elder) and the anti-corruption protests that coalesced around him in 2011.

For readers who want more information on the protests, which by 2012 had spread nationwide, I think this BBC profile of Arvind Kejriwal is helpful. Although Hazare is by no means a mere figurehead it's actually Kejriwal who organized the protests and kept them on track. Recently, in a surprising move, he struck off on his own to form a new political party. The name of the party is Aam Aadmi ("common man"); this usurps the motto of the dynastic Congress party, which has as much concern about the common man as did the court of Louis the 16th.

The new party, which has rooting corruption from government as the central platform, was launched just today -- November 26.  Readers who think the platform sounds hopelessly naive should read the Wikipedia article about Kejriwal, and do so before it gets updated again by another prankster in India's political establishment; even during the past couple days sentences have been lost to 'editing' notations regarding footnotes. Although the article writer's first language is obviously not English he or she provides enough data to indicate that Kejriwal knows exactly what he's doing, and knows where all the bodies are buried, as befits someone who worked for India's version of the U.S. Internal Revenue Service for more than a decade.

As to how India's political establishment and the one in the USA have been viewing Kejriwal's progress -- take a wild guess. I think a more interesting question is how the new party will be watched by anti-corruption activists in the USA and other countries, such as China. But now it's time to turn back the clock to early August, to a time before Aam Aadmi launched, before Salman Khurshid found himself publicly accused of corruption, and before the American documentary District of Corruption was released in the USA.

Unscrambling The Politician’s Prose
by K.V. Bapa Rao
Outlook India
August 3, 2012

Salman Khurshid's article Dunk Us All Into Liquid Oxygen doesn't quite manage to conceal that the ongoing events at Jantar Mantar reflect the anger of a great many Indians at the extent and scale of the culture of corruption in India’s political class.

The Indian people are pretty well hardened to the ineptitude and corruption of their politicians. But, as the recent power grid crash shows -- in a week that gave us a burning train, communal riots, highway deaths, attacks on women and another grid crash -- the politicians are always a step ahead of the people’s ability to take things in their stride. They see to it that we never lose our sense of wonder: what sort of minds, what thinking process, what value system, could possibly drive such a single-minded commitment to failure and disaster?

It’s all very well to say that they are venal and stupid; but that really isn’t any kind of answer. Consistent and massive failure in all imaginable fields is never the result of mere individuals acting out of ill intent; it needs organization. And an organization requires a guiding value system that drives a rationale for comprehensive failure and corruption. It is this value system and shared mental process that is revealed when a politician writes the rare article for public consumption.

Back in 1946 George Orwell wrote a short but insightful essay, Politics and the English Language, to explain the connection between badly-written prose and slimy political lies. The creator of the fictional Ministry of Truth (actually a factory of lies) made a lifetime study of the lies of public figures and the language they use for telling those lies. Orwell has this to say about politicians’ words:

In our time, political speech and writing are largely the defence of the indefensible. [Atrocious and morally unjustifiable things] can indeed be defended, but only by arguments which are too brutal for most people to face, and which do not square with the professed aims of the political parties. Thus political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness.

Orwell’s insight was that when politicians write badly, the rotten prose is no accident but a direct result and symptom of the rotten values and rationale that the writers are trying to conceal. No one can write without revealing their brain at work; when you write to lie and deceive, it is hard for the brain to reconcile what it believes to be true with the deception which it is being asked to perpetrate in logical and clear prose. As a result, the writing ends up failing on both fronts: the prose comes out unclear and barely coherent, while the truth peeks out from the covers, and can be extracted, with some effort by the reader. This extracted truth is the “brutal argument” that Orwell is talking about.

Indian  politicians usually keep their brains well out of public view; they carefully avoiding putting words down for people to read and criticize. So Khurshid’s recent article in Outlook affords a rare opportunity to apply Orwell’s methods to probe an Indian politician’s mind and piece together the brutal argument that he is not giving us, but is not quite able to conceal either.

The title of the article, Dunk Us All Into Liquid Oxygen, is a wry allusion to a popular quotation attributed to the late Hindi film actor Ajit, known for his roles as clownish villains spouting quirky dialogue. Torment by “liquid oxygen” at the hands of Ajit’s henchmen would leave the victim in a painful state of being simultaneously not-alive (due to the liquid) and not-dead (due to the oxygen).

The piece is evidently intended as a plaint against the India Against Corruption (IAC) organization that is currently involved in a national agitation (against political corruption) and hunger strike at Jantar Mantar in New Delhi. Khurshid professes “caring” for Anna Hazare -- a prominent activist who has been on the hunger strike -- but insinuates that Hazare, while himself a good person, is, sadly, a lousy judge of character who keeps company with some very bad persons whom Khurshid ostentatiously refrains from naming. Khurshid expends a great many words on the dangers that these unnamed persons pose to the delicate fabric of society, in a darkly conspiratorial tone reminiscent of entrenched old-school demagogues inveighing against “outside agitators” out to pollute, and destroy, our precious political system.

Khurshid leaves no doubts at all about the sheer intense wickedness of these nameless enemies of the people. He signs off with a famous verse from the famous poem, The Second Coming by the famous poet W.B. Yeats:

The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

It seems that Khurshid is actually quite angry with critics who have been giving his colleagues in the political class a hard time about corruption over the past year or so. In the article, he lays the blame squarely on these critics (who are “the worst”) for a deepening cynicism in the public about politics and the political system, and by conscious omission, holds the political class blameless and unjustly maligned. It is another thing that, to the public, it appears as though the political animals have been laying into the public weal like so many drunken monkeys unleashed on a banana boat. And just as those monkeys might, politicians become very cross indeed when someone has the nerve to try to thwart their orgy.

The gorging monkey analogy is rather unkind perhaps, but still apt. If the political class is driven by visions of loaves and fishes of office dancing in their eyes, they are hardly likely to take an interest in raising their standards of service to the public above simian levels, so to speak. Colossal power failures, trains lacking safety systems that were standard elsewhere in the 20th century, deadly roadways, subsistence levels of potable water, grinning indifference to enemy attacks on the nation’s cities, unspeakable sanitation, a disgraceful health care systems, a dodgy education system -- these and the rest of the dysfunctions besetting India all make sense now; they are built and maintained by the political equivalent of partying monkeys, when they can spare the time, that is.

Khurshid devotes a considerable portion of his article to fretting about what is to become of India’s pluralistic political system in the face of the debilitating demands of the dark forces, that is to say, the anti-corruption activists. On the face of it, this is nonsense -- corruption, or its impact, is the most pluralistic thing there is, sparing no one of whatever persuasion. Khurshid’s article is rather incoherent but not altogether useless. If we apply Orwell’s ideas and carefully read past, and into, the vaguely-worded but relatively well-written peroration, we can expose the “brutal argument.” Here are Khurshid’s concluding words:

The role of democratic politics is to find a workable arrangement between competing claims, ensuring, in the process, the stability of society. Where this breaks down, we are left exposed to the forces of unwholesome upheaval, even violence. The strength of Indian democracy is our unity in diversity. If the accommodation of legitimate interests is questioned every time, politics will not be a place for angels and idealistic young men and women. Young India will no longer dream, but will suffer the agony of unending nightmares. With the death of innocence in our times, what then will we tell our children? Who will join politics or become a judge? Will we bequeath to generations to come the lost years, because courage failed the good?

Khurshid evidently means to say that stability is paramount, and trumps all other concerns. Agitating against defalcations by the political class, harshly criticizing politicians, reacting to their bad-faith pretence at responsiveness with anger and refusing to back down -- all these things are the forces of unwholesome upheaval, and lead to bad consequences like the reluctance of young people to dream about becoming politicians, to be welcomed, nurtured and mentored as Khurshid himself was by his Congress Party.

But the conditions in which the majority of Indians are forced to live -- dangerous, deprived and unsanitary conditions engineered by Khurshid’s own political class -- are hardly a reasonable interpretation of stability or security, except by the inhumanly low standards that were imposed on the Indian people by persons like Khurshid, persons he evidently respects and admires. And if the Indian people don’t tear each other apart in despair and rage, it is no thanks to the politicians but due to the civilisational value system that Indians carry in their collective DNA.

So, what, then, is this stability that would be threatened when politicians are criticized? Well, the political class endeavoured, quite successfully, to insulate itself from the worst of the crippling consequences of its own corruption and comprehensive ineptitude, and the insulation has held steady. Anger directed at the political class could conceivably lead to a loss of this insulation, and politicians may have to actually put up with the consequences of their actions. With this in mind, we can now translate Khurshid’s words into plain English prose as follows, which would help us understand why he took the time to write his article:

Public corruption is not important. More precisely, it is far less important than political stability, which is to be maintained by a system of sharing the spoils of office with all political actors who can make enough trouble, thus pacifying them. When people actually confront corruption, but won’t settle for a cut of the action, it disrupts this political order. In the politicians’ eyes, this is the worst possible thing that can happen to India. Ergo, those that engage in such confrontation are the worst possible persons and therefore deserve the harshest possible treatment.

It is serious business, but the operative phrase above is “harshest possible.” Sometimes, harsh is less possible than at other times. After some experience, the politicians have learned to treat Anna Hazare with kid gloves. Less charismatic but still somewhat powerful colleagues of Hazare can be set apart from Hazare and blamed for destroying the country, but it is better to maintain a veneer of plausible deniability and avoid naming them, since they might possibly come around to be co-opted at some time.

Then there are powerless citizens like the hapless Gurgaon housewife Rajbala (no doubt one of the dark forces that worry Khurshid so) whom it was entirely possible to beat to death when she irritated the politicians by protesting against corruption. In the meantime, it is only prudent that the enabling machinery of protest and confrontation be crippled by effectively criminalizing, by default, all use of the internet.

If this is the honest rationale veiled by Khurshid’s opaque prose, then it is no wonder that, when tossing in the obligatory piety about commitment to accountability, debate and so forth, his prose dissolves into incomprehensible and self-contradictory near-gibberish:

Not for a moment should my position be thought to be seeking immunity from accountability. Ipso facto treating it as such would mean reluctance of the adversary to join in an open debate -- the essence of democracy, in whose name many self-opinionated, harsh, even irresponsible positions are being taken.

No one in their right mind would even try to interpret what the “ipso facto …” sentence could possibly mean. Considering the brazen opaqueness of that sentence and the evident impunity with which Khurshid utters it, what follows can only be a cliché-ridden falsehood:

Let me say it with all the emphasis at my command: We stand for the fullest transparency and accountability.

Here is Orwell again, about what lies behind such insults to the language:

The inflated style itself is a kind of euphemism. A mass of Latin words falls upon the facts like soft snow, blurring the outline and covering up all the details. The great enemy of clear language is insincerity. When there is a gap between one's real and one's declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink.

When employed to camouflage a “brutal argument” with platitudes, cant and bombast, the frontal lobe of the brain blows a fuse, prose rebels, twists itself into knots, and turns into a hideous caricature, albeit one which still retains a flavour of the truth.

What Khurshid’s article doesn’t quite manage to conceal is the reality that the ongoing events at Jantar Mantar reflect the anger of a great many Indians at the extent and scale of the culture of corruption in India’s political class. Anger induces rigidity of outlook; mass anger has a way of generating simplistic and ultimately unhelpful, even harmful answers. However, considering the depth, breadth and duration of the politicians’ malfeasance, and their stubborn imperviousness to self-correction, the expressions of anger have been rather mild and the proposed solutions rational, lawful and fairly reasonable, for all their flaws.

Khurshid and his political colleagues are livid that people are angry with them; they simply refuse to admit the fact that the people’s anger is entirely justified, and that it is entirely the politicians’ fault that the people are angry. If today the politicians feel trapped, tormented and hectored on all sides, it is but the proper and deserved consequence of their own actions. Khurshid’s shoddily-written tantrum of an article is a symptom of the continued reliance of the politicians on bluff and bluster in their efforts to divide and neutralize the organizers of the agitation and dissipate the people’s anger.

Khurshid’s concerns about the risks posed by the people’s anger to the stability of society are disingenuous. The agitation has remained peaceful for over a year, a remarkable thing for a grassroots street movement. Khurshid and his fellow politicians have vast, virtually unlimited powers, and they do use them quite ruthlessly to protect their rather sweet little racket. Khurshid’s fear is that, once people feel empowered to scrutinize politicians, they will turn on the politicians with the same fervour that politicians exhibit when thwarted. He worries too much -- unlike the government of which Khurshid is a member, the anti-corruption agitators, for all their anger, haven’t yet beaten anyone to death yet for confronting them, nor have they criminalized the use of the internet.

The minister is right about one thing -- we do need capable young people of good character to enter the political profession, since the people cannot do without hired help to act as their proxies in the exercise of power and in the management and development of shared resources. A key requirement of the job would be the temperament to cheerfully accept intense scrutiny and criticism, even when it is unfair, all the while learning and striving to deliver higher standards of service, and communicating honestly and clearly with the employer.

The apprentice politician might find Khurshid’s article of some use -- as an Orwellian cautionary tale to show that defending the indefensible is morally wrong and rots your prose.