Interview with Jesse at the Café Américain
Ilene: Jesse, thank you for doing this interview with me. I’ve been visiting your Americain Cafe now for over a year and have greatly enjoyed the experience. Your site makes me feel like I’m in a real Cafe and have just picked up an interesting article to read with my coffee. However, as it is a virtual meeting spot, we haven’t been formally introduced yet. Will you tell me a little bit about yourself and how the Cafe got started?
Jesse: I am pleased that you are enjoying the Cafe as it has been intended. Too much information about the markets and the economy is hurriedly snatched and gulped down, like American ‘takeaway.’ Sometimes it is valuable to sample information from diverse sources, taste it from different methods of preparation that do not hide its true flavor, and digest it properly. Otherwise we tend to move from bite to bite, with a broadly shallow appreciation of current events, driven by those who shape the mainstream menu offerings.
In 2000 I had taken an early retirement from corporate work, where I had been a vice president at a Fortune 500 company. My intention was to take ten years off to study economics in greater depth, but primarily to spend more time with my family.
I had always been fascinated with economics from the time I had studied it at the university when I went back for an MBA. I am originally an engineer by trade with a background in mathematics and the natural sciences, and while finance was my favorite subject, economics was a fascination. It was clearly a nascent science, full of competing theories, and struggling to find a footing.
Even with my limited background, I could tell that we were approaching an historic period in economic history. The bubble in tech was obvious to anyone who was able to read a chart, and look at the rationale for the boom with a historically skeptical eye.
I had started to study bubbles and crashes in 1998. One of the benefits of traveling for business is that one can become a voracious reader, and so I read quite a few books on bubbles and crashes to supplement what I already had known.
In 2000 I discovered the world of financial chat boards. It was interesting to find a group of people who also did not believe in ‘the bubble.’ This was a chat board at a place online called ‘Fall Street.’ I had been studying technical charting for some time, and looked into most of the methods. I liked the classic charting method, and gained quite a bit of knowledge from Ken Shaleen. I found my own style of charting with what I called ‘the Babson method’ which had been used by the economist, Roger Babson.
There were requests to see these charts, which I was generating on a variety of timeframes. I started posting the charts, which included quite of bit of hand drawn features, for viewing at Yahoo Geocities at a site simply called Jesse’s Charts.
Early in 2001, I started taking things I wrote for the chat board and turned them into small essays, and placing them as text images along with the charts on this site, since the chat board was impermanent and not readily searchable. At that time, blogs were not so readily available. The name of the site was changed to Jesse’s Crossroad Cafe.
The site was intended to be entertaining and visually appealing, often funny, as well as informative. This made it more interesting to me to produce, and the idea was to educate people while providing an interesting diversion. Education does not have to be dry and painful to be effective. There is a wonderful experience to be had in the joy of learning, the ecstasy of understanding. It merely needs some encouragement to occur.
The format on Geocities was a single page, with a background wallpaper and music that changed every few days. The documents and charts were presented as links arranged around the page. It was visually appealing but difficult to maintain and with no search or long term archiving capability.
Yahoo Geocities decided to end their site hosting business in the autumn of 2007, and essentially shut down the Crossroads Cafe over a weekend. At first I was devastated as all the information I had stored there was lost.
I decided to find a new venue, and blogging seemed an even more effective method of providing information of various types in an attractive format with searchable qualities.
Le Café Américain as it is today opened in February 2008. And so here we are today.
Ilene: Are you planning on going back to the corporate world any time? Or will you continue with your studies, blogging and quest to educate people, or all of the above?
Jesse: I am not sure. My ten year hiatus is ending next year. What I do next will depend on where I am needed the most, and I imagine on who would have me. I will be ready for something new, but will always continue with my studies and reflection, meditation, as I have done all my life. It is always a matter of degree. The first six months in a new position are always intense with new learning. I have thoughts of writing a book or two, perhaps some essays, but one has to first think of something essential to say.
Ilene: I’d be willing to bet that you’ll find essential things to say…. As an avid reader of your blog, I sense some skepticism of the equity market’s recent ascent. Do you have any thoughts on where this market is headed?
Jesse: It is always difficult to forecast the short term direction of the US equity and bond markets, but it is especially so now because the Fed and Treasury have provided unprecedented amounts of liquidity to a relatively small number of Wall Street banks. The Fed is openly monetizing debt, and buying the long end of the curve! Because of the way in which rescue has been structured, the banks have little or no incentive to lend the money to commercial interests, but have plenty of incentive to chase beta by speculating in the markets.
The government and associated pundits and analysts also have an incentive to see the bond and equity markets rally because this is viewed as a ‘good sign,’ a way for the economy to rebound and carry the US past its financial crisis and the collapsing credit bubble. .
Without a reform of the financial system and a rebalancing of the economy there can be no sustained recovery. The Fed and Treasury are debasing the dollar in the hopes of masking their past policy errors. This is shaking the global currency regime which has been in place since World War II to its foundations.
So, will the stock market continue to rally? It can, as long as the world keeps accepting dollars, and the Fed pursues the quantitative easing, and the banks are free to trade for their own accounts with sophisticated programs that add no value, but transfer wealth from the many to the few.
Eventually the markets will reflect this economic reality, and the trend will revert to the fundamental mean. When this happens it may be quite painful for all of us. But predicting the time that it will occur is difficult, except to say that it will almost certainly be when the Fed must raise interest rates to save the bond and the dollar. Perhaps earlier than this, if people realize that the market has become a liquidity driven Ponzi scheme without fundamental underpinnings in the productive economy.
This may be triggered by some exogenous event, something that happens from outside the system, which causes the pyramid scheme to collapse. An oil shock would do it for example. It would even distract the public from the underlying causes and the need for reform.
Ilene: Your writing captures the frustration that many people may feel watching the stunning series of events leading to the financial meltdown/so-called recovery. I see our Constitution subverted, new powers created out of nothing, a system of justice turned upside down, and a free market that never really was (causing me to rethink many of my prior views). If you agree with my assessment, how would you explain how this could happen?
Jesse: From discussing this with much older friends, too many of whom have by now passed away, and from my own personal observation of large organizations, I would say that there is always some element, some minority percentage of people, who are amoral and possessed with a need to have many possessions for their own sake, and power over others.
They are often very verbally proficient and quick-witted, good on their feet. They tend to view other people as objects, and do not hesitate to act in a manner that most people would consider to be unthinkably dishonorable. To them the ends definitely justify the means, and the ends are all about the accumulation of more people and possessions to try and fill the great hole in their beings. Some of them are simply as they are because their father or mother did not like them, and they need to prove them wrong, that they are worthwhile. And so they have a neurotic need to gain power over the people and situations because they are afraid. It’s very sad really.
These people are mildly sociopathic, and generally miserable people to be around, but are normally restrained by the rule of law and social conventions.
But at some times the conventions of an organization or a society become weakened, through war or financial stress and crisis, and this relatively small group begins to assume more positions of power, often indirectly through other public personalities. Other people who are merely opportunistic and weak-willed, socially immature, fall in with them, acting as their enablers and supporters.
They see how things are going, and say to themselves, "Why be good? Why be honorable? If these others can gain power and position and possessions why should I not do the same? If I do not, someone else will do it."
This is where we are today. It has its roots in the ‘me generation’ of the 1980’s and the ‘greed is good’ culture that came with the counter-reaction to the altruism and idealism gone bad of the 1960’s in the economic shocks of the 1970’s and the recession of the 1980’s.
It was a remarkable achievement of American democracy that it resisted the allure of statism such as overtook Italy, Japan, and Germany in the 1930’s. Much of the criticism of FDR is from those who were disappointed at their failed coup to bring fascism or communism to the States. I thought FDR did a remarkable job of steering what was then a ‘middle course’ and was branded as a traitor to his class for it.
In retrospect many are harsh in their criticisms, but considering what other countries experienced, the US did quite well with his leadership, and like it or not the people loved him for it, and the elite monied interests hated him for it. Of course, there are always the masses of the ignorant that are only too eager to mouth slogans and selectively odd notions fed to them that they think make them sound wise in a contrarian sort of way.
Left or right, it is all about being successful by advancing over another, by taking what they have, by possessing them, objectifying them, setting yourself apart from ‘the crowd’ whom you secretly despise. For the most part these may be smart people, but in life they are mediocrities, banal in their tastes, unoriginal and unloved, unloving. But they are focused by their mania. Could one find a more banal group of failed mediocrities than the National Socialist party leaders? And yet they almost succeeded in conquering much of the civilized world by corrupting a weakened nation.
After years of traveling, and seeking to meet people, I have come to the conclusion that people all over are essentially the same. But cultures can be different, because as an organization they reward and approve certain behaviours and discourage and admonish others.
Japan is very different culturally from the US. But I have met Japanese businessmen who were as egotistical and self-centered in private as an American scion of Wall Street might be publicly. But they tend to be restrained by their culture, and not held out as objects of admiration.
I do not believe in ‘conspiracy’ per se. But different types people tend to find each other, people with similar tastes and attitudes, and work together to achieve their similar ends when they are not fighting amongst themselves. It really is a sickness of the mind and the spirit, similar to any other sickness that needs to prey on others to satisfy its abnormal needs. It is because it involves financial and material goods, rather than physical abuse or physical theft, that a relativistic society can tolerate it, allow it to flourish.
It becomes a much more serious problem if amoral egoists begin to gain influence over the government and the media, and undermine the restraints on the will to power, their culture of emptiness. It only takes a minority of the people to give in to the darker impulses of fear and greed to support them, and for the majority to do nothing in response, and an entire nation can become slowly corrupted, allowing monstrous things to occur.
I would say that things in the US began to deteriorate in the middle 1990’s when Bill Clinton was in the White House. This was when we saw the overthrow of the last of the reforms put in place at the end of the Great Depression. Clinton was an egotistical verbalizer, a chronic abuser with a shocking set of personal habits that appear to be compulsive. And he was replaced by an amoral mediocrity that could view torture and the Constitution as impediments or enablers to his will. Now the US has another high IQ verbalizer, who may be sincere and inexperienced, but unfortunately has surrounded himself with the same elitist group of corrupt statists that enabled the Clintons.
Ilene: What do you mean by “elitists?”
Jesse: Elitists are self-identifying, powerful people in business and politics. Those who consider themselves the elite, based on their wealth, their bloodlines, their university, their personal connections. They are certainly not egalitarian or humanists. They tend to worship power above all, and hold those who have less power in disdain. They have a decided lack of sympathy for their fellow humans, preferring to consider them as objects if at all.
By the way, it is a common characteristic that they cheat, they break the rules, they often flout the law as a matter of course. This type of person views the rules as something to be imposed on the common people, the others, those who need to be ruled by them. If you don’t believe me, start looking into their backgrounds. Everyone may cheat now and then, but for some people it is a way of life, an affirmation of their privileged status. It can almost become a game.
In the UK, it is hard to see daylight. Tony Blair was an egoist verbalizer, and it will be too bad if he gains power over the EU. Gordon Brown is truly frightening. The Tories are intellectually and morally bankrupt, but Labour is corrupted.
The answer of course is for society to begin again to restrain the minority who would serve the will to power, and discourage their demimonde of followers and enablers. The only way to do it is to put justice back into place, restraints on the risk-reward calculations of corruption. There really is little downside to white collar theft and graft, if you are ‘connected.’ Move on, all will be forgiven, we do not have time to enforce the rules in an emergency or a crisis. Besides, he is a ‘goodfella.’ One of our crowd. One of us.
The politics of the US today remind me of the competing crime families we saw in Chicago and New York at various periods in US history. Obviously they can gain enormous power, and the influence of their corruption can run deep. And just as obviously they can be taken down through a concerted effort by cutting them down at the roots.
Ilene: But doesn’t the trend seem to be one of ever-increasing power and wealth in the hands of the minority elite, who use their wealth and power to acquire more – how can that be stopped?
Jesse: The good news is that they are a minority, and they do not run the country and the world. There is always a minority of those who break the law, who subvert society, and there is the means to stop them from succeeding.
Their strength is their weakness. The focus which permits some people to succeed also gives them a ‘tin ear’ for the effects of their greed. In other words, they always go too far, and begin to blatantly start breaking the law, and acting in ways that are obvious wrong. And when there is a public revulsion to their deformity, they just do not get it.
One has to restore a rule of law, an atmosphere in which there are risks for wrongdoing. It is a classic case of the need for reform after a period in which rule breaking has flourished. It is a familiar story throughout history.
The Wall Street banks must be restrained from gaming with the public money. The markets must be a level playing field in which insiders and larger players do not engage in fraudulent trading practices. This requires honest regulators above all, who have not accepted jobs and favors from insiders. Self regulation does not work, because the easiest road to corruption is through self-delusion.
The flow of money from special interests to politicians via lobbyists and campaign contributions must be stopped through campaign financing reform and scrupulous disclosures. Those who accept money from special interests over which they have a public stewardship are a cancer to a society.
The media must once again be managed by diverse elements, and not a few corporations.
People must once again be willing to tell the truth, to stand for what is right, to speak for the ideals which govern the country under the Constitution, without fear of retribution or penalty. Our treatment of ‘whistleblowers’ is often shameful.
Obama was obviously elected in the US as a reformer, and he is failing. Is he corrupt, or merely naïve? No matter. If he does not perform he will be replaced, by a third party if necessary.
I am a little less optimistic with regard to the UK, probably from a personal ignorance, but there is always hope.
America is a revolutionary country, and it still maintains a love of freedom and a dedication to its founding principles, even though at times it may seem to lose its way.
Reform is a response to a specific set of deteriorating conditions, some specific wrongs. It is when the majority of average people begin to restore a balance to their society by no longer being afraid to call certain behaviours ‘wrong’ and unacceptable to their society.
Who is to say what is wrong? There is a wonderful thing in America, its Constitution. It sets out the basic principles of freedom in a marvelous way. It is not perfect. It does not contain all the details, which are to be found in the body of laws that surround and support it, and those who swear to preserve, protect and defend it.
It starts by simply saying ‘no’ to those who would rule us by fear and discouragement. To say no to private prejudice and greed, which cause us to turn a blind eye to injustice. Daylight is a good disinfectant. Secrecy is not the normal condition in a free society.
Periods of time can be dangerous, because there are sometimes wolves in sheep’s clothing. Hitler was put forward as a strong reformer. He was elected by a minority, and suspended the rule of law. So a nation will be wise in whom it selects to lead it. If it holds on to its principles, in the case of America, the Constitution, then it can stay on the path to reform.