http://www.informationclearinghouse.info/49578.htm
The Absence of Diplomacy Is Isolating Washington
The dissolution of the Soviet Union removed the constraint on Washington’s unilateralism. The neoconservatives, who had just risen to power, seized the opportunity and replaced diplomacy with threat and coercion. One infamous example is from the George W. Bush regime when the Deputy Secretary of State, Richard Armitage, told Pakistan to do as you are told or you will be bombed into the stone age. We have this on the authority of the president of Pakistan himself, who did as he was told.
In the case of Russia during the Putin era, this level of threat is excessive as Russia can bomb back. So the threat has been reduced to: do as you are told or we will impose sanctions.
Sanctions are an assertion of hegemony of one country over another. They are an assertion that the imposer of sanctions has extra-legal international authority to tell other sovereign states what to do or to suffer consequences if they do not.
Once the constraint on Washington’s unilateralism was removed, sanctions became an instrument of US foreign policy and replaced diplomacy. The Clinton regime used them on Iraq. When the UN reported that the effect of the Clinton regime’s sanctions on Iraq was the deaths of 500,000 Iraqi children, Clinton’s Jewish Secretary of State was asked by Lesley Stahl on the national TV program “60 Minutes” if the sanctions were worth the deaths of a half million children. Madeliene Albright said yes, “the price is worth it.” The Jews feel the same way about the Palestinians. As the Palestinians’ country has been stolen by Israel, what is the point of Palestinians? Killing them is Israel’s answer. As one Israeli minister said, we are only doing what the Americans did to the native Americans known as Indians. As America shares this crime with Israel, little wonder that Washington always vetoes any UN action against Israel for its crimes against the Palestinians. The two criminal states stand united against the world.
And from Washington’s view, it has been “worth it” ever since as Washington during the 21st century proceeded to destroy in whole or part seven countries, and is still working on several more.
Any time a country doesn’t follow Washington’s orders, Washington imposes sanctions. Iran, North Korea, Russia, and Venezuela are all bearers of Washington’s sanctions. Moreover, Washington forces other countries, including its European allies, to also impose sanctions or Washington will sanction them as well.
This worked until Washington’s assertion of its hegemony over the world became excessive. That happened when Trump, guided by Israel and by Israel’s neoconservative agents who are Trump’s advisers, denounced and withdrew from the Iranian nuclear agreement signed by the US, Iran, Russia, China, France, the UK, and Germany.
When Washington’s European vassals did not also withdraw from the agreement that they had signed, Trump threatened them with sanctions.
All of Europe already suffers from high unemployment. Washington’s sanctions worsen the situation for Europe, which has resumed profitable business with Iran. Finally Europe has caught on. Washington is telling Europe that Europe must suffer economically so that Washington can exercise hegemony, from which Europe gets no benefit.
This is too much even for the European and British governments that have been Washington’s vassals since 1945. Rebellion is reported everywhere in the Internet news although not in the presstitute media. European and EU officials are saying that it is time that Europe represents its own interests instead of Washington’s. Even the head of the EU, a CIA creation, is in rebellion.
Will the rebellion last, or is it merely the antics of Europeans long on Washington’s payroll posturing for more money? How much does Washington have to shell out to quiet the European rebellion?
Vladimir Putin has been eating insults and provocations for years while awaiting for Washington’s arrogance to break up its European empire. Perhaps Putin’s patience is paying off, and it is happening now.
There are signs that Washington is isolating itself. Washington has ordered India and also Turkey, a NATO member, not to purchase Russian weapons systems, but both countries have given the bird to Washington, rejected Washington’s interference in their affairs and have gone ahead with the purchases.
The chairman of the European Commission, Jean Claude Juncker, said that it was time for Europe to reconnect with Russia and to stop attacking Russia. Will the EU, the CIA’s own creation, turn against Washington?
It is possible. Washington has threatened Germany with sanctions if Germany participates in Russia’s North Stream 2 gas pipeline project bringing energy to Europe. Washington’s preference is that Europe close down from lack of energy rather than to be dependent on Russia, as this dependency reduces Washington’s power over Europe.
Germany’s Merkel, long Washington’s whore, has changed her spots. She announced that the US is no longer a reliable political partner and that Germany “needs to take its fate into its own hands.” The latest poll shows that 82 percent of Germans agree with her that Washington is an “unreliable partner.”
Washington, wallowing in its fabled incompetence, is now worsening all of its empire relationships by threatening its own allies with trade wars. There is no one of sufficient competence in the Trump regime to be able to understand that America’s “trade problem” is entirely of its own making and is not due to Mexico, Canada, China, and Europe.
America’s extremely serious trade problem is due to globalism, neoliberal economics, and to the New York investment banks.
The US trade deficit with China has its origin in the offshoring of American jobs. Products, such as Levis, Nike shoes, Apple computers, once produced in America by American workers are now produced abroad where wages and various compliance costs are much lower. When these products produced abroad for American markets by US corporations come back to the US to be sold, they arrive as imports. Thus, the offshored production of US corporations is the most direct cause of American trade deficits.
However, this basic, indisputable fact is never reported by the presstitute media, or by the neoliberal economists or US government statistical agencies. The pretense is that it is all China’s, or Mexico’s, or Canada’s fault. You would never know that it was the direct result of the profit-seeking activity of US corporations.
What has happened is that with the Soviet dissolution, the governments of socialist India and communist China made a decision that capitalism was the wave of the future, and they opened their labor markets to foreign capital.
The American firms that did not want to desert their home towns and work forces by offshoring their production were forced to do so by threats from the New York investment banks. Domestic producers were told to move operations to China where lower labor costs would boost profits or face a takeover of the corporation that would raise profits by moving operations abroad.
The reason high productivity high value-added jobs have exited America is because of Wall Street and the greed of corporate executives and shareholders. As always happens, the ruling interest groups and their Washington puppets blame foreigners, thus protecting themselves.
However, now they have started what is mischaracterized as a “trade war.”
In effect, the Trump regime is not at war with China and other countries. The Trump regime is at war with the US corporations who moved their production for US markets offshore and with the New York banks that forced this move. The tariffs will fall not on Chinese exports but on the offshored production of US corporations. The tariffs will raise the price that Americans pay for the products that US corporation make in China.
Trump’s tariffs on steel and aluminum raise the cost of inputs used in US production functions. Raising the price of these inputs means that the products of US industry made from steel and aluminum also rise in price, thus hurting US competitiveness. This is the opposite of how protectionism is supposed to work. Protectionism works by minimizing the costs of inputs and by protecting outputs with tariffs on competing foreign products. In other words, the prices of domestically produced goods are lowered, and the prices of competing imports are raised.
The neoliberal economists lied when they gave assurances that the US manufacturing and professional skill jobs moved offshore would be replaced with better jobs for Americans. As the official payroll data makes clear, the replacement jobs are worse, consisting as they do of lowly paid domestic service jobs that characterize employment in third world countries.
Jobs offshoring has been disastrous for America. The resulting trade deficit is the least of it. The loss of well-paying jobs has hurt consumer purchasing power. To maintain living standards, consumers have substituted debt for the missing income. The result is that 41 percent of Americans cannot raise $400 should they be faced with an emergency.
The budgets of states that were once manufacturing powerhouses have also been hurt, calling into question their ability to meet pension obligations. The benefits of jobs offshoring were concentrated on a small group of corporate executives and shareholders and are dwarfed by the massive external costs of jobs offshoring on the US economy and work force.
Robotics will make the situation far worse. The smart people so happily working on replacement of humans in the work force are in fact stupid. They are destroying the social system. Tariffs cannot protect jobs lost to robots. Moreover, robots don’t buy houses, furniture, cars, clothes, entertainment, food, drink, smart phones, computers. All the money saved by replacing people with robots is not available to purchase the products made by robots. Consumer demand collapses. The only solution is the socialization of production that makes all members of society owners of the output. Even this is only a partial solution as it leaves unanswered the question of what people do with their time and what happens to people who do not have to work and to develop their capabilities.
Capitalism, despite the claim that it efficiently allocates resources over time, has a short-run time horizon—the next quarter’s profits. Everything about the system is short-term. We have reached the point at which executives destroy the company by indebting it in order to buy back the company’s shares, thus driving up the stock price and maximizing their “performance bonuses.”
By undermining the strength of the economy, the consequence of short-run profit maximization is to make the US more belligerent. Plunder becomes a way of keeping the system afloat. Thus, hegemony over others becomes a means of survival.
Matters are coming to a head in the Trump regime. Trump’s bullying personality mated with the belligerence of neoconservative hegemony produces war in its many forms. The economic warfare with which Washington is threatening its vassals can lead to an independent Europe friendly to Russia.
The decline in Washington’s hegemonic power is a prerequisite for the resurrection of the American economy. When plunder is not an option, policy has to turn inward. The responsibilities of corporations have to be restored to include employees, customers, and communities along with shareholders. The Sherman Anti-trust Act must be revived, monopolies dismembered, banks too big to fail broken up, and offshored production brought home by taxing corporations according to whether they produce for the US market at home or abroad.
Historically, foreign trade was unimportant to US economic development. A rising middle class produced a large consumer market that sufficed for the prosperity of large-scale manufacturing and industrial enterprises. This prosperous America was destroyed by globalism. American revival awaits a new class of leaders devoid of the hubris of “exceptionalism” who can reject the role of world bully and focus on the problems at home.
Wednesday, June 6, 2018
Monday, June 4, 2018
SC166-13
http://www.informationclearinghouse.info/49563.htm
Ignore Human Rights. Just Keep On Buying
THE FATHER of modern public relations and spin Edward Bernays was a cold, cynical manipulator of mass perception.
He knew that, by shaping people’s desires in a certain way, governments and corporations could sell just about any notion to the masses and manipulate them at will.
Whether it was whipping up fear about the bogeyman of communism or selling the “American Dream” through consumerism, Bernays and the public relations/advertising industry did exactly that.
Bernays was an expert in stage-managing events to capture the popular imagination. Among his various accomplishments was to get women hooked on cigarettes by associating feminism and fashion with smoking.
Calling cigarettes “torches of freedom,” he was instrumental in convincing women that cigarettes were trendy and that smoking symbolised emancipation.
From getting people to change their diets to putting fluoride in drinking water, corporations knew who to turn to when they wanted to sell their dubious products.
Thanks in large part to Bernays, politicians, the corporate media and the system’s opinion leaders learned to appeal to primitive impulses, such as fear, sex and narcissism, that have little bearing on issues beyond the narrow self-interests of a consumer society.
The whole point of such a society is to distract people from the reality of the wider world and train them to desire and want new things that they don’t really need — or, for that matter, even want — while stripping them of their ability to be self-reliant and independent.
The US government quickly learned that angels and demons could be manufactured from thin air and, from Guatemala and Congo to Vietnam, that wars and destabilisations could be built on packs of lies.
Adam Curtis’s 2002 BBC documentary series The Century of the Self describes how Bernays propagandised on behalf of the United Fruit Company (now Chiquita Brands International) and the US government to help overthrow the democratically elected president of Guatemala, Jacobo Arbenz.
Arbenz wanted to nationalise the company’s lands, but Bernays successfully helped brand Arbenz a communist with links to the Soviet Union, which had no basis in reality. This set the stage for public support for a US-backed violent overthrow of Arbenz.
Whether it has involved Iran, Syria, Afghanistan, Ukraine or Libya, Bernays’s tactics of deception have been further developed to keep the masses docile in order to sell imperialism under the lie of a war on terror, humanitarian intervention or exporting freedom, while enriching corporate interests in the process.
Millions are now locked into the pursuit of the Bernays’s model of consumerism. They are locked into addiction. Addicted to the pursuit of acquisition, of hedonism, of self-gratification. Addicted to the belief that there is an actual point to it all.
In the US Declaration of Independence, there is the phrase “life, liberty and the pursuit of happiness.” Freedom and happiness — or their pursuit — are central but were subverted by the likes of Bernays.
With his knowledge of psycho-analysis — Sigmund Freud was his uncle — Bernays knew it was relatively easy to manipulate desires and get people hooked on consuming.
The “American Dream” of consumerism was built on craving and propaganda. And it is maintained by stripping the environment bare, by the unsustainable raping of nature to fuel profits, and is underpinned by perpetual war to grab resources.
The deaths of millions of people killed by US-backed wars and death squads, covert ops and destabilisations are glossed over by countless Hollywood icons, commentators and politicians under the banner of championing freedom and democracy.
Today’s globalised system of capitalism exists to facilitate the desires of a tiny minority of extremely wealthy people and these billionaires, with their media, think tanks and lobbying networks, have enormous influence over global policies.
These so-called “wealth creators,” whose greed has bankrupted nations, leech off of the labour of ordinary people, which they stash away in tax havens and imposed a form of globalisation that results in devastating destruction and war for those who attempt to remain independent from them.
Little wonder then that attempts to redress the balance have been brutally suppressed over the decades. From democratic leftist organisations or governments pursuing a socialist alternative, or just displaying independent tendencies, this class has used intelligence agencies, front groups, threats, co-opted leaders or military might to attempt to subvert or annihilate any threat to its global hegemony.
From El Salvador and Chile to Egypt and India’s tribal belt, ordinary folk across the world have been subjected to policies that have resulted in oppression, poverty and conflict.
But this is all passed off by politicians and corporate media as the way things must be. Anyone who stands up to this lie is ridiculed or treated much worse.
Many of us know the truth of what “happiness” really is and the type of society necessary to achieve it — based on common ownership of natural assets (the commons), self-reliance, localisation, economic democracy and equality.
Yet it is ordinary men and women who sign up to join the military and support this system on behalf of these immensely wealthy people.
In part thanks to Bernays, such people have, however, been adept at manipulating the masses to rally around flag and nation, evoking an emotive misplaced sense of patriotism to pursue their militarism or justify their exploitation.
In his book A People’s History of England, A L Morton documented how ordinary people, over many hundreds of years, set out to challenge these rulers and often paid with their lives. Nothing ever came for free and ordinary working people fought tooth and nail for any rights that they managed to obtain.
Such a travesty then that ordinary people in the richer countries are today denied decent livelihoods because jobs have been sold to the lowest bidder in places such as China, Cambodia and Bangladesh — de facto colonial outposts for the US empire with its ready supply of cheap labour.
The US economy has been hollowed out. Much of its manufacturing has been shipped abroad. For those who benefited, US workers can go to hell in a handcart as long as profits keep rolling in.
It’s the ability to maximise profit by shifting capital around the world that matters to them, whether on the back of distorted free trade agreements that open the gates for plunder or through coercion and militarism, which merely tear them down.
Bernays was a sophisticated operator in his time, but things have certainly moved on since his day.
Today, there is a whole industry of public relations and think thank firms. Take companies like Strategic Communications Laboratories, APCO Worldwide, Cambridge Analytica, Hill and Knowlton etc, all of which have worked with governments and private corporations to shift people’s perception of the world and attempt to orchestrate the future for their clients’ benefits.
But none of this must be exposed. If the propaganda is to remain effective, the public must remain comatose, emotionally malleable, strung out on consumerism and endlessly subjected to an echo chamber of empty slogans about patriotism, the bogeyman at the door and freedom and democracy.
The system must promote a mass mindset that is immune to the lies because the alternative is rational analysis and emancipatory change.
Ignore Human Rights. Just Keep On Buying
THE FATHER of modern public relations and spin Edward Bernays was a cold, cynical manipulator of mass perception.
He knew that, by shaping people’s desires in a certain way, governments and corporations could sell just about any notion to the masses and manipulate them at will.
Whether it was whipping up fear about the bogeyman of communism or selling the “American Dream” through consumerism, Bernays and the public relations/advertising industry did exactly that.
Bernays was an expert in stage-managing events to capture the popular imagination. Among his various accomplishments was to get women hooked on cigarettes by associating feminism and fashion with smoking.
Calling cigarettes “torches of freedom,” he was instrumental in convincing women that cigarettes were trendy and that smoking symbolised emancipation.
From getting people to change their diets to putting fluoride in drinking water, corporations knew who to turn to when they wanted to sell their dubious products.
Thanks in large part to Bernays, politicians, the corporate media and the system’s opinion leaders learned to appeal to primitive impulses, such as fear, sex and narcissism, that have little bearing on issues beyond the narrow self-interests of a consumer society.
The whole point of such a society is to distract people from the reality of the wider world and train them to desire and want new things that they don’t really need — or, for that matter, even want — while stripping them of their ability to be self-reliant and independent.
The US government quickly learned that angels and demons could be manufactured from thin air and, from Guatemala and Congo to Vietnam, that wars and destabilisations could be built on packs of lies.
Adam Curtis’s 2002 BBC documentary series The Century of the Self describes how Bernays propagandised on behalf of the United Fruit Company (now Chiquita Brands International) and the US government to help overthrow the democratically elected president of Guatemala, Jacobo Arbenz.
Arbenz wanted to nationalise the company’s lands, but Bernays successfully helped brand Arbenz a communist with links to the Soviet Union, which had no basis in reality. This set the stage for public support for a US-backed violent overthrow of Arbenz.
Whether it has involved Iran, Syria, Afghanistan, Ukraine or Libya, Bernays’s tactics of deception have been further developed to keep the masses docile in order to sell imperialism under the lie of a war on terror, humanitarian intervention or exporting freedom, while enriching corporate interests in the process.
Millions are now locked into the pursuit of the Bernays’s model of consumerism. They are locked into addiction. Addicted to the pursuit of acquisition, of hedonism, of self-gratification. Addicted to the belief that there is an actual point to it all.
In the US Declaration of Independence, there is the phrase “life, liberty and the pursuit of happiness.” Freedom and happiness — or their pursuit — are central but were subverted by the likes of Bernays.
With his knowledge of psycho-analysis — Sigmund Freud was his uncle — Bernays knew it was relatively easy to manipulate desires and get people hooked on consuming.
The “American Dream” of consumerism was built on craving and propaganda. And it is maintained by stripping the environment bare, by the unsustainable raping of nature to fuel profits, and is underpinned by perpetual war to grab resources.
The deaths of millions of people killed by US-backed wars and death squads, covert ops and destabilisations are glossed over by countless Hollywood icons, commentators and politicians under the banner of championing freedom and democracy.
Today’s globalised system of capitalism exists to facilitate the desires of a tiny minority of extremely wealthy people and these billionaires, with their media, think tanks and lobbying networks, have enormous influence over global policies.
These so-called “wealth creators,” whose greed has bankrupted nations, leech off of the labour of ordinary people, which they stash away in tax havens and imposed a form of globalisation that results in devastating destruction and war for those who attempt to remain independent from them.
Little wonder then that attempts to redress the balance have been brutally suppressed over the decades. From democratic leftist organisations or governments pursuing a socialist alternative, or just displaying independent tendencies, this class has used intelligence agencies, front groups, threats, co-opted leaders or military might to attempt to subvert or annihilate any threat to its global hegemony.
From El Salvador and Chile to Egypt and India’s tribal belt, ordinary folk across the world have been subjected to policies that have resulted in oppression, poverty and conflict.
But this is all passed off by politicians and corporate media as the way things must be. Anyone who stands up to this lie is ridiculed or treated much worse.
Many of us know the truth of what “happiness” really is and the type of society necessary to achieve it — based on common ownership of natural assets (the commons), self-reliance, localisation, economic democracy and equality.
Yet it is ordinary men and women who sign up to join the military and support this system on behalf of these immensely wealthy people.
In part thanks to Bernays, such people have, however, been adept at manipulating the masses to rally around flag and nation, evoking an emotive misplaced sense of patriotism to pursue their militarism or justify their exploitation.
In his book A People’s History of England, A L Morton documented how ordinary people, over many hundreds of years, set out to challenge these rulers and often paid with their lives. Nothing ever came for free and ordinary working people fought tooth and nail for any rights that they managed to obtain.
Such a travesty then that ordinary people in the richer countries are today denied decent livelihoods because jobs have been sold to the lowest bidder in places such as China, Cambodia and Bangladesh — de facto colonial outposts for the US empire with its ready supply of cheap labour.
The US economy has been hollowed out. Much of its manufacturing has been shipped abroad. For those who benefited, US workers can go to hell in a handcart as long as profits keep rolling in.
It’s the ability to maximise profit by shifting capital around the world that matters to them, whether on the back of distorted free trade agreements that open the gates for plunder or through coercion and militarism, which merely tear them down.
Bernays was a sophisticated operator in his time, but things have certainly moved on since his day.
Today, there is a whole industry of public relations and think thank firms. Take companies like Strategic Communications Laboratories, APCO Worldwide, Cambridge Analytica, Hill and Knowlton etc, all of which have worked with governments and private corporations to shift people’s perception of the world and attempt to orchestrate the future for their clients’ benefits.
But none of this must be exposed. If the propaganda is to remain effective, the public must remain comatose, emotionally malleable, strung out on consumerism and endlessly subjected to an echo chamber of empty slogans about patriotism, the bogeyman at the door and freedom and democracy.
The system must promote a mass mindset that is immune to the lies because the alternative is rational analysis and emancipatory change.
SC166-12
http://kunstler.com/clusterfuck-nation/west-coast-state-mind/
A West Coast State of Mind
Driving south on I-5 into Seattle, the Cascadia Subduction Zone came to mind, especially when the highway dipped into a gloomy tunnel beneath Seattle’s relatively new skyscraper district. This fault line runs along the Pacific coast from north of Vancouver down into California. The western “plates” move implacably east and downward under the North American plate, building up massive tectonic forces that can produce some of the most violent megathrust earthquakes on the planet.
The zone also accounts for a chain of volcanoes that tend to produce titanic explosions rather than eruptions of lava and ash as seen in the hula movies. The most recent expression of this tendency was Mt. St. Helens in 1980, an impressive cataclysm by the standards of our fine-tuned complex civilization, but a junior event of its type compared to, say, the blow-off of Mt. Mazama 7,500 years ago, which left Crater Lake for the tourists. A publicity-shy correspondent writes:
By all acounts Mazama was floating upon a vast lake of steamy rhyolite. It was a structurally unstable stratovolcano the size of Mount Shasta with a net volume of 80 cubic miles. A 5 minute Triple Junction 9.3 Richter Scale shaker uncorked the Mount Mazama champagne bottle via massive lahars which removed the overpressure. Geologists estimate that the eruption lasted for about one day.
It’s only been in the last thirty years that Seattle hoisted up its tombstone cluster of several dozen office and condo towers. That’s what cities do these days to demonstrate their self-regard, and Seattle is perhaps America’s boomingest city, what with Microsoft’s and Amazon’s headquarters there — avatars of the digital economy. A megathrust earthquake there today would produce a scene that even the computer graphics artistes of Hollywood could not match for picturesque chaos. What were the city planners thinking when they signed off on those building plans?
I survived the journey through the Seattle tunnel, dogged by neurotic fantasies, and headed south to California’s Bay Area, another seismic doomer zone. For sure I am not the only casual observer who gets the doomish vibe out there on the Left Coast. Even if you are oblivious to the geology of the place, there’s plenty to suggest a sense of impossibility for business-as-usual continuing much longer. I got that end-of-an-era feeling in California traffic, specifically driving toward San Francisco on the I-80 freeway out in the suburban asteroid belt of Contra Costa County, past the sinister oil refineries of Mococo and the dormitory sprawl of Walnut Creek, Orinda, and Lafayette.
Things go on until they can’t, economist Herb Stein observed, back in the quaint old 20th century, as the USA revved up toward the final blowoff we’ve now entered. The shale oil “miracle” (so-called) has given even thoughtful adults the false impression that the California template for modern living will continue indefinitely. I’d give it less than five years now. The movers and shakers of that state dwell in an extra-special political bubble of their own that doesn’t accommodate much thought about the actual future in which all their recent investments in public infrastructure fail spectacularly.
There will be no Tesla utopia of self-driving electric cars to “solve” the dilemmas of internal combustion, despite the prototype demonstrations among status-seeking tech executive millionaires. From the Berkeley highlands at night, you could see across the fabled bay to the twinkling new skyscrapers of San Francisco — like Seattle’s, another expression of the inordinate riches spawned by computers. How was that a good idea, considering what happened there as recently as 1906?
What you see out there along the Pacific rim of the USA is a giant booby-trap of certain cataclysm. It’s part of the even greater tectonic phenomenon called the Ring of Fire, which circles the whole western ocean from the Aleutian Islands to Japan through Indonesia and up again along the western edge of South America. Things are livening up all over the darn thing right now, including the rumblings of a bunch of big volcanoes in the South Pacific and the Fuego volcano in Guatemala, uncorking lethally as I write. And, of course, none of the foregoing includes the giant magma dome of worthless stock and bond values swelling under the towers of Wall Street back east.
A West Coast State of Mind
Driving south on I-5 into Seattle, the Cascadia Subduction Zone came to mind, especially when the highway dipped into a gloomy tunnel beneath Seattle’s relatively new skyscraper district. This fault line runs along the Pacific coast from north of Vancouver down into California. The western “plates” move implacably east and downward under the North American plate, building up massive tectonic forces that can produce some of the most violent megathrust earthquakes on the planet.
The zone also accounts for a chain of volcanoes that tend to produce titanic explosions rather than eruptions of lava and ash as seen in the hula movies. The most recent expression of this tendency was Mt. St. Helens in 1980, an impressive cataclysm by the standards of our fine-tuned complex civilization, but a junior event of its type compared to, say, the blow-off of Mt. Mazama 7,500 years ago, which left Crater Lake for the tourists. A publicity-shy correspondent writes:
By all acounts Mazama was floating upon a vast lake of steamy rhyolite. It was a structurally unstable stratovolcano the size of Mount Shasta with a net volume of 80 cubic miles. A 5 minute Triple Junction 9.3 Richter Scale shaker uncorked the Mount Mazama champagne bottle via massive lahars which removed the overpressure. Geologists estimate that the eruption lasted for about one day.
It’s only been in the last thirty years that Seattle hoisted up its tombstone cluster of several dozen office and condo towers. That’s what cities do these days to demonstrate their self-regard, and Seattle is perhaps America’s boomingest city, what with Microsoft’s and Amazon’s headquarters there — avatars of the digital economy. A megathrust earthquake there today would produce a scene that even the computer graphics artistes of Hollywood could not match for picturesque chaos. What were the city planners thinking when they signed off on those building plans?
I survived the journey through the Seattle tunnel, dogged by neurotic fantasies, and headed south to California’s Bay Area, another seismic doomer zone. For sure I am not the only casual observer who gets the doomish vibe out there on the Left Coast. Even if you are oblivious to the geology of the place, there’s plenty to suggest a sense of impossibility for business-as-usual continuing much longer. I got that end-of-an-era feeling in California traffic, specifically driving toward San Francisco on the I-80 freeway out in the suburban asteroid belt of Contra Costa County, past the sinister oil refineries of Mococo and the dormitory sprawl of Walnut Creek, Orinda, and Lafayette.
Things go on until they can’t, economist Herb Stein observed, back in the quaint old 20th century, as the USA revved up toward the final blowoff we’ve now entered. The shale oil “miracle” (so-called) has given even thoughtful adults the false impression that the California template for modern living will continue indefinitely. I’d give it less than five years now. The movers and shakers of that state dwell in an extra-special political bubble of their own that doesn’t accommodate much thought about the actual future in which all their recent investments in public infrastructure fail spectacularly.
There will be no Tesla utopia of self-driving electric cars to “solve” the dilemmas of internal combustion, despite the prototype demonstrations among status-seeking tech executive millionaires. From the Berkeley highlands at night, you could see across the fabled bay to the twinkling new skyscrapers of San Francisco — like Seattle’s, another expression of the inordinate riches spawned by computers. How was that a good idea, considering what happened there as recently as 1906?
What you see out there along the Pacific rim of the USA is a giant booby-trap of certain cataclysm. It’s part of the even greater tectonic phenomenon called the Ring of Fire, which circles the whole western ocean from the Aleutian Islands to Japan through Indonesia and up again along the western edge of South America. Things are livening up all over the darn thing right now, including the rumblings of a bunch of big volcanoes in the South Pacific and the Fuego volcano in Guatemala, uncorking lethally as I write. And, of course, none of the foregoing includes the giant magma dome of worthless stock and bond values swelling under the towers of Wall Street back east.
Sunday, June 3, 2018
SC166-11
https://www.truthdig.com/articles/the-second-sight-of-w-e-b-du-bois/
The Second Sight of W.E.B. Du Bois
W.E.B. Du Bois, more than any intellectual this nation produced in the first half of the 20th century, explained America to itself. He did this not only through what he called the “color line” but by exposing the intertwining of empire, capitalism and white supremacy. He deftly fused academic disciplines. He possessed unwavering integrity, a deep commitment to the truth, and the courage to speak it. That he was brilliant and a radical was bad enough. That he was brilliant, radical and black terrified the ruling elites. He was swiftly blacklisted, denied the professorships and public platforms that went to those who were more obsequious and compliant. Du Bois had very few intellectual rivals—John Dewey perhaps being one, but Dewey failed, like nearly all white intellectuals, to grasp the innate violence and savagery of the American character and how it was given its natural expression in empire.
Regeneration and purification through violence is the credo of the American empire. D.H. Lawrence, like Du Bois, saw it, and said, “The essential American soul is hard, isolate, stoic, and a killer.” The pillars of American capitalism are genocide and slavery. America was not blessed by God. It was blessed, if that is the right word, by producing the most efficient killing machines and trained killers on the planet. It unleashed industrial violence on its enemies abroad and empowered armed white vigilante groups and gun thugs—the slave patrols, the Ku Klux Klan, the White Leagues (the armed wing of the Democratic Party), the Baldwin Felts and Pinkertons—to perpetrate a domestic reign of terror against blacks, Native Americans, Mexicans, Chinese, abolitionists, Catholics, radicals, workers and labor organizers. The ideological descendants of these killers have mutated into white hate groups and militarized law enforcement that terrorize immigrants and undocumented workers, Muslims and people of color trapped in our internal colonies. This bloody visage is the true face of America.
“Once in a while through all of us there flashes some clairvoyance, some clear idea, of what America really is,” Du Bois wrote. “We who are dark can see America in a way that white Americans cannot.”
Du Bois warned that in times of widespread unrest, this indiscriminate violence, familiar to poor people of color and those we subjugate abroad today in the Middle East, becomes the primary mechanism for internal social control. As the empire disintegrates under unfettered corporate capitalism, futile and costly military adventurism, political stagnation and despotism, we will learn the truth Du Bois elucidated.
Du Bois, early in his career and already recognized as one of the foremost sociologists in the country, attacked Booker T. Washington’s odious accommodation with the white segregationists in the South and industrial elites in the North. He derided Washington’s advocacy of vocational training for blacks at the expense of intellectual pursuits. The white capitalist Molochs, who funded and promoted Washington and his collaborationist scheme to train blacks to take their spots on the lowest rung of industrial society, turned on Du Bois with a vengeance. The underclass, then and now, was to be taught what to think, not how to think. They would be endowed with just enough numerical literacy to serve as serfs in the capitalist system. The capitalists were determined to maintain what Du Bois called “enforced ignorance,” an enforced ignorance now being visited on a dispossessed working class with the degrading of public education, funding of vocational charter schools, and withering away of the humanities.
“Either America will destroy ignorance or ignorance will destroy the United States,” he warned, an eerie forecast of the age of Trump.
He would always remain a double outsider. And this status as an outsider, coupled with his prodigious intellectual gifts and uncompromising honesty, allowed him to expose the hypocrisy of the country’s most revered institutions and beliefs.
“The history of the world is the history, not of individuals, but of groups, not of nations, but of races,” he wrote, “and he who ignores or seeks to override the race idea in human history ignores and overrides the central thought of all history.”
Du Bois was amazingly prolific. He authored 16 seminal texts of sociology, history, politics and race relations including “The Philadelphia Negro,” his revolutionary study that established the field of urban sociology; “Souls of Black Folk” that laid the foundations for modern African-American literature and history; and his 1935 classic, “Reconstruction,” that portrayed American democracy through the eyes of disenfranchised Southern blacks. He was the editor from 1910 to 1934 of Crisis, one of the country’s leading intellectual and civil rights journal. Cornel West calls him the “American Gibbon,” after the British historian Edward Gibbon, who chronicled the fall of the Roman Empire and used it as a warning to all empires.
But I want to begin today by looking at one of his often overlooked essays, “The Souls of White Folk,” from his book “Darkwater: Voices From Within the Veil.” He wrote this essay in 1920. White Europeans and Americans were struggling to cope with the suicidal slaughter and barbarity of World War I. Yet, as Du Bois pointed out, none of this savagery was a surprise to blacks in the United States or the victims of colonialism—10 to 12 million blacks died under the brutal colonial rule of the Belgian King Leopold in the Congo.
It was Belgium, not the Congo, however, that was held up as the victim of horrible atrocities due to German occupation after the war. “Behold little Belgium and her pitiable plight, but has the world forgotten Congo?” Du Bois asked. Racism, he saw, was not only endemic to capitalism and imperialism but deformed historical narratives, the stories that got told and those that did not. In the United States, the year before the essay was published, 66 black men and women, mostly in the rural South, were lynched. Another 250 died in urban riots, usually instigated by white vigilante mobs, in the North and in the Arkansas Delta. They could have told you, if they were asked, what America was.
“As we saw the dead dimly through the rifts of battle smoke and heard faintly the cursings and accusations of blood brothers, we darker men said: This is not Europe gone mad; this is not aberration nor insanity; this is Europe; this seeming Terrible is the real soul of white culture,” Du Bois wrote in the essay.
Du Bois attended the Versailles Conference that imposed punitive reparations on Germany, crippling its economy and setting the stage for fascism. But to Du Bois the decision by the victorious European powers to blithely carve up Africa, Indochina and the Middle East in open disregard for those who lived there was far more criminal. Self-determination, he saw, was only for white Europeans and Euro-Americans. He would help convene a Pan-African Congress to protest the renewed subjugation of people of color. The war, Du Bois argued, had nothing to do with democracy and freedom. It was a struggle between imperial powers for the ability to plunder the “dark world’s wealth and toil,” which is also, of course, what our wars in the Middle East are about.
Du Bois knew, like Karl Marx, whom he greatly admired, that the market economy was designed to make the weak weaker and the strong stronger. The idea that a class of black capitalists and entrepreneurs, or black politicians such as Barack Obama, would somehow rectify social and racial inequality within capitalism was absurd. These tokens would serve the capitalist and imperialist system, which, he said, had to be overthrown and replaced with socialism.
Outcasts are gifted, Du Bois wrote, with a “second-sight” or what he called a “double-consciousness.” It was, he wrote in “The Souls of Black Folk,” the sensation “of always looking at one’s self through the eyes of others.” This gives to outcasts, as it did to many Jewish intellectuals in Nazi Germany, the ability to see behind what Du Bois called the veil. This sight is imperative not only for the outcasts, but for the nation. Those blinded by privilege and the myth of whiteness cannot fathom reality, or understand themselves, without these outcasts. The more the voices of these outcasts are shut out, the more collective insanity grips the country. By silencing the voices of the oppressed, we ensure our own oppression.
“I have been in the world,” Du Bois said, “but not of it. I have seen the human drama from a veiled corner, where all the outer tragedy and comedy have reproduced themselves in microcosm within. From this inner torment of souls the human scene without has interpreted itself to me in unusual and even illuminating ways.”
The endemic violence that plagues the country stuns many white elites, but this violence is a daily reality to Iraqis, Afghans, Yemenis and, of course, poor Americans of color.
“But what on earth is whiteness that one should so desire it?” Du Bois asked. “Then always, somehow, some way, silently but clearly, I am given to understand that whiteness is the ownership of the earth forever and ever, Amen!”
“It is curious to see America, the United States, looking on herself, first, as a sort of natural peacemaker, then as a moral protagonist in this terrible time,” he wrote. “No nation is less fitted for this role. For two or more centuries America has marched proudly in the van of human hatred—making bonfires of human flesh and laughing at them hideously, and making the insulting of millions more than a matter of dislike—rather a great religion, a world-war cry: Up white, down black; to your tents, O white folk, and world war with black and parti-colored mongrel beasts.”
Du Bois saw redemption, certainly at the end of his life, not within the bowels of the empire but in liberation movements outside the empire struggling for freedom. He was arrested for “subversive” activities in 1951 and had his passport revoked for years. His books were removed from library shelves and eliminated from course curriculums. He remained steadfastly defiant. On Dec. 1, 1961, he formally joined the Communist Party. Soon after he left the United States to spend the rest of his life in Ghana.
Du Bois had a particular characteristic I especially admire. He was rooted in the reality of those he wrote about. He listened. He methodically interviewed poor blacks, whether in “The Souls of Black Folk” or “The Philadelphia Negro,” where historian Herbert Aptheker has estimated that Du Bois spent some 835 hours interviewing some 2,500 households. This gave his work a reportorial authenticity and freshness that eluded most other sociologists and philosophers who pondered the great questions ensconced in their academic enclaves.
There comes a time, Du Bois wrote, when the oppressed erupt in paroxysms of rage, much like jihadists in the Middle East. Those who never took the time to investigate the long, slow drip of collective humiliation and suffering are shocked. The rage, because it appears to have no context or rationality, is seen as incomprehensible, the product of racial or religious mutations. We see this with the Israeli reaction to the nonviolent protests in Gaza. The press, little more than courtiers to the elites, dutifully certifies the rage as incomprehensible. Because it is incomprehensible it must be violently crushed. Du Bois writes:
It is difficult to let others see the full psychological meaning of caste segregation. It is as though one, looking out from a dark cave in a side of an impending mountain, sees the world passing and speaks to it; speaks courteously and persuasively, showing them how these entombed souls are hindered in their natural movement, expression, and development. … It gradually penetrates the minds of the prisoners that the people passing do not hear; that some thick sheet of invisible but horribly tangible plate glass is between them and the world. They get excited; they talk louder; they gesticulate. … They may scream and hurl themselves against the barriers, hardly realizing in their bewilderment that they are screaming in a vacuum unheard and that their antics may actually seem funny to those outside looking in. They may even, here and there, break through in blood and disfigurement, and find themselves faced by a horrified, implacable, and quite overwhelming mob of people frightened for their own very existence.
Du Bois would hardly fare better today. His radical critique of empire and capitalism would make him even more of a pariah in the academy and on the airwaves. The corporate state, assured they can keep us entranced with their electronic hallucinations and spectacles, along with the inane trivia and gossip masquerading as news, do not see him or other radical theorists as a threat. They orchestrated the post-literate society, the “enforced ignorance,” that perpetuates their power. We have his books. Read them while you still can.
The Second Sight of W.E.B. Du Bois
W.E.B. Du Bois, more than any intellectual this nation produced in the first half of the 20th century, explained America to itself. He did this not only through what he called the “color line” but by exposing the intertwining of empire, capitalism and white supremacy. He deftly fused academic disciplines. He possessed unwavering integrity, a deep commitment to the truth, and the courage to speak it. That he was brilliant and a radical was bad enough. That he was brilliant, radical and black terrified the ruling elites. He was swiftly blacklisted, denied the professorships and public platforms that went to those who were more obsequious and compliant. Du Bois had very few intellectual rivals—John Dewey perhaps being one, but Dewey failed, like nearly all white intellectuals, to grasp the innate violence and savagery of the American character and how it was given its natural expression in empire.
Regeneration and purification through violence is the credo of the American empire. D.H. Lawrence, like Du Bois, saw it, and said, “The essential American soul is hard, isolate, stoic, and a killer.” The pillars of American capitalism are genocide and slavery. America was not blessed by God. It was blessed, if that is the right word, by producing the most efficient killing machines and trained killers on the planet. It unleashed industrial violence on its enemies abroad and empowered armed white vigilante groups and gun thugs—the slave patrols, the Ku Klux Klan, the White Leagues (the armed wing of the Democratic Party), the Baldwin Felts and Pinkertons—to perpetrate a domestic reign of terror against blacks, Native Americans, Mexicans, Chinese, abolitionists, Catholics, radicals, workers and labor organizers. The ideological descendants of these killers have mutated into white hate groups and militarized law enforcement that terrorize immigrants and undocumented workers, Muslims and people of color trapped in our internal colonies. This bloody visage is the true face of America.
“Once in a while through all of us there flashes some clairvoyance, some clear idea, of what America really is,” Du Bois wrote. “We who are dark can see America in a way that white Americans cannot.”
Du Bois warned that in times of widespread unrest, this indiscriminate violence, familiar to poor people of color and those we subjugate abroad today in the Middle East, becomes the primary mechanism for internal social control. As the empire disintegrates under unfettered corporate capitalism, futile and costly military adventurism, political stagnation and despotism, we will learn the truth Du Bois elucidated.
Du Bois, early in his career and already recognized as one of the foremost sociologists in the country, attacked Booker T. Washington’s odious accommodation with the white segregationists in the South and industrial elites in the North. He derided Washington’s advocacy of vocational training for blacks at the expense of intellectual pursuits. The white capitalist Molochs, who funded and promoted Washington and his collaborationist scheme to train blacks to take their spots on the lowest rung of industrial society, turned on Du Bois with a vengeance. The underclass, then and now, was to be taught what to think, not how to think. They would be endowed with just enough numerical literacy to serve as serfs in the capitalist system. The capitalists were determined to maintain what Du Bois called “enforced ignorance,” an enforced ignorance now being visited on a dispossessed working class with the degrading of public education, funding of vocational charter schools, and withering away of the humanities.
“Either America will destroy ignorance or ignorance will destroy the United States,” he warned, an eerie forecast of the age of Trump.
He would always remain a double outsider. And this status as an outsider, coupled with his prodigious intellectual gifts and uncompromising honesty, allowed him to expose the hypocrisy of the country’s most revered institutions and beliefs.
“The history of the world is the history, not of individuals, but of groups, not of nations, but of races,” he wrote, “and he who ignores or seeks to override the race idea in human history ignores and overrides the central thought of all history.”
Du Bois was amazingly prolific. He authored 16 seminal texts of sociology, history, politics and race relations including “The Philadelphia Negro,” his revolutionary study that established the field of urban sociology; “Souls of Black Folk” that laid the foundations for modern African-American literature and history; and his 1935 classic, “Reconstruction,” that portrayed American democracy through the eyes of disenfranchised Southern blacks. He was the editor from 1910 to 1934 of Crisis, one of the country’s leading intellectual and civil rights journal. Cornel West calls him the “American Gibbon,” after the British historian Edward Gibbon, who chronicled the fall of the Roman Empire and used it as a warning to all empires.
But I want to begin today by looking at one of his often overlooked essays, “The Souls of White Folk,” from his book “Darkwater: Voices From Within the Veil.” He wrote this essay in 1920. White Europeans and Americans were struggling to cope with the suicidal slaughter and barbarity of World War I. Yet, as Du Bois pointed out, none of this savagery was a surprise to blacks in the United States or the victims of colonialism—10 to 12 million blacks died under the brutal colonial rule of the Belgian King Leopold in the Congo.
It was Belgium, not the Congo, however, that was held up as the victim of horrible atrocities due to German occupation after the war. “Behold little Belgium and her pitiable plight, but has the world forgotten Congo?” Du Bois asked. Racism, he saw, was not only endemic to capitalism and imperialism but deformed historical narratives, the stories that got told and those that did not. In the United States, the year before the essay was published, 66 black men and women, mostly in the rural South, were lynched. Another 250 died in urban riots, usually instigated by white vigilante mobs, in the North and in the Arkansas Delta. They could have told you, if they were asked, what America was.
“As we saw the dead dimly through the rifts of battle smoke and heard faintly the cursings and accusations of blood brothers, we darker men said: This is not Europe gone mad; this is not aberration nor insanity; this is Europe; this seeming Terrible is the real soul of white culture,” Du Bois wrote in the essay.
Du Bois attended the Versailles Conference that imposed punitive reparations on Germany, crippling its economy and setting the stage for fascism. But to Du Bois the decision by the victorious European powers to blithely carve up Africa, Indochina and the Middle East in open disregard for those who lived there was far more criminal. Self-determination, he saw, was only for white Europeans and Euro-Americans. He would help convene a Pan-African Congress to protest the renewed subjugation of people of color. The war, Du Bois argued, had nothing to do with democracy and freedom. It was a struggle between imperial powers for the ability to plunder the “dark world’s wealth and toil,” which is also, of course, what our wars in the Middle East are about.
Du Bois knew, like Karl Marx, whom he greatly admired, that the market economy was designed to make the weak weaker and the strong stronger. The idea that a class of black capitalists and entrepreneurs, or black politicians such as Barack Obama, would somehow rectify social and racial inequality within capitalism was absurd. These tokens would serve the capitalist and imperialist system, which, he said, had to be overthrown and replaced with socialism.
Outcasts are gifted, Du Bois wrote, with a “second-sight” or what he called a “double-consciousness.” It was, he wrote in “The Souls of Black Folk,” the sensation “of always looking at one’s self through the eyes of others.” This gives to outcasts, as it did to many Jewish intellectuals in Nazi Germany, the ability to see behind what Du Bois called the veil. This sight is imperative not only for the outcasts, but for the nation. Those blinded by privilege and the myth of whiteness cannot fathom reality, or understand themselves, without these outcasts. The more the voices of these outcasts are shut out, the more collective insanity grips the country. By silencing the voices of the oppressed, we ensure our own oppression.
“I have been in the world,” Du Bois said, “but not of it. I have seen the human drama from a veiled corner, where all the outer tragedy and comedy have reproduced themselves in microcosm within. From this inner torment of souls the human scene without has interpreted itself to me in unusual and even illuminating ways.”
The endemic violence that plagues the country stuns many white elites, but this violence is a daily reality to Iraqis, Afghans, Yemenis and, of course, poor Americans of color.
“But what on earth is whiteness that one should so desire it?” Du Bois asked. “Then always, somehow, some way, silently but clearly, I am given to understand that whiteness is the ownership of the earth forever and ever, Amen!”
“It is curious to see America, the United States, looking on herself, first, as a sort of natural peacemaker, then as a moral protagonist in this terrible time,” he wrote. “No nation is less fitted for this role. For two or more centuries America has marched proudly in the van of human hatred—making bonfires of human flesh and laughing at them hideously, and making the insulting of millions more than a matter of dislike—rather a great religion, a world-war cry: Up white, down black; to your tents, O white folk, and world war with black and parti-colored mongrel beasts.”
Du Bois saw redemption, certainly at the end of his life, not within the bowels of the empire but in liberation movements outside the empire struggling for freedom. He was arrested for “subversive” activities in 1951 and had his passport revoked for years. His books were removed from library shelves and eliminated from course curriculums. He remained steadfastly defiant. On Dec. 1, 1961, he formally joined the Communist Party. Soon after he left the United States to spend the rest of his life in Ghana.
Du Bois had a particular characteristic I especially admire. He was rooted in the reality of those he wrote about. He listened. He methodically interviewed poor blacks, whether in “The Souls of Black Folk” or “The Philadelphia Negro,” where historian Herbert Aptheker has estimated that Du Bois spent some 835 hours interviewing some 2,500 households. This gave his work a reportorial authenticity and freshness that eluded most other sociologists and philosophers who pondered the great questions ensconced in their academic enclaves.
There comes a time, Du Bois wrote, when the oppressed erupt in paroxysms of rage, much like jihadists in the Middle East. Those who never took the time to investigate the long, slow drip of collective humiliation and suffering are shocked. The rage, because it appears to have no context or rationality, is seen as incomprehensible, the product of racial or religious mutations. We see this with the Israeli reaction to the nonviolent protests in Gaza. The press, little more than courtiers to the elites, dutifully certifies the rage as incomprehensible. Because it is incomprehensible it must be violently crushed. Du Bois writes:
It is difficult to let others see the full psychological meaning of caste segregation. It is as though one, looking out from a dark cave in a side of an impending mountain, sees the world passing and speaks to it; speaks courteously and persuasively, showing them how these entombed souls are hindered in their natural movement, expression, and development. … It gradually penetrates the minds of the prisoners that the people passing do not hear; that some thick sheet of invisible but horribly tangible plate glass is between them and the world. They get excited; they talk louder; they gesticulate. … They may scream and hurl themselves against the barriers, hardly realizing in their bewilderment that they are screaming in a vacuum unheard and that their antics may actually seem funny to those outside looking in. They may even, here and there, break through in blood and disfigurement, and find themselves faced by a horrified, implacable, and quite overwhelming mob of people frightened for their own very existence.
Du Bois would hardly fare better today. His radical critique of empire and capitalism would make him even more of a pariah in the academy and on the airwaves. The corporate state, assured they can keep us entranced with their electronic hallucinations and spectacles, along with the inane trivia and gossip masquerading as news, do not see him or other radical theorists as a threat. They orchestrated the post-literate society, the “enforced ignorance,” that perpetuates their power. We have his books. Read them while you still can.
Saturday, June 2, 2018
SC166-10
https://www.globalresearch.ca/italian-debt-crisis-erupts-is-this-a-greek-debt-crisis-writ-large/5642746
Italian Debt Crisis Erupts: Is this a Greek Debt Crisis Writ Large?
This past week, as the Italian populist party, ‘5-Star’, began to form a government, suddenly the realities of the Italian debt (government and bank) and the 7 year stagnating Italian economy got the attention of media, investors and politicians. 5-Star and its parliamentary ally, the League, campaigned during the recent Italian election on a program to unilaterally stimulate the Italian economy by fiscal policy spending and tax cuts and, if necessary, to leave the Eurozone system in order to take back control of its own monetary policy. Under the Eurozone rules, Italy, like all Eurozone members, gave up independent control of its banking system to the European Central Bank and other pan-national European institutions like the European Commission. Under Eurozone rules, Italy was also limited to a tight cap on its fiscal spending.
With no independent monetary policy and strict limits on its fiscal policy, all Italy could do in a recession or financial crisis, such as 2008-2010, was borrow money from the ECB and the Euro Commission (with help from the IMF–together the three pan-European institutions called the ‘Troika’). As it borrowed its government and private debt escalated. When the Eurozone slipped into a double digit recession in 2011-13, Italy’s crisis deepened. It borrowed still more, to pay the interest on the debt it had previously borrowed–the interest payments going to the Troika, and from the Troika to the northern Europe banks (especially Germany) from which the Troika in turn raised funds with which to lend to Italy (and other economies during the debt crises in Europe 2010-2015).
By 2013 Italy’s real economy had collapsed by 10% below 2008 GDP levels, and unemployment rose to near 20%. Italy government’s debt to GDP has risen from 100% in 2008 to 130% by 2017, and its real economy has stagnated since 2013, today still at 5% below 2013. Italy thus has never recovered from the 2008-09 crash and subsequent 2011-13 double dip Europe recession.
To pay for the interest and principal on its rising debt load, Italy was required by the Troika to impose fiscal austerity on its populace. Successive Italian governments extracted the surplus with which to pay its rising debt, causing the Italian economy to stagnate. This vicious debt cycle since 2011 has locked Italy into a debt-imposed recession and stagnation–not unlike Greece and other Euro periphery economies.
Italy was not alone in this self-sustaining debt depression cycle. Greece, and indeed much of the rest of the European southern periphery, found itself in a similar situation. Greece was thrust into what is now a ten year economic depression, with severe austerity imposed on it by the Troika. That depression has still not ended, with Greece’s GDP still 20%-22% below 2008 levels.
The Troika imposed austerity extracted income from Greek society to pay the interest on the debt owed to the Troika, to northern Europe banks, and to international bond investors. The first Greek debt crisis in 2010 was followed by a second in 2012, as more Troika debt was provided to ‘roll over’ and pay the old 2010 debt. The crisis erupted again in 2015, as still more debt was provided to pay for the 2012 debt. Throughout the period, Greek workers, small businesses and consumer households were squeezed to acquire the money capital to pay the Troika-investors-bankers. Today Greek debt as a percent of GDP is virtually the same as it was in 2012. And another round of debt and austerity is now on the agenda starting August 2018, as the 2015 debt deal expires. All that’s changed is that private bankers and investors will now ‘roll over’ the debt this time and repay the Troika (contrasted to Troika debt roll over that repaid the private investors and assumed their debt in 2012). Austerity continues nonetheless; only who gets paid the interest and principal on the Greek debt will change. (For my book analyzing this history of the Greek debt crisis, see ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, October 2016), and my series of articles on this blog since 2015.)
What we’re witnessing in Italy now is a repeat of the Greek debt crisis, with a populist government (5-Star) attempting to extricate itself from the economic vice-grip of the Eurozone and its pan-national institutions (European Commission, European Central Bank, IMF) that have served as the institutions for extracting payments to cover the debt it has provided Italy since 2010 to stay afloat (i.e. stagnate) economically. Austerity was imposed on Italy as well as Greece beginning in 2010. But being a larger economy, with more sophisticated pro-Eurozone capitalist parties, Italy was kept within the Euro fold and the Italian debt crisis was contained–but no longer. This changed with the election of the populist 5-Star movement and its attempt to assume control of government fiscal and monetary policy.
The case of Italy is more dangerous to the Eurozone than was (and is) Greece. Italy’s government debt is 130% of GDP, but its private sector and bank debt is potentially more destabilizing for the Eurozone. No less than $500 billion in non-performing bank loans hang over the private economy in Italy (nearly $2 trillion still Europe wide). Europe never removed the bad debt from bank balance sheets after 2008. That’s why its economy continually stagnates and is unable to recover fully from the 2008 crash. Recoveries are short and shallow and stagnation (and goods price deflation) is a perpetual problem.
The Euro periphery is even more severely impacted. The European Central Bank’s ‘QE” free money injections since 2015 have not gone into real investment, and especially not been directed the southern periphery where it is most needed. Most of the ECB free money has gone to German, French and other northern Europe banks that didn’t need it, and they in turn have mostly loaned it to Euro financial investors who have sent a good part of it offshore to US markets. Europe stagnates as a consequence.
The crisis in Italy has just begun–and it is occurring as the Eurozone (and UK) economies are again beginning to stagnate, and possibly head for a ‘triple dip’ recession in 2019. The populist 5-Star party, should it be allowed to form a government, is declaring it will not abide by Eurozone rules limiting its fiscal stimulus spending; it is also raising the possibility of assuming independent control of its monetary policy. For the latter, however, it will have to leave the Euro and establish its own currency. Both these policy directions have the Troika and the northern Eurozone elites increasingly worried.
When the Greek populist party, Syriza, came to power in 2015 it also declared it would do the same as 5-Star is now advocating. Within six months, however, the Troika smashed Syriza. The ECB sabotaged Greek banks and drove the economy even deeper into depression by mid-2015 to put pressure on Syriza and get it to back off its policies. Syriza party leaders–Alex Tsipras and Yanis Varoufakis–caved in by the summer 2015. Varoufakis was sidelined in the Syriza by June and Tsipras ignored the Greek referendum he himself had called in July and cut a deal with the Troika to extend Greek debt and austerity measures in August 2015. Ever since August 2015, Syriza and Tsipras have gone along with whatever the Troika has demanded, as more and more austerity was proposed on Greek workers annually with every review of the Greek 2015 debt deal.
All the political parties in Greece have now lost legitimacy, including the once populist challenger, Syriza. Now Greeks are taking to the streets in widespread strikes and demonstrations, as another round of Troika-investor austerity and debt is coming up in August 2018.
The key question is whether the Italian populist party and challenger to the banker-Germany dominated Eurozone system will fall into the same trap as Syriza? The Eurozone elites will attempt to maneuver and put increasing pressure on 5-Star to bring it to heel; to drop its insistence on pursuing independent fiscal stimulus or moving toward re-establishing an independent Italian central bank (and private banking system) and eventual currency. With no fiscal of monetary independence, 5-Star and Italy are at the mercy of the Troika and Eurozone(Germany). What will be a 5-Star government’s fiscal stimulus policy once it forms a government? Will it back off its program to assert independent central bank control–or to leave the Euro if necessary?
The Troika and Eurozone elite will have a harder time taming Italy than it had with Greece. Italy’s private banking system is nearly insolvent. With a $500 billion nonperforming loan overhang, banks like Monte dei Pasche, Banco Populare, Banco BPM, and even Banco Intesa are fragile,if not technically insolvent (aka bankrupt). Efforts to pressure Italy’s new government by withholding lending to Italy’s central bank, and in turn private banks, will only exacerbate the crisis of the Italian banking system further. Moreover, northern Europe banks–especially French banks Credit Agricole and BNP Paribas–are deeply integrated and exposed to Italian banks. Contagion could easily spread from Italy to France and beyond. The Troika-Germany will therefore probably go softer with Italy than it did with Greece initially. It will likely allow Italy to exceed Eurozone fiscal spending caps, and the ECB will likely provide even more debt to Italy’s government and private sector.
This response is not assured, however. It may try to apply its ‘Greek Debt’ strategy to Italy as well. Popular resistance could then spread throughout the Eurozone southern periphery. And that instability will further ensure the Eurozone economy will slip into triple dip recession in 2019–just as this writer is predicting the US economy will do the same.
Italian Debt Crisis Erupts: Is this a Greek Debt Crisis Writ Large?
This past week, as the Italian populist party, ‘5-Star’, began to form a government, suddenly the realities of the Italian debt (government and bank) and the 7 year stagnating Italian economy got the attention of media, investors and politicians. 5-Star and its parliamentary ally, the League, campaigned during the recent Italian election on a program to unilaterally stimulate the Italian economy by fiscal policy spending and tax cuts and, if necessary, to leave the Eurozone system in order to take back control of its own monetary policy. Under the Eurozone rules, Italy, like all Eurozone members, gave up independent control of its banking system to the European Central Bank and other pan-national European institutions like the European Commission. Under Eurozone rules, Italy was also limited to a tight cap on its fiscal spending.
With no independent monetary policy and strict limits on its fiscal policy, all Italy could do in a recession or financial crisis, such as 2008-2010, was borrow money from the ECB and the Euro Commission (with help from the IMF–together the three pan-European institutions called the ‘Troika’). As it borrowed its government and private debt escalated. When the Eurozone slipped into a double digit recession in 2011-13, Italy’s crisis deepened. It borrowed still more, to pay the interest on the debt it had previously borrowed–the interest payments going to the Troika, and from the Troika to the northern Europe banks (especially Germany) from which the Troika in turn raised funds with which to lend to Italy (and other economies during the debt crises in Europe 2010-2015).
By 2013 Italy’s real economy had collapsed by 10% below 2008 GDP levels, and unemployment rose to near 20%. Italy government’s debt to GDP has risen from 100% in 2008 to 130% by 2017, and its real economy has stagnated since 2013, today still at 5% below 2013. Italy thus has never recovered from the 2008-09 crash and subsequent 2011-13 double dip Europe recession.
To pay for the interest and principal on its rising debt load, Italy was required by the Troika to impose fiscal austerity on its populace. Successive Italian governments extracted the surplus with which to pay its rising debt, causing the Italian economy to stagnate. This vicious debt cycle since 2011 has locked Italy into a debt-imposed recession and stagnation–not unlike Greece and other Euro periphery economies.
Italy was not alone in this self-sustaining debt depression cycle. Greece, and indeed much of the rest of the European southern periphery, found itself in a similar situation. Greece was thrust into what is now a ten year economic depression, with severe austerity imposed on it by the Troika. That depression has still not ended, with Greece’s GDP still 20%-22% below 2008 levels.
The Troika imposed austerity extracted income from Greek society to pay the interest on the debt owed to the Troika, to northern Europe banks, and to international bond investors. The first Greek debt crisis in 2010 was followed by a second in 2012, as more Troika debt was provided to ‘roll over’ and pay the old 2010 debt. The crisis erupted again in 2015, as still more debt was provided to pay for the 2012 debt. Throughout the period, Greek workers, small businesses and consumer households were squeezed to acquire the money capital to pay the Troika-investors-bankers. Today Greek debt as a percent of GDP is virtually the same as it was in 2012. And another round of debt and austerity is now on the agenda starting August 2018, as the 2015 debt deal expires. All that’s changed is that private bankers and investors will now ‘roll over’ the debt this time and repay the Troika (contrasted to Troika debt roll over that repaid the private investors and assumed their debt in 2012). Austerity continues nonetheless; only who gets paid the interest and principal on the Greek debt will change. (For my book analyzing this history of the Greek debt crisis, see ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, October 2016), and my series of articles on this blog since 2015.)
What we’re witnessing in Italy now is a repeat of the Greek debt crisis, with a populist government (5-Star) attempting to extricate itself from the economic vice-grip of the Eurozone and its pan-national institutions (European Commission, European Central Bank, IMF) that have served as the institutions for extracting payments to cover the debt it has provided Italy since 2010 to stay afloat (i.e. stagnate) economically. Austerity was imposed on Italy as well as Greece beginning in 2010. But being a larger economy, with more sophisticated pro-Eurozone capitalist parties, Italy was kept within the Euro fold and the Italian debt crisis was contained–but no longer. This changed with the election of the populist 5-Star movement and its attempt to assume control of government fiscal and monetary policy.
The case of Italy is more dangerous to the Eurozone than was (and is) Greece. Italy’s government debt is 130% of GDP, but its private sector and bank debt is potentially more destabilizing for the Eurozone. No less than $500 billion in non-performing bank loans hang over the private economy in Italy (nearly $2 trillion still Europe wide). Europe never removed the bad debt from bank balance sheets after 2008. That’s why its economy continually stagnates and is unable to recover fully from the 2008 crash. Recoveries are short and shallow and stagnation (and goods price deflation) is a perpetual problem.
The Euro periphery is even more severely impacted. The European Central Bank’s ‘QE” free money injections since 2015 have not gone into real investment, and especially not been directed the southern periphery where it is most needed. Most of the ECB free money has gone to German, French and other northern Europe banks that didn’t need it, and they in turn have mostly loaned it to Euro financial investors who have sent a good part of it offshore to US markets. Europe stagnates as a consequence.
The crisis in Italy has just begun–and it is occurring as the Eurozone (and UK) economies are again beginning to stagnate, and possibly head for a ‘triple dip’ recession in 2019. The populist 5-Star party, should it be allowed to form a government, is declaring it will not abide by Eurozone rules limiting its fiscal stimulus spending; it is also raising the possibility of assuming independent control of its monetary policy. For the latter, however, it will have to leave the Euro and establish its own currency. Both these policy directions have the Troika and the northern Eurozone elites increasingly worried.
When the Greek populist party, Syriza, came to power in 2015 it also declared it would do the same as 5-Star is now advocating. Within six months, however, the Troika smashed Syriza. The ECB sabotaged Greek banks and drove the economy even deeper into depression by mid-2015 to put pressure on Syriza and get it to back off its policies. Syriza party leaders–Alex Tsipras and Yanis Varoufakis–caved in by the summer 2015. Varoufakis was sidelined in the Syriza by June and Tsipras ignored the Greek referendum he himself had called in July and cut a deal with the Troika to extend Greek debt and austerity measures in August 2015. Ever since August 2015, Syriza and Tsipras have gone along with whatever the Troika has demanded, as more and more austerity was proposed on Greek workers annually with every review of the Greek 2015 debt deal.
All the political parties in Greece have now lost legitimacy, including the once populist challenger, Syriza. Now Greeks are taking to the streets in widespread strikes and demonstrations, as another round of Troika-investor austerity and debt is coming up in August 2018.
The key question is whether the Italian populist party and challenger to the banker-Germany dominated Eurozone system will fall into the same trap as Syriza? The Eurozone elites will attempt to maneuver and put increasing pressure on 5-Star to bring it to heel; to drop its insistence on pursuing independent fiscal stimulus or moving toward re-establishing an independent Italian central bank (and private banking system) and eventual currency. With no fiscal of monetary independence, 5-Star and Italy are at the mercy of the Troika and Eurozone(Germany). What will be a 5-Star government’s fiscal stimulus policy once it forms a government? Will it back off its program to assert independent central bank control–or to leave the Euro if necessary?
The Troika and Eurozone elite will have a harder time taming Italy than it had with Greece. Italy’s private banking system is nearly insolvent. With a $500 billion nonperforming loan overhang, banks like Monte dei Pasche, Banco Populare, Banco BPM, and even Banco Intesa are fragile,if not technically insolvent (aka bankrupt). Efforts to pressure Italy’s new government by withholding lending to Italy’s central bank, and in turn private banks, will only exacerbate the crisis of the Italian banking system further. Moreover, northern Europe banks–especially French banks Credit Agricole and BNP Paribas–are deeply integrated and exposed to Italian banks. Contagion could easily spread from Italy to France and beyond. The Troika-Germany will therefore probably go softer with Italy than it did with Greece initially. It will likely allow Italy to exceed Eurozone fiscal spending caps, and the ECB will likely provide even more debt to Italy’s government and private sector.
This response is not assured, however. It may try to apply its ‘Greek Debt’ strategy to Italy as well. Popular resistance could then spread throughout the Eurozone southern periphery. And that instability will further ensure the Eurozone economy will slip into triple dip recession in 2019–just as this writer is predicting the US economy will do the same.
SC166-9
https://www.globalresearch.ca/america-is-in-a-debt-trap-death-spiral/5642744
America is In a Debt Trap Death Spiral
The US economy and its financial structures have never recovered from the great financial meltdown of 2008 despite the passage of ten years. Little discussion has been given to the fact that the Republican Congress last year abandoned the process of mandatory budget cuts or automatic sequestration that had been voted in a feeble attempt to rein in the dramatic rise in US government debt. That was merely an added factor in what soon will be recognized as a classic debt trap. What is now looming over not just the US economy but also the global financial system is a crisis that could spell the end of the post-1944 dollar system.
First some basic background. When President Nixon, on advice of Paul Volcker, then at US Treasury, announced on August 15, 1971 the unilateral end of the Bretton Woods gold-dollar system, to replace it with a floating dollar, Washington economists and Wall Street bankers realized that the unique role of the US dollar as leading reserve currency held by all central banks and the currency for world commodity and other trade, especially oil, gave them something that appeared to be a gift from monetary heaven.
So long as the world needed US dollars, Washington could run government deficits without end. Foreign central banks, especially the Bank of Japan in the 1980’s and since the turn of the century, the Peoples’ Bank of China, would have little choice but to reinvest their surplus trade dollar earnings in interest-bearing AAA-rated US Treasury securities. This perverse dollar system allowed Washington to finance its wars in faraway places like Afghanistan or Iraq with other peoples’ money. During the Administration of George W. Bush, when Washington’s annual budget deficit exceeded annually one trillion dollars, Vice President Dick Cheney cynically quipped, “debt doesn’t matter; Reagan proved that.” Up to a point that appeared so. Now we are getting dangerously near to that “point” where debt does matter.
Federal Debt Rise
There are generally speaking three major divisions of debt measured in the US economy: Federal debt of Washington, corporate debt and private household debt. Today, owing in large part to ten years of historic low interest rates following the largest financial crisis in history–the 2007-2008 sub-prime crisis that became a global systemic crisis after September 2008–all three sectors have borrowed as if there was no tomorrow because of the near-zero Federal Reserve interest rates and their various Quantitative Easings. Nothing so radical can last forever.
Since the financial crisis erupted in 2008 US Federal debt has more than doubled from $10 trillion to over $21 trillion today. Yet conditions were made manageable by a Federal Reserve emergency policy that dealt with the financial and banking crisis by buying almost $500 billion annually of that debt. Much of the remainder was bought by China, Japan and even Russia and Saudi Arabia. Further debt levels were restrained by the bipartisan spending caps established in the Budget Control Act of 2011 that had kept recent deficits partially in check.
Now conditions of future US Federal debt and deficit growth are pre-programmed for systemic crisis over the next several years.
‘Trumponomics’ Disaster
The economics of the Trump Tax Cuts Act of 2017, signed in December, dramatically cut certain taxes on business corporations from 35% to 21%, but did not offset that with revenue increases elsewhere. The promise is that cheaper taxes will spur economic growth. This is a myth under present economic conditions and overall public and private debt burdens. Instead, the new tax law, assuming ideal economic conditions, will decrease expected revenues by a total of $1 trillion over the next 10 years. If the economy goes into severe recession, highly likely, tax revenues will plunge and the deficits will explode even more.
What the new Trump tax cut act will do is dramatically increase the size of the US annual budget deficit. The Congressional Budget Office estimates that as early as Fiscal Year 2019 the annual deficit that must be financed by debt will reach $1 trillion. Then the Treasury Borrowing Advisory Committee expects government debt issues of $ 955 billion for FY2018, compared with $ 519 billion in FY 2017. Then for FY 2019 and 2020 the deficit will exceed $1 trillion. By 2028, ten years from now, under mild economic assumptions, the size of the USA Federal debt will rise to an untenable $34 trillion from roughly $21 trillion today, and the deficit in 2028 will exceed $1.5 trillion. And this year 2018 alone, with historically low interest rates the cost of interest only on the total Federal debt will reach $500 billion.
Zombie borrowers…time bombs
Now after almost a decade of unprecedented low interest rates to bail out Wall Street and create new asset inflation in stocks, bonds and housing, the Fed is in the early stages of what some call QT or Quantitative Tightening. Interest rates are rising and have been for the past year, so far very gradually as the Fed is being cautious. The Fed however is continuing to raise rates, and now the Fed Funds stands at 1.75% after nearly ten years at effectively zero. Were they to stop now it would signal a market panic that the Fed knew something far worse than they say.
Because never in its history has the Federal Reserve indulged in such a monetary experiment with so low rates so long, the effects of reversing are going to be as well unprecedented. At the onset of the 2008 financial crisis the Fed rates were around 5%. That is what the Fed is aiming at to return to “normal.” However, with rising interest rates, the lowest credit sector, so-called non-investment grade or “junk bonds” face domino style defaults.
Moody’s Credit Rating has just issued a warning that, barring some sort of miracle, as US interest rates rise, and they are, as much as 22% of US corporations that are being kept alive borrowing at historically low interest, not only in shale oil but in construction and utilities, so-called “zombie” corporations, will face an avalanche of mass defaults on their debt. Moody’s writes that, “low interest rates and investor appetite for yield has pushed companies into issuing mounds of debt that offer comparatively low levels of protection for investors.” The Moody’s report goes on to state some alarming numbers: since 2009, the level of global non-financial junk-rated companies has soared by 58%, representing $3.7 trillion in outstanding debt, the highest ever. Some 40%, or $2 trillion, are rated B1 or lower. Since 2009, US corporate debt has increased by 49%, hitting a record total of $8.8 trillion. Much of that debt has been used to fund stock repurchases by the companies to boost their stock price, the main reason for the unprecedented Wall Street stock market bubble.
Fully 75% of federal spending is economically non-productive including military, debt service, social security. Unlike during the 1930s Great Depression when levels of Federal debt were almost nil, today the debt is 105% of GDP and rising. Spending on national economic infrastructure including the Tennessee Valley Authority and a network of federally-build dams and other infrastructure resulted in the great economic boom of the 1950s. Spending $1.5 trillion on a dysfunctional F-35 all-purpose fighter jet program won’t do it.
Into this precarious situation Washington is doing its very best to antagonize the very countries that it needs to finance these deficits and buy the US debt—China, Russia and even Japan. As financial investors demand more interest to invest in US debt, the higher rates will trigger the default avalanche Moody’s warns. This is the real backdrop to the dangerous US foreign policy actions of the recent period. No one in Washington seems to care and that’s the alarming fact.
America is In a Debt Trap Death Spiral
The US economy and its financial structures have never recovered from the great financial meltdown of 2008 despite the passage of ten years. Little discussion has been given to the fact that the Republican Congress last year abandoned the process of mandatory budget cuts or automatic sequestration that had been voted in a feeble attempt to rein in the dramatic rise in US government debt. That was merely an added factor in what soon will be recognized as a classic debt trap. What is now looming over not just the US economy but also the global financial system is a crisis that could spell the end of the post-1944 dollar system.
First some basic background. When President Nixon, on advice of Paul Volcker, then at US Treasury, announced on August 15, 1971 the unilateral end of the Bretton Woods gold-dollar system, to replace it with a floating dollar, Washington economists and Wall Street bankers realized that the unique role of the US dollar as leading reserve currency held by all central banks and the currency for world commodity and other trade, especially oil, gave them something that appeared to be a gift from monetary heaven.
So long as the world needed US dollars, Washington could run government deficits without end. Foreign central banks, especially the Bank of Japan in the 1980’s and since the turn of the century, the Peoples’ Bank of China, would have little choice but to reinvest their surplus trade dollar earnings in interest-bearing AAA-rated US Treasury securities. This perverse dollar system allowed Washington to finance its wars in faraway places like Afghanistan or Iraq with other peoples’ money. During the Administration of George W. Bush, when Washington’s annual budget deficit exceeded annually one trillion dollars, Vice President Dick Cheney cynically quipped, “debt doesn’t matter; Reagan proved that.” Up to a point that appeared so. Now we are getting dangerously near to that “point” where debt does matter.
Federal Debt Rise
There are generally speaking three major divisions of debt measured in the US economy: Federal debt of Washington, corporate debt and private household debt. Today, owing in large part to ten years of historic low interest rates following the largest financial crisis in history–the 2007-2008 sub-prime crisis that became a global systemic crisis after September 2008–all three sectors have borrowed as if there was no tomorrow because of the near-zero Federal Reserve interest rates and their various Quantitative Easings. Nothing so radical can last forever.
Since the financial crisis erupted in 2008 US Federal debt has more than doubled from $10 trillion to over $21 trillion today. Yet conditions were made manageable by a Federal Reserve emergency policy that dealt with the financial and banking crisis by buying almost $500 billion annually of that debt. Much of the remainder was bought by China, Japan and even Russia and Saudi Arabia. Further debt levels were restrained by the bipartisan spending caps established in the Budget Control Act of 2011 that had kept recent deficits partially in check.
Now conditions of future US Federal debt and deficit growth are pre-programmed for systemic crisis over the next several years.
‘Trumponomics’ Disaster
The economics of the Trump Tax Cuts Act of 2017, signed in December, dramatically cut certain taxes on business corporations from 35% to 21%, but did not offset that with revenue increases elsewhere. The promise is that cheaper taxes will spur economic growth. This is a myth under present economic conditions and overall public and private debt burdens. Instead, the new tax law, assuming ideal economic conditions, will decrease expected revenues by a total of $1 trillion over the next 10 years. If the economy goes into severe recession, highly likely, tax revenues will plunge and the deficits will explode even more.
What the new Trump tax cut act will do is dramatically increase the size of the US annual budget deficit. The Congressional Budget Office estimates that as early as Fiscal Year 2019 the annual deficit that must be financed by debt will reach $1 trillion. Then the Treasury Borrowing Advisory Committee expects government debt issues of $ 955 billion for FY2018, compared with $ 519 billion in FY 2017. Then for FY 2019 and 2020 the deficit will exceed $1 trillion. By 2028, ten years from now, under mild economic assumptions, the size of the USA Federal debt will rise to an untenable $34 trillion from roughly $21 trillion today, and the deficit in 2028 will exceed $1.5 trillion. And this year 2018 alone, with historically low interest rates the cost of interest only on the total Federal debt will reach $500 billion.
Zombie borrowers…time bombs
Now after almost a decade of unprecedented low interest rates to bail out Wall Street and create new asset inflation in stocks, bonds and housing, the Fed is in the early stages of what some call QT or Quantitative Tightening. Interest rates are rising and have been for the past year, so far very gradually as the Fed is being cautious. The Fed however is continuing to raise rates, and now the Fed Funds stands at 1.75% after nearly ten years at effectively zero. Were they to stop now it would signal a market panic that the Fed knew something far worse than they say.
Because never in its history has the Federal Reserve indulged in such a monetary experiment with so low rates so long, the effects of reversing are going to be as well unprecedented. At the onset of the 2008 financial crisis the Fed rates were around 5%. That is what the Fed is aiming at to return to “normal.” However, with rising interest rates, the lowest credit sector, so-called non-investment grade or “junk bonds” face domino style defaults.
Moody’s Credit Rating has just issued a warning that, barring some sort of miracle, as US interest rates rise, and they are, as much as 22% of US corporations that are being kept alive borrowing at historically low interest, not only in shale oil but in construction and utilities, so-called “zombie” corporations, will face an avalanche of mass defaults on their debt. Moody’s writes that, “low interest rates and investor appetite for yield has pushed companies into issuing mounds of debt that offer comparatively low levels of protection for investors.” The Moody’s report goes on to state some alarming numbers: since 2009, the level of global non-financial junk-rated companies has soared by 58%, representing $3.7 trillion in outstanding debt, the highest ever. Some 40%, or $2 trillion, are rated B1 or lower. Since 2009, US corporate debt has increased by 49%, hitting a record total of $8.8 trillion. Much of that debt has been used to fund stock repurchases by the companies to boost their stock price, the main reason for the unprecedented Wall Street stock market bubble.
Fully 75% of federal spending is economically non-productive including military, debt service, social security. Unlike during the 1930s Great Depression when levels of Federal debt were almost nil, today the debt is 105% of GDP and rising. Spending on national economic infrastructure including the Tennessee Valley Authority and a network of federally-build dams and other infrastructure resulted in the great economic boom of the 1950s. Spending $1.5 trillion on a dysfunctional F-35 all-purpose fighter jet program won’t do it.
Into this precarious situation Washington is doing its very best to antagonize the very countries that it needs to finance these deficits and buy the US debt—China, Russia and even Japan. As financial investors demand more interest to invest in US debt, the higher rates will trigger the default avalanche Moody’s warns. This is the real backdrop to the dangerous US foreign policy actions of the recent period. No one in Washington seems to care and that’s the alarming fact.
Friday, June 1, 2018
SC166-8
https://www.oftwominds.com/blog.html
The U.S. Economy In Two Words: Asymmetric Gains
The core dynamic of the U.S. economy in this era is asymmetric gains: the gains in income, wealth and power are increasingly concentrated in the top slice of the economy and society, while the income, wealth and power of the majority stagnate or decline.
The Status Quo must paper over this widening gulf with threadbare narratives that no longer match reality: for example, we're an ownership society. We sure are: the vast majority of the nation's productive assets are owned by the top 5%.
The U.S. economy has changed, but the transformation is largely invisible to the average participant and conventional economist. The previous iteration of the economy expired in the 1970s, an era of stagflation (stagnant growth and rising inflation that eroded the purchasing power of most households), higher energy costs and increasing global competition, an era in which the "external costs" of industrial-scale pollution finally came home to roost and the early stages of digital technologies began impacting human labor.
Stocks and bonds were destroyed in the 1970s. Investing capital in industrial production no longer generated outsized profits.
The 1980s ushered in a New Economy based on financial magic: the outsized profits flowed to those with access to credit and the tools of financialization: buying assets with borrowed money, selling the assets off in the global marketplace and reaping enormous gains by producing no goods or services.
We now inhabit a hyper-financialized economy in which the only way to get ahead is to speculate. For the middle class, this means speculating in housing: if you hit the jackpot and your house soars in value, then leverage this new wealth into the cash needed to buy a second property--or extract the equity to fund a more luxe lifestyle.
Entrepreneurs seek to generate "value" only as a means of cashing out via an initial public offering or selling their company to a global corporation. The "value" sought now is the perception of value--the magic of future promise that boosts valuations into the millions, or better yet, billions.
How many entrepreneurs are looking forward to owning their company ten years hence? Very few, as "the long haul" has no value in a hyper-financialized economy. If you don't cash out in six months, your Big Idea might be worthless, leapfrogged by some other Big Idea.
In a hyper-financialized economy, hype is the most valuable skill. Those who can raise $100 million in capital for a fancy juicer win, as do those who sell the Big Idea to global corporations desperate not to miss out on the Next Big Thing.
In a hyper-financialized economy, future income is pulled into the present and monetized to benefit the top dogs. We borrow from the future to fund the inefficiencies of today. It's a great system, and the Status Quo has the answer to everything: the government can never go broke because all it has to do is print more money.
What a swell idea. Isn't that what Venezuela has done for the past decade? And how did that work for them? If you think that destroying the purchasing power of "money" is a winner, then by all means, go on believing that the government can never go broke because all it has to do is print more money.
Here's my favorite chart of asymmetric gains. The vast majority of the gains reaped since the 2008-09 Global Financial Meltdown have flowed to the top .1%. This is not a bug, it is a feature of hyper-financialization. Indeed, it is the only possible output of the current system.
Meanwhile, the bottom 95% live in an economy where wages go nowhere and costs are soaring. The financial media cheers when wages (supposedly) rise by 2%, but nobody dares measure the impact of rising costs in services such as healthcare and higher education.
The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy. Hype and propaganda are the key tools of the present era, as these are required to disconnect perception from reality. How long the disconnect will last is anyone's guess, but when the two reconnect, all that is solid now will melt into thin air.
The U.S. Economy In Two Words: Asymmetric Gains
The core dynamic of the U.S. economy in this era is asymmetric gains: the gains in income, wealth and power are increasingly concentrated in the top slice of the economy and society, while the income, wealth and power of the majority stagnate or decline.
The Status Quo must paper over this widening gulf with threadbare narratives that no longer match reality: for example, we're an ownership society. We sure are: the vast majority of the nation's productive assets are owned by the top 5%.
The U.S. economy has changed, but the transformation is largely invisible to the average participant and conventional economist. The previous iteration of the economy expired in the 1970s, an era of stagflation (stagnant growth and rising inflation that eroded the purchasing power of most households), higher energy costs and increasing global competition, an era in which the "external costs" of industrial-scale pollution finally came home to roost and the early stages of digital technologies began impacting human labor.
Stocks and bonds were destroyed in the 1970s. Investing capital in industrial production no longer generated outsized profits.
The 1980s ushered in a New Economy based on financial magic: the outsized profits flowed to those with access to credit and the tools of financialization: buying assets with borrowed money, selling the assets off in the global marketplace and reaping enormous gains by producing no goods or services.
We now inhabit a hyper-financialized economy in which the only way to get ahead is to speculate. For the middle class, this means speculating in housing: if you hit the jackpot and your house soars in value, then leverage this new wealth into the cash needed to buy a second property--or extract the equity to fund a more luxe lifestyle.
Entrepreneurs seek to generate "value" only as a means of cashing out via an initial public offering or selling their company to a global corporation. The "value" sought now is the perception of value--the magic of future promise that boosts valuations into the millions, or better yet, billions.
How many entrepreneurs are looking forward to owning their company ten years hence? Very few, as "the long haul" has no value in a hyper-financialized economy. If you don't cash out in six months, your Big Idea might be worthless, leapfrogged by some other Big Idea.
In a hyper-financialized economy, hype is the most valuable skill. Those who can raise $100 million in capital for a fancy juicer win, as do those who sell the Big Idea to global corporations desperate not to miss out on the Next Big Thing.
In a hyper-financialized economy, future income is pulled into the present and monetized to benefit the top dogs. We borrow from the future to fund the inefficiencies of today. It's a great system, and the Status Quo has the answer to everything: the government can never go broke because all it has to do is print more money.
What a swell idea. Isn't that what Venezuela has done for the past decade? And how did that work for them? If you think that destroying the purchasing power of "money" is a winner, then by all means, go on believing that the government can never go broke because all it has to do is print more money.
Here's my favorite chart of asymmetric gains. The vast majority of the gains reaped since the 2008-09 Global Financial Meltdown have flowed to the top .1%. This is not a bug, it is a feature of hyper-financialization. Indeed, it is the only possible output of the current system.
Meanwhile, the bottom 95% live in an economy where wages go nowhere and costs are soaring. The financial media cheers when wages (supposedly) rise by 2%, but nobody dares measure the impact of rising costs in services such as healthcare and higher education.
The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy. Hype and propaganda are the key tools of the present era, as these are required to disconnect perception from reality. How long the disconnect will last is anyone's guess, but when the two reconnect, all that is solid now will melt into thin air.
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