Archive

Archive for the ‘Uncategorized’ Category

Humpty-Dumpty and the Fall of Berlin’s Wall

by Victor Grossman

SpeakOut | Op-Ed (October 06 2014)

Humpty-Dumpty sat on a wall,

Humpty-Dumpty had a great fall.

The children’s rhyme and its words Wall and Fall came to mind in connection with commemorations of the fall of the Berlin Wall – actually its opening up. Is such an allusion frivolous? Maybe. For millions that event twenty-five years ago was marked by genuine, understandable euphoria. But unceasing ballyhoo in the German media, weeks and weeks ahead of the anniversary, and plans for 8000 white helium balloons lit up by 60,000 batteries along the ten-mile length of the former wall, to be released in the evening with triumphant trumpet blasts, jubilant church bells or something similar while Angela Merkel, Lech Valesa, Mikhail Gorbachov, Berlin’s departing mayor and other celebrities cast their eyes gratefully heavenward, may perhaps justify my somewhat different approach.

After the Wall lost its barrier status on November 9th 1989, what soon fell in the months that followed hardly conjured up the funny-looking egg some recall from Alice’s looking-glass adventures. It was rather the forty-year-old institution calling itself the German Democratic Republic, the GDR.  To employ the ovoid allusion again, one might inquire: Did it fall because it was totally foul? Was it given an outside push or two? And did that downfall represent simply the glorious revolution of a folk yearning for freedom – or is the matter more complicated? This is still very relevant, for many similar uprisings have since occurred – and are still occurring.

Why did the GDR go under? Despite reams of bad publicity since its start after 1945, it was born largely of the hopes and dreams of a relatively small number of survivors of Hitler fascism, some in exile on many continents, others in Nazi camps and prisons. These men and women were determined to create a new Germany – or part of Germany at least – rejecting fascism and the powerful forces behind it: Bayer and BASF (of I G Farben), which built and helped run Auschwitz; Siemens, Krupp and Flick, which misused hundreds of thousands of starved concentration camp prisoners and forced laborers from all Europe; and the Deutsche Bank which helped finance every bloody step of the way. Despite their defeat, for a second time, these forces never gave up plans for recuperation and renewed expansion and were already re-establishing themselves. But not in eastern Germany, where such plans were thwarted and their factories and property nationalized. It was this vitally crucial move by the GDR which was never forgiven, not to this day.

Those first activists, facing millions of widowed, orphaned, embittered, ideologically cynical or still Nazi-infected people, invited the best exiled anti-fascist writers, artists, professors, theater and film experts to help alter these moods and prejudices, at least in eastern Germany. Among those responding were Bertolt Brecht, Hanns Eisler, Anna Seghers, Ernst Busch, Arnold Zweig, Heinrich Mann (who died just before his arrival). Others, like Hans Fallada, had remained in Germany but opposed fascism. These people, and those who learned from them, created progressive theater, music, film and literature to match any in the world. Here, too, fully contrary to developments in that other Germany across the Elbe, Nazis were ejected from schoolrooms, lecture halls, police stations and judge’s benches.

And though it started with a veritable pile of ruins, a wrecked industry which paid 95 percent of German war reparations and was increasingly discriminated in world markets, the GDR toiled to build a remarkable new economy – one without profits. With an almost total lack of natural resources a new iron and steel industry was created, factories for ships, farm combines, cranes and machine tools, when possible also in areas like Mecklenburg, for centuries primitive, feudal backwaters. And this with no Marshall Plan and the loss of Nazi-tainted engineers and managers who left in droves.

Gradually, especially after a ceaseless, well-organized westward brain drain had been harshly stopped by that Berlin Wall, more could also be invested in consumer goods. By world comparisons a high living standard was achieved, as nearly every home had a fridge, color TV, a washing machine. About half the families owned at least a small car, but cheap public transportation was stressed.

In forty years, despite the worst of odds, the little GDR was able to solve many problems now troubling so many nations. For one small tax all medical care was completely covered, so was family planning including abortions, child care, summer camps, cultural and sports activities for young and old. All education was free, scholarships covered basic living costs so no loans were needed, and post-graduation jobs were guaranteed. Women were enabled to work – at equal pay rates; well over ninety percent did. Best of all, there was no joblessness, evictions were strictly forbidden, no-one needed to fear the next day – or year. Lots still needed accomplishment, blunders were made, frequent shortages of one or the other commodity led to countless jokes – and lots of anger. And yet, poverty had been almost completely eradicated. Where else in the world was this accomplished?

But the GDR had to compete with one of the world’s most prosperous economies, West Germany. It was never able to match the swift innovation pace of competing corporations whose ups and downs may have cost many tears in lost jobs and ruined plans but meant a constant stream of chic, modern products – above all good cars. Like people elsewhere, GDR citizens thrilled at enticing advertising. But that was West German TV – GDR-TV had no commercials. Envy was widespread. It was worsened by often old-fashioned tastes of the men ruling the roost – and rule it they did, almost to the end.

I think most of those aging anti-fascists retained their original hopes, their ideals based on socialism. But as they grew older, accustomed to central rule and constantly flattered by the careerist Yes-men who always gather where power and perks are found, they increasingly lost touch with much of the population. Many freedoms were indeed curtailed, worst of all for the media which were, when political, dull, rigid, one-sided and self-laudatory. As for free speech, after the earlier years the fears and anxieties featured in many Stasi films had largely disappeared, at least on a private, every-day basis. People usually said what they thought – except in public meetings (or classes), where they often feared losing chances at a bonus, a promotion or a trip to relatives across the Wall if they were seen as too “pro-western”.

The GDR had wonderful theater, opera, ballet; for other tastes there were good beat groups. Most of the better Hollywood and other western films were shown. Yet life for many seemed drab, cut-and-dried, regulated. People felt locked-in, even after the number of those able to visit West Germany kept rising, reaching a few million by 1988. Seniors had long been able to travel westward for a month each year.

Although this system never conformed to most ideals of democracy, it was never absolute. There was a constant response to people’s needs, reacting to wishes and demands funneled upward from the big grass-roots membership of over two million in the ruling party, from constant reports by the state security apparatus or Stasi (one of its more positive functions) and in full mailbags with personal complaints and requests.

Increasingly however, young people especially took all advantages, especially economic security, quite for granted. So many loved Donald Duck, admired handsome Marlboro cowboys or lovely Hollywood celebrities and dreamed of crossing the Golden Gate or even feasting under a Golden Arch, without knowing or really caring about the conditions of those serving the big Whoppers.

Dissatisfaction increased in the 1980s as the economy slowed, hit by the desperate need to build, without outside help, an electronics industry, also by a giant housing program and heavy investment in armed forces trying to match those in the West. And rulers who grew up politically in the years of Stalin never learned how to counteract such envy or dissatisfaction and feared glasnost a la Gorbachov, recalling that Hitler had taken power with open elections and noting, not incorrectly, that the West was quick to use any openings to push for “regime change”. By 1989, when this had succeeded in Hungary and Poland, soon largely “westernized”, the dissatisfaction boiled over, and people started to demonstrate, in Berlin, Leipzig, Dresden and elsewhere.

At first, when the Wall opened up, people demanded an improved GDR, with new freedoms. But when Kohl, Brandt and many others moved in, waving well-packaged products, well-phrased promises and above all well-printed, enticing West German D-Marks, the GDR went down the drain.

What role in the pushing was played by Vernon Walters, sent as ambassador to West Germany by George H W Bush in April 1989 with the job of “going whole hog over there”? The morning after the Wall opened up he organized a flight for Chancellor Kohl to Berlin to inspect the area from a helicopter, then descend to “get into the act”. Later, speaking proudly of the fall of the GDR, he said “We got here because we were strong. We got here because we were determined, and we got here because we defended the free choice of people to choose their own destiny.” Walters, a key player with Reagan and Pope John Paul in achieving regime change in Poland, had “been involved directly or indirectly in the overthrow of more governments than any other official of the US government”, among others Iran in 1953, Brazil in 1964, Chile in 1973, even Fiji in 1987. As for people’s free choice, in his view the war in Vietnam was “one of the noblest and most unselfish wars” in USA history.

Plenty has changed in East Germany in 25 years. It’s a mix. Travel and consumer goods involve no other problems than their prices. Bright advertisements and commercials brighten TV programs, the streets, new cafes, even the sides of buses and streetcars. GDR industry was soon destroyed, both worn old factories and very modern newer ones were pawned off and closed down. Millions moved west, but with Germany now the strongest economy in Europe there has been a partial recovery; perhaps a third of the East Germans are doing better than before, about a third are holding their ground. The rest had bad luck. Medical coverage, though better than in the USA, is hit by jumps in price, like fares and rent. Private schools are blossoming everywhere for those with enough money. Higher education is increasingly for the well-to-do. The Daimlers and the Deutsche Bank ride high.

The GDR did change many people to a degree. Egotism, jealousy, even greed could hardly be eliminated entirely. But the small gap between the more and the less prosperous, while no-one could become wealthy by exploiting others, the opportunities for women to find jobs and professions permitting far less subservience to husbands or bosses, the fact that no group was played off against others due to differences in age or background and the feeling of economic security meant, as polls then found, that eastern citizens were on average friendlier and closer to family and workmates.

The freedoms now achieved are appreciated today. But a lack of response by leading parties to the needs of those with half-time, temporary and other insecure jobs, or none at all, has often caused new cynicism. Seeing a Tweedle Dee-Tweedle Dum species of democracy (to recall Alice), many stay home instead of voting; in recent state elections only half the citizens went to the polls. Others have indeed voted, to hit out at “the foreigners” – a truly dangerous trend. About ten percent, largely in eastern Germany, defy all media taboos to choose what they hope is a better alternative, the LEFT party.

But in view of today’s economic doldrums in Europe and the threat of a hard, belt-tightening future, some East Germans are wondering if, in believing all the promises and rejecting everything the GDR had offered, they made a partial blunder 25 years ago like that, once more with Alice, of the gullible little oysters who fell for the friendly invitation to a stroll with the hungry Walrus and the Carpenter:

“Now if you’re ready, oysters dear, we can begin to feed”.

“But not on us!”, the oysters cried, turning a little blue.

“After such kindness that would be a dismal thing to do!”

Does all this matter? Fat Cheshire cats are grinning as they corner ever more of the world’s wealth, damage the planet irreparably and gain control of every phone call, Email or Sunday trip to the country with an efficiency Stasi officers would have envied. While the dangers of communism or socialism seem abolished, they aim at preventing any reconsideration of their possibilities, while squelching by intrigue or by force all signs of independence, progressive or not, in every country.

That is also certainly true in Germany, where many corporations and their politician friends still recall with a shudder an era when there was an eastern barrier to stacking gigantic fortunes and indulging in limitless economic and strategic ambitions. We see that in school curricula, tireless TV broadcasts, exhibitions, frequent ceremonies and plans for new monuments.

No king’s horses and no king’s men can put an eggy Humpty-Dumpty – or the GDR – together again. But there remains an almost panicky fear that the remnants, recollections of past accomplishments, might some day go into cooking up a healthy new souffle – though not one at all to their taste. This, I am convinced, is the main reason for the fancy white balloons and the unceasing hullaballoo.

_____

Victor Grossman is a writer based in Germany.

Copyright, Truthout. May not be reprinted without permission.

http://www.truth-out.org/speakout/item/26667-humpty-dumpty-and-the-fall-of-berlins-wall

Categories: Uncategorized

Fifty Percent of American Workers …

… Make Less Than 28,031 Dollars a Year

by Michael Snyder

The Economic Collapse (October 23 2014)

The Social Security Administration has just released wage statistics for 2013, and the numbers are startling.  Last year, fifty percent of all American workers made less than $28,031, and 39 percent of all American workers made less than $20,000.  If you worked a full-time job at $10 an hour all year long with two weeks off, you would make $20,000.  So the fact that 39 percent of all workers made less than that amount is rather telling.  This is more evidence of the declining quality of the jobs in this country.  In many homes in America today, both parents are working multiple jobs in a desperate attempt to make ends meet. Our paychecks are stagnant while the cost of living just continues to soar {1}.  And the jobs that are being added to the economy pay a lot less than the jobs lost in the last recession.  In fact, it has been estimated that the jobs that have been created since the last recession pay an average of 23 percent less than the jobs that were lost.  We are witnessing the slow-motion destruction of the middle class, and very few of our leaders seem to care.

The “average” yearly wage in America last year was just $43,041.  But after accounting for inflation, that was actually worse than the year before {2} …

American paychecks shrank last year, just-released data show, further eroding the public’s purchasing power, which is so vital to economic growth.

Average pay for 2013 was $43,041 – down $79 from the previous year when measured in 2013 dollars. Worse, average pay fell $508 below the 2007 level, my analysis of the new Social Security Administration data shows.

Flat or declining average pay is a major reason so many Americans feel that the Great Recession never ended for them. A severe job shortage compounds that misery not just for workers but also for businesses trying to profit from selling goods and services.

Average pay declined in 59 of the 60 levels of worker pay the government reports each October.

And please keep in mind that “average pay” is really skewed by the millionaires and billionaires at the top end of the spectrum.

Median pay in 2013 was just $28,031.02.  That means that fifty percent of American workers made less than that number, and fifty percent of American workers made more than that number.

Here are some more numbers from the report {3} that the Social Security Administration just released …

* 39 percent of American workers made less than $20,000 last year.

* 52 percent of American workers made less than $30,000 last year.

* 63 percent of American workers made less than $40,000 last year.

* 72 percent of American workers made less than $50,000 last year.

I don’t know about you, but those numbers are deeply troubling to me.

It has been estimated that it takes approximately $50,000 a year to support a middle class lifestyle for a family of four, and so the fact that 72 percent of all workers make less than that amount shows how difficult it is for families that try to get by with just a single breadwinner.

The way that our economy is structured now, both parents usually have to work as hard as they can just to pay the bills.

But there was one group of Americans that did see their incomes actually increase last year.

Those making over fifty million dollars had their pay increase by an average of $12.8 million in 2013.

For everyone else, the news was not good.

And of course this is a trend that has been going on for a long time.

Posted below is a chart that comes from the Federal Reserve.  It shows how real median household income in the United States has declined since the year 2000 …

Meanwhile, the cost of living has continued to rise at a steady pace.

Needless to say, this is putting a tremendous squeeze on the middle class {4}.  With each passing day, more Americans are losing their spots in the middle class and this has pushed government dependence to an all-time high.  According to the US Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month.  This is completely and totally unsustainable, but our long-term economic problems just keep getting worse.

Our politicians have stood by as millions upon millions of good paying jobs have been shipped out of the country.  Millions of other middle class jobs have been lost to technology.  This has resulted in intense competition for the middle class jobs that remain.

And at this point we are even losing lots of lower paying retail jobs.  For example, it is being reported {5} that Sears plans to close 110 more stores and lay off more than 6,000 workers.  Sears says that the report “isn’t accurate”, but it isn’t denying {6} that stores will be closed either …

In an email to USA Today, Sears spokesman Howard Riefs said the store count and closures “isn’t accurate”, but did not provide store closures or layoff numbers.

“As we stated in our (second quarter earnings report), we disclosed that we would be closing unprofitable stores as leases expire and in some cases will accelerate closings when it is economically prudent. And that we would consider closing additional stores during the remainder of the year”, Riefs said. “Make no mistake, we believe the store will continue to play an integral role in our transformation, however, if a store is not generating a profit, it is straightforward that the store should be considered for closure”.

No matter how many stores Sears does end up closing over the next few months, the truth is that our economy is a complete and total mess at this point {7}.

Our politicians and the mainstream media are trying to put a happy face on everything, but the cold, hard numbers {8} prove that we are not anywhere close to where we were prior to the last recession.

Because it is so difficult to find a good job in America today, I often recommend to people that they should consider starting their own businesses.

But thanks to the bureaucratic control freaks in the Obama administration and in our state governments, small business ownership in America today is at an all-time low {9}.  It is almost as if they don’t want the “little guy” to win.  Every avenue of prosperity for the middle class is under assault, and there does not appear to be much hope that this will change any time soon.

And the truly frightening thing is that this is about as good as things are going to get for the middle class.  We are rapidly approaching the next major wave of our long-term economic decline, but that is a topic for a future article.

Links:

{1} http://theeconomiccollapseblog.com/archives/low-inflation-the-price-of-ground-beef-has-risen-17-percent-over-the-past-year

{2} http://www.infowars.com/compensation-shrinks-for-all-income-groups-except-the-very-highest/

{3} http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2013

{4} http://theeconomiccollapseblog.com/archives/30-stats-to-show-to-anyone-that-does-not-believe-the-middle-class-is-being-destroyed

{5} http://seekingalpha.com/article/2587065-sears-layoffs-top-6000-closing-over-110-outlets

{6} http://www.usatoday.com/story/money/business/2014/10/23/sears-disputes-report-of-100-store-closures-widespread-layoffs/17770199/

{7} http://theeconomiccollapseblog.com/archives/19-very-surprising-facts-about-the-messed-up-state-of-the-u-s-economy

{8} http://theeconomiccollapseblog.com/archives/12-charts-that-show-the-permanent-damage-that-has-been-done-to-the-u-s-economy

{9} http://theeconomiccollapseblog.com/archives/small-business-ownership-in-america-is-at-an-all-time-low

http://theeconomiccollapseblog.com/archives/50-percent-of-american-workers-make-less-than-28031-dollars-a-year

Categories: Uncategorized

Shocking New Report

Super-Rich Have Grabbed Half the World’s Assets

by Lynn Stuart Parramore {1}
 
http://alternet.org (October 21 2014)

According to a new report, the richest one percent have got their mitts on almost half the world’s assets. Think that’s the end of the story? Think again. This is only the beginning.

The “Global Annual Wealth Report” {2}, freshly released by investment giant Credit Suisse, analyzes the shocking trend of growing wealth inequality around the world. What the researchers find is that global wealth has increased every year since 2008, and that personal wealth seems to be rising at the fastest rate ever recorded, much of it driven by strong equity markets. But the benefits of this growth have largely been channeled to those who are already affluent. While the restaurant workers in America struggled to achieve wages of $10 an hour for their labor, those invested in equities saw their wealth soar without lifting a finger. So it goes around the world.

The bottom half of the world’s people now own less than one percent of total wealth, and they’re struggling to hold onto even that minuscule portion. On the other hand, the wealthiest ten percent have accumulated a staggering 87 percent of global assets. The top percentile has 48.2 percent of the world wealth. For now.

One of the scary things about the wealth of the supper-rich is what French economist Thomas Piketty pointed out in his best-selling book, Capital in the Twenty-First Century (2014). Once they’ve got a big chunk of wealth, their share will get bigger even if they sit by and do absolutely nothing. Piketty sums up this economic reality in a simple and horrifying formula: r > g.

Basically, this means that when rate of return on wealth is greater than the overall rate of growth of the economy, as it has nearly always been throughout history, the rich will grow inevitably richer and the poor poorer unless there is some kind of intervention, like higher taxes on wealth, for example. If r is less than g, the assets of the super-wealthy will erode, but if r is greater than g, you eventually get the explosion of gigantic inherited fortunes and dynasties.

This is happening now: If you look at the Forbes 400 list of the wealthiest people in America {3}, you see a lot more inherited fortunes in the upper ranks than you did a couple of decades ago, when the policies that held inequality at bay began to get dismantled. In today’s Top Ten, there are more scions of the Walton family than entrepreneurs like Bill Gates or Mark Zuckerberg. These people have essentially done nothing of value for society, and yet their undue influence shapes our political landscape with the wave of a wad of cash.

There have been moments in history when things were not so lopsided. During the post-war period, inequality was contained because governments made sure their rich didn’t accumulate at such alarming rates by doing things like taxing their estates at a high rate. At the same time, they created policies to lift the incomes of the less well-off and allow them to have some basic security. But that’s an exception in history. Most of the time, this kind of intervention did not happen, and so the rich kept gobbling more and accumulating more power to keep it that way until one of two things happened – a revolution or some kind of catastrophe or disruptive event, like a war, shook things up.

As the Credit Suisse report states:

[Wealth inequality] has been the case throughout most of human history, with wealth ownership often equating with land holdings, and wealth more often acquired via inheritance or conquest rather than talent or hard work. However, a combination of factors caused wealth inequality to trend downwards in high income countries during much of the 20th century, suggesting that a new era had emerged. That downward trend now appears to have stalled, and possibly gone into reverse.

That’s right. We’re on a turbo-charged ride back to the days of Downton Abbey. Piketty warns that we’re in the early stages of reverting right back to periods of massive inequality, like 19th-century Britain or 18th-century France, where great dynastic fortunes ruled and everybody else fought for scraps.

What the statistics and formulas don’t show is the kind of human suffering that results from this kind of extreme inequality. While the global elite zip around the world in private jets and watch their stock portfolios expand on computer screens from within their gated mansions, the bottom half stays awake at night trying to think of how to pay for medicine for a sick child. The things that give life dignity and meaning, like a quality education, a decent job, and the security of knowing you have a roof over your head and a doctor to care for you when you are ill grow further and further out of reach. Anxiety never leaves because one unforeseen mishap can push you down into poverty, and if you’re already there, you spend much of your time searching, often fruitlessly, for a way out.

But there’s a little bit of anxiety percolating at the top, too. On the June cover of the conservative magazine American Spectator {4}, a cartoon shows an incensed mob looking on as a monocled fatcat is led to a bloody guillotine – a scene evoking the Reign of Terror during the French Revolution. The caption reads, “The New Class Warfare: Thomas Piketty’s intellectual cover for confiscation”. In the story that accompanies the image, James Pierson warns of revolution and a growing class of suffering people who want to punish the rich and take away their toys.

That would be one way to address things. Another would be the recognition that inequality is extremely destabilizing and dangerous, and that non-violent interventions are possible, as we saw in America with the New Deal. Things like robust tax reform, unions, regulation, changes in corporate governance and CEO pay, affordable education, jobs programs, expansion of Social Security and universal healthcare.

Or we could just do things the old-fashioned way and wait for a disaster even bigger than the meltdown of 2007 and 2008. In that case, fasten your seatbelts. This ride could get very rough.

Links:

{1} http://www.alternet.org/authors/lynn-stuart-parramore

{2} https://publications.credit-suisse.com/tasks/render/file/?fileID=60931FDE-A2D2-F568-B041B58C5EA591A4

{3} http://www.forbes.com/forbes-400/

{4} http://spectator.org/issues/2014/jun

http://www.alternet.org/economy/shocking-new-report-superrich-have-grabbed-half-worlds-assets

Categories: Uncategorized

Happy Black Thursday

Do Tumbling Buybacks Signal Another Market Crash?

by Mike Whitney

CounterPunch (October 23 2014)

Frankly, we are so far off the economic rails, the locomotive is stuck in a swamp and the trailing cars are piling up around it.

– Anonymous, Comments line, Naked Capitalism

Since the end of the recession in 2009, investors have borrowed a record amount of money to finance their stock acquisitions. According to the Financial Times, margin debt on the New York Stock Exchange (NYSE) peaked in February 2014 at $466 billion and has only recently dipped slightly lower. That’s $85 billion more than 2007 at the peak of the bubble. (Below: Margin debt tends to trace the trajectory of the markets fairly closely, although it’s a poor indicator of a market “top”.)

“NYSE Margin Debt drifts higher in August”, ETF Daily News {1}

When stocks start see-sawing like they did last week, it’s usually a sign that over-extended investors are dumping their stocks to meet margin calls. The same thing happened in the run-up to the Crash of 1929. Stocks dropped sharply in late October which forced deeply-indebted investors to unload their holdings at firesale prices. The falling prices triggered a panic that sent stocks into freefall wiping out billions of dollars, crashing the markets, and paving the way for the Great Depression. Here’s a brief summary of what happened:

On September 3, the market dropped sharply only to rise and then drop again. It was like tremors before a big earthquake but nobody heeded the warning. The market had sagged temporarily before, but it always came back stronger. The market dipped sharply again on October 4 (and) October 21 saw an avalanche of selling as many tried to salvage something from their loss. On October 24 –  Black Thursday –  the panic took on a life of its own as selling orders overwhelmed the Exchange’s ability to keep up with the transactions …

Wall Street financiers tried to inspire confidence by buying as many shares as they could. It worked – temporarily. (But) on Monday the panic started again, and then came Black Tuesday – October 29. The panic on the Exchange floor changed to bedlam. According to one observer, “They hollered and screamed, they clawed at one another’s collars. It was like a bunch of crazy men. Every once in a while … you’d see some poor devil collapse and fall to the floor”. This was the Crash, although few could see it at the time … Thirty billion dollars had been lost – more than twice the national debt. The nation reeled, and slipped into the depths of the Great Depression. {2}

Unsurprisingly, the banks were at the center of that fiasco too, as was their principle agent, the Federal Reserve. In fact, the International Monetary Fund just issued a scathing rebuke of the Fed’s policies saying that zero rates, which have been in effect for over five years, have put the financial system at risk again. Here’s more on the IMF report from the Guardian:

“Accommodative policies aimed at supporting the recovery and promoting economic risk taking have facilitated greater financial risk taking”, the IMF said. As evidence it pointed to rising asset prices, smaller premiums on riskier investments and the lack of volatility in financial markets …

The IMF said there was a trade-off between the upside economic benefits of low interest rates and the money creation process known as quantitative easing and the downside financial stability risks … “market and liquidity risks have increased to levels that could compromise financial stability if left unaddressed”. {3}

In other words, fixing the price of money at zero for years-on-end, increases financial instability while doing nothing for the real economy. The IMF is basically admitting that the Fed has created the conditions for another meltdown.

And the excessive risk taking is not limited to margin debt either. It’s visible in financial assets across the board. Take stock buybacks, for example. Buybacks, which add nothing to a company’s productivity or real value, merely juice stock prices so shareholders and executives can cream bigger profits for themselves. What most people don’t know about buybacks is that the fatcat corporate bosses are not recycling profits into share purchases, but taking advantage of the low rates to load on more debt. Check out this eyepopping chart at Zero Hedge which shows the lethal symmetry between corporate borrowing and stock buybacks {4}:

Why is this happening?

It’s happening because the Obama administration reduced the budget deficits thereby choking off the fiscal stimulus the economy needs to grow. That bit of belt-tightening weakened overall demand forcing corporations to look for other ways to boost profits. What many CEOs figured out was that they could increase earnings by cutting costs and shedding workers while, simultaneously, goosing stock prices by taking advantage of the low interest rates and adding more debt. This is the strategy that energized the stock buyback craze, the revenue-shrinking, worker-trimming, industry-gutting plan to enrich the few at the expense of the company, its employees and its future. Check this out from the Wall Street Journal:

Preliminary data showed stock buybacks reached $116.2 billion in the second quarter … down 27% from $159.3 billion recorded for the first quarter of this year, the second highest on record.

For the twelve months ended June, companies raised their stock repurchases to $533 billion, an increase of nearly 27% from a year earlier. Meanwhile, combined buyback and dividend expenditures for the period reached a record of $865.9 billion, with buybacks representing 61.6% of the total. {5}

So you want to know why stocks keep soaring higher on so-so economic data?

Buybacks, that’s why. Here’s a clip from an earlier article in the Wall Street Journal that underscores the magnitude of the flimflam:

Last year, the corporations in the Russell 3000, a broad US stock index, repurchased $567.6 billion worth of their own shares – a 21% increase over 2012, calculates Rob Leiphart, an analyst at Birinyi Associates, a research firm in Westport, Connecticut. That brings total buybacks since the beginning of 2005 to $4.21 trillion – or nearly one-fifth of the total value of all US stocks today”.  {6}

If buybacks represent twenty percent of the total value of stocks today, then what’s going to happen when conditions change, that is, when QE ends and rates rise?

Stocks are going to tumble, right?

Right. And if you want to see how destructive this buyback chicanery really is, just check out the details on IBM’s recent earnings debacle. Here’s the story from the New York Times:

In the first six months of this year, the company spent more than $12 billion … on its own shares … But all these “shareholder friendly” maneuvers have been masking an ugly truth: IBM’s success in recent years has been tied more to financial engineering than actual performance.

That became readily apparent Monday morning when the company announced its earnings, missing analysts’ expectations by a wide margin. The stock fell more than seven percent to $169.10 by the end of the day, below the average price Mr Buffett paid since he started buying the stock in 2011.

The company’s revenue hasn’t grown in years. Indeed, IBM’s revenue is about the same as it was in 2008.

But all along, IBM has been buying up its own shares as if they were a hot item. Since 2000, IBM spent some $108 billion on its own shares, according to its most recent annual report. It also paid out $30 billion in dividends. To help finance this share-buying spree, IBM loaded up on debt.

While the company spent $138 billion on its shares and dividend payments, it spent just $59 billion on its own business through capital expenditures and $32 billion on acquisitions … All of which is to say that IBM has arguably been spending its money on the wrong things: shareholders, rather than building its own business.

“IBM’s financials make it self-evident that its stock-rigging strategy is not about value creation through ‘investment’ “, David A Stockman, the director of the Office of Management and Budget under President Ronald Reagan … “IBM is a buyback machine on steroids that has been a huge stock-market winner by virtue of massaging, medicating and manipulating” its earnings per share. {7}

But IBM is no different than anyone else. They’re all doing the same thing; “dissipating corporate assets” and “shrinking their businesses” (Yves Smith) to enrich greedy executives and their voracious shareholders. And who can blame them, after all, these corporations are merely responding to the incentives created by the Fed’s monetary policies. Stock buybacks make perfect sense when credit is easy and the price of money is zero.

So why did stock prices plunge last week?

It’s all about expectations. Investors know that the conditions that have been favorable for stock buybacks are about to change, (The Fed plans to end QE in October) so they are making their adjustments while prices are still high. That’s why the markets have been gyrating lately. It’s also why buybacks have dropped by 27 percent in the last quarter. Check out this graph from Zero Hedge {8}:

Corporations have been willing to buy their own shares because (a) money is cheap and (b) because they knew the Fed was shrinking the supply of financial assets by buying US Treasuries. Now that the Fed is threatening to turn off the money-spigot, (which will have the same effect as raising rates) the buybacks will slow and stocks will drop. Of course, that’s not the way the analysts at Goldman Sachs see things. They think the slowdown in stock buybacks is just a temporary glitch that coincides with earnings reports. According to Business Insider:

Goldman Sachs’ David Kostin believes a temporary pullback may explain why the S&P 500 has tumbled from its all-time high of 2,019 on September 19.

“Most companies are precluded from engaging in open-market stock repurchases during the five weeks before releasing earnings”, Kostin notes. “For many firms, the beginning of the blackout period coincided with the S&P 500 peak on September 18. So the sell-off occurred during a time when the single largest source of equity demand was absent …

“We expect companies will actively repurchase shares in November and December”, he writes. “Since 2007, an average of 25% of annual buybacks has occurred during the last two months of the year”. {9}

Goldman could be right, but I don’t think so, mainly because increased volatility and ructions in the bond market suggest that market dynamics have changed. It’s a whole different ballgame now. “The VIX Volatility Index topped thirty briefly last week – often seen as an unofficial warning sign, while CNNMoney’s own Fear & Greed Index is still in “Extreme Fear” mode with the current reading is five”. And the troubles in the bond market are even scarier. Check this out on Bloomberg:

Corporate bond values are fluctuating the most in more than a year as Wall Street’s biggest banks opt against using their own money to absorb debt being sold by clients.

The 22 dealers that do business with the Fed reduced their net holdings of high-yield bonds by $1.7 billion in the two weeks ended October 8 to a net $6.3 billion, Fed data show. They were joining the crowd in selling, with high-yield bond mutual funds receiving $7.4 billion of withdrawals since mid-September … {10}

Here’s more from Bloomberg:

High-yield investors are more worried that no one will bid on their bonds than they are about the risk of companies defaulting. At a time when the default rate for below investment-grade companies is holding at about half its historical average, junk-bond investors are increasingly concerned that they’ll be unable to sell when they want to …

“Clients now want to sell any bond they don’t want to hold for the long-term for fear that they will not be able to sell them later”, Bank of America Corporation analysts led by Michael Contopoulos wrote in a note today. The recent volatility “has been a wake-up call for many that dealer balance sheet constraints leads to faster price discovery and gappier price moves”… {11}

Investors are afraid that they won’t be able to get out when they want to?

Precisely, and that fear is adding to market volatility.

So what happens now?

Well, it looks like things are going to get a whole lot crazier for a while, particularly if economic data is weak, and the Fed winds down QE on schedule. Then we could see a noticeable increase in the violent swings in daily trading. One thing to keep an eye on is yields on high-yield debt which have been gradually rising signaling that investors are less eager to provide cheap credit to marginal corporate borrowers. That’s going to make it more expensive to finance stock buybacks which means that the main driver of the stock market is going to begin to stall. When buybacks drop off, the markets will drift sideways leading to a selloff in the bond market that could spark a race for the exits. Here’s how Jeff Cox sums it up over at CNBC:

Picture this: The bond market gets spooked by a sudden interest rate scare, sending a throng of buyers streaming toward the exits, only to find a dearth of buyers on the other side. As a result, liquidity evaporates, yields soar, and the US finds itself smack in the middle of another debt crisis no one saw coming …

We saw the imbalance this summer, when global unrest caused sudden outflows from high-yield corporates, and last spring, when a swift, but not unprecedented, move in rates caused a negative knee-jerk reaction in credit spreads. As one trader put it: “The Taper Tantrum was the thirty-second preview to a full feature film that might yet play out”. {12}

We’ve already had three dress rehearsals for Cox’s “doomsday scenario” since last summer, (the most recent of which took place last Wednesday when the Dow dropped 460 points before rebounding) so there’s no doubt that there’s trouble ahead. Once stocks start to fall, the bond bubble will burst igniting a broader selloff and a swift plunge in prices. That will leave the balance sheets of many corporations and financial institutions deep in the red precipitating a second major financial crisis in less than seven years.

Sound plausible?

I think so. And the problems can all be traced back to the easy money policies of the Central Bank; our friend, the Fed.

Links:

{1} http://etfdailynews.com/2014/09/24/nyse-margin-debt-drifts-higher-in-august/

{2} http://www.eyewitnesstohistory.com/snpmech5.htm

{3} http://www.theguardian.com/business/2014/oct/08/imf-low-interest-rates-financial-crisis-threat-speculation

{4} http://www.zerohedge.com/news/2014-09-09/buyback-party-indeed-over-stock-repurchases-tumble-second-quarter

{5} http://online.wsj.com/articles/companies-reduced-stock-buybacks-in-2nd-quarter-1411483460

{6} http://blogs.wsj.com/moneybeat/2014/03/21/will-stock-buybacks-bite-back/

{7} http://dealbook.nytimes.com/2014/10/20/the-truth-hidden-by-ibms-buybacks

{8} http://www.zerohedge.com/news/2014-09-09/buyback-party-indeed-over-stock-repurchases-tumble-second-quarter

{9} http://www.businessinsider.com/goldman-on-buybacks-and-market-volatility-2014-10#ixzz3GnJ6ad9M

{10} http://www.bloomberg.com/news/2014-10-19/leveraged-money-spurs-selloff-as-record-treasuries-trade.html

{11} http://www.bloomberg.com/news/2014-10-20/lonely-bond-buyers-feel-deserted-when-junk-market-rout-heats-up.html

{12} http://www.cnbc.com/id/102070764

_____

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press, 2012). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

CounterPunch is Moral Oxygen in a Corrupt Empire. Support the Fund Drive Today!

https://www.paypal.com/cgi-bin/webscr?cmd=_s-xclick&hosted_button_id=ZPL58QDQ46KWC

http://www.counterpunch.org/2014/10/23/happy-black-thursday/

Categories: Uncategorized

How to Start a War and Lose an Empire

by Dmitry Orlov

Club Orlov (October 21 2014)

A year and a half I wrote an essay on how the US chooses to view Russia, titled The Image of the Enemy {1}. I was living in Russia at the time, and, after observing the American anti-Russian rhetoric and the Russian reaction to it, I made some observations that seemed important at the time. It turns out that I managed to spot an important trend, but given the quick pace of developments since then, these observations are now woefully out of date, and so here is an update.

At that time the stakes weren’t very high yet. There was much noise around a fellow named Magnitsky, a corporate lawyer-crook who got caught and died in pretrial custody. He had been holding items for some bigger Western crooks, who were, of course, never apprehended. The Americans chose to treat this as a human rights violation and responded with the so-called “Magnitsky Act” which sanctioned certain Russian individuals who were labeled as human rights violators. Russian legislators responded with the “Dima Yakovlev Bill”, named after a Russian orphan adopted by Americans who killed him by leaving him in a locked car for nine hours. This bill banned American orphan-killing fiends from adopting any more Russian orphans. It all amounted to a silly bit of melodrama.

But what a difference a year and a half has made! Ukraine, which was at that time collapsing at about the same steady pace as it had been ever since its independence two decades ago, is now truly a defunct state, with its economy in free-fall, one region gone and two more in open rebellion, much of the country terrorized by oligarch-funded death squads, and some American-anointed puppets nominally in charge but quaking in their boots about what’s coming next. Syria and Iraq, which were then at a low simmer, have since erupted into full-blown war, with large parts of both now under the control of the Islamic Caliphate, which was formed with help from the US, [and] was armed with US-made weapons via the Iraqis. Post-Qaddafi Libya seems to be working on establishing an Islamic Caliphate of its own. Against this backdrop of profound foreign US foreign policy failure, the US recently saw it fit to accuse Russia of having troops “on NATO’s doorstep”, as if this had nothing to do with the fact that NATO has expanded east, all the way to Russia’s borders. Unsurprisingly, US–Russia relations have now reached a point where the Russians saw it fit to issue a stern warning: further Western attempts at blackmailing them may result in a nuclear confrontation.

The American behavior throughout this succession of defeats has been remarkably consistent, with the constant element being their flat refusal to deal with reality in any way, shape or form. Just as before, in Syria the Americans are ever looking for moderate, pro-Western Islamists, who want to do what the Americans want (topple the government of Bashar al Assad) but will stop short of going on to destroy all the infidel invaders they can get their hands on. The fact that such moderate, pro-Western Islamists do not seem to exist does not affect American strategy in the region in any way.

Similarly, in Ukraine, the fact that the heavy American investment in “freedom and democracy”, or “open society”, or what have you, has produced a government dominated by fascists and a civil war is, according to the Americans, just some Russian propaganda. Parading under the banner of Hitler’s Ukrainian SS division and anointing Nazi collaborators as national heroes is just not convincing enough for them. What do these Nazis have to do to prove that they are Nazis, build some ovens and roast some Jews? Just massacring people by setting fire to a building, as they did in Odessa, or shooting unarmed civilians in the back and tossing them into mass graves, as they did in Donetsk, doesn’t seem to work. The fact that many people have refused to be ruled by Nazi thugs and have successfully resisted them has caused the Americans to label them as “pro-Russian separatists”. This, in turn, was used to blame the troubles in Ukraine on Russia, and to impose sanctions on Russia. The sanctions would be reviewed if Russia were to withdraw its troops from Ukraine. Trouble is, there are no Russian troops in Ukraine.

Note that this sort of behavior is nothing new. The Americans invaded Afghanistan because the Taleban would not relinquish Osama Bin Laden (who was a CIA operative) unless Americans produced evidence implicating him in 9/11 – which did not exist. Americans invaded Iraq because Saddam Hussein would not relinquish his weapons of mass destruction – which did not exist. They invaded Libya because Muammar Qaddafi would not relinquish official positions – which he did not hold. They were ready to invade Syria because Bashar al Assad had used chemical weapons against his own people – which he did not do. And now they imposed sanctions on Russia because Russia had destabilized and invaded Ukraine – which it did not do either. (The US did that.)

The sanctions against Russia have an additional sort of unreality to them, because they “boomerang” and hurt the West while giving the Russian government the impetus to do what it wanted to do all along. The sanctions infringed on the rights of a number of Russian businessmen and officials, who promptly yanked their money out of Western banks, pulled their children out of Western schools and universities, and did everything else they could to demonstrate that they are good patriotic Russians, not American lackeys. The sanctions affected a number of Russian energy companies, cutting them off from Western sources of technology and financing, but this will primarily hurt the earnings of Western energy companies while helping their Chinese competitors. There were even some threats to cut Russia off from the SWIFT system, which would have made it quite difficult to transfer funds between Russia and the West, but what these threats did instead was to give Russia the impetus to introduce its own RUSSWIFT system, which will include even Iran, neutralizing future American efforts at imposing financial restrictions.

The sanctions were meant to cause economic damage, but Western efforts at inflicting short-term economic damage on Russia are failing. Coupled with a significant drop in the price of oil, all of this was supposed to hurt Russia fiscally, but since the sanctions caused the Ruble to drop in tandem, the net result on Russia’s state finances is a wash. Oil prices are lower, but then, thanks in part to the sanctions, so is the Ruble, and since oil revenues are still largely in dollars, this means that Russia’s tax receipts are at roughly the same level at before. And since Russian oil companies earn dollars abroad but spend rubles domestically, their production budgets remain unaffected.

The Russians also responded by imposing some counter-sanctions, and to take some quick steps to neutralize the effect of the sanctions on them. Russia banned the import of produce from the European Union – to the horror of farmers there. Especially hurt were those EU members who are especially anti-Russian: the Baltic states, which swiftly lost a large fraction of their GDP, along with Poland. An exception is being made for Serbia, which refused to join in the sanctions. Here, the message is simple: friendships that have lasted many centuries matter; what the Americans want is not what the Americans get; and the EU is a mere piece of paper. Thus, the counter-sanctions are driving wedges between the US and the EU, and, within the EU, between Eastern Europe (which the sanctions are hurting the most) and Western Europe, and, most importantly, they drive home the simple message that the US is not Europe’s friend.

There is something else going on that is going to become more significant in the long run: Russia has taken the hint and is turning away from the West and toward the East. It is parlaying its open defiance of American attempts at world domination into trade relationships throughout the world, much of which is sick and tired of paying tribute to Washington. Russia is playing a key role in putting together an international banking system that circumvents the US dollar and the US Federal Reserve. In these efforts, over half the world’s territory and population is squarely on Russia’s side and cheering loudly. Thus, the effort to isolate Russia has produced the opposite of the intended result: it is isolating the West from the rest of the world instead.

In other ways, the sanctions are actually being helpful. The import ban on foodstuffs from EU is a positive boon to domestic agriculture while driving home a politically important point: don’t take food from the hands of those who bite you. Russia is already one of the world’s largest grain exporters, and there is no reason why it can’t become entirely self-sufficient in food. The impetus to rearm in the face of NATO encroachment on Russian borders (there are now US troops stationed in Estonia, just a short drive from Russia’s second-largest city, Saint Petersburg) is providing some needed stimulus for industrial redevelopment. This round of military spending is being planned a bit more intelligently than in the Soviet days, with eventual civilian conversion being part of the plan from the very outset. Thus, along with the world’s best jet fighters, Russia is likely to start building civilian aircraft for export and competing with Airbus and Boeing.

But this is only the beginning. The Russians seem to have finally realized to what extent the playing field has been slanted against them. They have been forced to play by Washington’s rules in two key ways: by bending to Washington’s will in order to keep their credit ratings high with the three key Western credit rating agencies, in order to secure access to Western credit; and by playing by the Western rule-book when issuing credit of their own, thus keeping domestic interest rates artificially high. The result was that US companies were able to finance their operations more cheaply, artificially making them more competitive. But now, as Russia works quickly to get out from under the US dollar, shifting trade to bilateral currency arrangements (backed by some amount of gold should trade imbalances develop), it is also looking for ways to turn the printing press to its advantage. To date, the dictat handed down from Washington has been: “We can print money all we like, but you can’t, or we will destroy you”. But this threat is ringing increasingly hollow, and Russia will no longer be using its dollar revenues to buy up US debt. One proposal currently on the table is to make it impossible to pay for Russian oil exports with anything other than rubles, by establishing two oil brokerages, one in Saint Petersburg, the other, seven time zones away, in Vladivostok. Foreign oil buyers would then have to earn their petro-rubles the honest way – through bilateral trade – or, if they can’t make enough stuff that the Russians want to import, they could pay for oil with gold (while supplies last). Or the Russians could simply print rubles, and, to make sure such printing does not cause domestic inflation, they could export some inflation by playing with the oil spigot and the oil export tariffs. And if the likes of George Soros decides to attack the ruble in an effort to devalue it, Russia could defend its currency simply by printing fewer rubles for a while – no need to stockpile dollar reserves.

So far, this all seems like typical economic warfare: the Americans want to get everything they want by printing money while bombing into submission or sanctioning anyone who disobeys them, while the rest of the world attempts to resist them. But early in 2014 the situation changed. There was a US-instigated coup in Kiev, and instead of rolling over and playing dead like they were supposed to, the Russians mounted a fast and brilliantly successful campaign to regain Crimea, then successfully checkmated the junta in Kiev, preventing it from consolidating control over the remaining former Ukrainian territory by letting volunteers, weapons, equipment and humanitarian aid enter – and hundreds of thousands of refugees exit – through the strictly notional Russian-Ukrainian border, all the while avoiding direct military confrontation with NATO. Seeing all of this happening on the nightly news has awakened the Russian population from its political slumber, making it sit up and pay attention, and sending Putin’s approval rating through the roof.

The “optics” of all this, as they like to say at the White House, are rather ominous. We are coming up on the 70th anniversary of victory in World War Two – a momentous occasion for Russians, who pride themselves on defeating Hitler almost single-handedly. At the same time, the US (Russia’s self-appointed arch-enemy) has taken this opportunity to reawaken and feed the monster of Nazism right on Russia’s border (inside Russia’s borders, some Russians/Ukrainians would say). This, in turn, makes the Russians remember Russia’s unique historical mission is among the nations of the world: it is to thwart all other nations’ attempts at world domination, be it Napoleonic France or Hitleresque Germany or Obamaniac America. Every century or so some nation forgets its history lessons and attacks Russia. The result is always the same: lots of corpse-studded snowdrifts, and then Russian cavalry galloping into Paris, or Russian tanks rolling into Berlin. Who knows how it will end this time around? Perhaps it will involve polite, well-armed men in green uniforms without insignia patrolling the streets of Brussels and Washington, DC. Only time will tell.

You’d think that Obama has already overplayed his hand, and should behave accordingly. His popularity at home is roughly the inverse of Putin’s, which is to say, Obama is still more popular than Ebola, but not by much. He can’t get anything at all done, no matter how pointless or futile, and his efforts to date, at home and abroad, have been pretty much a disaster. So what does this social worker turned national mascot decide to do? Well, the way the Russians see it, he has decided to declare war on Russia! In case you missed it, look up his speech before the UN General Assembly. It’s up on the White House web site {2}. He placed Russia directly between Ebola and ISIS among the three topmost threats facing the world. Through Russian eyes his speech reads as a declaration of war.

It’s a new, mixed-mode sort of war. It’s not a total war to the death, although the US is being rather incautious by the old Cold War standards in avoiding a nuclear confrontation. It’s an information war – based on lies and unjust vilification; it’s a financial and economic war – using sanctions; it’s a political war – featuring violent overthrow of elected governments and support for hostile regimes on Russia’s borders; and it’s a military war – using ineffectual but nevertheless insulting moves such as stationing a handful of US troops in Estonia. And the goals of this war are clear: it is to undermine Russia economically, destroy it politically, dismember it geographically, and turn it into a pliant vassal state that furnishes natural resources to the West practically free of charge (with a few hand-outs to a handful of Russian oligarchs and criminal thugs who play ball). But it doesn’t look like any of that is going to happen because, you see, a lot of Russians actually get all that, and will choose leaders who will not win any popularity contests in the West but who will lead them to victory.

Given the realization that the US and Russia are, like it or not, in a state of war, no matter how opaque or muddled, people in Russia are trying to understand why this is and what it means. Obviously, the US has seen Russia as the enemy since about the time of the Revolution of 1917, if not earlier. For example, it is known that after the end of World War II America’s military planners were thinking of launching a nuclear strike against the USSR, and the only thing that held them back was the fact that they didn’t have enough bombs, meaning that Russia would have taken over all of Europe before the effects of the nuclear strikes could have deterred them from doing so (Russia had no nuclear weapons at the time, but lots of conventional forces right in the heart of Europe).

But why has war been declared now, and why was it declared by this social worker turned national misleader? Some keen observers mentioned his slogan “the audacity of hope”, and ventured to guess that this sort of “audaciousness” (which in Russian sounds a lot like “folly”) might be a key part of his character which makes him want to be the leader of the universe, like Napoleon or Hitler. Others looked up the campaign gibberish from his first presidential election (which got silly young Americans so fired up) and discovered that he had nice things to say about various cold warriors. Do you think Obama might perhaps be a scholar of history and a shrewd geopolitician in his own right? (That question usually gets a laugh, because most people know that he is just a chucklehead and repeats whatever his advisers tell him to say.) Hugo Chavez once called him “a hostage in the White House”, and he wasn’t too far off. So, why are his advisers so eager to go to war with Russia, right now, this year?

Is it because the US is collapsing more rapidly than most people can imagine? This line of reasoning goes like this: the American scheme of world domination through military aggression and unlimited money-printing is failing before our eyes. The public has no interest in any more “boots on the ground”, bombing campaigns do nothing to reign in militants that Americans themselves helped organize and equip, dollar hegemony is slipping away with each passing day, and the Federal Reserve is fresh out of magic bullets and faces a choice between crashing the stock market and crashing the bond market. In order to stop, or at least forestall this downward slide into financial/economic/political oblivion, the US must move quickly to undermine every competing economy in the world through whatever means it has left at its disposal, be it a bombing campaign, a revolution or a pandemic (although this last one can be a bit hard to keep under control). Russia is an obvious target, because it is the only country in the world that has had the gumption to actually show international leadership in confronting the US and wrestling it down; therefore, Russia must be punished first, to keep the others in line.

I don’t disagree with this line of reasoning, but I do want to add something to it.

First, the American offensive against Russia, along with most of the rest of the world, is about things Americans like to call “facts on the ground”, and these take time to create. The world wasn’t made in a day, and it can’t be destroyed in a day (unless you use nuclear weapons, but then there is no winning strategy for anyone, the US included). But the entire financial house of cards can be destroyed rather quickly, and here Russia can achieve a lot while risking little. Financially, Russia’s position is so solid that even the three Western credit ratings agencies don’t have the gall to downgrade Russia’s rating, sanctions notwithstanding. This is a country that is aggressively paying down its foreign debt, is running a record-high budget surplus, has a positive balance of payments, is piling up physical gold reserves, and not a month goes by that it doesn’t sign a major international trade deal (that circumvents the US dollar). In comparison, the US is a dead man walking: unless it can continue rolling over trillions of dollars in short-term debt every month at record-low interest rates, it won’t be able to pay the interest on its debt or its bills. Good-bye, welfare state, hello riots. Good-bye military contractors and federal law enforcement, hello mayhem and open borders. Now, changing “facts on the ground” requires physical actions, whereas causing a financial stampede to the exits just requires somebody to yell “Boo!” loudly and frighteningly enough.

Second, it must be understood that at this point the American ruling elite is almost entirely senile. The older ones seem actually senile in the medical sense. Take Leon Panetta, the former Defense Secretary: he’s been out flogging his new book, and he is still blaming Syria’s Bashar al Assad for gassing his own people! By now everybody else knows that that was a false flag attack, carried out by some clueless Syrian rebels with Saudi help, to be used as an excuse for the US to bomb Syria – you know, the old “weapons of mass destruction” nonsense again. (By the way, this kind of mindless, repetitive insistence on a fake rationale seems like a sure sign of senility.) That plan didn’t work because Putin and Lavrov intervened and quickly convinced Assad to give up his useless chemical weapons stockpile. The Americans were livid. So, everybody knows this story – except Panetta. You see, once an American official starts lying, he just doesn’t know how to stop. The story always starts with a lie, and, as facts emerge that contradict the initial story, they are simply ignored.

So much for the senile old guard, but what about their replacements? Well, the poster boy for the young ones is Hunter Biden, the VP’s son, who went on a hookers-and-blow tour of Ukraine last summer and inadvertently landed a seat on the board of directors of Ukraine’s largest natural gas company (which doesn’t have much gas left). He just got outed for being a coke fiend. In addition to the many pre-anointed ones, like the VP’s son, there are also many barns full of eagerly bleating Ivy League graduates who have been groomed for jobs in high places. These are Prof. Deresiewicz’s “Excellent Sheep” {3}.

There just isn’t much that such people, young or old, can be made to respond to. International embarrassment, military defeat, humanitarian catastrophe – all these things just bounce off them and stick to you for bringing them up and being overly negative about their rose-colored view of themselves. The only hit they can actually feel is a hit to the pocketbook.

Which brings us all the way back to my first point: “Boo!”

Links:

{1} http://cluborlov.blogspot.jp/2013/01/the-image-of-enemy.html

{2} http://www.whitehouse.gov/the-press-office/2014/09/24/remarks-president-obama-address-united-nations-general-assembly

{3} https://duckduckgo.com/?q=%22Excellent+Sheep%22

http://cluborlov.blogspot.jp/2014/10/how-to-start-war-and-lose-empire.html

Categories: Uncategorized

The ‘Medicine’ of the Trans-Pacific Partnership …

… as Bitter as Ever

by Systemic Disorder (October 23 2014)

The Trans-Pacific Partnership is as dangerous as ever. Denying access to medicines, increased surveillance of Internet usage and mandatory patents at the behest of multi-national corporations are some of the corporate goodies stashed in the TPP’s intellectual property chapter, revealed by WikiLeaks this month. Journalism could even be criminalized.

The more we know about the TPP, the worse it gets, which is why the governments of the twelve countries involved, led by the Obama administration, continue to negotiate in unprecedented secrecy. The latest text of the TPP’s intellectual property chapter shows very little change from an earlier draft also published by WikiLeaks. In a press release accompanying this month’s publication of the revised text, WikiLeaks says:

[T]here are significant industry-favouring additions within the areas of pharmaceuticals and patents. These additions are likely to affect access to important medicines such as cancer drugs and will also weaken the requirements needed to patent genes in plants, which will impact small farmers and boost the dominance of large agricultural corporations like Monsanto.

An analysis by Public Citizen explains:

A rule [would] require the patenting of plant-related inventions, such as the genes inserted into genetically modified plants, putting farmers in developing countries at the mercy of the agriculture industry, including seed manufacturers such as Monsanto, and threatening food security in these countries more broadly.

Monsanto, already attempting to gain a stranglehold over the world’s food supply, is hardly in need of yet more favorable treatment. Proprietary seeds and genetically modified organisms are Monsanto’s routes to control what you eat and what farmers grow. Once under contract, farmers are required to buy new genetically engineered seeds from the company every year and the Monsanto herbicide to which the seed has been engineered to be resistant.

Stealth ‘Fast-Track’ Process Needed to Sneak TPP through Congress

Concomitant to the secrecy shrouding the TPP is the stealth needed to pass the “free trade” treaty. The Obama administration is seeking to be given “fast-track” authority by Congress. Under the fast-track process, Congress cedes its right to make any changes, limits its time to debate, and must schedule a straight yes-or-no vote (no amendments allowed) in a short period of time. Some of the worst “free trade” deals have been approved in this manner, and the importance of fast-track is shown in that the last US trade pact approved, with South Korea, was approved in 2007 – literally one minute before fast-track authority expired!

A fast-track bill, known as Camp-Baucus for its two sponsors, was essentially dead on arrival early this year due to widespread opposition in Congress, mostly by Democrats but also some Republicans. That this arose was because of organized activist work by groups across the United States. But Democratic Senator Ron Wyden, last April, signaled his intention to introduce a new fast-track bill, which he rebranded “smart track”. US activists widely speculate that either Senator Wyden’s thinly disguised “smart track” bill or a more openly fast-track bill, perhaps written by Republicans in the House of Representatives, will be introduced in Congress following the November election with the intention of ramming it through a lame-duck session.

US activists for the past year and a half have focused on stopping fast-track in Congress because it will be virtually impossible to pass the TPP otherwise. Other countries have signaled their reluctance to agree to a final TPP text unless Congress grants the Obama administration fast-track authority. Without such authority, Congress would retain the right to make changes to an agreed-upon treaty, potentially unraveling any deal. The Canadian government, in late September, made this reluctance explicit.

Washington Trade Daily recently reported that the Canadian ambassador to the US, Gary Doer, said Canada and other negotiating countries won’t conclude negotiations until the Obama administration has the “political muscle” of trade-promotion authority (the formal name for fast-track). Thus, activists advocate no lessening of vigilance against new attempts to introduce fast-track legislation. A Week of Action Against Fast Track is being organized for November 8 to 14 in the US. In Australia, a series of rallies opposing the TPP are taking place this week in Sydney and Canberra.

These efforts come against a renewed push for a completed deal; negotiators are meeting this week, to be immediately followed on October 25 by a ministerial-level meeting in Sydney.

Criminalizing Your Right to Know

There is much to oppose in the Trans-Pacific Partnership itself. A trade-secrets provision in the leaked intellectual property chapter is written in a way that makes it possible for reporting the contents of a future trade deal to be prosecuted. The article in question states:

In the course of ensuring effective protection against unfair competition … each Party shall ensure that natural and legal persons have the legal means to prevent trade secrets lawfully in their control from being disclosed to, acquired by, or used by others (including state commercial enterprises) without their consent in a manner contrary to honest commercial practices.

Criminal penalties would be mandatory for:

… the unauthorized, willful access to a trade secret held in a computer system; the unauthorized, willful misappropriation of a trade secret, including by means of a computer system; or the fraudulent (or unauthorized) disclosure of a trade secret, including by means of a computer system.

WikiLeaks’ publication of this text would be a criminal matter under this provision. This provision would make it mandatory for signatory governments to enact strict laws protecting undefined “trade secrets”. The text of the TPP itself is classified as a secret! Legislators and the public are excluded from seeing the text. In the United States, the only people other than negotiators to have access to the text are 605 “advisers”, who are almost all executives of multi-national corporations or corporate lobbyists.

The Age newspaper of Melbourne summarizes the threat to journalism this way:

The leaked treaty text shows that in an effort to deal with ‘unfair competition’, largely from Chinese industrial espionage, the United States has pushed ahead with proposals to criminalise disclosure of trade secrets across the Pacific Rim. The draft text provides that TPP countries will introduce criminal penalties for unauthorised access to, misappropriation or disclosure of trade secrets, defined as information that has commercial value because it is secret, by any person using a computer system.

There are no public interest or free speech exemptions. Criminalisation of disclosure would apply to journalists working for commercial media organisations or wherever the leak was considered harmful to the ‘economic interests’ of any TPP country.

Barriers to Cheaper Generic Medications

Other rules in the TPP intellectual property text would raise barriers to generic medications becoming available and mandating that the terms of patents be extended on demand by patent holders. The United States and Japan even propose language that would require intellectual property enforcement to be elevated above any other legal consideration! The US is also seeking the criminalization of copyright infringement, even in cases where there is no attempt to gain financially, such as a fan posting a work, and would also mandate that Internet service providers remove content upon a corporation’s demand to avoid legal penalties.

The linchpin to enforcement of draconian rules – the worst of which are put forth by the United States with Japan often seconding – is the “investor-state dispute mechanism”. That is a requirement that governments submit to binding arbitration in secret tribunals when an “investor” wants a law changed; the judges in these tribunals are corporate lawyers.

The dispute mechanism is not directly mentioned in the intellectual property chapter, but the one article that purports to uphold national sovereignty is contradicted by another article that mandates that multi-national corporations be given the same rights as national corporations. That clause, standard in “free trade” agreements, is a battering ram used by the secret tribunals to order the withdrawal of laws safeguarding environmental, safety, health or labor standards. These rulings, in turn, become precedents that are used to hand down future harsher decisions.

The Trans-Pacific Partnership, however, is far from the only danger to working people. There is also the Transatlantic Trade and Investment Partnership between the US and the EU; the Trade In Services Agreement that would eliminate the ability of governments to regulate the financial industry (fifty countries are in on this one); and the Canada-European Union Comprehensive Economic and Trade Agreement. Each of these are designed to elevate corporations to the level of a country, although in practice, because of tribunal precedents, they would elevate corporations above national governments.

“Free trade” agreements have little to do with trade, and much to do with imposing the domination of capital in as many spheres of life as possible. They are massive failures for working people in all countries. They offer, and can offer, nothing but a race to the bottom. Attempting to reform a race to the bottom is a fool’s errand. The TPP and its equally vile cousins must be defeated, and a complete re-conceptualization of trade and who should benefit from trade, substituted. That in turn requires directly challenging prevailing economic systems, otherwise we will be shoveling against the tide.

http://systemicdisorder.wordpress.com/2014/10/23/medicine-of-tpp-bitter/

Categories: Uncategorized

The Absurd Illusions of a Shining City on a Hill

by Mark Weiser

Dissident Voice (October 16 2014)

The average natural born citizen in any country is continuously indoctrinated into the national culture starting about the time they begin understanding the meaning of words. There’s one country in particular where reality is staring the public in the face, but the truth has been grossly distorted for decades by government, and mass media, bias and propaganda. If the citizens would suddenly see the truth, instead of what they’ve been conditioned to believe, they would find themselves in a strange and bizarre foreign land that’s contrary in many ways to their personal beliefs regarding home. For those who experience this sudden revelation, as soon as the truth is realized, it’s likely to provoke a profound and immediate sense of disbelief. Like emergency room personnel making insensitive jokes, laughter at some point becomes a self-defense mechanism for offsetting continuous parades of the absurd realities and outright horrors. This is all happening while the general population takes great pride in having a capitalist-democracy as their social-economic model for the stated purposes of providing equal rights, freedom, justice for all, and an all-inclusive participation in the political system. While in all truth, the capitalist-democracy in question has been corrupted directly by the legislation in place and the collective society’s inability to keep the system working for its stated and intended purposes.

Imagine being brought to a place without having any say in the matter, then being charged an exorbitant fee for the transportation costs and administration fees. Once at this location you’re required to work and sacrifice for the privilege of eating and paying your incurring debt while the rate of pay is set by your captors. There’s no escape, and the path of least resistance is to submit. Resisting the power structure in immediate terms would make life difficult to say the least. This is no imaginary scenario; for many this is reality in “the land of the free and home of the brave”, the United States of America, where natural citizens are born with the country’s debt already hanging over their heads, and from there on out, they’re indoctrinated as slaves to serve the dictates of the ruling-class when the time comes. The irony, and major absurdity, is that the populace believes theirs is the greatest capitalistic-democracy ever on earth, while the country has actually been moving further from the true workings of a capitalistic-democracy for decades and the percent of those being trapped in the indentured-servant class just keeps right on growing.

In cases where the US government appears to act deceptively on its own behalf, we have the CIA’s Operation Mockingbird, and the FBI’s COINTELPRO as prime examples of programs designed specifically to manipulate public opinion and illegally interfere with the people’s rights to free speech and assembly. With writers and editors of influential “news” sources on the government payroll as operatives, there is no better way to wage a propaganda war against the public’s “constitutionally guaranteed” democratic rights. The CIA and FBI do not distort the truth and subvert Constitutional rights just for kicks; they are directly aiding and abetting those behind the scenes who have an agenda which is pure and simple –  corporate profits. Our government representatives are essentially screened, groomed and “voted in” by huge campaign contributions derived from corporate profits, and ultimately the press is financed by those same corporations. And for their “investment in capital”, the corporations are getting what they want in return. So when corporate and special interests influence the government and news media directly, while the US government also influences news networks directly on behalf of corporations, then public opinion regarding any important issue is essentially being manufactured and controlled to a very large degree by corporate and special interests. The plain truth is the government, news media, corporate and special interests are all in a symbiotic criminal relationship with the absolute bottom line being they are willingly and knowingly denying Constitutional rights to the American citizenry which, in some of these instances, makes all those in violation willing traitors as defined by US law. And no, a group of conspirators does not need be prosecuted and found guilty in a court of law to be living and breathing traitors …

To maintain corporate profits and our status as world champion capitalists requires the US to undemocratically wage wars for “protecting our self-interests” of continually acquiring and consuming resources. Capitalism demands resources, and in our case, “democratically” waged wars to obtain those resources, require a willing public to sacrifice blood and treasure towards that goal. It’s all part of modern capitalism as practiced today –  convincing the public, through deception, to sacrifice their blood and treasure to keep the whole system going for maximizing the bottom line of corporate profits. The beloved political-economic system keeps us addicted, enslaved and condemned to languish in a continuous cycle of acquisition through any means, including military aggression.  After being manipulated by unpatriotic government officials and news networks to serve unpatriotic corporations and special interests, we believe we’re being patriotic when waving our flags while we’re actually throwing truth, freedom and democratic principles into the bin of the “Unnecessary and too Risky” for the powers that be. The entire system of control and manipulation is being run by less than one percent of the population for their guaranteed advantages, while on the other end, the system is rigged to keep the majority in perpetual servitude. And because American citizens are part of the system and contributing to it, in that sense they are an accessory to the crimes being committed against themselves.

The truth being known in all of this presents a danger for those who pull the strings keeping the slave camp operating, but so far, the propaganda campaigns have been successful in keeping the general public from recognizing the truth. When this reality is presented to the average America born citizen, chances are high they’ll reflexively and automatically deny the truth as a form of self-defense. They simply don’t want to accept the reality of their governments’ betrayal, and many believe they’re being patriotic by defending what they think America is, but again, they’re defending lies when the truth is told. When people are held captive and trapped, hope and dignity can be cultivated through planned or spontaneous rebellion of one flavor or another –  which might be the closest America will ever come to pulling itself up by the boot straps. But because roughly seventy percent of the general population doesn’t think independently, they’ll look to someone else or society in general when determining how to think and react; this fact is literally being banked on by those who mislead us through “our government” and “news media” while profiting at our expense and that of the entire world. If the prevailing winds, prevaricated by the government and news media, say there’s no reason to rock the boat, then the majority will bow their heads and continue on as compliant slaves, just as we’ve seen over recent decades.

When it comes to obtaining foreign resources, America’s “interests” often come at the expense of someone else. Converting a socialist leaning country, creating and aiding developing countries, or propping up dictators “friendly to western interests” can all work to enhance corporate profits with “privatizing the world” being part of the agenda. Under the table deals, coercion and outright military intervention, in any combination, are all being used to gain control of the world’s resources. This is often done under the guise of the IMF, and World Bank, making loans to “help” developing countries. In all reality the IMF and World Bank are there to secure the rights to a country’s natural resources, with the bottom line purpose again being corporate profits while having no concern for the indigenous people or anything else.

Corporate America is actively seeking to control water, farmland, mineral and energy rights all over the world. This all comes at the expense of human rights and lives, domestic and foreign. Very few, if any, of the ruling-class personally risk anything other than their personal integrity in these gambits. But everyday Americans, through propaganda, are persuaded to sacrifice their lives and tax money for use in the arsenal of weapons to beguile and wrestle the resources away from people in foreign lands. The powers that be are currently trying to tell the world we’ll all be better off with rain water being corporately owned so they can charge human beings for being alive. Next on the agenda is privatizing sunshine which probably sounds absurd to everyone –  just as the concept of owning land was incomprehensible to native Americans. Judging by the actions of the ruling-class and not their words, as long as they have enough slaves to manipulate, they don’t care if American citizens or others must die so they can accomplish their primary goal of enriching themselves while controlling everything and everyone to that end. The wealthy and politically influential in the US are perfect examples of success in our overall corrupt capitalistic-democracy; while the rest of us are the epitome of failed dupes, having failed to exercise our democratic rights while being exploited. When summed up, the fact that Americans go along with all of this in the direction it’s going, is ludicrous when considering the impact all of this is having on the earth’s ecosystem (which can no longer be denied) –  the ruling-class agenda is completely out of touch with reality –  if the human race doesn’t get it together soon, all those corporate profits will all be for naught anyway, and could possibly end up being what ends it all for the human race. We do enjoy our self-deceptions though, and denials of the truth, while as master escape artists acknowledging a destiny beyond our control we turn on our favorite televised entertainment as absolute proof.

Destiny is inevitable and unstoppable just like the need to show the world how powerful we were in 1945, by dropping atomic bombs on Nagasaki and Hiroshima when the US had already known the Japanese were preparing to surrender. With special interests in mind, the US recognized ethnic cleansing of Palestinians as being legitimate starting before 1948 and continuing to this day. We can’t leave out the CIA’s roll in overthrowing democratically elected Mohammad Mossadegh in 1953 Iran, only to install a murdering tyrant so the corporation now known as British Petroleum would benefit at the expense of the Iranian people. We had the Vietnam duo, with Henry Kissinger aiding Nixon’s treason, which ultimately cost one million Vietnamese lives, twenty thousand American lives and one hundred thousand Americans wounded. For authorizing the Watergate scandal, Nixon later received a pardon from his personally designated successor. The overthrow of democratically elected Salvador Allende in 1973 Chile was backed by Nixon’s CIA which supported the brutally repressive regime of Augusto Pinochet. Another illegal Kissinger duet with Gerald Ford started in 1975 East Timor. Then came Ronald Reagan and the arms for hostages’ deal which circumvented Congress to supply weapons to Reagan’s murderous Contras. There was the “just say no to drugs” when Reagan’s CIA aided importing crack cocaine with the profits also illegally supporting the Contras’ killing machine. The Savings and Loan crisis of the 1980s was our largest wealth redistribution up to that time, with many of the well-connected, including the Bush family, profiting at the expense of tax payer dollars. With the 2003 Iraq war being part of the neocon strategy for “securing the realm”, America was led to war through lies and deceit while the defense contractors made huge profits from the death and destruction at tax payers’ expense, which we’ll still be paying for decades from now. The 2008 economic meltdown resulted from the biggest financial rip-off and redistribution of wealth in the entire history of mankind, and while there was plenty of criminal activity on record, there were no prosecutions among the Wall Street ring leaders who orchestrated those crimes. Ultimately, after the 2008 economic collapse, the redistribution of wealth to the well-connected banks and their already wealthy stock holders, was again put on the tab of tax-paying slaves.

Our government escapes the consequences of these realities by manipulating the truth with the well-oiled propaganda machine. And by allowing Wall Street bankers to keep what they stole, and the press having no interest in holding anyone accountable, it all works out to continue bribing politicians with more “investment capital” in the form of “campaign contributions” from those same banks –  and the US keeps right on moving toward the goal of lording over the entire world. It’s all just part of America doing business as usual, served up by corporate and special interests influencing the unpatriotic duo of US government and main-stream media networks to manipulate the American public into unwitting support for corporate fascism. By all means the illusion of equality, liberty and justice through a disingenuous capitalistic-democracy must be kept alive by our government and news media. If not for the illusion, who or what would run the show?

Links: The original version of this article, at the last URL below, contains many links to further information not included here.

_____

Mark Weiser was thrown into this world without any say as to when, or where, and to whom I would be born. My story is the same as all others in that respect as we all come from this same earth and began the same way. There is absolute truth in all matters among human kind, even if it’s that truth we’re afraid to acknowledge or don’t yet know. The truth where I’m concerned is preferable to anything else; it’s where my search began and where it never ends. Mark can be reached at: lonngfello@yahoo.com

Read other articles by Mark at http://dissidentvoice.org/author/markweiser/.

http://dissidentvoice.org/2014/10/the-absurd-illusions-of-a-shining-city-on-a-hill/

Categories: Uncategorized
Follow

Get every new post delivered to your Inbox.

Join 30 other followers