Monday, September 26, 2005

Signs of the Economic Apocalypse 9-26-05

From Signs of the Times 9-26-05:

Gold continued its rise last week, closing at 467.40 dollars an ounce, up 1% from last week's 17-year record close of $462.90. Oil resumed its climb, closing at 64.19 dollars a barrel, up 1.9% from the previous week's close of $63.00 partly on fears of the effects of Hurricane Rita, which ended up not being as damaging as feared. The dollar closed at 0.8306 euros, up 1.6% from 0.8174, completing a 3% rise over two weeks against the euro. That puts the euro at $1.2040 compared to $1.2234 a week earlier. Gold in euros would be 388.21 euros an ounce at Friday's close, up 2.6% from the previous Friday's close of 378.37 and completing a 6.2% two-week rise. Oil in euros would be 53.31 euros a barrel at week's close, up 3.5% from the previous week's close of 51.50. The gold/oil ratio closed at 7.28 barrels of oil for an ounce of gold, down 1% from 7.35 last week. In the U.S. stock market, stocks were down for the week, with the Dow Jones Industrial Average closing at 10,419.59, down 2.1% from 10,641.94 at the previous week's close. The NASDAQ closed at 2,116.84, down 2.1% from last week's close of 2160.35. The yield on the ten-year U.S. Treasury note closed at 4.25%, down two basis points from last week's 4.27.

In spite of the clear weakness of the U.S. dollar in particular and the U.S. economy in general post-Katrina, the dollar rose against the euro. The drop in the euro can be partially attributed to the results of the German election. And we can call it a drop in the euro rather than a rise in the dollar because the dollar fell sharply again against gold.

Regarding the German election, once again, European voters had the sense to reject Anglo-American neoliberal policies, this time in Germany, earning German voters the condescension of both the Anglo-American and the European media.

International press pours scorn on German voters

By Peter Schwarz

21 September 2005

The international press has reacted to the German parliamentary (Bundestag) election held on Sunday with a mixture of horror and indignation. The message given by voters was clearly understood. The result expressed a rejection of the policies of welfare cuts and "free market" reforms which are currently being pursued by all European governments.

The anticipated clear-cut victory of the conservative opposition, consisting of the Christian Democratic Union (CDU), the Christian Social Union (CSU) and the Free Democratic Party, over the ruling coalition of the Social Democrats (SPD) and the Greens, failed to materialize. Instead, neither camp won a majority in the Bundestag, the German parliament, and both the Social Democrats and the CDU recorded lower votes than in the previous national election.

It was, above all, a sharp defeat for the CDU and its candidate for chancellor, Angela Merkel, who had until recently enjoyed a double-digit lead over the incumbent chancellor, Gerhard Schröder of the SPD, according to pre-election polls. In the aftermath of the election, both Merkel and Schröder were insisting that they would head a new government.

The result of Sunday's vote marked the first time in Germany's post-war history that a national election failed to produce a clear victor, ushering in a period of parliamentary horse-trading and political uncertainty.

The overwhelming response of the European and international press to the election was indicated by the Milan-based Corriere della Sera, which lamented that in Germany "fears of economic decline and the loss of its welfare state had won." The Spanish newspaper El País commented: "The Germans tend anyway towards the left. They seem to prefer a moderate reform in the form of the Agenda 2010 to a radical change of the social system, as the right-wing intended."

Following the "no" vote in the European Union referendum in France, the German election marks the second time voters in a major European country have delivered a decisive blow to plans by the ruling elite to reorganize Europe on the basis of strict "free market" criteria.

"European politics, which was already in crisis following the no to the European Union constitution in France, threatens to be more paralyzed than ever," complained the Paris-based Figaro. The Corriere della Sera came to a similar conclusion, writing, "[I]t will be Germany and all of Europe which will have to pay the price."

The British Daily Telegraph concluded: "Beyond that, the absence of a black-yellow partnership [a government of Germany's conservative opposition] will mean, at best, scant advance on the limited changes introduced in Mr. Schröder's second term. And that, in turn, could slow reform in countries such as France and Italy. Europe as a whole is a loser from this profoundly unsatisfactory result."

The Danish Jyllands Posten lamented: "The result of the elections in Germany was just about the last thing which Europe needs now from its largest and most important nation."

From Stockholm, the Dagens Nyheter complained: "The signal for friends of reform in Europe is bad: Those who dare to take up responsibility for necessary steps run a large risk of being punished."

The staunchly conservative Swiss newspaper Neue Zürcher Zeitung reminded German voters: "The fact that the situation which has now come about excludes any reasonable future option can only be termed catastrophic. One is tempted to say that this fact must now penetrate deep into general consciousness. The people must look into the mirror and ask themselves what they really want."

Other newspapers joined in heaping abuse on the German electorate. The most extreme example was the Paris-based Libération, which, like the German Greens and their house organ taz, has its roots in the 1968 protest movement, but has in recent years developed into a reliable prop of the bourgeois order.

"Europe will emerge even more unsure of itself... from this strange election in Germany," Libération grumbled. "Germany now joins the club of countries in which protesters and radicals can create such damage that any normal political change is blocked and long-term policy paralyzed."

Astonishing. Libération is complaining that "normal political change" and "long-term policy" are not things that the public should have any say in. Of course we always knew this, but for a left-wing publication to chime in like this shows the gulf that is opening between the European public and the elite of whichever ideology.

Almost unanimously, the British press adopted a similar tone, accusing German voters of being too stupid to understand the necessity for reforms. The Guardian, which has close links to Tony Blair's Labour Party, wrote:

"For all the comparisons with Margaret Thatcher, 'Angie' [Angela Merkel]... demonstrated neither the charisma of Britain's "iron lady" nor the sort of radical policies needed to take Germany out of the doldrums where it has languished for the last seven years... This election was marked by deep pessimism, profound disillusion with the big parties and volatile voters who recognized the need for change but feared the effects it may bring. Much horse-trading and haggling lies ahead as these extraordinary results are digested. Germans may well want reform. But now paralysis looms because their nerves appear to have failed them."

The conservative Daily Telegraph blustered:

"The German electorate yesterday failed to grasp the opportunity for reform presented by the Christian Democrats (CDU) under Angela Merkel."

Both the British head of the government, Tony Blair, and the British conservative opposition had made no secret prior to the German election of their sympathies for Merkel. Blair even precipitated a diplomatic tiff during his last trip to Berlin in June, when he demonstratively visited the leader of the opposition before meeting with Germany's Social Democratic chancellor, Gerhard Schröder. Now there is even greater disappointment over Merkel's debacle in the elections.

Nearly all international newspapers warn against a grand coalition of the SPD and conservative parties which, they claim, would lead to economic paralysis and stagnation.

The London Financial Times based its comments on economists who warned that "... such a coalition would make it difficult for Europe's largest economy to adopt the structural reforms needed to overcome stagnation and record unemployment." The newspaper then quoted an executive at the auto concern BMW: "This is exactly what the country didn't need - a long period of uncertainty and negotiations. We will all be losers."

The American Wall Street Journal took up the theme:

"The muddled result, with neither major party able to form a stable parliamentary majority, means that Germany will not be taking decisive action anytime soon to reform its unwieldy welfare state, which has helped bring it 11 percent unemployment and zero economic growth. That will not be good for the world... "

The New York Times came to the same conclusion:

"In a grand coalition any reform of the German economy would be virtually excluded, as well as any rapprochement with the United States, as Merkel had indicated."

The vehemence with which the entire international press attacks the election result must be understood as a warning. The ruling elite is less and less willing to accept democratic procedures if they stand in the way of its own business and political interests.

This applies not only to the international press, but also to the German media, which comes to very similar conclusions. Under the heading "A Debacle," the Frankfurter Allgemeine Zeitung intoned:

"There seems to be less chance of convincing citizens to see the sense of fundamental changes and be prepared for changes of policy than some have maintained."

Last and not least, at the end of a long article in which all of the parties were subjected to some biting criticism, the weekly magazine Der Spiegel claimed that the German election result presented a "great chance": Finally all principles and election promises could be thrown overboard in favor of unrestrained expediency.

Wrote Der Spiegel, "Because outside of the election campaigns everybody knows each other in the political arena, what differentiates the parties today are above all cultural differences and historical factors... After this election, SPD-Green projects and intellectual-moral maneuvers can be finally dumped in the garbage can of history in favor of a blithe pragmatism."

The spooky unanimity with which the elite policy makers and the elite media parrot the neoliberal line is disturbing. Why do they so quickly reject the German model of social democracy (social insurance, high productivity, high cooperation between labor, industry and government), especially given its remarkably successful track record in the past sixty years? Sure, the U.K. can point to higher growth levels than Germany, but the U.K. was in much worse shape than Germany at the point when the neoliberal plans began to be implemented there. And the aggregate "growth," we are finding, has little to do with social health in societies where the gap between rich and poor is high. And long term economic health, as opposed to short term economic growth, depends on social and ecological health, two things likely to get worse under the neoliberal prescription. Here is the Prime Minister of Sweden on social and economic health:

We don't need no stinkin' US style capitalism! Sweden tells Europe to hold its head high

In defense of the welfare state, by Jonathan Power, International Herald Tribune:

(Stockholm) The statistics had arrived on the Swedish prime minister's desk … It was good news. Goran Persson, now in his ninth year of office, told me that the growth rate for this year will be near 3 percent and next year more than 3 percent - enough, he said, to maintain Sweden's trajectory of the last decade, which was "above the average for the European Union" and, in particular, "as good as the Anglo-Saxons, Britain and the U.S." ... This raised the first question - how does this self-confessed socialist state do it? What is the secret for success when Swedish taxes are the highest in the world and the welfare state is the country's single largest employer?

…"If you have a free economy," explained the prime minister, "a highly educated work force, a very healthy people, very high productivity and a sound environment then you can create the critical size of resources to create good growth." That has to be joined with adequate public financing of universities, research and development. As long as we are efficient and constantly challenging ourselves we continue to be productive. "Then if we produce successful growth, the government gets the public's support for high taxes. If the quality of the public sector is good, then a prosperous people will continue to vote for funding it."

…Persson … ends the conversation with two quick jabs. "Europe has a lack of confidence vis-à-vis the U.S.," he said. "The U.S. is competitive, but not as competitive as we think. We are too self-critical in Europe, even though we have a much better social system and in Sweden are just as productive. On unemployment, it is overlooked that the U.S. has approaching two million people in jail and out of the labor market."…

Xymphora has more on inequality and social health:

The problem of excessive inequality

From a review by Polly Toynbee of "The Impact of Inequality: How to Make Sick Societies Healthier" by Richard G. Wilkinson:

"Equality has gone out of fashion. Social justice under Labour means heaving the poorest over the poverty threshold and lifting the life chances of children from lower social classes. Tony Blair said early on that he was not bothered about wealth, only about abolishing poverty. Talk of inequality sounds like the old politics of envy. Equality of opportunity, yes, but equality for its own sake, why?

"Here is the answer. Richard Wilkinson is a professor of social epidemiology, an expert in public health. From that vantage point he sees the world in terms of its physical and psychological wellbeing, surveying great sweeps of health statistics through sociological eyes. He has assembled a mountain of irrefutable evidence from all over the world showing the damage done by extreme inequality.

However rich a country is, it will still be more dysfunctional, violent, sick and sad if the gap between social classes grows too wide. Poorer countries with fairer wealth distribution are healthier and happier than richer, more unequal nations."


"Life expectancy in rich nations correlates precisely with levels of equality. So Greece, with half the GDP per head, has longer life expectancy than the US, the richest and most unequal country with the lowest life expectancy in the developed world. The people of Harlem live shorter lives than the people of Bangladesh. When you take out the violence and drugs, two-thirds of the reason is heart disease. Is that bad diet? No, says Wilkinson, it is mainly stress, the stress of living at the bottom of the pecking order, on the lowest rung, the stress of disrespect and lack of esteem. Bad nutrition does less harm than depression."

This runs exactly counter to the praises of excessive capitalism that is all we hear churned out by the usual propaganda machines that seem to be run by the corpse of Ayn Rand. From a discussion of Wilkinson's work by James Lardner (and see here):

"If inequality damages health, it probably operates through a variety of pathways. As George Kaplan and John Lynch at the University of Michigan point out, low income (even if it isn't low enough to meet the official definition of poverty) means limited access to education, health care, and other services, with long-term consequences for health. At the University of British Columbia in Vancouver, Clyde Hertzman has done extensive work on the latent effects of socioeconomically influenced differences in prenatal care and early childhood development. In the June 3rd issue of The Journal of the American Medical Association, Paula Lantz and James House, who work with Kaplan and Lynch at the University of Michigan, analyze the link between income and such forms of self-destructive behavior as smoking, alcohol abuse, and over-eating.

"But as Lantz and House point out, these specific risk factors explain only a comparatively small part of the socioeconomic gradient in health, which Wilkinson himself believes may, at bottom, have more to do with psychosocial factors - with what inequality does, for example, to friendship and the will to take part in social and community activities. 'I think that social relations - friendships and alliances - should be seen as horizontal relations between equals in contrast to the vertical hierarchy of power relations,' he says. 'Friendship and hierarchy are opposite principles of social organization. In friendship one is talking about mutuality and reciprocity - your needs being my needs. Hierarchy is about power, coercion, and access to resources regardless of other people's needs... It's strength and power that determine who gets what, and I think that's the fundamental reason why as inequality increases the social environment deteriorates.' We have much to learn, he says, from the 'vigilant sharing' of hunter-gatherer societies, where people 'don't compete for the essentials of life.'"

In the current climate of the dog-eat-dog world it is like farting in church to even mention it, but the single most important thing that those who set public policy can do to improve the health and happiness of society is to reduce inequality. The two ways to do this are through income redistribution through tax policy, and the public funding of education and health care (and in particular an early childhood development strategy). In the current political climate of the United States it is impossible to conceive of how these type of policies would be possible, but all those countries not suffering from the current American political malaise should be hopping to it. This issue is directly connected to the issue of social mobility.

As for ecological health, here is Urban Survival:

Accounting for the actual value of natural resources, including resource depletion and population growth, shows that net savings per person are negative in the world's most impoverished countries, particularly in sub-Saharan Africa, according to a new World Bank publication, Where is the Wealth of Nations?, launched on the eve of the 2005 U.N. World Summit…

"Where is the Wealth of Nations further substantiates the realization," said Steve McCormick, President and CEO, The Nature Conservancy, "that if we can't get a handle on the deconstruction of natural systems, then we will seriously jeopardize our efforts to make lasting, substantial progress on improving the standard of living of the world's poorest people. Put simply, healthy ecosystems are the foundation of healthy economies."

As we have alluded to over at our site, the problem for bankers is that they mostly live in a world of just 14 items (10 digits and the +,-,/,and * signs). The paradox is that in order to solve the problems of sustainable development there will have to be monetary values placed on things which don't lend themselves to investment.

Take a migratory path for salmon in the North Pacific. How do you capitalize that? What's the value of leaving it alone and safe from long liners and draggers from Japan, Russia, and Korea which have happily raped the ocean's insides?

Maybe it is time to join geology with economics. In that regard, many observers are sensing the possibility of some sort of Big Bad Event which manifests itself in both geological and economic ways. The Signs of the Times discussed economic issues last Friday, so if you haven't read it check out the archive of that page. Without repeating everything said, the editors made this prediction:

For many months we have been predicting that the American economy will collapse before the end of 2005. Given the available signs and evidence, we are now of the opinion that the current severe hurricane season, triggering a major earthquake and volcano on the US mainland, may well be the precursor to just such a collapse and its dire consequences for millions of American people. In essence, the scenes at the end of last month in New Orleans will soon be common throughout large areas of the North American continent.

Interestingly, the forecaster at Urban Survival who analyzes web-bot word scan results to predict near future events, sees heightened risk of earthquakes in California:

So there I was, just getting off the evening conference call with my friend Cliff of and we were speculating on the possibilities of what the Big Event will be between September 26 and October 3-5th. I suggested that it might be a market crash, but Cliff still leans toward something else - yet to be revealed, perhaps another hurricane behind Rita - while the November 21st window in the linguistic scans looks mighty ugly for California in general and around earthquakes in particular. Still, even with Houston emptying out, we're less than half way to the emotive values that will arrive by the first half of December. Something wicked this way is coming, predicts the linguistic shift software.

With this cheerful mindset (not), I decided to call Robin Landry, an ex-Merrill, ex-Stifel-Nicolas VP… My first question for Landry was, with the market down under 10,400 at the close on Wednesday, how soon does the ultimate disaster - a second coming of 1929 Crash take place?

"I have been monitoring the wave structure on the 15-minute chart and watching the count and it's following, with clocklike precision, the Elliott Wave structure, We are due for a few small rallies in wave 4's to complete the Fourth Wave on this decline and then the 5th wave down to complete the first wave down of the Third Wave."

For those not familiar with Elliott theory, what the heck does that mean?

"It means that after a small rally in another decline to the approximate 1180 on the S&P 500 and the 10,200 of the Dow, then there will be a larger rally that will last a day or two. Then all hell breaks loose."

When you say "all hell" what does that mean in terms of the numbers?

"If my wave count is correct, when we break through the 1190-1200 area of the S&P, the uptrend line from the lows of April of this year, which were down around 1136 on the SP, at that point, the odds of this just being a corrective before the rally goes higher, the odds go over 50 percent and we jump up to 70% chance.

What that means at a minimum is that we will visit the 7,100 area of the October 2002."

Fine, but what's the real downside over the next year - with all the infrastructure damage, turning off oil, the shut-in gas, and millions of refugees plus the popping of housing and soaring unemployment - what is the possible downside once the whole derivatives house of cards begins to unwind because of massive defaults that will follow these natural disasters that were unforeseen as coming in two's and three's and four's when derivatives were drafted?

"In our past conversations I have mentioned to you many times that there was no question in my mind that we would visit 6,400 - no question. The next target below that is 5,000 and then below that I have a target at the 3,600 area.

The problem in the counts is how fast these events will happen. The targets, you might say, are pretty well established with the wave structures of the past - the things Gary Lammert talks about - but the wave structure is very clear when it breaks the 1190 and then the 1136 level.

In the Dow, a break below 10,000 is dangerous - after that there is no strong support until you reach the low of October of last year (9,700) but I believe that support will be very very easily broken because the trend line from that low up through the low of April at 10,000 drawn up through today shows it broke down yesterday.

Remember the rally from the 7,100 level in October 2002 went up and then tested that area around 7,400 in March of 2003. From March 2003 to February of 2004, that rally was strong and continuous. There are no stopping points along the way. You get a little bit of support from the bounce at up to 9,000, but looking at the wave structure, I believe the 9,000 is hardly worth thinking about because it was a short two day kind of thing on the way up. In short, you can't point to anything substantial and say "Ah, that's support..."

Well, if I put a dollar on the table today, regardless of what the market does in today's session, do you think the Dow will be above say 9,000 by the end of this year?


How about 8,000?


Could it be as low as say 6,400 by New Years?

"That is entirely possible. You have to remember, in the wave structure count, a third wave decline (c). A third wave down (or up) is the longest and strongest. That doesn't mean the most time, it usually means the distance traveled is the longest. And the third wave is when people begin to realize that the direction of the market is going to be there for a good long while. We call what's on the horizon the "point of recognition" - which is where even the novices "get it" that the market is going down for a long time. Then you see the momentum swell and the selling goes through the roof and you won't be able to get out fast enough. The market will open down so fast that you won't be able to get out. Sure, we'll get sharp rallies, because that will complete the wave structure in the decline.

I believe the most likely time period for us to reach the 7,100 area or below is by October-November of 2006, but it's entirely possible that if you have a crash on the order of the ones in 1929 or the A wave down after the 2000 top, being a third wave now, these could could be a Fibonacci 1.618 times the size of those.

George the first one was from the top about 5/18/2001 at 11,350 and from there down to the 8,100 area on 9/21/2001. In five months, the market fell almost 5,000 points! The second crash came after the rebound off that which peaked around the week of 3/22/2002 at 10,676. Then the market fell to the intraday low of the 7,100 area on 10/11/2002. So here we had a period of not quite seven months. But here again, the decline was a little larger."

So if everyone saw this at once, and throw in a major California quake and a couple of more big hurricane hits, just to really push it over the top - and maybe a defeat of some size in Iraq, what does the 1.618 decline from what top look like.

"If you were to take that, I believe the next 5,000 points on the Dow could come off in short order. How fast that happens is a question mark. But I do believe that at the point of recognition (which we're coming to) we will have a one day decline of a thousand points."

What is in some sense disturbing is that more and more mainstream pundits are seeing the Apocalypse in the headlights. A couple of weeks ago we saw David Broder say that we are headed for 1929. Now Marshall Auerback is seeing fascism in the policies of the Bush regime:

Neither Compassionate, Nor Conservative

Marshall Auerback

September 20, 2005

"Couple a multi-state disaster of Katrina's magnitude, (including some of the poorer and less well-governed states in the union), add on a dysfunctional federal bureaucracy that had deteriorated in recent years, and a chief executive whose motto seemed to be, until yesterday, the buck stops there, and we get a helluva mess." – Richard Murray, Houston-based public policy expert quoted in the Washington Post

"The worst storm in our history proved perfect for exposing this president because in one big blast it illuminated all his failings: the rampant cronyism, the empty sloganeering of 'compassionate conservatism,' the lack of concern for the 'underprivileged' his mother condescended to at the Astrodome, the reckless lack of planning for all government operations except tax cuts, the use of spin and photo-ops to camouflage failure and to substitute for action." – Frank Rich, NY Times

Describing the President's panicked political response to his falling poll numbers as "compassionate conservatism", (as New York Times columnist David Brooks did last Sunday, "A Bushian Laboratory", September 18, 2005), borders on the ludicrous. Mr Bush has now overseen the fastest increase in domestic spending of any president in recent history. Furthermore, he has never resolved the inherent contradiction between his so-called "compassionate" spending policy and his small-government tax policy (which was ostensibly designed to "kill the beast" of Big Government once and for all, according to the President's conservative apologists). And his casual dismissal of the remnants of civilian authority in the Gulf basin – "It is now clear that a challenge on this scale requires greater federal authority and a broader role for the armed forces -- the institution of our government most capable of massive logistical operations on a moment's notice" – evokes something more along the lines of Mussolini-style fascism than any coherent, mainstream conservative, philosophy.

Hurricane Katrina is only the latest example of the President's extraordinary fiscal largesse – this time, borrowing hundreds of billions of dollars under the guise of "clear[ing] away the legacy of inequality." Sixty-two billion dollars has already been appropriated in the storm's aftermath, but total spending on hurricane relief could hit $200bn before all is said and done. This for an area in which a substantial proportion of people are unlikely to return. Occurring so late in the fiscal year, the hurricane will have little effect on federal spending in 2005, when the deficit is forecast to come in around $330bn, but the 2006 deficit is looking likely to hit the $450bn mark. No wonder the gold price hit a fresh 17-year high last week.

Not even the most liberal social engineers would dare to have been as bold as the Bush administration. The President gives no accounting of how the money will be found. His governing philosophy appears to be: "It's going to cost whatever it's going to cost" in contrast to the vision of "focused and effective and energetic government", David Brooks imputes to him. Mr Bush has left the oversight in the hands of his political operative, Karl Rove, suggesting that this a major PR exercise, rather than (per Brooks) "a positive use of government that is neither big government liberalism nor antigovernment libertarianism". (As an aside, maybe Mr Rove should have been placed in charge of the initial rescue effort. Without a single mishap, the Bush "rescue team" delivered to central New Orleans its own generators, lights, the camouflage netting designed to conceal the surrounding devastation, and its own communications equipment; the city almost looked whole again. The Federal government, it appears, cannot run an evacuation and relief effort properly, but it does a magnificent job of televised stage-setting in a disaster area.)

For all of the talk of the President's radical foreign policy, an even more remarkable metamorphosis has taken place domestically: The Republican Party has come full circle from, "Government is not the solution to our problem; government is the problem" to an acceptance of the primacy of government responsibility for all things. The man elected ostensibly to curb the excesses of the "spendthrift Democrats" has presided over an expansion the likes of which put FDR and LBJ to shame. According to the Heritage Foundation (not exactly a liberal propagandist), the rebuilding effort in New Orleans follows a 33 percent expansion of the federal government since 2001, a period that saw:

- The 2001 No Child Behind Act, the most expensive education bill in American history, which led to a 100 percent increase in education spending;
- The 2002 Farm Security and Rural Investment Act, the most expensive farm bill in American history;
- The 2003 Medicare Modernization Act, the most expensive Great Society expansion in history;
- A war in and the rebuilding of Iraq that, while justified, could cost between $300 and $600 billion, in total;
- International spending leap 94 percent;
- Housing and Commerce spending surge 86 percent;
- Community and regional development spending jump 71 percent;
- Health research spending increase 61 percent;
- Veterans' spending increase 51 percent; and
- The number of annual pork projects leap from 6,000 to 14,000.

This from a Federal government, which has hitherto shown a singular inability to conduct an evacuation and relief effort properly, but is now expected to lead the way in reconstructing New Orleans, a city in which the school system is virtually bankrupt and racked by corruption (the U.S. Education Department reported in February that $70-million in federal funds for low-income students had been misspent or could not be accounted for), presumably to be part-administered by a mayor whose stunning failure to mobilize resources to evacuate car-less residents and hospital patients - despite warning signals from the city's botched response to the threat of Hurricane Ivan in September 2004 – demonstrates that ineptitude extends to all levels of government.

What a change in course from just a mere year ago when the administration pressured Congress to cut $71 million from the budget of the Army Corps' New Orleans district despite warnings of the epic hurricane seasons close at hand. In fact, during the early stages of the Bush Presidency, then director of FEMA, former Bush campaign manager Joe M. Allbaugh, (now a lobbyist for Kellogg Brown & Root Services, a subsidiary of Halliburton), decried disaster assistance as "an oversized entitlement program" and urged Americans to rely more upon the Salvation Army and other faith-based groups.

The reality today is that there remains a fundamental contradiction between the planned Gulf Opportunity Zone approach (is there a Wizard of GOZ?) which rhetorically fits the Ownership Society theme of this Administration, and the actual botched dirigiste response to date, which further begs the question: what good has all that money dropped into homeland security done if the government cannot execute natural disaster relief effectively? So much for a consistent governing philosophy!

To be fair, one element of consistency has always been evident during the Bush Presidency: that of cronyism. Within days of this disaster striking, Halliburton was awarded a Navy contract for repairing naval installations. This company's ongoing involvement in the operations of the US Federal government is nothing new, but it is not the only beneficiary from the latest example of "compassionate conservatism". Many other Bush-allied companies that have performed so well in the field of Iraqi "reconstruction" are getting the lion's share of new no-bid contracts, while smaller, local businesses (which arguably have a far greater stake in the economic survival in the region) are essentially being locked out of the rebuilding effort….

Among the other recipients who did hear from the Bush administration were California-based Fluor Corp., which has contributed more than $800,000 to political campaigns this decade, about three-fourths of it to the GOP, the Shaw Group Inc. of Louisiana, (another client of consultant Joe Allbaugh), and Kellogg, currently working under a $500 million contract with the Navy on repairs of Navy facilities damaged in the hurricane. President Bush's "compassionate conservatism" appears neither particularly compassionate, nor conservative (nor particularly efficient: with all of the reconstruction work largely conducted via contractors and sub-contractors, it is difficult to see how the government will effectively monitor the funds provided for this exercise). But it does reward political loyalty.

If Halliburton et al actually provided value for money for the American taxpayer, it would be one thing. The reality is quite different: Henry Waxman, a Democrat and the ranking minority member on the House of Representatives Committee on Government Reform has uncovered evidence that Vice President Cheney's former company was being grossly overpaid by the American occupation authorities for the petrol it was importing into Iraq from Kuwait, at a profit of more than $150 million. Waxman and his assistants found, for example, that Halliburton was charging $2.64 a gallon for petrol for Iraqi civilians, while American forces were importing the same fuel for $1.57 a gallon.

The reconstruction of Louisiana, Mississippi, and Alabama provides a fascinating picture of how the Bush administration actually works. His government represents an odd melding of corporatism and cronyism, more in tune with the workings of 1930s Italy or Spain. In fact, if one looks at fascist regimes of the 20th century, it is appears that the Bush administration draws more from these sources than traditional conservatism. Dr. Lawrence Britt has examined the fascist regimes of Hitler (Germany), Mussolini (Italy), Franco (Spain), Suharto (Indonesia) and several Latin American regimes. Britt found 14 defining characteristics common to each:

1. Powerful and Continuing Nationalism - Fascist regimes tend to make constant use of patriotic mottos, slogans, symbols, songs, and other paraphernalia. Flags are seen everywhere, as are flag symbols on clothing and in public displays.

2. Disdain for the Recognition of Human Rights - Because of fear of enemies and the need for security, the people in fascist regimes are persuaded that human rights can be ignored in certain cases because of "need." The people tend to look the other way or even approve of torture, summary executions, assassinations, long incarcerations of prisoners, etc.

3. Identification of Enemies/Scapegoats as a Unifying Cause - The people are rallied into a unifying patriotic frenzy over the need to eliminate a perceived common threat or foe: racial, ethnic or religious minorities; liberals; communists; socialists, terrorists, etc.

4. Supremacy of the Military - Even when there are widespread domestic problems, the military is given a disproportionate amount of government funding, and the domestic agenda is neglected. Soldiers and military service are glamorized.

5. Rampant Sexism - The governments of fascist nations tend to be almost exclusively male-dominated. Under fascist regimes, traditional gender roles are made more rigid. Divorce, abortion and homosexuality are suppressed and the state is represented as the ultimate guardian of the family institution.

6. Controlled Mass Media - Sometimes to media is directly controlled by the government, but in other cases, the media is indirectly controlled by government regulation, or sympathetic media spokespeople and executives. Censorship, especially in war time, is very common.

7. Obsession with National Security - Fear is used as a motivational tool by the government over the masses.

8. Religion and Government are intertwined - Governments in fascist nations tend to use the most common religion in the nation as a tool to manipulate public opinion. Religious rhetoric and terminology is common from government leaders, even when the major tenets of the religion are diametrically opposed to the government's policies or actions.

9. Corporate Power is protected - The industrial and business aristocracy of a fascist nation often are the ones who put the government leaders into power, creating a mutually beneficial business/government relationship and power elite.

10. Labor Power is suppressed - Because the organizing power of labor is the only real threat to a fascist government, labor unions are either eliminated entirely, or are severely suppressed.

11. Disdain for Intellectuals and the Arts - Fascist nations tend to promote and tolerate open hostility to higher education, and academia. It is not uncommon for professors and other academics to be censored or even arrested. Free expression in the arts and letters is openly attacked.

12. Obsession with Crime and Punishment - Under fascist regimes, the police are given almost limitless power to enforce laws. The people are often willing to overlook police abuses and even forego civil liberties in the name of patriotism. There is often a national police force with virtually unlimited power in fascist nations.

13. Rampant Cronyism and Corruption - Fascist regimes almost always are governed by groups of friends and associates who appoint each other to government positions and use governmental power and authority to protect their friends from accountability. It is not uncommon in fascist regimes for national resources and even treasures to be appropriated or even outright stolen by government leaders.

14. Fraudulent Elections - Sometimes elections in fascist nations are a complete sham. Other times elections are manipulated by smear campaigns against or even assassination of opposition candidates, use of legislation to control voting numbers or political district boundaries, and manipulation of the media. Fascist nations also typically use their judiciaries to manipulate or control elections.

(Source: The Fourteen Defining Characteristics of Fascism, Dr. Lawrence Britt, Spring 2003, Free Inquiry)

Perhaps it is unfair to characterise the Bush Presidency in these terms, because it would imply the existence of a coherent governing philosophy. In fact, the President's actions in regard to the "war on terror", Iraq, and now the reconstruction efforts in the Gulf basin smack of panic and political expediency: When there's a problem, throw money at it. For all of the talk about the President "accepting responsibility" for the fiasco, his speech was certainly no Trumanesque "The buck stops here" oratory; it was rather a promise to rebuild New Orleans with other people's money, saying that his people (not the President himself, mind you) had made mistakes and they would fix them. Of course, part of the point of fiscal responsibility, after all, is that disasters do happen and the government should have fiscal leeway to respond to them. But the US today has no leeway at all, thanks to this president and his party. The "compassion and resolve of our nation" are amply demonstrated by a whopping huge expenditure, the costs of which are to be imposed on future generations of American taxpayers. Or more accurately, coming during a week which also saw the annual rate of growth in the current account deficit hitting nearly $750 billion, (more than 6% of GDP), the President's latest act of "compassionate conservatism" puts the rest of the world on notice that it is going to have to stump up even more credit for this Argentina of the northern hemisphere. One wonders whether these particular creditors' goodwill is likely to prove as durable as the levees of New Orleans.

Monday, September 19, 2005

Signs of the Economic Apocalypse, 9-19-05

From Signs of the Times, 9-19-05:

Gold closed at a price not seen in 17 years on Friday: $462.90 an ounce, up 2.1% from the previous week's close of $453.40. The U.S. dollar closed at 0.8174 euros, up 1.4% from last week's close of 0.8058 euros. That put the euro at 1.2234 dollars compared to 1.2410 a week ago. The price of gold, then went up even more in euros, closing at 378.37 euros an ounce, up 3.6% from 365.35 a week earlier. Oil closed at 63.00 dollars a barrel, down 1.7% from $64.08 at the previous week's close. Oil in euros would be 51.50 euros a barrel, down only 0.3% from 51.64 the week before. The gold/oil ratio closed at 7.35 on Friday, up 3.8% from 7.08 the previous week. In the U.S. stock market, the Dow closed at 10,641.94, down 0.3% from10,678.56 a week earlier. The NASDAQ closed at 2160.35 for the week, down 0.7% from 2,175.51. The yield on the ten-year U.S. Treasury note closed at 4.27%, up 15 basis points from 4.12 a week earlier and up 24 basis points over the last two weeks on clear inflation fears.

Ominously, gold has reached a 17-year high on inflation fears (a euphemism, perhaps, for "fear of a complete currency collapse"). Also influencing the price of gold was the clarity with which the weakness of the U.S. government was exposed with Katrina and the Iraq War.

Gold settles at new 17-year peak

U.S. benchmark gold futures closed at a 17-year high on Friday as robust demand for bullion and jitters over inflation and the U.S. economy stoked a buying spree in the precious commodity for a second straight day.

December delivery gold on the New York Mercantile Exchange's COMEX division climbed $4 to end at $463.30 an ounce. The session high at $464 was the loftiest level for a most-active futures contract in New York gold since June 1988.

Gold's rally this week has added $10, or 2.3 percent, to the December gold contract.
Prices extended gains after first hitting a 17-year peak on Thursday as money from investment funds and independent traders continued to flow into the market, traders and analysts said.

"The inflation signals are getting to be stronger and stronger and that's what is attracting the buying," said Frank Aburto, a broker at Rosenthal-Collins Group in New York. "And it is not over yet."

Gold, seen as a classic hedge against inflation and economic uncertainty, has benefited from record crude oil and gasoline prices and doubts about U.S. economic strength and the dollar, especially after the destruction wrought by Hurricane Katrina along the U.S. Gulf Coast.

Higher energy costs, already hitting U.S. citizens hard, will hit even harder when the cold weather hits. Economically, Katrina came at a time so precarious that it may push the U.S. economy over the edge. As Jeff Berg put it:

[H]ad Katrina passed through say at the end of Clinton's term she very likely would have been a storm the status quo would have weathered . But coming as she does when America's balance sheet is in such a precarious position* is sure to pique the interest of those very influential members of the elite that concern themselves with such mundane matters as how things get paid for. When this is added to the administration's culpability in weakening New Orleans defenses, and America's ability to come to the aid of its own citizens in times of a national emergency, it is very likely to shake the faith of even the most devout members of the BAU parties. (BAU: business as usual)

*This analysis assumes that America is particularly vulnerable at this time because its debt-to-asset and debt-to-GDP ratios as well as its national debt, the percentage of its national debt that is foreign held, its budgetary deficit and capital accounts deficit are all at their highest levels in American history. Furthermore they are also higher than the levels experienced by countries that have subsequently crashed such as Argentina in 2001, Russia in 1991 and America in 1929.

Here's a succinct explanation of why the economy will crash sooner rather than later by two short sellers, Lee Mikles and Mark Miller interviewed in Barrons (quoted in James Wolcott's blog):

Barron's asks: "Why do you think we are at an inflection point?

"Mikles: Bottom line, the consumer is broke and he doesn't know it yet. But he is about to find out. All the buckets that propelled consumer spending are empty now, whether it is the increase in mortgage debt, the increase in consumer debt or the reduction in the savings rate. No one statistic will tip the scale at the end of the day. But one very obvious and very curious statistic is that we have dipped into a negative savings rate for the first time. That is not only unsustainable, it is sustainable only for a few months. That's important to note because it tells you consumers are borrowing money to make debt payments. The U.S. consumer has become payment driven. He is driven not by the aggregate amount of debt he possesses but by the amount of the payment. And now the consumer has not only taken his savings rate to nothing, it has turned negative.

"Miller: Every month there is some increase in consumer borrowing that has to occur just for the consumer to stay level. The consumer is treating his balance sheet much the way the government is treating theirs, but, of course, the consumer can't create currency like the government can. The point is the consumer cannot continue to borrow to make his debt-service payments for very long. How did we get here? We got here because of the huge differential between wage growth and what we spend and what we consume.

"Q: What about the argument that consumers may not be saving but the appreciation they have seen on their houses is a form of savings?

"Mikles: The consumer doesn't know he is broke because his house hasn't stopped going up yet. It hasn't starting going down, it just hasn't stopped going up. Once it stops going up, the consumer will immediately -- and I mean a matter of months -- find out that he is, in fact, broke."

The point that every United States citizen should take to heart, though, is that the people in charge at the moment do not care about any of this. They see Katrina as a stroke of luck economically and a political difficulty that can be survived. Why? Here's the "Voice of the White House":

First, all of the poor blacks (and other unproductive and non-spending individuals) will be forced out of their sodden homes because of ‘health reasons.' Then, if fires don't level whole poor neighborhoods, FEMA will order these buildings raised to the ground as 'unhealthy" and 'uninhabitable.'

The owners, or residents, will have been dispersed throughout the country but will be duly notified by a proper advert placed in an obscure official New Orleans legal paper that the houses are being torn down and that the owners will be liable for the costs of destruction. Naturally, these people will not read the legal notices and their houses will be smashed flat and the remains put into trucks and used for landfill somewhere else.

Following this, liens will be placed on the property for the costs of tearing down the homes and again, the owners will not be aware of this and will not pay. The vacant lots will then be siezed by the authorities for non-payment and put up for sale. And a cartel, already formed, will purchase these vacant lots for five cents on the dollar and after this, the government will proudly announce that "new, affordable, housing will be built for the citizens of New Orleans."

Bids will be let, contests held for the designing of attractive buildings and much hype will follow with, no doubt, a smirking President telling the world, and potential voters, that he and his people are indeed showing rare compassion and concern for the dispossessed. Of course, 'affordable housing' does not mean cheap housing and the new homes, built out of government (read taxpayer) money will be sold, or leased, through another government agency, to affluent members of the middle class, businesses and others. In one stroke, undesirable welfare blacks will be chased off of valuable lands and the many friends of the current Administration will become further enriched.

As far as the helpless and exploited exportees are concerned, the President will thank, on behalf of the American people, all those wonderful communities who now house and clothe the dispossessed and newly-homeless of New Orleans and, most especially, pay for their food and living out of local, and not Federal, funds.

And of course, the levees will quickly be rebuilt, by Republican-friendly and well-paid contractors, and New Orleans, like the phoenix, will be reborn from the shit-filled mud, commerce will blossom and thanks to FEMA and the President, the Administration will be much richer on a personal basis.

Here is Al Martin:

Governor Blanco of Louisiana, and Mayor Nagin of New Orleans are playing the good cop against Bush's bad cop. They kept saying – Where is the cavalry and when are they coming?

Why? Because they stand to profit the most from casinos. They're going to be receiving the preponderance of bribes that are paid out locally. Payback money, etc. So this is a good bargaining chip for them.

Then the road will be clear for New Orleans to become the new Vegas, the Vegas of the Gulf.

How convenient. A hurricane displaces a Black BOVOB [Burned-Out Victims of Bushonomics] population, that now gets dispersed because this is a population that has nothing -- no skills, nothing, and that has always relied on government assistance programs. And yet you notice how reticent the government, particularly FEMA and OEM, have been about mentioning the facilities where these people are going.

…They are going to FEMA-controlled facilities in Texas, Oklahoma and other states where they will be detained for at least five months. This plan to disperse 200,000 or more people across the nation will keep them under federal control in discreet facilities. Notice how reticent the federal government has been in even publicly announcing where the facilities are located that these people are going to be housed in.

Former KGB General Yevgeni Primakov warned us of the establishment of American Gulags, when he said that it requires only an incident and the political will to establish them.

Could these then be the new plantations that everybody can look forward to? If you are a BOVOB, this is the new plantation. And it doesn't distinguish between Black, White or Latino. There is no color barrier. If you have been declared seditious, which means anti-Bush and you are an economically unproductive citizen, your credit rating is below a certain level, and you don't have a job, or whatever, then it's the CILF for you. These are the new improved Civilian Inmate Labor Facilities, the New Plantation or the American Gulag.

And if you think that this means Hillary, forget it. She doesn't have a prayer. They're not going to let go. Because everybody in this country is now concerned about hanging on to what they got. Even if that means that there's got to be 3 million or 30 million or who knows how many millions of BOVOBs put discreetly out of sight on federal lands in controlled facilities -- so no one has to see them or be interested in them or have them in your face.

Bushonomics, after all, creates victims -- victims of its own economics. And ultimately you have to have someplace to put these people.

As long as we have a new imperial senate, we might as well have a new slave caste. With the top 1% of the population now controlling 70% of the nation's private wealth, at some point you have to have facilities to put the victims.

Bushonomics is a trickle-up form of economics. Eventually everything will trickle up from the bottom 10 or 20%, so there is nothing left to trickle up from them. And then, what do you do with these people?

You can't generate enough new jobs in the economy, particularly unskilled or semi-skilled labor jobs. When you combine this with the Bushonian job exportation program to seek higher productivity in the economy, you're creating, effectively, a new slave caste here. Ultimately you have to have the ability to house them, to control them and to get something productive out of them without damaging an already fragile economy, which incidentally was made fragile by your very own economic policies.

How do you make these people pay for themselves and be productive, without damaging the economy? You can't put them into the economy and take away jobs from loyal citizens. Ultimately you have got to put them in work camps.

On Friday, Sept 9, Tom DeLay's most recent pronouncement with regards to Hurricane Katrina in an interview with a CNBC reporter, when asked -- Who ultimately would be in charge of distributing the $51.4 billion in Hurricane Katrina aid voted by the Senate today, Tom DeLay admitted that he didn't have a clue as to who would be in charge of it, but that certainly some of it would be wasted.

Readers should be reminded of the fraud in the Iraq War slash fund headed by Paul Bremer. He got away with a reported $9 billion with no accountability.

Now we don't know how much it is going to be absconded with, but even DeLay came out and said that some would be wasted.

Earlier last week, the GAO came out with its final audit on the federal spending on the four hurricanes' relief in Florida last year. The federal government had spent $5.5 billion in federal relief monies in Florida, of which, the GAO points out, $3.9 billion cannot be accounted for.

So -- if the Bushonian fraction holds true, approximately $37 billion of this $51 billion would be defrauded.That's why Dick Cheney was smiling when they showed him in New Orleans. They were interviewing him and he was saying how awful it is, and he had a team of 6 guys from Halliburton with him.

Among other things, Fascism is economic suicide. Everything of value goes to the war machine (and to enrich the circle of insiders) and eventually gets consumed in a great conflagration. Fascism is the political embodiment of the Entropic Principle or of Freud's Death Drive, the rejection of creativity and change and the ultimate desire for obliteration, for stillness, for non-existence. Just look at some pictures of Germany or Japan in late 1945 and 1946.

The French philosopher Gilles Deleuze and radical psychiatrist Felix Guattari write of the "paradox of fascism,"

…the way in which fascism differs from totalitarianism. For totalitarianism is a State affair… Even in the case of a military dictatorship, it is a State army, not a war machine, that takes power and elevates the State to the totalitarian stage. Totalitarianism is quintessentially conservative. Fascism, on the other hand, involves a war machine. When fascism builds itself a totalitarian State, it is not in the sense of a State army taking power, but of a war machine taking over the State. A bizarre remark by Virilio puts us on the trail: in fascism, the State is far less totalitarian then it is suicidal. There is in fascism a realized nihilism. Unlike the totalitarian State which does its utmost to seal all possible lines of flight, fascism is constructed on an intense line of flight, which it transforms into a line of pure destruction and abolition…

Suicide is presented not as a punishment but as the crowning glory of the death of others. One can always say that is is just a matter of foggy talk and ideology, nothing but ideology. But that is not true. The insufficiency of economic and political definitions of fascism does not simply imply a need to tack on vague, so-called ideological determinations. We prefer to follow Faye's inquiry into the precise formation of Nazi statements, which are just as much in evidence in politics and economics as in the most absurd of conversations. They always contain the "stupid and repugnant" cry, Long live death!, even at the economic level, where the arms expansion replaces growth in consumption and where investment veers from the means of production toward the means of pure destruction… A war machine that no longer had war as its object and would rather annihilate its own servants than stop the destruction. (Gilles Deleuze and Felix Guattari, A Thousand Plateaus: Capitalism and Schizophrenia, Minneapolis, University of Minnesota Press, 1987, pp. 230-1)

Deleuze and Guattari here quote a passage from Paul Virilio that shows how little chance we have to avoid the final end with any sort of normal political opposition to the Bush regime arising from disgust at its reaction to the disaster:
"It was in the horror of daily life and its environment that Hitler finally found his surest means of governing, the legitimation of his policies and military strategy; and it lasted right up to the end, for the ruins and horrors and crimes and chaos to total war, far from discharging the repulsive nature of its power, normally only increase its scope. Telegram 71 is the normal outcome: If the war is lost, may the nation perish. Here Hitler decides to join forces with his enemies in order to complete the destruction of his own people, by obliterating the last remaining resources of its life-support system, civil reserves of every kind (potable water, fuel, provisions, etc.)." (from Paul Virilio, L'insécurité du territoire, ch.1)
The sick feeling people in the U.S. and around the world feel now watching the "horror of daily life" in New Orleans on their television screens comes from the deep feeling that we will all be experiencing this soon, and that with each degradation the grip of those in power will grow stronger. And Fascism is now being welcomed by the populace in the United States as a solution to the problems that it itself has caused, when the media and public were relieved when the U.S. military occupied a U.S. city. The sick, slavish fawning over military leaders is another feature of Fascism. Here is Bill Van Auken:

US media hails martial law general in New Orleans

By Bill Van Auken

13 September 2005

The abject failure of American capitalist society in face of the human tragedy in New Orleans, and the disaster's exposure of the stark social polarization in the US, have proven deeply unsettling for the ruling elite and the more comfortable sections of the upper middle class.

In search of reassurance, the media has latched onto an unlikely hero—the US Army general who is overseeing what amounts to martial law in New Orleans, directing thousands of heavily armed troops in this largely deserted American city littered with floating corpses.

The media is systematically promoting Lt. Gen. Russel Honore. He is portrayed as the antidote to the miserable incompetence and negligence exhibited by every level of government in the first four days following the hurricane, when the poor, the elderly, the sick and infant children were left literally to die in the streets without aid.

Anyone who has lived in countries which have a history of military coups (e.g., Latin America, Pakistan, etc.) know that initially, military takeovers of government are welcomed. The military is seen as "able to get things done" and as less susceptible to corruption than the civilian government. That is why the display of incompetence by FEMA was deliberate, in my view.

Honore was first hailed by New Orleans' Democratic Mayor Ray Nagin as "one John Wayne dude," a characterization that the television networks, followed by the print media, gleefully echoed. Now he is the subject of lengthy panegyrics in the press, extolled as the city's savior. Among the sickest and most fawning of these tributes was a piece published Monday in the "Style" section of the Washington Post.

"There's the swagger, and that ever-present stogie," it reads. "There's the height and heft of his physique. And that barking voice with its font of perhaps impolitic obscenities... not to mention his penchant for not suffering fools, as is the prerogative of a three-star general."

No cliché is spared in extolling the martial law commander. He doesn't speak, he "barks." He doesn't walk, he "strides." He is, the Post reporter tells us, "a soldier's soldier, the man you want in the trenches with you, the kind of man who'll cover your back."

The tone of the article, written by Post reporter Lynne Duke, is that of a lovesick schoolgirl, lacking a shred of objectivity, much less critical skepticism. Duke's colleagues working the story in New Orleans may have a somewhat more jaundiced view of the general, having been subjected to harassment and restrictions at the hands of the military.

Honore's "barking" has not infrequently been directed at anyone questioning the government's role in New Orleans. A prominent target of his "impolitic obscenities" has been reporters asking why relief did not come sooner.

…As head of the military's Task Force Katrina, Honore played a principal role in engineering an intervention that delayed any significant aid to the tens of thousands of people left without water, food, shelter or medical assistance during those first horrific four days.

His agenda was that of the Pentagon, which ordered the city sealed—no relief in, no evacuees out—until the military could intervene with overwhelming force to impose law and order and defend private property. He acted on the basis of plans and doctrines designed not for relief of human suffering, but suppression of civil unrest. The result was many more needless deaths. All this is conveniently forgotten in the media's lionizing of the "take-charge" general.

…[A] piece entitled "‘Man of Action' What City Needed," released Sunday by the Associated Press, was even more explicit. "To troops, he's the ‘Ragin' Cajun,' an affable but demanding general barking orders to resuscitate a drowning city," the article declared. "To his country, he's an icon of leadership in a land hungry for a leader after a hurricane exposed the nation's vulnerability to disasters."

The content of these articles is both ridiculous and ominous. It would seem that those who seek to shape public opinion in America are promoting the idea that the country's immense problems—and its "hunger for a leader"—may be answered by the rise of a military man on horseback.

There is an objective basis and a profound political logic behind such conceptions. The "vulnerability to disasters" of which the AP speaks is the product of more than a quarter century of attacks on social programs in general, and civilian disaster relief capabilities in particular.

Meanwhile, spending on the military has been exempted by Democrats and Republicans alike in their attacks on "big government," leaving the Pentagon the only agency with the resources to mount a response to an event like Katrina. FEMA (Federal Emergency Relief Agency), which is ostensibly in charge of such operations, proved itself utterly unprepared and ineffectual, in the end serving primarily as a stalking horse for the military, diverting and blocking aid until there were sufficient "boots on the ground."

While FEMA had made no serious preparations for responding to the catastrophe, the Pentagon had a well-rehearsed strategy and the troops to implement it. In tandem with the growth of militarism abroad and the attacks on democratic rights at home, the US military has made extensive preparations for the takeover of American cities and the imposition of martial law throughout the country.

It is not merely a matter of turning to the military out of expediency, however. There are deep concerns within America's financial oligarchy about the country's political stability. The gulf separating the super-rich at the top of the economic ladder—who control both major parties—and the great majority of American working people has become so great as to render any form of democracy unworkable.

The storm that hit New Orleans brought this social chasm starkly into the open and, with it, the potential for social upheavals. The greatest fear within the American establishment is that out of this deepening crisis there will emerge a mass political challenge to the profit system. These are the conditions in which a martial law general is being offered as an "icon of leadership."

The shameless promotion of General Honore must serve as a political warning. There is no significant section of the US ruling elite that is committed to the defense of democratic rights and the maintenance of democratic forms of rule. To defend its vast wealth and power against the social demands of the majority, the American plutocracy is prepared to resort to the methods of police-military dictatorship.

In other ominous news, Delta and Northwest airlines filed for bankruptcy in order to get out of pension and health insurance payments to their retirees, clearly demonstrating the end game of deregulation:

The bankruptcy filings, with their brutal implications for tens of thousands of workers, are themselves the culmination of a process of unrestrained profiteering and self-enrichment that was set in motion by the deregulation of the US airline industry in 1978. Nearly thirty years later, it is abundantly clear that what was billed as encouraging competition and unleashing the dynamic impetus of the "free market" was a means of plundering the assets of the airlines for the benefit of the financial elite.

Hundreds of thousands of jobs have been destroyed, wages and benefits have been repeatedly slashed, and now the pensions and health provisions of retired workers are being wiped out, while a small fraternity of corporate CEOs gorge themselves with multi-million-dollar salaries and bonuses.

Since deregulation was initiated—under the Democratic administration of Jimmy Carter—major airlines have disappeared entirely, such as Braniff, Pan American, Trans World Airlines and Eastern. The removal of government regulation has encouraged, not efficiency, but irrationality and chaos in the organization of routes and the setting of fares. Passengers, especially the vast majority who cannot afford the exorbitant price of first class tickets, are now handled little better than cattle, crammed into overcrowded cabins and, on most flights, denied a meal.

The airlines themselves have become milch cows for CEOs who enrich themselves at the expense of their own companies. Northwest Chairman Gary Wilson, for example, the largest single shareholder, has been dumping his own stock hand over fist. The Wall Street Journal reported June 13 that, according to Securities and Exchange Commission filings, Wilson cut his stake to 1.75 million shares from 4.34 million between March 31 and the first week in June.

Al Checchi, a former co-chairman who worked with Wilson to acquire Northwest in 1989, sold $26.4 million worth of Northwest stock between January and June, according to the Minneapolis Star Tribune.

These top executives and company insiders dumped their stock knowing that in so doing they were worsening the financial position of the company and making bankruptcy filing all the more likely. While they were protecting their own fortunes, they were demanding ever more draconian sacrifices from their employees.

The living standards of workers, the comfort and safety of passengers and the general public interest have all been subordinated to the naked drive for profit, and unscrupulous asset-strippers and speculators such as Frank Lorenzo and Carl Icahn have risen to the heights of corporate power.

With the latest bankruptcy filings, the final act in the drama is unfolding, as the airline industry undergoes a further consolidation, resulting in a few mega-airlines which will cut all unprofitable routes, close down hubs and ratchet up ticket prices to previously unheard of levels.

The bankruptcy of Northwest and Delta is one more expression of the failure of the profit system. The same fundamental tendencies of social dysfunction and decay that have found an appalling expression in the needless destruction of lives and communities from Hurricane Katrina take another socially destructive form in the chaos and collapse of the airline industry.

In what cannot have been a surprise, but is being presented as one, U.S. consumer confidence fell to the lowest level since the last Bush recession in 1992, a fall that will help to make the economic collapse more likely, a matter of months if not weeks away.

Monday, September 12, 2005

Signs of the Economic Apocalypse 9-12-05

From Signs of the Times 9-12-05:

The U.S. stock market rose last week in response to the disaster of Hurricane Katrina. Oil prices pulled back as well. The Dow Jones Industrial Average closed on Friday at 10,678.56, up 2.2% from the previous Friday's close of 10,447.37. The NASDAQ closed at 2,175.51, up 1.6% from 2141.07 last week. The yield on the ten-year U.S. Treasury Note was 4.12% at Friday's close, up 9 basis points from 4.03 a week earlier. Oil closed at 64.08 dollars a barrel, down 5.4% from $67.57, which is even lower than it was pre-Katrina (down 3.2% over two weeks from $66.13). The U.S. dollar even gained ground after Katrina, closing at 0.8058 euros, up 1.3% from 0.7954 euros the week before. The euro, then, closed at $1.2410 down from 1.2573 dollars at the previous Friday's close. That puts oil in euros at 51.64 euros a barrel, down 4.1% from the previous week's close of 53.74 euros a barrel. Gold closed at $453.40 an ounce, up 1.3% from last week's close of $447.80. Gold in euros would be 365.35 euros an ounce up 2.6% from 356.16 on the previous Friday. The gold/oil ratio closed at 7.08 barrels of oil per ounce of gold, up sharply (6.7%) from 6.63 a week before.

So why the strength in the dollar and U.S. stocks given the real economic threat posed by Hurricane Katrina? According to Wall Street observers, it was the thought that maybe, given what happened, the Federal Reserve Board might not raise interest rates again. No one mentioned the fact that many corporations (especially Bush-connected ones) stand to make a lot of money on reconstruction and that oil companies have made out like bandits from the sharp rise in gasoline prices.

Firms with Bush ties snag Katrina deals

Sat Sep 10,11:03 AM ET

Companies with ties to the Bush White House and the former head of FEMA are clinching some of the administration's first disaster relief and reconstruction contracts in the aftermath of Hurricane Katrina.

At least two major corporate clients of lobbyist Joe Allbaugh, President George W. Bush's former campaign manager and a former head of the Federal Emergency Management Agency, have already been tapped to start recovery work along the battered Gulf Coast.

One is Shaw Group Inc. and the other is Halliburton Co. subsidiary Kellogg Brown and Root. Vice President Dick Cheney is a former head of Halliburton.

Bechtel National Inc., a unit of San Francisco-based Bechtel Corp., has also been selected by FEMA to provide short-term housing for people displaced by the hurricane. Bush named Bechtel's CEO to his Export Council and put the former CEO of Bechtel Energy in charge of the Overseas Private Investment Corporation.

Experts say it has been common practice in both Republican and Democratic administrations for policy makers to take lobbying jobs once they leave office, and many of the same companies seeking contracts in the wake of Hurricane Katrina have already received billions of dollars for work in Iraq.

Halliburton alone has earned more than $9 billion. Pentagon audits released by Democrats in June showed $1.03 billion in "questioned" costs and $422 million in "unsupported" costs for Halliburton's work in Iraq.

But the web of Bush administration connections is attracting renewed attention from watchdog groups in the post-Katrina reconstruction rush. Congress has already appropriated more than $60 billion in emergency funding as a down payment on recovery efforts projected to cost well over $100 billion.

"The government has got to stop stacking senior positions with people who are repeatedly cashing in on the public trust in order to further private commercial interests," said Danielle Brian, executive director of the Project on Government Oversight.

For the most part, though, the economic news related to Katrina was bad. Increased budget deficits, higher prices, and lower consumer confidence will probably be the main consequences of the disaster. Take a look at the airline industry, for example. In some ways that industry is emblematic: it was already teetering on the brink of multiple bankruptcies before Katrina:

US airline losses could hit $10 billion

Fri Sep 9,10:11 PM ET

U.S. airline losses in 2005 could reach $10 billion, due mainly to soaring fuel prices made worse by Hurricane Katrina, the industry's chief trade group estimated on Friday.

To try and stem the red ink, major carriers plan to ask Congress next week for a one-year holiday from the federal tax on jet fuel to save $600 million, the Air Transport Association said.

"There simply is no rational business plan we can continue to operate under with fuel at the price it is today," Jim May, the association's chief executive, said in an interview with CNBC.

Estimated losses for the year rose from $7 billion to between $9 billion and $10 billion, the association said.

…Mike Boyd, a Colorado-based industry consultant, said fuel and fuel alone is driving substantial industry losses just as traffic returned this spring and summer to levels not seen since before the September 11, 2001, hijacked aircraft attacks.
"If oil prices had stayed where they were in 2004 we would be talking about how profitable the airlines are," Boyd said.

Two carriers, United Airlines and US Airways, are in bankruptcy while Delta Air Lines and Northwest Airlines are weighing Chapter 11 filings. All have cited high fuel prices for their woes. Battered by fuel increases, low fare carrier Independence Air, a unit of FLYi Inc., could also seek court protection.

In addition to these purely economic effects, the United States also faces the prospect of bitter conflict within the elite and between the elite and the public at large. George Bush has been attacked surprisingly hard by the elite media. Scathing editorials and newly sceptical and outraged reporters seem to have the green light to question Bush officials like never before. Bush's overall approval rating has now fallen below 40% -- a level that usually foreshadows downfall and a change of regime. Large segments of the population have lost what little confidence in the government they had. There is a sense of depression and powerlessness among the people. The problem in this case is that the 35% or so of the public that supports Bush still supports him strongly and that the elements of the ruling class that have thrown their lot in with the Bush gang are particularly ruthless and Machiavellian. Political instability like this has never been good news economically.

A certain bellwether of conventional moderate elite opinion, the senior and well-respected columnist David Broder, published the following last week in the Washington Post:

A Price To Be Paid For Folly

By David S. Broder

Sunday, September 11, 2005; B07

In the wake of Hurricane Katrina, credible private experts are forecasting a federal budget deficit of $500 billion for this year, a sharp reminder of the government's fiscal folly.

For all the deserved criticism the Bush administration has received for its tardy and ragged response to the storm's ravages on New Orleans and the Gulf Coast, the long-term costs to the nation of the reckless disregard both the president and Congress have shown toward paying the nation's bills may be even greater.

In time those forced from their homes in Louisiana and Mississippi will be returned, and a degree of order will be restored to their communities. Business will recover. Mardi Gras will again be celebrated in the French Quarter. But our children and grandchildren will pay a continuing price for the refusal of our leaders to face the reality of an out-of-control budget.

The scale of the failure is measured by a set of numbers that Rep. John Spratt of South Carolina, the senior Democrat on the House Budget Committee, carries with him. They chart the annual increases passed by Congress in the national debt limit. In 2002 it was $450 billion; in 2003, $984 billion; in 2004, $800 billion; and this year, the House has passed an increase of another $781 billion, on which the Senate has yet to act. That totals a stunning $3 trillion in additional debt in four years -- a 50 percent increase in the cumulative debt from all of America's previous history.

When you look at that record, the self-congratulatory tone of the Republicans who have been running Washington seems absurdly unjustified. In July, when the White House Office of Management and Budget said the deficit for this year would decline to $333 billion from $412 billion in 2004, President Bush said, "It's a sign that our economy is strong, and it's a sign that our tax relief plan, our pro-growth policies are working."

In August, when the Congressional Budget Office lowered the deficit forecast to $331 billion, Republican Rep. Jim Nussle of Iowa, the chairman of the House Budget Committee, said, "We're clearly on the right track. The strong economy, higher revenues and falling deficit projections are all results of the successful leadership and policies of the Congress and the president."

These judgments were faulty at the time. They made no provision for the continuing costs of the war in Iraq, or for the Republican plan to end the estate tax and make all the previous Bush tax cuts permanent. And, most of all, they did not realistically calculate the costs of the new Medicare prescription drug benefit and the looming obligations to the millions of baby boomers who are nearing retirement age.

Now those pre-Katrina estimates have been rendered even more ridiculous. In the first 10 days since the storm hit, the president asked Congress for emergency appropriations of $62 billion -- and the bills are just starting to come in.

The question is whether this will force the president and congressional Republicans to suspend their obsessive drive to reduce the revenue base of the federal government, or whether they will finally start paying the bills their government is incurring.

It is hard to be optimistic on that score. This president may not literally be incapable of reversing directions, but we have yet to see him do that on any significant matter. Treasury Secretary John Snow reportedly told congressional Republicans in a closed meeting that Katrina strengthens the case for making the Bush tax cuts permanent. Some Republicans in Congress are appalled at the fiscal wreckage, but the leadership on Capitol Hill has yet to assert its constitutional power of the purse or do anything but increase the damage by cutting taxes while simultaneously boosting spending.

The warning signs of impending economic calamity are every bit as evident as the forecasts of ruin for New Orleans when a major hurricane hit.

The runaway budget deficits are compounded by the persistent and growing imbalance in our trade accounts -- jeopardizing the inflow of foreign funds we have used to finance our debt.

At a private dinner the other evening where many of the men and women who have steered economic and fiscal policy during the past two decades were expressing their alarm about this situation, one speaker summarized the feelings of the group:
"I think it's 1925," he said, "and we're headed for 1929."

Phrases like "economic calamity" and "we're headed for 1929" are not the type of alarmist language you would normally ever hear from David Broder. He is telling us that the economic policy insiders in private conversation are telling him that we are headed for complete economic collapse. And the fact that Broder published this makes it more likely to take place. Just last year the elite were united in presenting an optimistic view of the economy to the public. The public may not have bought it, but just the seeming confidence with which that optimism was universally expressed by the official culture helped prop up an adequate level of consumer confidence. Any confidence and optimism is now gone, however. Here is Newsweek:

Eye of the Political Storm

A new NEWSWEEK poll suggests President Bush could become Katrina's next casualty.

By Marcus Mabry

Updated: 1:31 p.m. ET Sept. 10, 2005

Sept. 10, 2005 - Hurricane Katrina claimed her first political casualty Friday. Michael Brown, the head of FEMA, the federal disaster readiness and response agency, was sidelined from the largest disaster relief project in the nation's history. Brown was recalled to Washington by his boss, Homeland Security Secretary Michael Chertoff. But a new NEWSWEEK Poll suggests the post-Katrina political storm may just be rising. And her ultimate casualty could be President George W. Bush.

In Katrina's wake, the president's popularity and job-approval ratings have dropped across the board. Only 38 percent of Americans approve of the way Bush is doing his job overall, a record-low for this president in the NEWSWEEK poll. (Fifty-five percent of Americans disapprove of his overall job performance.) And only 28 percent of Americans say they are "satisfied with the way things are going" in the country, down from 36 percent in August and 46 percent in December, after the president's re-election. This is another record low and two points below the satisfaction level recorded immediately after the Abu Ghraib prison abuse scandal came to light. Fully two-thirds of Americans are not satisfied with the direction of the country.

But Katrina's most costly impact could be a loss of faith in government generally, and the president, in particular. A majority of Americans (57 percent) say "government's slow response to what happened in New Orleans" has made them lose confidence in government's ability to deal with another major natural disaster. Forty-seven percent say it has made them lose confidence in the government's ability to prevent another terrorist attack like 9/11, but 50 percent say is has not. (Note: our question asked about "government" in general, so we cannot say whether respondents meant state, local, federal or a combo of any of the three.)

More critical to President Bush - and the GOP's future as the nation's majority party: most Americans, 52 percent, say they do not trust the president "to make the right decisions during a domestic crisis" (45 percent do). The numbers are exactly the same when the subject is trust of the president to make the right decisions during an international crisis.

Why the gloom? Forty percent of Americans say the federal government's response to the crisis in New Orleans was poor. Thirty-two percent say it was fair; 21 percent say it was good and five percent believe it was excellent. Americans don't think much of the local and state governments' responses either: 35 percent say state and local officials did a poor job and 34 percent say they did a fair job; 20 percent say they did a good job and five percent say an excellent job after the storm hit.

The Katrina effect is evident in how Americans rate the president personally. In every category, the view of the president is at all-time lows for the NEWSWEEK poll. Only 49 percent of Americans now believe the president has strong leadership qualities. The same percentage of registered voters feel that way, 49 percent - down from 63 percent the week before Bush's reelection. Only 42 percent of Americans believe the president cares about people like them; 44 percent of registered voters feel that way - down from 50 percent the week before the election. And only 49 percent of Americans and the same percentage of registered voters believe Bush is intelligent and well-informed - down from 59 percent before the election.

Similarly, public approval of the president's policies on issues from the economy (35 percent) to the war in Iraq (36 percent) to terrorism and homeland security (46 percent) have suffered. Demonstrating the widespread havoc that Katrina has wrought on the president's political fortunes - even far from issues of disaster response - for the first time in the four years since 9/11, more Americans disapprove of Bush's handling of terrorism and homeland security than approve of it.

Reflecting the tarnished view of the administration, only 38 percent of registered voters say they would vote for a Republican for Congress if the Congressional elections were held today, while 50 say they would vote for a Democrat.

The president and the GOP's greatest hope may be, ironically, how deeply divided the nation remains, even after national tragedy. The president's Republican base, in particular, remains extremely loyal. For instance, 53 percent of Democrats say the federal government did a poor job in getting help to people in New Orleans after Katrina. But just 19 percent of Republicans feel that way. In fact, almost half of Republicans (48 percent) either believes the federal government did a good job (37 percent) or an excellent job (11 percent) helping those stuck in New Orleans.

…The deep partisan divide, evident in whom Americans blame for the slow relief effort, could act to brake any further fall in the president's support levels, particularly if Bush's base feels the Democrats or the media are piling on the president.

A more troubling finding of the NEWSWEEK Poll is that as divided as we are by party, Americans are even more divided by race. For instance, 66 percent of those polled say a "major reason" for government's slow response to the crisis in New Orleans was poor communication between federal, state and local officials. Fifty-seven percent say a major reason was that the destruction was more than expected and overwhelmed officials. Fifty-five percent believe that the incompetence of federal officials was to blame and 57 percent believe state and local officials' incompetence led to the slow response.

But whites and non-whites disagree sharply on the role of race and class in the tragedy. Fully 65 percent of non-whites believe that government was slow to rescue those trapped in New Orleans because they were black, while 64 percent of whites say race was not a cause at all of the government's slow response.

Overall, 22 percent of those polled say a "major reason" government action was slow was that New Orleans was "not a priority because the people affected were mostly African-American." But 47 percent of non-whites believe race was a "major reason;" only 13 percent of whites do. Meanwhile, 20 percent of whites and 53 percent of non-whites believe a "major reason" the response was slow was that most of those trapped were poor. (Overall, 29 percent of Americans believe the poverty of those affected was a major reason for the slow response.)

In general, 35 percent say that the heads of federal agencies such as FEMA and the Department of Homeland Security are most to blame for not getting help quickly enough to the people in New Orleans; just 17 percent say President Bush himself is to blame.

The question now is whether any of this will matter come the Congressional mid-term elections more than a year from now. The White House is hoping it won't.

So Bush's survival strategy is clear: rally the fascist, fundamentalist and white supremacist popular base (why else would they send Barbara Bush out there but as a wink and a nod to the racist base, just as Laura Bush and Condolleeza Rice were presenting a different face?) to provide enough of a safe haven to conduct smear campaigns against critics, then implement creeping martial law. Amazingly, a new disaster might help Bush more than hurt him. As Jeff Wells noted, Bush governs from disaster to disaster and each new disaster blots out memory of previous ones. How many people talk about Enron any more? Even ongoing ones can get shoved aside. How many conversations have people had about the Iraq War in the last week? And, with each disaster, the rights of the people get weakened or eliminated and the control of an unaccountable power over the public grows stronger.

What has been most depressing in the last two weeks for people in the United States is the sick feeling you get watching the footage of whole cities laid waste, of federal troops taking a U.S. city by force and people relocated to camps to serve as cheap, indentured labor and to lose any property they may have had or, with martial law declared, any civil rights they may have had, and that this may be a foretaste of things to come - that these people will stop at nothing to maintain control.

The term "ethnic cleansing" has even been used to describe plans within the borders of the United States. Here's Xymphora:

If most of the victims weren't black, it simply wouldn't be possible to do what Bush is now doing to New Orleans. I've written about the ethnic cleansing of New Orleans, and some people laugh. Here is a report from the Wall Street Journal on the plans of the white elites of New Orleans for the rebuilding (my emphasis in bold; we all know what he means by 'poor people'):

The power elite of New Orleans - whether they are still in the city or have moved temporarily to enclaves such as Destin, Fla., and Vail, Colo. - insist the remade city won't simply restore the old order. New Orleans before the flood was burdened by a teeming underclass, substandard schools and a high crime rate. The city has few corporate headquarters.

The new city must be something very different, Mr. Reiss says, with better services and fewer poor people. 'Those who want to see this city rebuilt want to see it done in a completely different way: demographically, geographically and politically,' he says. 'I'm not just speaking for myself here. The way we've been living is not going to happen again, or we're out.'

The plan is to use the ethnic cleansing to return the city to Republican party control. Remember these rebuilding plans when you keep hearing how 'uninhabitable' the city will be. Apparently, it will only be uninhabitable for blacks. With all the money that is going to be pouring into the pockets of local bigwigs to realize their grandiose white plans, it should be possible for the government to fund the return of all displaced residents. As Glen Ford states:

"Displacement based on race is a form of genocide, as recognized under the Geneva Conventions. Destruction of a people's culture, by official action or depraved inaction, is an offense against humanity, under international law. New Orleans – the whole city, and its people – is an indispensable component of African American culture and history. It is clear that the displaced people of New Orleans are being outsourced – to
everywhere, and nowhere. They are not nowhere people. They are citizens of the United States, which is obligated to right the wrongs of the Bush regime, and its unnatural disaster. Charity is fine. Rights are better. The people of New Orleans have the Right to Return – on Uncle Sam's tab."

It would be a real shame if, on top of all the corruption, negligence, stupidity and malfeasance, the Bush regime also got away with destroying the culture of New Orleans in order to ethnically cleanse it into a Dixieland theme park that votes Republican. The Right of Return is not only for Palestinians!

Commenting on the same article, Kurt Nimmo wrote:

Christopher Cooper's War Street Journal article (Old-line families plot the future) is worth excerpting at length because it so shamelessly reveals how the rich elite "business" sociopaths of New Orleans think and operate:

…A few blocks from Mr. O'Dwyer, in an exclusive gated community known as Audubon Place, is the home of James Reiss, descendent of an old-line Uptown family. He fled Hurricane Katrina just before the storm and returned soon afterward by private helicopter. Mr. Reiss became wealthy as a supplier of electronic systems to shipbuilders, and he serves in Mayor Nagin's administration as chairman of the city's Regional Transit Authority. When New Orleans descended into a spiral of looting and anarchy, Mr. Reiss helicoptered in an Israeli security company to guard his Audubon Place house and those of his neighbors.

Obviously, if you're going to hire ruthless killers to protect your property from people driven insane by hunger and thirst, you may as well hire the best - and for killing people, the Israelis are right up at the top of the list, having spent the last fifty years or so killing desperately poor Palestinians.

…In short, rich sociopaths such as Mr. Reiss are fed up with poor people, even though they profitably exploit them as janitors and food servers and cashiers at Wal-Marts. Reiss believes there should be a manageable number of poor minimum wage workers in the new New Orleans - just enough to clean the toilets and sweep the floors at the new casinos and luxury hotels he envisions. Incidentally, Bush has set the tone by suspending the minimum pay scale requirements for federal contractors in New Orleans under the Davis-Bacon Act. It appears Reiss and the "business elite" would like to set up isolated Bantustans of impoverished workers and have them shipped in to serve tourists and middle class fun seekers. Sort of reminds you of South Africa under apartheid.

Is it possible the "business elite" in New Orleans deliberately sabotaged the levees, thus flooding poor areas of the city and ethnically cleansing thousands of poor people, most of them African-American? It wouldn't be the first time.

In 1927, the so-called Great Mississippi Flood was used to ethnically cleanse African-Americans. "As the flood approached New Orleans, Louisiana 30 tons of dynamite were set off on the levee at Caernarvon, Louisiana," explains Wikipedia. "This prevented New Orleans from experiencing serious damage but destroyed much of the marsh below the city and flooded all of St. Bernard Parish… During the disaster 700,000 people were displaced, including 330,000 African-Americans who were moved to 154 relief camps. Over 13,000 refugees near Greenville, Mississippi were gathered from area farms and evacuated to the crest of an unbroken levee, and stranded there for days without food or clean water, while boats arrived to evacuate white women and children. Many African-Americans were detained and forced to labor at gunpoint during flood relief efforts… The aftermath of the flood was one factor in the Great Migration of African-Americans to northern cities." (Emphasis added.)

It is becoming clear that dominant elements in the ruling class are out to make the United States a military dictatorship. The techniques developed in Iraq are now being used on citizens of the United States!

New Orleans: the specter of military dictatorship

Statement of the World Socialist Web Site Editorial Board

10 September 2005

The appalling incompetence and negligence that characterized the government's response at the outset of the human tragedy unleashed by Hurricane Katrina have now given way to ruthlessly efficient methods of military occupation and repression in the ravaged city of New Orleans.

For four critical days, Washington proved incapable of mounting any credible effort to rescue the tens of thousands of largely poor and working class New Orleaneans who were left to their fate in the city's flooded streets, many of them losing their lives not to the surging waters, but to the lack of food, water or medicine.

Now the city has been inundated with troops, federal agents and cops of all descriptions, turning it into one of the most heavily armed camps on the face of the globe. Combat-equipped soldiers and police wearing helmets and flak jackets are going door to door in the city to enforce a mandatory evacuation at the point of a gun.

City authorities claimed Friday that they have yet to order forced removal of residents and would do so only with "minimum force." In many cases, demands by armed troops have proven sufficient to drive people from their homes. "When you get 15 M16s pointed at you and they line you up against the wall, it's kind of scary," one New Orleans resident told the Washington Post, explaining why she was leaving.

In other cases, however, the official assertions are belied by televised images of cops and troops kicking in the doors of homes and dragging people away in plastic cuffs. The New Orleans Police Department acknowledged Friday that it had arrested 200 people that day.

With an estimated 10,000 residents still in the city, far worse is yet to come. Many justifiably fear that if they leave they will have no homes to come back to. "They are trying to get this neighborhood for the rich people," one man told the New Orleans Times-Picayune Thursday.

The first 11 days of the disaster have revealed two political truths about present-day America. First, for all the talk about beefing up "homeland security" against an alleged terrorist threat, the US government has developed no serious civil defense plans to protect the American people from mass disasters, either natural or man-made.

Second, in the wake of September 11, 2001, Washington has exploited the terrorist attacks to concentrate ever-growing power in its military-police apparatus, while elaborating extensive preparations for martial law nationwide.

…Confronted with the inability of FEMA and other civilian agencies to organize a relief effort, the government had no option but a military one. Once it decided to use it, there were definite consequences.

While there was no adequate planning for disaster relief, the military and the Homeland Security Department had well developed and rehearsed blueprints for imposing martial law and the suppression of civil unrest. These have been the key focus of planning at both the Pentagon and the Homeland Security Department in the four years since the September 11 attacks.

Once these plans were taken off the shelf and the military was called in, its own protocols and doctrines drove the intervention, with deadly consequences.

First, the city was effectively sealed off, with residents seeking to flee the disaster turned back at gunpoint and those trying to bring in relief supplies turned back. The Red Cross, which has played the leading role in countless previous disasters, was never allowed to enter the city. This took place as a horrified world watched people dying in the hungry crowds that waited outside the New Orleans Convention Center and amid the squalor of the Superdome.

The order for the military to go in came only after the Pentagon was assured that it could intervene with overwhelming force. Senior commanders spoke in terms of a "combat operation" and "storming" the convention center, where people were waiting to be evacuated.

Now the city is bristling with automatic weapons and is patrolled by troops in armored vehicles fresh from Iraq. The obvious question is what is this massive armed force doing in New Orleans, a city that is largely submerged under water and nearly deserted? This level of military occupation is on its face absurd, but it has been executed according to existing plans for martial law that are the product of protracted secret deliberations.

The central focus of this military operation has been the establishment of law and order, the protection of private property and, to those ends, the forced evacuation of the remaining residents of the city.

The most chilling revelation coming out of New Orleans is that for America's ruling elite and its state apparatus, the lives of ordinary Americans count for nothing. This has found its most grotesque expression in the failure of the authorities for a full 10 days to make any effort to recover the bodies of the storm's victims, which lie rotting in the streets.

The storm's survivors complained bitterly about the media's referring to them as "refugees," understandably bridling over a term that suggests that the largely poor and black masses of newly homeless are foreigners in their own land. Yet, the reality is that many of them have been treated more as criminals than victims.

Those loaded onto trucks in the mandatory evacuation are not told where they are going. As the Salt Lake Tribune reported, one planeload of evacuees was informed that they were being shipped off to Utah only after their plane had taken off from New Orleans International Airport. There also were multiple reports that those being dispersed across the country are in many cases subjected to restrictions on their movements and behavior that come close to penal confinement.

Both the lack of preparation in terms of civil defense or humanitarian relief and the turn towards martial law have deep roots in the social structure and political system of the United States.

For more than a quarter century, both Democratic and Republican administrations have pursued a policy designed to transfer wealth from the vast majority of working people to the financial elite. They have systematically slashed every program aimed at ameliorating conditions of poverty in order to award ever fatter tax cuts to those at the top of the economic pyramid. In the process, the ruling elite has created conditions of profound social inequality and instability that have erupted to the surface with the disaster in New Orleans.

The deepening of social inequality has been accompanied by an unprecedented attack on basic democratic rights - conducted under the pretext of a "war on terrorism" and "homeland security" - and an increasing reliance on military force, both at home and abroad.

The events in New Orleans provide a sobering warning of the immense dangers posed by these developments. The assumption of extraordinary and unconstitutional powers by the president, the development of a secret shadow government, revealed in the aftermath of September 11, the passage of the Patriot Act, the establishment of the Homeland Security Department, and the creation of a US Northern Command, the first such military command to prepare and conduct nationwide operations on US soil, have together established the framework for a police-military dictatorship. In New Orleans, such a regime is being given a dry run.

What all this tells us is that the driving force now is not economics or politics; it is pure military power. It tells us that they have been developing techniques to deal with the consequences of an economic collapse or true political opposition, and they will have no reluctance to use these techniques in the most ruthless manner on anyone.

These people do not care about "markets" or "economic growth." They care only about their own power. Economic growth has served its purpose and now only destroys their environment and crowds their planet with undesirables.