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.

2 Comments:

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