Signs of the Economic Apocalypse 11-21-05

From Signs of the Times 11-21-05:

Gold closed at 486.40 dollars an ounce on Friday, up 3.5% from $470.00 for the week. The dollar closed at 0.8495 euros Friday, down 0.4% from 0.8531 the previous Friday. The euro, then, closed at 1.1772 dollars, up from $1.1722 the week before. Gold in euros, then, would be 413.18 euros an ounce, up 3.0% from 400.96 at the previous Friday’s close. Oil closed at $57.21 a barrel, down 0.6% from $57.53 the week before. Oil in euros would be 48.60 euros a barrel, down 1.0% from 49.08 the week before. The gold/oil ratio closed at 8.50, up 4.0% from 8.17 at the previous Friday’s close. In the U.S. stock market, the Dow closed at 10,766.33 on Friday, up 0.8% from 10,686.04 for the week. The NASDAQ closed at 2,227.07 up 1.1% from 2,202.47 the Friday before. The yield on the ten-year U.S. Treasury note was 4.50% down seven basis points from 4.57 at the previous week’s close.

Except for the continued rise in gold, it was again a pretty good week for the U.S. imperial economy with oil down, stocks up and the dollar preserving recent gains against the euro. On the other hand, there are more and more troubling reports in the mainstream media about housing and the triple deficits. Fear and pessimism regarding the future compete with a somewhat prosperous present to give an eerie air of unreality about the U.S. economy. A quote from the new Flashman book by George MacDonald Fraser sums it up:

You can always tell when something is coming to an end. You know, by the way events are shaping, that it can’t last much longer, but you think there are still a few days or weeks to go . . . and that’s the moment when it finishes with a sudden bang that you didn’t expect.

This week USA today ran the following article on the front page. Note the disaster metaphor:

A ‘fiscal hurricane’ on the horizon

By Richard Wolf, USA TODAY

WASHINGTON — The comptroller general of the United States is explaining over eggs how the nation’s finances are going to hell.

“We face a demographic tsunami” that “will never recede,” David Walker tells a group of reporters. He runs through a long list of fiscal challenges, led by the imminent retirement of the baby boomers, whose promised Medicare and Social Security benefits will swamp the federal budget in coming decades.

The breakfast conversation remains somber for most of an hour. Then one reporter smiles and asks, “Aren’t you depressed in the morning?”

Sadly, it’s no laughing matter. To hear Walker, the nation’s top auditor, tell it, the United States can be likened to Rome before the fall of the empire. Its financial condition is “worse than advertised,” he says. It has a “broken business model.” It faces deficits in its budget, its balance of payments, its savings — and its leadership.

Walker’s not the only one saying it. As Congress and the White House struggle to trim up to $50 billion from the federal budget over five years — just 3% of the $1.6 trillion in deficits projected for that period — budget experts say the nation soon could face its worst fiscal crisis since at least 1983, when Social Security bordered on bankruptcy.

Without major spending cuts, tax increases or both, the national debt will grow more than $3 trillion through 2010, to $11.2 trillion — nearly $38,000 for every man, woman and child. The interest alone would cost $561 billion in 2010, the same as the Pentagon.

From the political left and right, budget watchdogs are warning of fiscal trouble:

•Douglas Holtz-Eakin, director of the non-partisan Congressional Budget Office, dispassionately arms 535 members of Congress with his agency’s stark projections. Barring action, he admits to being “terrified” about the budget deficit in coming decades. That’s when an aging population, health care inflation and advanced medical technology will create a perfect storm of spiraling costs.

•Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, sees a future of unfunded promises, trade imbalances, too few workers and too many retirees. She envisions a stock market dive, lost assets and a lower standard of living.

•Kent Conrad, a Democratic senator from North Dakota, points to the nation’s $7.9 trillion debt, rising by about $600 billion a year. That, he notes, is before the baby boom retires. “We’re not preparing for what we all know is to come,” he says. “We’re all sleepwalking through this period.”

•Stuart Butler of the conservative Heritage Foundation projects a period from now until 2050 in which tax revenue stays stable as a share of the economy but Medicare, Medicaid and Social Security spending soars. To avoid big tax increases, he says the government has to “renegotiate” the social contracts it made with its citizens.

•Alice Rivlin and Isabel Sawhill of the centrist Brookings Institution put their pessimism into a book titled Restoring Fiscal Sanity. Rivlin, who became the first director of the Congressional Budget Office in 1974, says it will take an “economic scare” such as the 1987 stock market crash to spur action. Sawhill likens the growing gulf between what the government spends and takes in to a “Category 6 fiscal hurricane.”

‘The Fiscal Wake-Up Tour’

They are the preachers of doom and gloom. Liberals and conservatives, Democrats and Republicans, they are trying to be heard above the ka-ching of the cash register as it tallies the cost of government benefits and tax cuts, Iraq and Hurricane Katrina. To raise their profile in recent months, several have traveled together to places such as Richmond, Va., and Minneapolis for what they call a “Fiscal Wake-Up Tour.”

Leon Panetta, former White House budget director and chief of staff to President Clinton, calls them “disciples of balanced budgets. ... And at some point, they’ll be proven right.”

So USA today is telling us we need to expect much less from government. Here’s the New York Times, in an article about the impact of General Motors’s problems on a forty-nine year old auto worker’s family, telling us not to expect anything from corporations:

For a G.M. Family, the American Dream Vanishes

By Danny Hakim

Flint, Mich. - Four generations of the Roy family relied on General Motors for their prosperity.

Over more than seven decades, the company’s wages bought the Roys homes, cars and once-unimaginable comforts, while G.M.’s enviable medical and pension benefits have kept them secure in their retirements.

But the G.M. That was once an unassailable symbol of the nation’s industrial might is a shadow of its former self, and the post-World War II promise of blue-collar factory work being a secure path to the American dream has faded with it.

After a long slide, it now looks like the end of an era. “General Motors, when I got in there, it was like I’d died and went to heaven,” said Jerry Roy, 49 – who started at G.M. In 1977 and now works on an assembly line at a plant operated by Delphi, the bankrupt former G.M. Parts unit that was spun off in 1999.

When Mr. Roy was hired at G.M., nearly three decades ago, his salary more than doubled from his job at a local supermarket. He traded in his five-year-old Buick for a new Chevy and since then he has done well enough to buy a pleasant house on a lake near Flint.

But now he faces the prospect of either losing his job or accepting a sharp pay cut. And for those coming after him, “it’s just sad that it’s ending, that it looks like this,” he said. In his hometown, he added, “all these places that used to be factories are now just parking lots.”

Those factories supported the Roy family for generations.

Jerry’s great-grandfather, John Westley Roy, came to Michigan from Missouri in 1931, in the depths of the Depression. He built a home five blocks north of a plant operated by General Motors’ AC Delco division and worked there for a decade before he was injured and retired to a farm.

Mr. Roy’s grandfather, Edward, worked at the Delco plant during the war, when it was converted into a machine-gun plant: he would tell a story about a day one of the guns came off a mount and began shooting holes in the wall of a cafeteria.

Mr. Roy’s father, Gerald, started at G.M.’s Fisher Body unit in 1951, was laid off after a year and a half, and then got a job in 1954 at AC Delco. Gerald’s sister, uncle and future wife, Delores, worked at the plant.

The elder Mr. Roy remembers the 1950’s and ‘60’s as a golden era, when everything seemed possible.

“There were three shifts – they worked around the clock,” he said of the AC Delco plant, adding, “you’d go in there and you couldn’t even hardly walk.”

Buoyed by such prosperity, the auto industry was the pioneer in advancing what became the American model for the social contract between workers and their employees – from the $5 a day Henry Ford offered workers in 1914 to the all-inclusive health care and pension benefits that became a mainstay of the vast expansion of the middle class in the second half of the 20th century.

In many ways, it was not the government but Detroit and other major industries, at the prodding of their unions, that created the American-style social safety net, and helped foster the shared prosperity that is now fracturing.

“The days when blue-collar work could be passed on down the family line, those days are over,” said Gary N. Chaison, a professor of labor relations at Clark University in Worcester, Mass. “Where you did have automobile plants, it was always looked at as an elite job. It was hard work, but good, steady work, with wonderful benefits and good solid pay, and you were in the upper middle class.”

Now, with G.M. And other domestic automakers and suppliers fighting to survive brutal global competition, Detroit is planning to cut even more manufacturing jobs. At the same time, the industry is moving to rewrite or even tear up its labor contracts in a bid to turn itself around by drastically reducing both wages and benefits. Today, Mr. Roy and Gerald, 71, who once helped him get his job, are both preparing to make sacrifices.

…Not only is the company seeking to cut two-thirds of its 34,000 hourly workers in the United States, it wants to cut wages to as little as $10 an hour from as much as $30.

…Delphi is also seeking major cuts in the health care and pension benefits of retirees, though under the terms of the spinoff of Delphi, G.M. Would have to assume much of those costs, setting up a further quandary because simply dumping troubles on G.M., its largest customer, is not necessarily palatable to Delphi or the union.

Delphi plans as well to do more of what it has been doing since its spin-off, by continuing to shift thousands of jobs overseas. An internal memo obtained earlier in November by The Detroit News listed the Flint plant where Jerry Roy works among factories intended for closing. Delphi has called the memo incomplete and preliminary.

Delphi puts the choices facing Detroit and its workers in starkest relief. G.M., at least so far, has sought a more compromising approach, in large part because automakers face slightly less-onerous competitive dynamics than their suppliers.

In early November , U.A.W. Members reluctantly agreed to allow the company to shave $15 billion, or nearly 20 percent, from its retiree health care liability. The elder Mr. Roy and other retirees will now be required to pay monthly premiums, deductibles and co-payments for medical services for the first time, with costs of as much as $752 a year.

For his part, Gerald Roy is more worried for his son Jerry than himself.

“What worries me the most, or bothers me the most, is him working for 28 years for G.M. And he might lose his retirement,” he said.

But the Roys are the lucky ones. Gerald and his wife, Delores, another G.M. Retiree, are healthy and not on medication, and their son is single and does not have any children. They are both aware that the good life that auto work has afforded their family for four generations, and for hundreds of thousands of other families in Michigan and elsewhere across the country, is ending.

Indeed, others face more difficult times.

“We’re going to have to make a choice between what bill to pay, whether to go to the doctor,” said Larry Mathews, who works at the same Delphi plant as Mr. Roy and is also the editor of The Sparkler, a paper for plant workers. If the pay cuts go through, Mr. Mathews said he would no longer be able to afford his son’s college tuition.

“I know I’m going to have to call my son at Central Michigan and tell him to come home,” he said. “I bet those executives don’t have to make those calls.”

Like Gerald Roy, Mr. Mathews’s father retired from G.M. At a time when the bond between the company and its workers was still strong. Mr. Mathews’s father died from an asbestos-related illness stemming from his plant work. Even so, Mr. Mathews said his father, who became ill in his late seventies, refused to sue.

“He said, ‘This place paid for everything I got today; I’m not going to sue them now,’ “ Mr. Mathews recalled.

But now, Mr. Mathews makes clear that he has no desire for his own son to continue the family tradition.

…Not that anyone has much chance of getting a job at these companies anymore. Wages are less important because the industry is so much more efficient than it used to be and has already cut so many jobs.

G.M. Plans to cut its blue-collar work force even further, though, to 86,000 Americans nationwide by the end of 2008, about the same number of people it once employed in Flint alone in the 1970’s. At its peak, G.M. Employed more than 600,000 Americans.

“Frankly in our business, the progress in improving productivity has been dramatic,” Mr. Wagoner said. “Over a 10-year period, we have gone from a ballpark of 40-plus hours a vehicle in assembly to 20-plus hours a vehicle.”

Benefits are another matter. G.M. Pays about $1,500 per car assembled in the United States for health care, more than it spends on steel.

More than steel? How terrible! I would hope they pay more for employee health care than they do for steel. Notice they don’t say, “for a little more than what they spend on steel, a basic commodity, they are able to provide health care for all their employees and retirees.”

Even with the coming cuts for retirees, the elder Mr. Roy is not concerned; he is actually more worried about paying heating bills for the large house he built two years ago, abutting woods just outside Flint.

…But his son Jerry, knowing that his job may disappear and that his pay is likely to shrink no matter where he ends up, faces much greater uncertainty.

“What can you do?” Jerry asked. “People survive somehow, regardless of what happens. I mean, it’s sad, I could cry all night, but I’ll figure out a way to get by – somehow.”

Turning to Europe, whenever a country has the misfortune to be ruled by a “grand coalition” the one benefit is that the mask of there being any real political “opposition” in a bourgeois democracy is taken off. In Germany, where, in recent elections, a majority voted against any cutbacks in social benefits, a grand coalition has been imposed on the country for the purpose of ramming through anti-labor measures under the cover of “competition” and “efficiency.”

German coalition government accord: a declaration of war on working people

By Dietmar Henning

19 November 2005

On November 14 the party congresses of the Social Democratic Party (SPD), Christian Democratic Union (CDU) and Christian Social Union (CSU), who make up Germany’s new “grand coalition” government, voted in favour of an agreement that had been made public just two days previously. It is titled: “Together for Germany—with courage and humanity.” Its contents represent a declaration of war on working people—in both an economic and political sense.

Both the SPD and CDU/CSU rejected initial criticism of the accord by referring to the “compromises” which had to be made. This was how it had to be in a grand coalition, they claimed. The election result allowed no other possibility. This is an outright lie. In the coalition accord, two parties which lost support in the election have agreed to the type of right-wing, antisocial program that was clearly rejected on September 18 by the large majority of German voters.

… Next year the coalition plans to radically transform the German system of health and nursing insurance. Both sides want to “impartially” examine the different models. They have already agreed amongst themselves, however, that in the future private insurance provision will play an increasing role in the German insurance system.

Labour policy

The thrust of the coalition accord is most clearly to be seen in its labour policy. The initial period of a employer-employee relationship is to be extended to two years. This represents a major step towards a “hire and fire” jobs system whereby in these first two years the employer can terminate an employee’s job with two weeks’ notice and without having to provide a reason. As the document suggests, all those elements in the field of employment policy which are “ineffective and inefficient will be abolished.”

…All in all, the SPD and right-wing union parties want to save €4 billion annually from unemployment allowances which, they claim, have “gotten out of control.” Parental support for their older children is to be cut and the considerable cuts in unemployment payments are to take place as part of a campaign against alleged “abuse” of the payments system.

The recent brochure produced by the outgoing economic and employment minister Wolfgang Clement (SPD) “against abuse, spongers and self-service in the welfare state,” in which the unemployed are referred to as “parasites”—language also used by the Nazis against its opponents—is to be the ideological basis for this campaign against the most deprived social layers. Measures giving the authorities the right to check the data of unemployed persons—via pension savings, health insurance companies and banks—to determine “cases of abuse” are to be intensified and such checks can be carried out four times annually.

According to the plans of the grand coalition, the unemployed are to be transformed into an enormous army of cheap labour lacking any basic rights. New measures will expand the field of cheap wage work. Unemployed Germans will be forced to replace low-wage workers from eastern Europe who currently assist with the asparagus or fruit harvest.

…An Intensified “Agenda 2010”

The policy of the grand coalition which emerges is an intensified version of the Agenda 2010 introduced by the coalition government of the SPD and Green Party, led by chancellor Gerhard Schröder, that has just been voted out of office—i.e., a huge redistribution of wealth from the poor to the rich.

…The coalition accord officially departs from the conception that politics can regulate fundamental social issues and secure the elementary needs of the population. There is no attempt to make the case that the grand coalition can address and overcome Germany’s most pressing social problem—mass unemployment. The agreement is exclusively concerned with the reorganisation of the state budget in the interests of big business.

There is not a trace of the postwar social reformist doctrine which argued that capitalism or the free-market economy was capable of reconciling opposed social interests. The words “social free-market economy” appear just once in the 191-page contract—in the heading “The right politics for a social free-market economy.”

In an insightful commentary on the agreement, the Süddeutsche Zeitung noted: “The political pragmatism, which here comes to light and which will probably characterise the future government, follows a logic which is equally paradoxical and full of consequences.... Every policy which dedicates itself to the economic and social crisis can in the foreseeable future only be an organisation of asymmetries. No political prescription will be able to prevent the ever dramatic gap between circumstances of income and wealth, no one is capable of stopping the increasing fragmentation of society, never mind the asymmetries between rich and poor countries, which is the source for the enormous worldwide pressure for redistribution.”

This represents a rejection of any form of democracy. If “the ever dramatic gap between circumstances of income and wealth” cannot be remedied then there is also no basis for the maintenance of democracy. Such politics can only be implemented with authoritarian forms of rule.

It is no coincidence that Germany’s recent early election to the Bundestag was arranged as a sort of state putsch—following pressure from business groups and through abuse of the constitution. The declaration of war on the working population contained in the coalition agreement is the direct result of this illegitimate early election.

Armament of the state and the dismantling of democratic rights

The grand coalition is itself very conscious of the potential impact of its plans and is preparing accordingly for coming confrontations with the population. Democratic rights are being restricted and the state apparatus beefed up. Germany’s security and police services are to be expanded. In this respect the new government can draw on the antidemocratic measures introduced by the SPD-Green government and its interior minister, Otto Schily (SPD).

The anti-terror laws introduced after the attacks of September 11 2001, have been re-examined and, as the contract indicates, will be expanded.

…The use of German armed forces for domestic purposes is assured. Here, however, the coalitionists are waiting for an appropriate judgement by the Federal Constitutional Court. If Germany’s highest court decides in favour of the domestic use of the army, then moves will immediately be made to change the German constitution, which currently prevents such a development.

Germany’s leading police authority, the Federal Criminal Investigation Office, is to be allowed to enforce so-called preventive anti-terror measures, which activity until now was the province of Germany’s regional state police. German legal circles are also involved in these changes, which include the introduction of a controversial regulation allowing the judiciary to award reduced sentences to criminals who implicate others. In 1999 a SPD-Green party government refused to renew this measure, which was originally introduced in the 1970s by the state in its campaign against Red Army anarchists.

Now those from the SPD involved in the coalition negotiations have thrown their constitutional doubts to the wind and agreed to the reintroduction of the regulation.

In light of the youth rebellion currently taking place in France one feature of the coalition agreement is particularly remarkable. Not only can the psychologically ill and incurable sexual criminals be locked up in “preventive detention,” i.e., with no time limit on their detention; the SPD and CDU/CSU union politicians have decided to expand this barbaric regulation to young people: “A condition for its imposition [indefinite detention] will be based on the special danger represented by the culprit.” In fact, this ruling opens floodgates that will be hard to close, allowing the state to lock away juvenile offenders for years or even decades.

This is frightening. German business seems to have taken control of the country and pushed it, against the will of the people, into the arms of the U.S./Neocon, global capital, cheap-labor alliance. Similar moves are afoot in France where riots conveniently broke out across the country leading to the resuscitation of the political fortunes of a previously discredited tool of the neocons, Nicholas Sarkozy. This is similar to how political reaction was begun in the United States in the late nineteen sixties, when riots were ignited (it now appears that the sparks that ignited those riots were struck by agent provocateurs—you can see the civil rights leaders of the time laughing ruefully about that now in PBS documentaries) leading to the ascendance of the previously discredited Richard Nixon. We even have Jean-Marie LePen playing George Wallace to Sarkozy’s Nixon:

France’s state of emergency—Sarkozy threatens mass deportations

By Antoine Lerougetel 12 November 2005

Jean-Marie Le Pen, leader of the neo-fascist National Front, who received 18 percent of the vote in the runoff for the presidency in 2002, has enthusiastically endorsed Sarkozy’s actions. He said that he was “very appreciative of the permanent tribute being paid to [him] by Messrs Villiers [Philippe de Villiers, ultra-conservative Catholic monarchist] and Sarkozy, by taking up the slogans and the proposals of the National Front, and thus braving official monolithic thinking.”

Sarkozy has gained the ascendancy over the old Gaullists round Chirac, and wrested the chairmanship of the party from the president’s supporters through extreme law-and-order and anti-labour policies and calculatedly insulting denunciations of the youth of the council estates. His harsh crackdown on illegal immigrants has also been a means of attempting to poach Le Pen’s supporters. As the youth riots flared up, he faced criticism from the Chirac-Villepin camp for having provoked the youth by referring to them as “scum” and “gangrene.”

…By imposing a state of emergency, the French ruling elite has moved toward police-state measures. It recognizes that reducing the living standards and rights of workers to make French big business competitive on the globalised world market requires assaulting democratic rights and legal niceties.

All over the formerly (at least relatively) “free world,” measures have been put in place to allow for indefinite detention, the military to be used for domestic pacification, controls on movements of people and goods in “emergencies,” and to weaken worker rights and strengthen corporate powers at the same time as wealth is being funneled upwards to a wealthy super-elite. Why is this happening so fast, right now?