Monday, April 24, 2006

Signs of the Economic Apocalypse, 4-24-06

From Signs of the Times, 4-24-06:

Gold closed at 638.50 dollars an ounce on Friday, up 6.0% from $602.10 the week before. The dollar closed at 0.8103 euros, down 1.9% from 0.8258 at the close of the previous Friday. That put the euro at 1.2341 dollars, compared to 1.2110 dollars the week before. Gold in euros, then, would be 517.38 euros an ounce, up 4.1% from 497.19 at the previous week’s close. Oil closed at 75.12 dollars a barrel on Friday, up 8.2% from $69.45 the week before. Oil in euros would be 60.87 euros a barrel, up 6.1% from 57.35 euros at the end of the previous week. The gold/oil ratio closed at 8.50 on Friday, down 2.0% from 8.67 the week before. In the U.S. stock market, the Dow closed at 11,347.45 on Friday, up 1.9% from 11,137.65 the Friday before. The NASDAQ closed at 2,342.86 Friday, up 0.7% from 2,326.11 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 5.01% down two basis points from 5.04 the week before.

The mainstream media discovered gold and precious metals last week, having to explain the sharp rise in the last two weeks. Unfortunately for the media, the causes are hard to avoid: massive triple deficits in the United States and the apparently serious threat of an attack on Iran, or maybe Venezuela. Many analysts see no way around war in Iran short of an overthrow of the Bush/Neocon presidency, something that would also be bad for the dollar and good for gold.

The visit to the United States by Chinese president Hu this past week, had implications for all of the issues outlined above. China owns a great deal of U.S. government debt, and China’s patience with the United States is one of the main reasons the dollar hasn’t collapsed already. Maybe China, with a seat on the U.N. Security Council and a hold of the U.S. dollar by the throat, can be the one who can get a message through Bush’s thick skull not to attack Iran.

While we can only speculate on what was said about Iran and Venezuela during the meetings between Bush and Hu, the debate within the U.S. military is becoming unusually public, a fact that signifies strong opposition to further Bush/neocon wars in the military.

Could the following scenario, leaked to TBR News, be playing out?
April 17, 2006: “One of my best sources for Asian/PRC information is the bureau chief of a major international news service, now stationed in Beijing. He sent me. this morning. a thirty page email containing his views on the current Sino/US relations, both economic, political and military…

The Chinese PRC has grown tired of trying to make any sense of the weird Bush foreign policies, let alone try to come to reasonable grips with them. These two countries do an enormous amount of profitable business with each other. The PRC holds billions of dollars of U.S. Treasury notes and if they became angry and disposed of them at cheap prices on the world bourses, the result would be an economic catastrophe. China has a huge population and an enormous military establishment. China has atomic weaponry and the means to deliver them. China has no oil and needs it badly for its burgeoning economy. China buys oil from Venezuela and Iran. The Bush Administration has clearly indicated their strong desire to oust both governments by internal (read CIA) subversion or, as a final resort, threats of military action. The US has interfered with PRC/Taiwan relations, threatening the PRC with vague military action in the event of hostilities between the two entities. Now, China has determined to draw a line in the sand between themselves and the unstable Bush people. They are going to say, in public, that the PRC will certainly offer support to any other country (read Iran and Venezuela) who feel themselves physically threatened by the Bush people. Beijing has told Bush to butt out of their economic business or China will consider this continued mindless nonsense as a threat to China and act accordingly.

Egged on by the powerful Israeli political lobby and the violently pro-Israel neo cons (who basically influence Bush’s foreign policy in the Middle East to the point of absolute control) Bush has leaked information that the United States “may well” resort to nuclear attacks on Iran because of their alleged building of atomic weapons (that can only threaten nearby Israel and not the United States.) There is no doubt that such military plans exist. They were drawn up before the 9/11 disaster by the American military, at the request of Secretary Rumsfeld and the Vice President with the full concurrence of Bush. Staff talks between the IDF representatives and American military planners were instituted and the final plans were put into a safe in the Pentagon in the event that they were needed.

Bush’s growing fury with the government of Iran, for ignoring his bluster and threats, caused him to order the leakage to the US media of the Iranian Solution. There is no doubt this is a genuine plan but there is serious doubt if it will ever be implemented. From a strictly military logistical point of view, it is impossible of effective implementation. From a domestic, and foreign, political view, it has proven to be a public relations disaster.

Bush is seen by an increasing number of domestic and foreign leaders as mad as Caligula and someone who will lead this country into a hecatomb from which it might never recover.

The Italian prime minister is now afraid to leave office because there is a very probable criminal indictment waiting for him once his immunity has been lifted. A number of the Bush people, viz Cheney, Rice, Rumsfeld, Rove and the leadership of the neo cons strongly fear that some such public vengeance will be wreaked on them if and when Bush leaves the scene. This is the main reason why ultra-right Republicans introduced a measure in Congress to repeal the 22nd Amendment to the Constitution that limits a president to two terms. This failed to loud laughter but the idea is still there.

Bush, who is a terrible physical and moral coward, has similar fears of retribution for the enormous death tolls he has become responsible for plus the incredible looting of the public treasury and embezzlement of public funds by his loyal, and greedy, supporters.

Men afraid of retribution can be very dangerous and now that China is calling Bush’s bluff, it will be interesting to see what he and his poison dwarves will do next.”

According to George Ure,
The visit of Chinese president Hu Jintao with Bill Gates up in Seattle is important. What's being said publicly is that US-China ties must be strengthened. But there's a lot more to it than that.

China is in the position of being a shoemaker for poor people, when it comes to US trade. Right now, China has been lending the poor people (the US) money (buying our debt) in order that the shoemaker can keep making shoes.

But at some juncture - and we think it's close at hand - the shoemaker will say "we have other people who want to buy our shoes, so we won't lend you poor people are much money to buy shoes.

Then the roof falls in on the poor people and the dollar collapses as ever bigger piles of paper are printed. you don't want to see what hgappens when the music stops.

The other warning likely delivered by Hu is that Condi and the neoCON's better watch their step in trying to whip up/create a frenzy to bomb Iran. China is strengthening ties with Iran by pushing for their membership in the Asian Bloc, and I wouldn't be surprised to see China sign mutual defense pacts with Iran, Venezuela, and any other resource rich country the neoCON's are drooling over. Peg that somewhere between a guess and prediction.

Events taking place right now in Nepal can only add to the impression that China is on the rise and the U.S. empire is falling. According to Wayne Madsen,
A real "themed" revolution now taking place in Nepal. Pro-democracy and leftist forces in Nepal are poised to oust Nepal's King Gyanendra in a bona fide "people's revolution". This is not a neocon-engineered public relations stunt like the "Rose Revolution" in Georgia and the "Orange Revolution"" in Ukraine, but an actual grass roots revolution to oust a royal dictator who took power after a U.S. and Indian engineered coup saw the mass regicide of the former royal family in June 2001. The genocide was automatically blamed on a drunken Crown Prince Dipendra. However, as WMR has reported, the coup was actually engineered by Gyanendra and Pentagon and Indian intelligence agents who did not like the policies of the murdered King Birendra (presumably supported by his heir Dipendra) in pursuing a power sharing arrangement with Maoist guerrillas. The course of action taken was to eliminate Birendra's entire line of succession to the throne. Although the international media bought the "Crown Prince kills family" story, many papers and wire services are now using the words "alleged" and "purported" in referring to the "official story" of the regicide.

Although the Bush administration has rushed military equipment and mercenary advisers to bail out Gyanendra, who is an old friend of arch-war criminal Henry Kissinger, the United States, bogged down in Iraq and Afghanistan, is in no position to save the "God King" of Nepal. Soon, the Bush administration will have to contend with a new "people's republic" on the Indian subcontinent.

The fact that Bush chose this point of weakness to insult and snub the Chinese president boggles the mind. Bush seems to be trying as hard as he can to crash the economy, insulting an increasingly powerful lender and business partner and scaring the daylights out of the world with war talk that will only send oil and gold skyrocketing. Xymphora thinks that is the point:
The oil reason for Iran talk

Oil companies pump oil out of the ground, refine it, and move it. They pay a pittance to the countries they lift it from (Chavez is on the hot seat, mainly because he is trying to change this), and a relatively small amount on their other costs, which are pretty much fixed. The supply is always about the same, and the demand is always about the same. Oil is an addictive substance, and people seem prepared to pay whatever they can be fooled into paying, until they are literally incapable of paying more and the economy collapses. If oil is $10 a barrel, oil companies lose money; if it is $60 or $70 a barrel, they make hundreds of billions of dollars a year. The job of oil company executives is to arrange for people to pay the higher amount, which they do through various kinds of advertising and spin, largely based on raising questions of possible future supply problems. The actual day-to-day amounts of oil available on the market varies very little, due to the fact that enormous amounts of it are always available in storage, but the executives have to find varied ways to make people think there is an upcoming crisis. This scam works until they cause a recession. During the recession they sell much less oil at a much lower price, thus keeping the oil in the ground for when they can sell it at a higher price.

Oil prices were sagging, so we recently heard, out of the blue, that the Kuwaiti oil fields were failing. There was no evidence for this, but it succeeded in keeping the price up for a while. Keeping the price per barrel as high as possible is the single most important reason for all the talk about Iran. All the talk about the United States wanting to control the oil fields of Iraq or Iran is more spin; the key is to control the oil market.

Meanwhile average families are feeling the squeeze of trying to fund record profits for the oil industry and nine figure payouts for their CEO’s.

The very rich in America: “The kind of money you cannot comprehend”

By David Walsh

19 April 2006

“Let me tell you about the very rich,” F. Scott Fitzgerald famously wrote in a 1926 story, “They are different from you and me.” But even Fitzgerald could not have imagined how different “from you and me” the very rich would become in America eight decades later.

The sums that the very wealthy have at their disposal in the US are almost unimaginable: Oil executive Lee Raymond receiving some $400 million in a retirement package; the 2005 compensation of bank chairman Richard Fairbank totaling some $280 million; Omid Korestani, head of Google’s global sales, exercising stock options providing him with $288 million last year.

The accumulation is brazen. What once would have been considered a somewhat discreditable fact of social life, the proliferation of billionaires, is now hailed as a sign of America’s success. The demise of the Soviet Union and the supposed absence of any alternative to capitalism, the putrefaction of the AFL-CIO trade unions, the ignominious collapse of American liberalism and the lack to this point of broad-based, organized political opposition to the ruling elite and its two parties have rendered the American financial aristocracy “dizzy with success.” These people have lost their heads.

In the face of public outrage over oil company profits and soaring gasoline prices, Exxon arrogantly defended Raymond’s hundreds of millions, arguing that they were rewarding the executive’s “outstanding leadership of the business, continued strengthening of our worldwide competitive position, and continuing progress toward achieving long-range strategic goals.” The company added that it considered Raymond’s compensation package “appropriately positioned.”

In a study published in October 2005, three accounting professors reported that negative, even occasionally scathing press coverage, “does not substantively change corporate behaviour with regard to pay packages.” The American establishment is all but impervious to the sentiments of the broad masses of the population. In response to a recent report detailing the immense and growing social gap, a spokesman for New York state’s Business Council told a reporter that the incomes earned by his state’s rich were “something that everybody who cares about New York should be pleased about.”

An insulated world of immense wealth exists as never before, at least in modern US history. The number of Americans with assets of $1 million or more reached 7.5 million in 2004, according to a survey conducted by the Spectrem Group. Beyond that, however, are those who possess “Ultra High Net Worth” (a mellifluous term invented by Merrill Lynch circa 2001): individuals in households with $5 million or more in net worth. In a country of 300 million people, the UHNW form a very small percentage of the population, but a not insignificant number in absolute terms. Economic, political and cultural life in America is to an enormous extent organized for their benefit.

This is not simply obscene or unjust, it is socially irrational and immensely destructive. How is it possible to allocate resources, repair and renew the infrastructure, carry out any type of long-term economic planning, cure any social ills, when the official guiding principle is the ability of an oligarchic elite to accumulate ever-greater personal wealth? The gravitational pull of such wealth asserts itself in every aspect of life.

…So we learn that Microsoft’s Paul Allen owns a $250-million, 414-foot “gigayacht,” with seven decks, two helicopter landing pads, a swimming pool, a basketball court, an infirmary, a garage for Land Rovers, a movie theater, a concert space for 260 and a recording studio. Not to be outdone, Larry Ellison of software giant Oracle had his giant yacht built 452 feet long. Ellison’s vessel has five stories, 82 rooms, “a wine cellar the size of most beach bungalows, a dozen yacht-length tenders, and a generator capable of providing enough electricity for a small town in Idaho or Maine... Final cost: $377 million.” (Associated Press)
The wealthy elite are also purchasing their own widebody airplanes, reports Business Week—Airbus A340s and Boeing 777s, which list for over $100 million—as “airborne penthouses.” Customized outfitting may add $25 to $30 million to the cost.

The “supercar” business is also thriving. Ocean Drive, one of the new magazines aimed at the affluent, carries a piece on Michael Fux, whose Sleep Innovations manufactures Memory Foam products. Fux has collected some 50 luxury cars. He recently took possession of a $2 million Ferrari FXX, one of only 20 in the world.
USA Today, in a piece describing the new “super-rich supercar fanatics” who collect Ferraris and Maseratis and Bugattis, cites the comments of one auto broker in southern California, “There’s a whole new breed of collector that has emerged in the last three-four years. Almost all make the kind of money you cannot comprehend.”

Yet great unease persists in these circles. A yacht broker told Associated Press that “a sea change in attitude among America’s superrich” has taken place in the wake of September 11. “Clients are telling me, ‘Hey, I could have been in the Twin Towers. That could have been me jumping out a window.’ The thinking among wealthy people now is, you can die anytime. Nobody can protect you. So you might as well spend your money now and enjoy it.”

…The term “conspicuous consumption,” coined by Thorstein Veblen in The Theory of the Leisure Class (1899), hardly does justice to the current situation. There is a considerable element of recklessness, even desperation, in the obsessive spending. Throwing money to the wind hardly speaks to a sense of historic optimism or confidence among the elite in its own future or the general health of the American social order.

At the height of US global economic hegemony, in the 1950s, corporate directors were expected to lead rather sedate lives, modestly tending to the nation’s economy. Of course they lined their pockets, but they were not expected to live like pharaohs.

In 1957, Fortune magazine reported that some 250 or so individuals in the US were worth $50 million or more. The wealthiest of them, oil tycoon J. Paul Getty, stood all alone in the $700 million to $1 billion category. The equivalent of $50 million today—some $350 million—would not place an individual anywhere near the richest 400 people in the US, according to Forbes’s 2005 list (which begins at $900 million). Getty would find himself somewhere between 31st and 42nd on the list.

The roll call of the wealthiest Americans a half-century ago included famous names—Rockefeller, Harriman, Mellon, duPont, Astor, Whitney and Ford, along with a quartet associated with General Motors, Alfred P. Sloan Jr., Charles F. Kettering, John L. Pratt and Charles S. Mott. These were all ruthless capitalists, but their fortunes were based, directly or indirectly, on the growth of the productive forces.

Today, the list of the super-rich reveals an extraordinary growth of parasitism. One indication is Forbes’ listing of the “400,” which includes an extraordinary number of people whose wealth, according to the publication, is derived from “Investments,” “Hedge Funds,” “Leveraged buyouts,” “Real estate,” “Fashion,” etc. The “captains of industry” of old are few and far between.

If trends continue there will be only owners and the owned. How does it feel to be a comfortable wage slave in the United States? Julian Edney shows how a small but significant number of pathological people in key positions in the workplace can sap the energy and creativity of the normal majority:

Slaves to Debt: Can Our Economy Run Without Fear?

By Julian Edney
April 22 / 23, 2006

A survey question that is becoming increasingly popular asks people if they like their jobs. Depending on which survey you read, somewhere between 40% and 50% of American workers say they don't like their work (1,2).

What is it exactly people don't like at work? We get a clue from the survey that asked what people liked best about their jobs (3). The one aspect respondents liked was not being there. Funny perhaps, but apparently it is something to be found at the job site that makes work so bad. We find out from other sources (4,5) that it's the people.

Fear comes in varieties. Humans can experience a whole botany of these feelings, varying from flicks of worry to cross-eyed terror, but stresses on the job are now so serious, according to a New York Times report by John Schwartz titled "Sick Of Work," that 53% of people keep going back to the job, that "echo chamber of angst," despite feeling overwhelmed (6). We do it so regularly that eight hours of loathing is an everyday routine. CNN now offers how-to-cope tips for workers who hate their jobs in the same dandy, colorful format as the weather and entertainment (7).

Fear on the job? Of course there are other difficulties, the eyestrain, the hurried meals when meeting deadlines. But frequent descriptions of supervisors and coworkers at some job sites are frightful, in fact they sometimes sound like a tribe of mutants. In her book Red Ink Behaviors, Jean Hollands gives illustrations. The Intimidator (loud, domineering, abusive, throws tantrums), the Stressor (spills her chronic frustration over coworkers in sarcasm and unending interruptions), the Micromanager (requires written reports at every turn) the Withholder (has data necessary for operations which she will not share), the Inconsistent (high drama, unpredictable hysteric, lapses into stream-of-consciousness communications) and the brilliant but hostile Techno-specialist (8).

These personalities can be extremely judgmental and may turn rabid when confronted, sending waves of anxiety across the office. Ranting supervisors and other rageaholics are so frequently listed that "the office bully" is now a cliché (9,10). This is what many workers fear, and they begin to sprout everyday symptoms: chronic fatigue, suspiciousness, depression (11). These bullies are devastating to company morale. (We may try the nice middle-class term, anxiety. But anxiety is fear about the future.) Cubicle workers patch their emotions together to get through the day.

In their book Driving Fear Out of the Workplace, Ryan and Oestreich further explain this is difficult to change because the perpetrators are often hard-to-replace specialists. They are often extremely competitive personalities, interpreting every successful intimidation as a personal win (12).

So why do workers go back?The simple answer is, we owe.

It turns out that the average American is also about $8,500 in debt (aside from mortgage--mostly on credit cards), and if payments are late, interest charges up to 30% are common, but many states have no usury laws, so credit card companies can charge what the market will bear. A debt can grow by leaps. Bankruptcy laws have recently been changed, so now there is little or no escape; lenders can pursue debtors for life. Many credit card holders get on a financial treadmill that requires them to make ever larger monthly payments to keep themselves solvent. Eventually we are up to our nostrils in obligation.

If you fall behind on your debt payments, you'll meet another bully, the debt collector. From distant phones which nobody can trace, these unblinking intimidators wait until you get home and then call you persistently to make sure you never forget about the money you owe. Legally or illegally, they threaten criminal charges, garnishment, property confiscation, or revealing your purchases to your boss and relatives (13). About half of Americans say they worry about debt, and 2 in 10 say they worry about debt most or all of the time (14).

Debt payments are a scourge.

Back at work, the manager understands. In 1960 Douglas McGregor wrote a book The Human Side of Enterprise detailing two different management styles. The more common (especially in bigger companies) he dubbed "Theory X," a theory managers carry around in their heads: that humans inherently dislike work, and they have to be threatened and coerced. These managers openly use a hard, punishing style to get people to produce; they also believe people like being controlled. (Theory Y bosses are convinced people are naturally happy and creative, and that job satisfaction is a motivator)(15). Theory X supervisors are very common. They can induce saturnine hopelessness in the easiest of jobs.

From intimidation at work, to debt fears at home, and back again. People bear these fears in an ancient silence born of shame, believing they are failures in a system which otherwise seems free and open because everybody else on TV looks like they're having a good time.

Some Americans are making good money on the job, but at the other end, according to a Pew Survey, roughly 20% of people say they have insufficient funds to buy needed clothing and food (16). Many people are worried about losing their jobs (60% see a job scarcity, with so many jobs going overseas (17)).So we can add to the catalog of fears another type, the fear of consequences. "What would happen if?" I'm guessing most people in debt have let their minds stray over the changes of scenery that would ensue if they lost their jobs, lost their credit, lost the car, wound up in court, lost the house, etc. ­ all the more possible if they have divorce stresses, support payments, large medical costs, or are in a legal suit.

The manager understands.

Which is why he can act with impunity.If the stress is temporary, we may feel temporarily ill, but people who bear this for years develop other signs: a few drinks each lunch, the inaudible voice of the seriously depressed, the trembling hands. The effects of stressful events add up. Later, the praying on the way to work, the paranoia, road rage, alcoholism, the sobbing in the toilets, and domestic violence. An astonishing 30 million Americans are now swallowing prescription antidepressants. The same New York Times report says "Workplace stress costs the nation $300 billion each year in health care, missed work, and the stress reduction industry that has grown up to soothe workers and keep production high"(18).Most of us work because we have no other choice (19). It is economic coercion. The less money you have the less liberty you have. Millions of people lead torn up lives in which pursuit of a personal ideal, or dream, or self-actualization, is a grim joke. Instead, as Studs Terkel reported after interviewing hundreds of people for his book Working, "To survive the day is triumph enough for the walking wounded among the great many of us"(20).

But few writers have stopped to make the broader point, that this large proportion of the population living in degrees of coercion and fear is incompatible with enlightened democracy. Barbara Ehrenreich did, in her book Nickle and Dimed: "We can hardly pride ourselves on being the world's preeminent democracy, after all, if large numbers of citizens spend half their waking hours in what amounts, in plain terms, to a dictatorship"(21).

Despite the staggering losses in production revenues and the emotional and medical costs, it doesn't look as if all this is going to change soon. Rather than taking the steps to change these toxic personalities, we rationalize. We lurch forward another year under the banner, business is business.

It is fear. If workers had no fear of the consequences, they would not work.

Could our economy run without fear? It is a practical question. What if all people living in this quiet desperation stopped working? True, our economy is not entirely composed of fear, indeed it is not entirely composed of workers. But if you removed fear of consequences, we don't need calculators to figure that the system would come to a collapsing halt.

There is a powerful resistance to change. From the point of view of employers, of course, fear is useful. It is a goad. It keeps workers pulling at the oars.

The science of economics will not truck with this, of course. Fear is not a rational factor. They call it an "externality," because it will not fit into their dry formulas.

Perhaps we can try this image. We have been talking about 40% to 50% of the population, so perhaps the economy floats on fear like a boat half in, half out of the water. Technically the water is 'external' to it. Then, like a boat, the economy doesn't need fear to exist; but it works much better with it.

Julian Edney is the author of Greed: a Treatise in Two Essays. Born in Uganda, he now teaches college in southern California and can be contacted through his website.

1. Many employees dislike their job and employers. (2005, May 17). Wall Street This is a report and summary of a Harris Poll. 2. Only half of Americans like their jobs. (2002, August 21) FoxNews: Reuters report of survey conducted by the Conference Board.
3. Ibid
4. Ryan, K and Oestreich, D. Driving fear out of the workplace. San Francisco: Jossey-Bass Publishers, 1998.
5. Hollands, J.A. Red ink behaviors: Measuring the surprisingly high cost of problem behaviors in valuable employees. Mountain View, CA: Blake/Madsen Publishers, 1997.
6. Schwartz, J. Sick of work.(2004, September 5). New York Times, Health section. A series of three articles about the enormous costs of stress at work.
7. Lorenz, K. Hate your job? 10 ways to cope. (2005, July 15).
8. Hollands, Ibid.
9. Workplace stress self assessment.(2006, April 11). 10. Getting along with your co-workers. (2004 September 17).
11. Neils, H. 13 signs of burnout and how to help you avoid it. (Undated). 12. Ryan, K and Oestreich, D. Ibid.
13. Lazaroni, l. Debt collector horror stories. (20054, September 20) 14. Lester, W. Half of Americans worry about debts. (Undated). AP report on AP-Ipsos poll.15. McGregor, D. The human side of enterprise. (1960/2005) New York: McGraw-Hill.
16. Economic concerns fueled by many woes.(2005, June 1). Pew Research Center survey reports on economy-related sources of worry for Americans.
17. Ibid
18 Schwartz, J. Ibid.
19. Curry, A. Why we work. ( 2004, February 3) US News and World
20. Terkel, S. Working. New York: The New Press, 1972.
21. Ehrenreich, B. Nickel and dimed: On (not) getting by in America. New York: Henry Holt and Company, 2001.

Author: Julian Edney teaches college. His recent book Greed: A Treatise in Two Essays picks up these arguments in 'Greed II'. He can be contacted through his website.

What Edney has described is the results of a process of ponerization, a term coined by the Lobaczewski in Political Ponerology. Edney in fact succumbs to the hopelessness engendered by ponerization (the careful takeover of organizations by psychopaths who can cooperate with each other) by failing to conceive of an economy of confident creativity. The economy we have now may need fear, but we can imagine one that doesn’t.

Monday, April 17, 2006

Signs of the Economic Apocalypse, 4-17-06

From Signs of the Times, 4-17-06:

Gold broke the $600 dollar mark for the week on Friday, closing at 602.10 dollars an ounce up 1.6% from $592.70 the week before. The dollar closed at 0.8258 euros on Friday, down 0.1% from 0.8269 at the previous week’s close. That put the euro at 1.2110 dollars, compared to 1.2093 the week before. Gold in euros would be 497.19 euros an ounce, up 1.4% compared to 490.12 at the end of the previous week. Oil closed at 69.45 dollars a barrel, up 3.1% from $67.38 for the week. Oil in euros would be 57.35 euros a barrel, up 2.9% from 55.72 at the end of the previous week. The gold/oil ratio closed at 8.67, down 1.5% from 8.80 the Friday before. U.S. stock markets were closed on Friday, but the Dow closed the week at 11,137.65, up 0.2% from 11,120.04 for the week. The NASDAQ closed at 2,326.11, down 0.6% from 2,339.02 at the end of the previous week. The yield on the ten-year U.S. Treasury note broke the 5% mark, closing at 5.04%, up six basis points from 4.98 the week before.

Gold, oil and U.S. interest rates continued rising last week, rises that do not bode well for the imperial economy. However, as we have been saying for the past year, the future of the economy has more to do with non-economic events than economic ones. Specifically, if the United States attacks Iran (as seems increasingly likely), it’s all over. Economic self-interest no longer explains the actions of those driving world events right now. The Neocons worship power, not money. In spite of the official economic ideology of the U.S. empire, they have little use for neoliberalism, except insofar as it advances their ambitions for power and control. Here is Kurt Nimmo in “The Neocon Plan to Wreck the Economy” quoting Shadia Drury, an astute academic observer of the Neoconservative movement:

Strauss borrowed a lot from the “Marxist of the right,” Alexandre Kojève (a student of the Nazi lover Martin Heidegger), and the Nazi jurist and advocate of totalitarianism, Carl Schmitt. “Kojève lamented the animalization of man and Schmitt worried about the trivialization of life,” explains Drury. “All three of them were convinced that liberal economics would turn life into entertainment and destroy politics; all three understood politics as a conflict between mutually hostile groups willing to fight each other to the death. In short, they all thought that man’s humanity depended on his willingness to rush naked into battle and headlong to his death. Only perpetual war can overturn the modern project, with its emphasis on self-preservation and ‘creature comforts.’ Life can be politicized once more, and man’s humanity can be restored…. The combination of religion and nationalism is the elixir that Strauss advocates as the way to turn natural, relaxed, hedonistic men into devout nationalists willing to fight and die for their God and country.”

Drury continues:

If America fails to achieve her “national destiny”, and is mired in perpetual war, then all is well. Man’s humanity, defined in terms of struggle to the death, is rescued from extinction. But men like Heidegger, Schmitt, Kojève, and Strauss expect the worst. They expect that the universal spread of the spirit of commerce would soften manners and emasculate man. To my mind, this fascistic glorification of death and violence springs from a profound inability to celebrate life, joy, and the sheer thrill of existence.

Our current crop of Straussians, well ensconced in the White House and the Pentagon, are in the process overturning the “modern project” and a not so modern project, the Constitution and the Bill of Rights. This will be accomplished through economic catastrophe and engineered war. Deprived of opportunity, income, and even food—and for those unable to provide for themselves, consider the Super Dome in New Orleans as a grim reminder—the masses will do whatever is required, especially if darksome devils and frightful Islamic enemies are unrelentingly portrayed at the ready with dirty nukes. In dire straits, with the prospect of wheelbarrows of money to buy loaves of bread as inflation shoots skyward by the hour, people will do almost anything asked of them.

We have also noted the bizarre disconnect between economic news and political news lately. Many people who, if you press them, would admit to a great deal of fear about political events of the near future, seem capable of economic optimism. Recent news in the United States about corporate profits, supposedly low unemployment rates and rises in stock prices have given the financial optimists the upper hand. How that can be squared with the news that the U.S. military already has special forces in Iran identifying targets for a bombing campaign, bombing that may well be nuclear, is beyond me. It must have something to do with the cheerful voices on our televisions. Most likely, that is to ensure that we keep our money in their markets until they decide to pull the plug. However, it must be noted that fear is seeping into the financial news with the belated coverage of the rise in gold prices:

Gold’s bull run could reach $850

By Chris Flood

April 12 2006
The current bull run for gold could push prices above the 1980 record high of $850 a troy ounce, according to the Gold Survey 2006 from GFMS, the precious metals consultancy.

“Levels safely over $600 are now in our sights and further hefty gains over the next year or two are quite possible - in the right circumstances, the 1980 high of $850 could even be taken out,” said Philip Klapwijk of GFMS.

Gold is benefiting from a general rise in investor interest in commodities both for speculative purposes and as an alternative asset to equities, bonds and cash.
The success associated with investing in gold since 2001 is attracting new players, such as pension funds, and could bring a significant increase in new investment flows into a comparatively small market.

Investment flows are expected to be sustained by the the high probability of a sharp slowdown in US economic growth while greater global inflationary pressures and political tensions in the Middle East are also expected to be supportive factors.

The optimists, on the other hand, even spin the rise in U.S. interest rates positively. According to this view, the yield on the ten-year U.S. Treasury note broke the 5% level because bond traders were worried about too much economic growth! No mention that interest rates on the U.S. dollar will need to rise sharply if there is any hope at all of avoiding a dollar crash, due to the massive triple deficits in the United States. Nor is there any mention of the disastrous effects that rise will have on the housing market. Sure 5% is low by historical standards but the level of personal debt is way beyond any historical comparison. With the risky interest only and adjustable rate mortgages people have taken out recently, small increases in already low rates can have a catastrophic effect.
U.S. 10-Year Note’s Yield Rises to 5%, Highest Since June 2002

April 13 (Bloomberg) -- U.S. 10-year Treasury note yields rose to 5 percent for the first time since June 2002, a harbinger of higher borrowing costs for everything from home loans to corporate bonds.

Investors are pushing yields higher to compensate for the risk economic growth will cause inflation to accelerate, eroding the value of the notes’ fixed payments and leading the Federal Reserve to add to 15 interest-rate increases. Lenders use 10-year yields in setting the rates they charge consumers, while investors use them to determine yields on debt sold by companies.

“Growth expectations are improving around the world,” said Harry Harrison, global head of U.S. interest-rate products at Barclays Capital Inc. in New York, one of the 22 primary dealers of government securities that trade directly with the Fed. “There is further to go in this sell-off.”

Yields extended their climb after a government report showed retail sales increased last month more than analysts forecast. The 10-year note’s yield, which moves inversely to its price, rose 7 basis points, or 0.07 percentage point, to 5.05 percent at 4 p.m. in New York, according to Cantor Fitzgerald LP. The yield is up from 4.39 percent at the end of last year.

The price of the 4 1/2 percent note due February 2016 dropped more than 1/2, or $5 per $1,000 face amount, to 95 25/32.

“People are going to hear about it tonight on the TV, the highest yields in four years,” said William Hornbarger, chief fixed-income strategist at St. Louis-based brokerage firm A.G. Edwards Inc., which manages about $331 billion. The yield may climb to 5.38 percent by mid-year, he said.

Yields also are rising on speculation higher short-term interest rates and improving economic growth prospects in Japan and Europe will entice people in those regions to invest domestically rather than in U.S. Treasuries. Japan, the biggest foreign owner of U.S. government debt, may increase borrowing costs from zero percent as soon as July.

‘The Force’

“We underappreciated the force of foreign buying in anchoring down rates” for the past year, said John Ryding, chief economist at primary dealer Bear Stearns Cos. in New York. With Japanese and European yields rising, making them more appealing relative to U.S. Treasuries, “some of that foreign support is diminishing,” he said in an interview.

Ten-year yields are up 14 basis points since April 6, the day before a Labor Department report fanned concern that a strengthening labor market, in combination with rising commodity prices, will lead to more Fed rate increases.

Economists have been lifting their 10-year-yield forecasts. The median estimate of 78 analysts surveyed by Bloomberg News from April 3 to April 7 is for the yield to end this quarter at 5 percent, up from a 4.8 percent median forecast a month earlier.

…“Who’s really complaining about interest rates?” said Mark Ficke, head of Treasury trading at primary dealer BNP Paribas Securities Corp. in New York. “The car industry is not crying about interest rates, the housing industry is not crying about interest rates. Corporate America continues to roll their debt. Historically these are still relatively low yields.”

Before 1998, 10-year yields had not traded below 5 percent since 1967.
Traders since March 30 have been fully pricing in another rate increase to 5 percent at the Fed’s next meeting on May 10, interest-rate futures show. The odds of a 17th straight increase on June 29, to 5.25 percent, today is 58 percent, up from zero as recently as two weeks ago.

Japanese Buying

Investors in Japan, including the Ministry of Finance, reduced the amount of U.S. government debt they held last year for the first time since 2000 as the dollar rose about 14 percent against the yen. The $668 billion they owned at the end of January was the least since June 2004, down from a peak of $699.4 billion in August 2004, Treasury Department data show.

Economic growth may slow during the current quarter as a result of the rise in yields, said Ashok Varadhan, head of U.S. dollar interest rate products trading at primary dealer Goldman, Sachs & Co. in New York. “Since 2003, sharp moves up in higher long-term yields have preceded periods of soft data,” he said in an e-mailed response to a question.

The average rate on a 30-year fixed mortgage rose to 6.49 percent this week, the highest since 2002, according to McLean, Virginia-based Freddie Mac, the second-largest buyer of U.S. mortgages. The rate is up from last year’s low of 5.53 percent in July.

The increase means a consumer taking out a $250,000 fixed- rate mortgage for 30 years will pay about $154 a month more in principal and interest.

In the corporate bond market, investment-grade rated companies pay an average of 5.92 percent in yield to sell debt, the highest since August 2002, according to Merrill Lynch & Co.

Notice how the chief economist of Bear Stearns glides quietly over the worst news, floating on clouds of understatement and euphemism:
“We underappreciated the force of foreign buying in anchoring down rates” for the past year, said John Ryding, chief economist at primary dealer Bear Stearns Cos. in New York. With Japanese and European yields rising, making them more appealing relative to U.S. Treasuries, “some of that foreign support is diminishing,” he said in an interview.

That has been one of the great fears: that “foreigners” will not buy as much U.S. government debt. Who can blame them? Without that support, however, the dollar will plummet and interest rates will rise sharply.

This is the environment in which Bush, whose U.S. political support has completely collapsed, is planning to begin a third losing war in five years. Theories of behavior based on rational self-interest of well-meaning actors with souls and consciences cannot explain such madness. Luckily for us, at this crucial moment in history, a book many years in the making has appeared in print that can make sense of this madness, Political Ponerology by Andrew Lobaczewski. According to Lobaczewski, societies can be taken over by well-organized groups of psychopaths (people without consciences) who form a “pathocracy,” rule by psychopaths. These pathocrats act in much the same way as the Neocons described by Nimmo and Drury. Here is Lobaczewski:
Psychopaths are conscious of being different from normal people. That is why the “political system” inspired by their nature is able to conceal this awareness of being different. They wear a personal mask of sanity and know how to create a macrosocial mask of the same dissimulating nature. When we observe the role of ideology in this macrosocial phenomenon, quite conscious of the existence of this specific awareness of the psychopath, we can then understand why ideology is relegated to a tool-like role: something useful in dealing with those other naive people and nations. [...]

Pathocrats know that their real ideology is derived from their deviant natures, and treat the “other” – the masking ideology - with barely concealed contempt

The names and official contents are kept, but another, completely different content is insinuated underneath, thus giving rise to the well known double talk phenomenon within which the same names have two meanings: one for initiates, one for everyone else. The latter is derived from the original ideology; the former has a specifically pathocratic meaning, something which is known not only to the pathocrats themselves, but also is learned by those people living under long-term subjection to their rule.

We need to keep that doubletalk technique in mind when the neocons talk about “democracy,” “freedom,” or “free-markets.”
… This privileged class of deviants feels permanently threatened by the "others", i.e. by the majority of normal people. Neither do the pathocrats entertain any illusions about their personal fate should there be a return to the system of normal man. ...

If the laws of normal man were to be reinstated, they and theirs could be subjected to judgment, including a moralizing interpretation of their psychological deviations; they would be threatened by a loss of freedom and life, not merely a loss of position and privilege. Since they are incapable of this kind of sacrifice, the survival of a system which is the best for them becomes a moral imperative. Such a threat must be battled by means of any and all psychological and political cunning implemented with a lack of scruples with regard to those other "inferior-quality" people that can be shocking in its depravity. ...

Pathocracy survives thanks to the feeling of being threatened by the society of normal people, as well as by other countries wherein various forms of the system of normal man persist. For the rulers, staying on the top is therefore the classic problem of “to be or not to be”…

A ponerological perspective can help us understand the hostility of the Bush neocons to Hugo Chavez’s Venezuela. Much more than just oil is at stake. What Chavez has done is use oil wealth to try to setup a “society of normal people.” The pathocrats cannot let that stand. The pathocracy has sunk its claws so deeply into U.S. society that it is hard for us in the United States to even imagine what a society of normal people could be. That is no accident, but such imaginative impoverishment can only be maintained over the long run if no models (like France or Venezuela) exist.

Monday, April 10, 2006

Signs of the Economic Apocalypse, 4-10-06

From Signs of the Times, 4-10-06:

Gold closed at 592.70 dollars an ounce on Friday, after having broken the $600 mark earlier in the day, representing an increase of 1.6% from last week’s $583.50 price. The dollar closed at 0.8269 euros on Friday, up 0.2% from 0.8252 at the end of the previous week. That put the euro at 1.2093 dollars, compared to 1.2118 the week before. Gold in euros, then would be 490.12 per ounce, up 1.8% from 481.52. Oil closed at 67.38 dollars a barrel Friday, up 1.6% from $66.35. Oil in euros would be 55.72 euros a barrel, up 1.8% from 54.75 the week before. The gold/oil ratio closed at 8.80, up 0.1% from 8.79 at the end of the previous week. In the U.S. stock market, the Dow Jones Industrial Average closed at 11,120.04 on Friday, down 0.1% from 11,109.32 for the week. The NASDAQ closed at 2,339.02, virtually unchanged from 2,339.79. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.98%, up 13 basis points from 4.85 the week before.

Last week we looked at the high rate of corporate profits realized lately. With stocks strong, global growth rates high, and profits high, why does the economy feel so bad for most people? The following article contains some clues:

Profits surge to 40-year high
When will corporations spend some of their hoard?

By Rex Nutting, MarketWatch
Mar 30, 2006

WASHINGTON (MarketWatch) -- U.S. corporate profits have increased 21.3% in the past year and now account for the largest share of national income in 40 years, the Commerce Department said Thursday.

Strong productivity gains and subdued wage growth boosted before-tax profits to 11.6% of national income in the fourth quarter of 2005, the biggest share since the summer of 1966. See full story.

For all of 2005, before-tax profits totaled $1.35 trillion, up from $1.16 trillion in 2004 and just $767 billion in 2001.

Meanwhile, the share of national income going to wage and salary workers has fallen to 56.9%. Except for a brief period in 1997, that's the lowest share for labor income since 1966.

"It's a big puzzle," said Josh Bivens, an economist for the Economic Policy Institute. "If this is a knowledge economy, how come the brains aren't being compensated? Instead, the owners of physical capital are getting the rewards."

Despite the flood of cash coming in the door, corporations are investing comparatively little in expanding their operations. Capital spending has been below average, especially considering the strength of the economy, the level of profits and the special tax breaks given to boost investment.

In the fourth quarter, business fixed investment increased just 4.5%. In the past year, investment has risen 6.8%. The growth rate has been falling for the past four quarters.

Some economists are counting on the corporate sector to pick up their investments in the coming year, to replace the economic stimulus that will be lost as the housing market cools.

Profits have been so high because almost all of the benefits from productivity improvements are flowing to the owners of capital rather than to the workers.

While profits are up 21.3% in the past year, labor compensation is up just 5.5%. After adjusting for inflation, population growth and taxes, real disposable per capita incomes are up just 0.5% in the past year.

The economy is good for the very top of the system, and it is bad for the rest of us and likely to get worse. Neoliberal economics has a hard time understanding exploitation. See this, for example from the New York Times:

The Economics of Henry Ford May Be Passé

David Leonhardt
April 5, 2006

HENRY FORD was 50 years old, and not all that different from a lot of other successful businessmen, when he summoned the Detroit press corps to his company's offices on Jan. 5, 1914. What he did that day made him a household name.

Mr. Ford announced that he was doubling the pay of thousands of his employees, to at least $5 a day. With his company selling Model T's as fast as it could make them, his workers deserved to share in the profits, he said.

His rivals were horrified. The Wall Street Journal accused him of injecting "Biblical or spiritual principles into a field where they do not belong." The New York Times correspondent who traveled to Detroit to interview him that week asked him if he was a socialist.

But the public loved it. The country was then suffering a deep recession, and the Ford news seemed to offer hope. Within 24 hours, 10,000 men were lined up outside the Ford employment office in Michigan. The following year, Mr. Ford was mentioned as a future presidential contender.

The mythology around this story holds that Mr. Ford wanted to pay his workers enough so they could afford the products they were making.

In fact, that wasn't his original reasoning. But others made the point, and, in time, it became part of Mr. Ford's rationale as well. The idea became a linchpin in an industrial philosophy known as Fordism.

More production could lead to better wages, which in turn would lead to more spending by the public, yet more production and eventually even higher wages.

"One's own employees ought to be one's own best customers," Mr. Ford said years later. "Paying high wages," he concluded, "is behind the prosperity of this country."

This turned into a pillar of 20th-century economic wisdom. It's time to ask, though, whether Mr. Ford's big idea is as ill suited to this century as his car company seems to be.

By any reasonable standard, the last few years have been bad ones for most people's paychecks. The average hourly wage of rank-and-file workers — a group that makes up 80 percent of the work force — is slightly lower than it was four years ago, once inflation is taken into account. That's right: Most Americans have taken a pay cut since 2002.

But you would never know it by looking at the headline numbers on economic growth. From the standpoint of the broad national economy — the value of the goods and services the country produces — the last few years have been stellar. Despite two wars, soaring oil prices and business scandals, the economy has been growing more than 3 percent a year.

Henry Ford would have no idea what to make of this.

What was so comforting about Fordism was that it suggested that the economy operated on a virtuous, self-reinforcing cycle. Only when the middle class did well could the country do well. And as the country grew ever richer, so would the middle class.

In the last few years, however, the economy has kept growing in large part because high-income families — the top 20 percent, roughly — have done so well and have been such devoted spenders.
Globalization and new technology have helped many white-collar workers make more money, even as those same changes have closed factories and depressed wages for others. Stock portfolios and houses on the coasts, meanwhile, are much more valuable than they once were, making their owners more willing to spend.

In fact, well-off families, not cash-short ones, have been the ones increasing their borrowing and cutting their savings the most in recent years, according to the Federal Reserve. In 1992, the top fifth of households, as ranked by income, accounted for 42 percent of consumer spending. By 2000, the share had grown to almost 46 percent, and it is probably not much different today. That may sound like a small change, but it's an enormous amount of money, a shift of $300 billion a year in spending from the poor and middle class to the affluent.

In Michigan, Ford and General Motors have been cutting thousands of jobs, creating the country's sickest local economy and hurting even well-to-do suburbs. Yet the Suburban Collection, a car dealership north of Detroit, sold 90 Bentleys last year, up from 70 in 2004. David Butler, a manager there, said he expected to sell more than 100 Bentleys this year. The car costs at least $180,000. The dealership also opened a Lamborghini showroom in January. It is true that Rolls-Royces aren't selling very well, but the main reason seems to be that Mr. Butler's customers don't feel comfortable being seen in a $300,000 car when the state is suffering so badly. "It's not that they can't afford it," he said. "It's because of the image it would give."

Wages are likely to rise slightly in 2006, but stagnation seems to be the norm over the long term. Except for a span of a few years in the late 1990's, the hourly pay of most workers has done no better than inflation for the last 30 years. Even some Democrats, who have long embraced Fordism, are coming to the conclusion that Mr. Ford's reassuring cycle is not the only thing that can keep the American economy humming. "You don't need an equitable distribution to have a sustainable recovery," said Jared Bernstein, a liberal economist in Washington.

Politically, though, I am not so sure that the current trends are sustainable. Before the 1990's boom lifted wages, stagnating pay had helped cause a series of upheavals: Bill Clinton's election, the Ross Perot and Pat Buchanan phenomena, the Republican takeover of Congress. Today, with the boom fading from memory, protectionism is on the rise, and President Bush's approval ratings are miserable.

So it seems as if now would be a good time to start talking about what to do. There has never been a shortage of ideas: helping more teenagers to finish college, training middle-age workers to switch careers, embarking on public projects like better highways and high-speed trains. Or we could pretend it's still 1914.

I guess wanting all workers to be paid well means we think we are in 1914. To be 21st century, according to the New York Times, means to acquiece in an economy based on a few rich families. The rest of us will be their servants. The logic is strange: because wages haven’t been rising in the United States in the last thirty years, then there is nothing we can do about it, it is a fact of nature, and we should only try to re-train people to do jobs that are being offshored anyway.

In order to eliminate any successful model of high pay, strong economies, the globalizers, in coordinated action, are striking at the heart of social democratic Europe, going after French and German workers, perhaps the best-off in the world. The fact that large majorities in both countries favor maintaining social insurance and worker protection matters to ruling groups only to the extent that such support requires those directing change to change tactics:

CPE à la Merkel: Job protection laws to be gutted in Germany

By Dietmar Henning

4 April 2006

With millions of people in France taking to the streets against attacks on the job security of young people, the Grand Coalition government in Germany is quietly attempting to push through parliament its own version of the CPE (First Job Contract), with provisions that go far beyond those in France.

The coalition pact which the government parties—the Christian Democratic Union (CDU), its sister organisation the Christian Social Union (CSU), and the Social Democratic Party (SPD)—signed last year when they took office specified the extension of the current probationary period for new employees from six months to two years.

During the probationary period, employers can dismiss workers with two weeks’ notice, without cause. The right to compensation or redundancy payments is more or less excluded. If the employment contract does not specify a probationary period, the general dismissal period (i.e., four weeks) applies.

At the heart of the French CPE is the establishment of a two-year probationary period during which employees 26 years of age and younger can be terminated without cause. The regulation specified in the German coalition pact is essentially the same, except that it would apply not only to young workers, but to all new hires, regardless of age.

The fact that no protests have occurred against this measure, and that most people are not even aware of its existence, is to be attributed to the German trade unions. They tacitly supported the creation of the Grand Coalition and are doing everything they can to prevent a mobilisation against it.

At the same time, the events in France are leaving their mark on Germany. On the one hand, the tough stance taken by the French government has encouraged the German employer associations and elements within the CDU and CSU to push for a more rapid dismantling of the social security system and the implementation of “reforms” outlined in the coalition pact. The SPD, on the other hand, is growing nervous over the prospect of mass resistance developing in Germany.

Speaking of Germany, Der Spiegel published an interview with Joseph Stiglitz about the true economic cost of the Iraq War:

Interview with Nobel Laureate Joseph Stiglitz

"The War Is Bad for the Economy"

Nobel Prize winning economist Joseph Stiglitz, 63, discusses the true $1 trillion cost of the Iraq conflict, its impact on the oil market and the questions of whether the West can afford to impose sanctions on Iran.

SPIEGEL: Professor Stiglitz, at the beginning of the Iraq war, the United States administration was hoping to almost break even in terms of the costs ...

Stiglitz: ... they truly believed the Iraqi people could use their oil revenues to pay for reconstruction.

SPIEGEL: And now you are estimating the cost of war at levels between $1 trillion and $2 trillion. How do you explain this difference?

Stiglitz: First, the war was much more difficult than President Bush and his government expected. They thought they were going to walk in, everybody would say thank you, and they would set up a democratic government and leave. Now that this war is lasting so much longer, they constantly have to adapt their budget. It rose from $50 billion to $250 billion. Today, the Congressional Budget Office talks about $500 billion or more for this adventure.

SPIEGEL: That's still by far lower than your own calculations.

Stiglitz: The reported numbers do not even include the full budgetary costs to the government. And the budgetary costs are but a fraction of the costs to the economy as a whole. And compare this to Gulf War number one, where America almost made a profit!

SPIEGEL: Because Germany paid for it?

Stiglitz: Because Germans paid, because everybody paid. We got our allies to pay full price for used equipment, and we got to refurbish our military. This time, most of the other countries were not willing to do so again.

SPIEGEL: Did Bush just miscalculate, or was he misleading the public about the true costs of war?

Stiglitz: I think it was both. He wanted to believe it was not going to be expensive, he wanted to believe it would be easy. But there's also enormous evidence now that information channels into the White House were distorted. Bush wanted only certain information, and that's mostly what they supplied him with. Larry Lindsey ...

SPIEGEL: ... the White House's former top economic adviser ...

Stiglitz: ... gave -- back in 2002 -- a number of up to $200 billion. I think that was the most accurate inside information at the time. He was dismissed. They didn't want to hear it.

SPIEGEL: In the US, the financial costs of war are seldom discussed. It used to be considered a sacrifice to achieve common goals. Why is it different today?

Stiglitz: This is not like a world war where you're attacked. We were attacked in Pearl Harbor, we had to respond. This time, we had a choice, we had to decide how and who we are going to attack ...

SPIEGEL: ... and if you can afford it.

Stiglitz: Well, we can afford it, that's not the issue. The issue is: $1 trillion or $2 trillion is a lot of money. If our objective is to have stability in the Middle East, secure oil, or extend democracy, you can do a lot of democracy buying for this sum. To put it in context: The whole world spends $50 billion a year on foreign aid. So what we're talking about is multiplying the foreign aid budget 20-fold. Wouldn't you say this could do more for peace and stability and security?

SPIEGEL: Bush would argue it's worth spending that much to decrease the probability of a major terrorist attack on the US.

Stiglitz: Nobody takes that seriously. Instead, most people think the Iraq war has increased the probability of an attack. However, it's difficult to put this aspect into financial terms.

SPIEGEL: How did you calculate the costs of the war?

Stiglitz: The official figures are only the tip of an enormous iceberg. For instance, one of the costs of the war is that soldiers today get very seriously injured but stay alive, and we can keep them alive but at an enormous price.

SPIEGEL: Is this the biggest item in your calculations?

Stiglitz: It's very important. The Bush administration has been doing everything it can to hide the huge number of returning veterans who are severely wounded -- 17,000 so far including roughly 20 percent with serious brain and head injuries. Even the estimate of $500 billion ignores the lifetime disability and healthcare costs that taxpayers will have to spend for years to come. And the administration isn't even generous with veterans, widows and their kids.

SPIEGEL: What does that mean?

Stiglitz: If you're injured in an automobile accident, and you sue the driver, you get much more for your injury than if you're fighting for your country. There's a double standard here. If you happen to put your life at risk fighting for your country, you get a little. If you walk across the street and get injured, you get a lot more. Similarly, payments for a dead soldier amount to only $500,000, which is far less than standard estimates of the lifetime economic cost of a death. This statistical value of a life in the US amounts to circa $6.5 million.

SPIEGEL: How much will a severely brain-damaged soldier cost the US government?

Stiglitz: My moderate estimate is about $4 million. For this group alone there will be a total cost of $35 billion that nobody is talking about. But look at the broader picture: The Veterans Administration originally projected that roughly 23,000 veterans returning from Iraq would seek medical care last year. But in June 2005, it revised this number to an estimated 103,000. No wonder the Veterans Administration had to appeal Congress for emergency funding of $1.5 billion last year.

SPIEGEL: If this is a $1 trillion war, why couldn't the US provide its soldiers with safer body armor and better protected vehicles?

STIGLITZ: Obviously, the US can afford to pay for body armor. Rumsfeld, our Secretary of Defense, said you have to fight with the armor you have, but that's unconscionable. The military is focusing only on the short run costs. If they don't provide appropriate body armor, they save some money today, but the healthcare cost is going to be the future for some other president down the line. I view that as both fiscally and morally irresponsible.

SPIEGEL: This war could have been both safer for the troops and cheaper for the country?

Stiglitz: Exactly.

SPIEGEL: Is war no longer affordable even for countries as rich as the United States?

Stiglitz: You have to remember we are an economy of $13 trillion a year. The issue is not whether you can afford it but whether this is the way you want to spend your money. In using the limited resources that we have for fighting this war, we have less resources to do other things. You saw on your TV what happened in New Orleans after Hurricane Katrina. The Reserves or National Guard are usually the people we use for those national emergencies. They weren't here, they were over in Iraq, and so we were less protected.

SPIEGEL: Before the invasion of Iraq, the US administration said the best way to keep oil prices in check is a short and successful war. A barrel was at $25 at that time, and now it's over $60. What of this increase is due to Iraq?

Stiglitz: In our analysis about the cost of war, we only assumed a modest $5 to $10 caused by the war. We wanted to keep our study conservative, so no one would dispute our numbers, and no one did. But I believe that's a vast underestimation of the true cost.

SPIEGEL: But why? China and India are increasing their demand, real global growth has been going on. This is driving the prices.

Stiglitz: When demand rises so does supply -- that's how markets usually work. Now we're seeing that demand for oil is rising but we're not getting a commensurate increase in supply. And there's a simple answer, it's Iraq. But it's not just because it production has been down.

SPIEGEL: Why else?

Stiglitz: The Middle East is the lowest cost producer in the world. They can produce oil for $10, $15 or $20 a barrel. Now we have the technology to produce oil elsewhere for $35 to $45. But who wants to develop fields or invest in new technologies elsewhere if they know that in five years' time, the Middle East may be supplying oil at previous prices?

SPIEGEL: In other words, were peace and stability re-established in the Middle East, the oil price would be back to maybe $25, despite the huge global hunger for energy?

Stiglitz: Yes. By the way that's the price level oil traders were speculating on in futures trading before the outbreak of war.

SPIEGEL: There should be huge economic pressure on Bush to end this conflict.

Stiglitz: The only people benefiting in this war are Bush's friends in the oil industry. He has done the American economy and the global economy an enormous disfavor, but his Texan friends couldn't be happier. The price of oil is up, and they make money when the price of oil goes up. Their profits are at record levels.

SPIEGEL: You don't like this president very much.

Stiglitz: Oh, it's nothing personal. It's all about his politics.

SPIEGEL: There is an old saying: War is good for the economy.

Stiglitz: Listen, World War II was really unusual, because America was in the Great Depression before. So the war did help the US economy to get securely out of this decline. This time, the war is bad for the economy in both the short and long run. We could have spent trillions in research or education instead. This would have led to future productivity increases.

The liberal wing of the neoliberal movement always seems puzzled by events. It stems the fact that they don’t understand malevolent exploitation. Stiglitz can detail the Bush administration’s mistakes and profligacy with great effectiveness without understanding the deeper reasons, reasons may mean that seemingly stupid moves may actually have been shrewd ones. Here is Salon’s Andrew Leonard on Stiglitz and Robert Reich, both liberal/left globalizers. Notice how they assume that those setting economic and trade policy have the best interests of their constituents at heart, when in fact they don’t:
The zero-sum globalization game nightmare
Robert Reich asks Joseph Stiglitz a hard question.

Andrew Leonard
Apr. 03, 2006

On Sunday, the New York Times finally got around to reviewing a book that I've been talking about here since January, Joseph Stiglitz and Andrew Charlton's "Fair Trade for All." Maybe the reviewer, Robert Reich, the former Clinton administration labor secretary, had issues with his deadline. But better late than never -- the review is excellent and it nails a point that has come up with increasing frequency in the ongoing conversation at How the World Works about globalization.

Specifically, Stiglitz and Charlton's vision for fair trade is one in which rich nations are obligated to open their markets to poorer nations, but poorer nations enjoy the privilege of protecting their markets against the rich. This is because rich nations can adapt much more effectively to the competition unleashed by free trade.

"Surprisingly, though Stiglitz has spent some years in Washington, he doesn't answer the obvious next question: How can this commendable agenda be sold to richer nations?" writes Reich. "Their political leaders are in a bind since so many of their own citizens are also losing jobs and experiencing declining incomes and, rightly or wrongly, blaming globalization for their plight. This is one of the major reasons the antiglobalization movement is as strong in the developed world as in the developing.

"While Stiglitz and Charlton nobly assert that trade agreements should be viewed as presumptively unfair if they bestow disproportionate benefits on richer nations, they fail to acknowledge that within richer nations free trade is already disproportionately benefiting the best educated and best connected. The wealthy are growing much wealthier while the middle class is being squeezed. In fact, the adjustment mechanisms the authors find lacking in most developing economies -- good public schools, modern infrastructure and adequate social safety nets -- are coming to be less and less available even in America. Free trade surely generates the gains Ricardo claimed for it. But until those gains are more widely shared -- within richer countries as well as between richer and poorer -- we can kiss any further round of trade liberalization goodbye."

I think it's unfair to assert that Stiglitz and Charlton fail to acknowledge the inequality of the distribution of benefits from free trade in the developed world. My own guess is that this is so mind-bendingly obvious to them that they don't feel the need to belabor it.

But Reich's review does set the table for a challenging question. Liberal economists like Stiglitz and Jeffrey Sachs have focused their energies on trying to make globalization work for the world's poorest regions. In doing so, they run the risk, like Stiglitz here, of demonstrating a lack of concern for the poor and less well-off in their own, highly developed nations. But finding a solution that responds to globalization's pressures, as Stiglitz suggested in the Nation last week, without "trying to enhance the well-being of our citizens at the expense of those abroad who are even poorer" is a desperately hard nut to crack.

In How the World Work's darker moments, we recall an epiphany experienced by Frank Holliwell, the protagonist in Robert Stone's great novel about the U.S. and Central America, "A Flag for Sunrise." Contemplating the mess made by the U.S. in Latin America, he fears that the affluence of the rich countries of the North requires the poverty of the poor nations of the South. In Holliwell's nightmare, globalization is a zero-sum game: Luxury in New York mandates starvation in Zambia.

There's got to be a better way.

The following AP article details a simple fact, one that can only be puzzling to those who don’t understand greed and exploitation. If every economic trend of the past thirty years is concentrating wealth in fewer and fewer hands, the following should come as no surprise:
Labor Official Notes Pension Disparities
By WILL LESTER, Associated Press Writer
Thu Apr 6, 7:00 PM ET

The AFL-CIO, pushing for more federal regulation of lucrative corporate salaries and pensions, released information Thursday about some of the sweetest executive retirement deals in the country.

"As corporate America is slashing workers' pensions left and right, we think investors and the public should know about the huge pensions these CEOs are raking in," said Richard Trumka, secretary-treasurer of the AFL-CIO.

The labor federation, which represents more than 9 million workers, posted updated information about executive salaries and pensions on its Web site.

Trumka said average executive pay at a company on the Standard & Poor's 500 is already more than 400 times the average worker's wages. And many executives now get multimillion-dollar "supplemental executive retirement plans" at a time that many companies are cutting back on reliable "defined benefit" retirement plans for workers, he said.

Those retirement deals could run as high as $6.5 million annually and may not reflect a company's performance, Trumka said.

The AFL-CIO Web site,, looks at 25 of the richest executive pension plans in the country, based on research done with the Corporate Library.

Trumka said the Securities and Exchange Commission is pushing for more public disclosure of executive pay and other benefits, an area that has angered company investors. He noted that some companies that have cut worker retirement several times in recent years have some of the richest pension deals for their chief executive.

He urged union supporters to push the SEC to improve disclosure of executive pay and benefits. The labor federation, he said, is urging the SEC to also require companies to publicize their standards for tying strong job performance to executive pay.

On the economic collapse front, a disturbing news item surfaced yesterday in the Financial Times:
Europe simulates financial meltdown

By George Parker in Vienna
Sun Apr 9, 4:10 PM ET

Europe's financial regulators have held a "war game" exercise, simulating a continent-wide financial crisis, amid fears they are ill- prepared to stop a problem in one country spreading across borders.

The exercise involved simulating the collapse of a big bank with operations in several large countries to see whether the European Central Bank, national central banks and finance ministries could work together to contain the crisis.

It is understood the exercise took place at the headquarters of the ECB in Frankfurt at the end of last week. One person involved said: "It is like checking whether a nuclear power plant can survive a plane crashing into it."

The exercise took place on the eve of a meeting of European Union finance ministers and central bank chiefs in Vienna, at which the bloc's financial stability was high on the agenda. Officials at the meeting confirmed that ministers had discussed the ECB crisis management exercise.

The aim was to test the ability of national regulators to share information with other national bodies in a crisis and to overcome "differences in culture" and other practical obstacles. The results are being analysed and will be reported to the Ecofin council in June.

Europe's vulnerability to a cross-border financial crisis was revealed in a confidential report prepared by officials for the Ecofin council. Regulators are particularly worried about the risks to financial stability posed by the growth in hedge funds and credit derivatives.

It said that "progress has been insufficient in most of the member states" in putting in place national structures for crisis management, and urged national regulators to stage their own crisis simulation exercises.

The EU has rejected the creation of a single European financial regulator to manage cross-border risks, and has instead placed its faith in national authorities working together.

Last year regulators signed an agreement that they would share information openly and speedily in the event of a crisis in a national financial institution, in an attempt to stop the contagion spreading across Europe's single market.

The report submitted to the Ecofin council identified a possible housing market crash, a bird flu pandemic and high oil prices as potential sources of risk, but said that the situation in the banking sector was "solid".

However, the report warned that hedge funds and credit derivatives were sources of concern "as related risks remain opaque and they have become extremely relevant in assessing financial stability both across borders and across all financial sectors".

It said that, while hedge funds could contribute to market efficiency, they "can also be sources of systemic risks".

Credit derivatives markets were said to have grown by 128 per cent in 2005 compared with the previous year, with a nominal value of EU12,430bn ($14,900bn, £8,700bn) in June last year….

Monday, April 03, 2006

Signs of the Economic Apocalypse, 4-3-06

From Signs of the Times, 4-3-06:

Gold closed at 583.50 dollars an ounce on Friday, up 4.2% from $560.00 for the week. The dollar closed at 0.8252 euros on Friday, down 0.7% from 0.8308 euros at the end of the previous week. That put the euro at 1.2118 dollars, compared to 1.2036 the week before. Gold in euros would be 481.52 an ounce, up 3.5% from 465.27 for the week. Oil closed at 66.35 dollars a barrel on Friday, up 3.2% from $64.27 at the end of the previous week. Oil in euros would be 54.75 euros a barrel, up 2.5% from 53.40 the Friday before. The gold/oil ratio closed at 8.79, up 0.9% from 8.71 for the week. In U.S. stocks, the Dow closed at 11,109.32, down 1.5% from 11,279.97 the Friday before. The NASDAQ closed at 2,339.79 on Friday, up 1.2% 2,312.82 at the close of the week before. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.85%, up 19 basis points from 4.66 for the week.

Friday was the last day of the first quarter of 2006, so let’s recap the year so far. Gold went from $519.70 an ounce to $583.50, a rise of 12.3% in three months. Oil went from 61.04 dollars a barrel to $66.35, an increase of 8.7% after having risen 40.5% in 2005. The yield on the ten-year U.S. Treasury note increased 46 basis points from 4.39 to 4.85 so far this year. The Dow Jones Industrial Average is up for the quarter, going from 10,717.50 to 11,109.32, a rise of 3.7%. The NASDAQ rose 6.1%, from 2,205.32 to 2,339.79 in Q1 2006. Sounds like good news for the U.S. stock market, unless you compare stock prices to the price of oil or gold. The dollar fell 2.3% from 0.8440 to 0.8252 euros so far in 2006.

The trends we saw in 2005 continued in the first quarter of 2006: sharp rises in gold and oil, increases in long-term and short-term U.S. interest rates, relative stagnation of stocks, and the dollar and euro trading within a limited range.

Given the complete disaster that the U.S. invasion of Iraq has turned out to be, given the collapse in political support and legitimacy for the neocon project domestically, and given the hatred and resentment engendered against the United States throughout the world by the neocon imperial project, it might be surprising that stocks and the U.S. dollar have not fallen further. U.S. stocks represent the profit-making ability of U.S. corporations, and the early stages, at least, of even disastrous wars offer plenty of opportunities for profit. War in Iraq and fears of a much wider war have driven oil prices up, but that only led to record profits for U.S. oil companies. Here are some examples from Britain of how it’s done:
British companies draw huge profits from occupied Iraq

By Harvey Thompson1 April 2006

According to the findings of a recent joint investigation by Corporate Watch, an independent watchdog, and the Independent, a total of 61 British companies are identified as benefiting from at least £1.1 billion of contracts and investment in occupied Iraq since the US-led invasion.

Corporate Watch believes that the real figure could be as much as five times higher, as many companies have undisclosed business dealings in Iraq and the value of several large contracts is unknown. The investigation was further muddied by the UK government’s refusal to release the names of companies it has directly helped to win contracts in Iraq.

British firms include private security/military services, banks, PR consultancies, urban planning consortiums, oil companies, architects offices and energy advisory bodies.

The report acknowledges that although British corporations still lag behind the huge profits paid to US companies (the latest Halliburton/KBR military contract alone is worth about £2.85 billion), in two areas British firms are playing a central role. The Iraqi insurgency means private security companies (PSCs) or private military companies (PMCs) are in great demand, and it is the one area where British firms are on a par with their US equivalents. Corporate Watch estimates there are between 20,000 and 30,000 security personnel working in Iraq, half of whom are employed by companies run by retired senior British officers and at least two former defence ministers.

The biggest British outfit, Aegis—run by Tim Spicer, the former British army lieutenant colonel who founded the PMC Sandline—has a workforce the size of a military division and may rank as the largest corporate military group ever assembled, according to the report. It has made more than £246 million from a three-year contract with the US Pentagon to coordinate military and security companies across Iraq.

Other private security/military companies have sprung up almost overnight to protect British and American interests. Among the highest grossing UK corporations Iraq is the construction firm Amec, which has made an estimated £500 million from a series of contracts restoring electrical systems and maintaining power generation facilities since 2004. Another PMC, Erinys, has amassed more than £86 million, a substantial portion from the protection of oilfields.

Britain is also playing a critical role in advising on the creation of state institutions and the “business of government.” PA Consulting, which has also received a contract for advising on the UK government’s identity cards scheme, worth around £19 million, is now a key adviser in Iraq.

Loukas Christodoulou of Corporate Watch has been monitoring British business relations with Iraq since the March 2003 invasion. He says in his conclusion to the joint report: “The presence of these consultants in Iraq is arguably a part of the UK government’s policy to push British firms as lead providers of privatisation support. The Department for International Development has positioned itself as a champion of privatisation in developing countries. The central part UK firms are playing in reshaping Iraq’s economy and society lays the ground for a shift towards a corporate-dominated economy. This will have repercussions lasting decades.”

In five years, the £1.1 billion official figure of contracts identified in the report will be dwarfed by what British and the US companies hope to reap from investments. In addition to this, highly lucrative oil contracts have yet to be handed out. The Anglo-Irish company Petrel Resources, an oil and gas exploration company, is seeking licences to run three existing oil wells, for example…

Clearly, then, it would be a mistake to equate the economic health of a country with that of its corporations. The Treasury has been looted for Bush’s reckless wars and other giveaways to the rich. U.S. taxpayers will have to pay for these giveaways with both their taxes and with their pay and benefits. Will the United States public ever wake up enough to demand changes? The U.S. media’s coverage of the labor protests in France asks that very question (from an unsympathetic point of view):

US media reacts to French protests with hatred and fear

By Jerry White

1 April 2006

The US media, not known for following the internal political developments of other countries too closely unless it has a direct impact upon the US, has provided an inordinate amount of ill-tempered commentary on the wave of protests and strikes in France against the introduction of a law that enables employers to fire young workers without cause.

The reaction of the media has been universally hostile, varying from denunciations by the right-wing press of “mob rule” to the more low-key perplexity expressed by the liberal media, which suggests that French are suffering from some type of collective dementia because they believe they have the right to such things as job security.

The headlines of several newspaper commentaries give a flavor of this contempt, from the Wall Street Journal’s, “The Decline of France” (March 21) and “Casseurs” (or “Smashers,” March 29); to the Washington Post’s “French take to the Streets to Preserve their Economic Fantasy” (March 22) and “The French In Denial” (March 28); to the New York Times’ “France’s Misguided Protesters” (March 27).

In one way or another all of the commentaries suggest the protests are illegitimate. They declare that France’s labor laws and social protections are outmoded and must be “reformed” if corporations are to thrive and create jobs. They suggest that “everyone” agrees with this, everyone, that is, except the millions of workers and young people marching on the streets of France. Echoing the infamous comments of British Prime Minister Tony Blair at the time of the invasion of Iraq, the US media suggests that the strength of a democracy is measured by the ability of political leaders to defy the will of the people and do “what’s right.”

As always, the Wall Street Journal leads the pack of reactionary voices. Having spared no provocative insult against Jacques Chirac and Dominique de Villepin for refusing to line up behind the US invasion of Iraq, the Journal now declares the French president and prime minister the champions of democracy. The French government is facing down “Jihadist” students, who, the newspaper claims, are resorting to violence to defend their “religion of job security.” Writer Nidra Poller declares, “Democracies run on elections and legislation; mobs rule by fire and the sword,” suggesting that state repression is needed to crush the protests and uphold “democracy.”

Like the Wall Street Journal, the premise of liberal newspapers such as the Washington Post and the New York Times is that France’s high unemployment rate is due to the unfair burden placed on employers by the social protections fought for by the working class and put in place after World War II. If corporations are given the unrestricted right to fire workers and exploit them like American workers, the story goes, this will entice companies to create new jobs.

While “those of you brainwashed by Anglo-American market capitalism” see the need for this type of “market flexibility” to increase employment, Post writer Steven Pearlstein declares cynically, “viewed through the dark prism of the French imagination, these aren’t real jobs—they’re ‘garbage jobs’ and ‘slave contracts’ meant to undermine the birthright of all Frenchmen to be shielded from all economic risk. Give in on this, and who knows what could go next? The 35-hour workweek? The six weeks of paid vacation? State-mandated profit sharing? Retirement at age 60?”

Oh, what horrors!

Posing as a defender of the unemployed, Pearlstein claims that the reason immigrant youth and many university students cannot find jobs is because a “shrinking pool of older, middle-class workers” enjoy the “full panoply of worker protections” and are “sucking the innovation and vitality from the economy.” Expressing dismay over the fact that young people are demanding the same rights their parents achieved, Pearlstein complains, “rather than supporting the reforms that might generate more jobs and more income, the outsiders have bought into the nostalgic fantasy of a France that once was, but can never be again, making common cause with the very ‘insiders’ whose selfishness and pigheaded socialism have left them out in the cold.”

Indeed it is the continuing influence of socialism and egalitarian ideals in France—in spite of the betrayals of Stalinism and social democracy—that most outrages Pearlstein and his cohorts in the media. The Post reporter disparagingly notes the results of a recent poll by the University of Maryland on international policy attitudes showing that only 36 percent of French respondents felt that “the free enterprise system and free market economy” is the best system. This was the lowest percentage of any of the 22 countries polled and compared with 59 percent in Italy, 65 percent in Germany, 66 percent in Britain and 71 percent in the United States.

Complaining that France sported “only” 14 billionaires, as compared to 24 in similarly sized Britain, Pearlstein concludes his column: “Indeed, when you ask French university students who is the Bill Gates of France, they look at you blankly. It’s not simply that they can’t name one. The bigger problem is that they can’t imagine why it matters, or why that has anything to do with why they can’t find a good job.”

Nowhere does Pearlstein explain how the hoarding of vast fortunes by the super-rich and the gaping levels of social inequality have improved the lot of American workers. Instead, he, along with the other well-heeled pundits in the corporate-controlled news media take as given that US employers should wield dictatorial powers in the workplace and retain the unquestioned “right” to destroy thousands of jobs and slash wages and benefits. After all, Dr. Pangloss, this is the best of all possible worlds.

Pearlstein’s fellow columnist at the Post, Robert J. Samuelson, argues that the protests in France point a “larger predicament” for Europe. “Hardly anyone wants to surrender the benefits and protections of today’s generous welfare state, but the fierce attachment to these costly and self-defeating programs prevents Europe from preparing for a future that, though it may be deplored, is inevitable.”

Samuelson then lets the cat out of the bag, acknowledging that the media’s take on the French protests is bound up with political situation in the US and concerns over how American workers will respond to the unprecedented attacks now on the agenda of corporate America and both of its political parties. “The dilemma of advanced democracies,” he says, “including the United States, is that they’ve made more promises than they can keep. Their political commitments outstrip the economy’s capacity to deliver...To disavow past promises incites public furor; not to disavow them worsens the country’s future problems.”

This anxiety over possible “public furor” in the US was spelled out even more clearly in a USA Today editorial, entitled, “Before you scoff at the French, consider the U.S. connection.” It begins by warning that the French protests demonstrate the “lengths that people will go to preserve guarantees and benefits” despite “harming their own long-term prospects and those of their children.”

While the US should consider itself “fortunate” that it does not “endow its workers with the right not to be fired,” the editorial says, “one can see counterproductive sentiments similar to those of the French protesters in the workers at companies such as General Motors. They demand preservation of generous pensions and lifetime health coverage from employers that might be driven out of business...

“On a larger scale, it’s possible to see the French in the intractability of the Medicare and Social Security debates,” the editorial continues. Claiming that longer life spans, the coming retirement of baby boomers and exploding health costs, were pushing the government and economy toward a “fiscal abyss,” the newspaper complains that “those who receive these benefits, or are about to, have shown scant interest in reforms needed to avert a looming crisis...”

The editorial concludes: “The USA rarely has the strikes and street protests that France is almost as famous for as its cheeses. But it does suffer from some of the same unwillingness to consider the future.”

Thus, the media’s sudden interest in France reveals itself to be a concern that working class resistance could spread to the US itself, where the reactionary agenda of free market policies was initiated in the first place, before it spread to Britain and the rest of the world. With unrelenting attacks on workers by GM, Delphi, Northwest Airlines and other US corporations, as well as plans by the Bush administration to slash “entitlement” programs to pay for further tax cuts to the rich and the burgeoning costs of America’s worldwide military adventures, there is no doubt that at least some establishment figures who are not too blind to see are considering the possibility that if mass opposition could explode in France, it could happen here too.

The arguments that society simply cannot afford to provide for the basic needs of working people are becoming increasingly threadbare, not only for French workers but for their American counterparts as well. Despite their efforts to reassure themselves about popular support for the profit system, the reality is that there are growing numbers of workers and youth in America who realize that the real problem is that society cannot afford to allow a tiny minority of the population to monopolize the wealth created by working people. Despite the insistent claims over the years about the death of the class struggle and the working class, the explosive events in France, as they so often have done throughout history, are a sign of what is coming throughout the world, and within the US itself.

If the ruling class in the United States really is afraid of its own people, then they may have to inflate the dollar even more to keep the U.S. public from mass bankruptcy. According to this scenario, the types of controls that have been working so well on the U.S. public are dependent for their efficacy on the general prosperity of the public. If, on the other hand, they are not afraid of the public, if they feel they have the situation well under control, then they may believe that their prospects of maintaining control will be even better under economic collapse. If that is the case, and I think it is, then we are in trouble.

Ron Jacobs, writing in Counterpunch about the differences between French and U.S. public opinion, identifies one of the best forms of control imposed on the U.S. public: the idea that no one can do anything to prevent corporate autocracy:
Where Capital is Not God
France Shows the Way

March 31, 2006

By Ron Jacobs

Back in the 1990s, when I was part of a union organizing effort at the University of Vermont, one of the assumptions expressed by the school's administration was the inevitability of the university's continuing corporatization. This assumption was also shared by many of the workers that we were attempting to organize. Furthermore, the assumption was not one specific to the university. Indeed, it was actually usually expressed as part of a larger reality that assumed that the world was going to continue down a path that would result in the ultimate supremacy of the world's largest corporations and banks running everything. Most of these businesses were naturally US- owned, even if they had their offices overseas.

Now, the aspect of this whole series of assumptions that irked me the most wasn't that the corporations (and, locally, the university's administration and trustees) told us that this was a good thing. Nor was it that they acted like this scenario was a natural thing, because, according to the laws of capitalist accumulation, it was. No, what irked me the most (and still irks me) is the attempt to portray this form of monopoly capitalism and corporate takeover of every part of our lives as something over which no one has any control. This portrayal is so complete that most workers, especially in the US (where capitalism reigns supreme) honestly believe that there is nothing they can do but submit. When your company tells you that they are gutting your pension plan, you submit. When your medical premiums increase three hundred percent, you submit. When your pay is reduced in the name of making a concession, you submit. It's as if these attacks on your livelihood are not mere attempts by the owners and their executives to maintain their profit levels, but are instead edicts from heaven that no one dare not obey.

This consciousness exists not only in our work lives. It is also omnipresent in our government, where we elect men and women who gut the minimal economic protections that existed for the least among us so that we can provide tax cuts for the wealthiest people in the world. In addition, we ignore the obvious attempts to legalize every form of graft and corruption while we excuse those politicians who happen to be busted committing crimes of corruption that have yet to be legalized. It's as if we as a people have given up our lives to some omnipotent god and that god not only controls our social beings, he controls our entire selves. The false consciousness of capitalism has so thoroughly taken over our minds that we no longer have anything even approaching souls. Anybody that dares to point this out is immediately branded as someone who is, at best, not a team player and, at worst, an anarchist or a criminal. Or maybe even (god forbid) a terrorist!

Corporations, set up by conscious design as psychopaths are the perfect tool for the pathocracy. They keep people occupied, make them atomized and hopeless, all the while funnelling wealth to the pathocrats. Jacobs continues,
France Shows the Way

In a recent Newsweek column economist Robert Samuelson mocked the protests by French workers and youth against the proposed youth employment law known as the CPE or (what the protesters prefer to call) the Kleenex law. Samuelson, who seems to accept the aforementioned supremacy of the neoliberal marketplace (and its inevitable victory over all), wrote: "the student protesters in France think that if they march long enough...they can make the future go away. No such luck." He continued, enumerating the various global capitalist arguments against the so-called welfare state and its economic inviability in today's modern world. According to this mindset. the decision by many governments to dismantle their systems of national health care, public education, subsidized housing, and old age security is not a matter of choice, but one of necessity. If such cuts are not made, say the cuts' proponents, there will be no future.

Of course, this is simply not true. What this mindset's adherents really mean is that maintaining the current systems of health, education and general welfare for the general population would require bucking the system of international capitalist accumulation and profiteering. It would mean that all of that money being made by so very few corporations and banks would have to be put back into the various national economies from which it has been taken. The entire international economic system of the past sixty years would have to be re-examined and redesigned.
In short, new choices would have to be made. Choices that put people, not profit first. Choices that would provide decent work for all of those wishing to work. This is what the French youth and workers are telling their government and the corporations that it kowtows to. This is what the last decade of protests against the WTO and the rest of the international economic system have been about. Poverty and war are not inevitable. Indeed, they are part of the reason why people leave their countries in the southern hemisphere to work in the northern one. On the other side of that coin, they are also underneath the reason nativist elements want to send immigrants back to their home countries and lock down the borders. The economics of neo-imperialism force the logic of the dollar on them all., causing the breakup of families and the growth of unreasonable fears. Fears that serve the interests of the financial masters behind it all. While immigration is certainly part of the natural evolution of human history, the economics of global capital have certainly forced many to leave the places they prefer to live. A system thtat pur people first would either leave those people alone or create good jobs where they live, not where capital goes.

The protests against the job law, the WTO and IMF, and totalitarian immigration laws are the results of conscious choices made by a relatively small number of the earth's inhabitants. The protests in France are a wake up call to all of us. It's time we started making our own choices. Because they are bound by their need for profit, the masters of capital have proven that they are incapable of doing so. A French student in Paris stated the situation quite clearly: "You can't treat people like slaves. Giving all the power to the bosses is going too far." (Reuters 3/28/06)