Signs of the Economic Apocalypse, 5-29-06
Gold closed at 653.30 dollars an ounce on Friday, down 0.9% from the previous Friday’s close of $659.00. The dollar closed at 0.7860 euros on Friday, up 0.4% from 0.7827 for the week. That put the euro at 1.2722 dollars compared to 1.2777 at the end of the previous week. Gold in euros, then, would be 513.52 euros an ounce, down 0.4% from 515.77 for the week. Oil closed at 71.38 dollars a barrel on Friday, up 4.4% from last week’s close of $68.36. Oil in euros would be 56.11 euros a barrel, up 4.9% from 53.50 at the end of the previous week. The gold/oil ratio closed at 9.15, down 5.4% from 9.64 for the week. In the U.S. stock market, the Dow Jones Industrial Average closed at 11,278.61 on Friday, down 1.2% from 11,144.06 at the end of the week before. The NASDAQ closed at 2,210.37, down 0.8% from 2,193.88 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 5.05%, down one basis point from 5.06 at the previous week’s close.
Lay and Skilling from Enron were convicted this week of numerous felonies. It doesn’t hurt to throw of few of those people in jail, but Enron just represented an extreme version of a common pattern of corporate behavior. But the trial did provide a glimpse into how the slicker types of psychopaths tend to rise to the top of corporate hierarchies. That is no accident, since the corportion by its very charter is designed to be a psychopath, a self-serving actor that cannot care about others. So human psychopaths rise to the top of corporate, political and military hierarchies, while the corporations move to the top of the world economic hierarchy. In the process of doing that, they have written the rules everyone must follow in order to facilitate their takeover. That, in essence, is neoliberalism, a sophisticated set of rules, arising out of unprecedented cooperation among psychopaths, that helps them maintain power over normal people.
In fact, the basic problems with corporations are structural, and inherent in the forms and rules by which they are compelled to operate. The corporation is not as subject to human control as most people believe it is; rather, it is a largely autonomous technical structure that behaves by a system of logic uniquely well-suited to its primary functions: to make profit, to give birth and impetus to new products and technologies, to expand its reach and powers, and to spread the consumer life-style around the globe. (Jerry Mander, “The Rules of Corporate Behavior,” The Case Against the Global Economy, Jerry Mander and Edward Goldsmith, eds, San Francisco, 1996, p. 310)
Corporate control of world media makes the job easier. They have bored their way into our souls:
The failure to grasp the nature and inevitabilities of corporate structure has left our society far too unconscious and passive to corporate desires and has helped corporations increase their global influence, power and freedom from accountability. More than any other institution (including government), corporations dominate our conceptions of how life should be lived. Corporate ideology, corporate priorities, corporate styles of behavior, corporate value systems, and coporate modes of organization have become synonymous with “our way of life...”
If you switch on your radio, flip on the television, or open your newspaper, corporations speak to you. They do it through public relaitons and through advertising. U.S. corporations [in 1996] spend more than $150 billion yearly on advertising, which is far more than is spent on al secondary education in this country…
The average U.S. viewer already watches 22,000 commercials every year. Twenty-two thousand times, corporations place images in our brains to suggest that there is something great about buying commodities. (Ibid., p. 310-11)
What about military power, you might ask? Certainly armies are more powerful than corporations. The rise of private military contractors (PMC’s) that accompanied the massive outsourcing of core military functions in the United States armed forces, has blurred the distinction. Is Blackwater consulting a coporation or a paramilitary army?
In any case, one of the most important achievements of all that propaganda is making the corporate neoliberal economy seem inevitable:
USA – the self-styled CEO of Planet Inc.
By Siv O'Neall
May 26, 2006, 15:44
Neoliberalism is not inevitable
For all those millions and millions of people who have been brainwashed into believing that neoliberalism is the inevitable solution to all our economic and humanitarian problems on the planet, there is news.
The inevitability of the neoliberal economic system is a huge hoax, which has been acted out at the expense of the human race in the sole interest of profit for the few and the total subjugation of the billions of the rest of us. We, the working people, are, so far, obediently bending our backs and making do with the few crumbs the corporate rulers are throwing our way while we accommodate them with out ingrained belief that that’s the way the system works, and that’s the only way the system can ever work.
Actually, neoliberalism was intended to gradually strangle the economies of the third-world countries and thus seriously degrade the living standards of the people. The World Bank, the IMF and the WTO were set up to make it possible for the rich countries of the world to run the business of the planet, naturally under the judicious leadership and the ultimate profit of the multinational corporations mainly linked to the psychopathic and ruthless mega power that is the U.S. of A. Psychopathic mainly in as much as it is totally impervious to human and geopolitical reality. Europe and Asia were supposed to toe the line or else risk being deprived of their share of the booty…
The brutality of eternal war and destabilization
However, keeping the world in continuous upheaval is the goal of the U.S. statesmen, and the openly expressed goal of the neocons in particular. Aggressive wars, civil wars, economic destabilization and bankruptcy of countries dependent on WTO and the World Bank for survival, are all means to the end of assuring U.S. world dominance. NATO was supposed to play the U.S. game (and did in the case of the Kosovo tragedy). The UN too was seen by the American administrations as a handy tool for enforcing American interests, thus the horrible ploy of the veto power of five countries, a power that has been used innumerable times by the U.S. and by the USSR/Russia, but far less by the other veto holding powers.
The one thing the U.S. administrations fear more than anything else is democracy – with its accompanying openness. Oh, they will mouth the word, but it doesn’t have any real meaning any more. Americans are condescendingly allowed to live happily in the fantasy world that hundreds of years of propaganda has created for them, the belief that theirs is a democratic country. And what’s more, it is the greatest democracy in the world, the most moral, the most devout, the most compassionate country in the world.
American ignorance and naiveté are unlimited and the leaders very carefully see to it that things remain that way. Even looking back on history, it is doubtful if anyone can honestly refer to the rapacious United States of America as a great democracy. Ruthless killings and brutal grabbing of other people’s territories have always been the rule of the game, ever since the indescribably cruel decimation of the Native Americans.
Both political options offered those of us living in these so-called democracies support the corporate agenda. Wayne Madsen last week, republished something he wrote in 2000 about the “left” alternative in the anglo-american countries, called “The Third Way” To A Fascist World: The cryptic international political movement of Clinton and Blair,” in which he wrote:
There is another more disturbing aspect to the Third Way agenda. The rights of the individual are increasingly marginalized in nations governed by Third Way leaders. In Blair’s Britain this trend has manifested itself into a call by Home Secretary Jack Straw for the elimination of trial by jury for all but the most serious crimes and scrapping the law against double jeopardy, which protects someone from being tried multiple times for the same crime. Straw has also promoted enhanced police surveillance capabilities of communications (wiretapping) and activities (video surveillance). Third Way Britain is rapidly beginning to look like 1984’s Airstrip One, the British component of the totalitarian transatlantic realm known as Oceania. George Orwell’s Thought Police also seem to have come alive in Third Way Britain. Straw wants to elevate certain public comments to the level of a major crime.
Similarly, the Clinton administration, through its efforts to give law enforcement and intelligence agencies practical unfettered access to communications, including the Internet, is endorsing the Third Way’s enmity towards an individual’s right to freedom of speech, thought, and assembly. Limiting privacy has been embraced by another philosophical guru of New Age political thought, George Washington University sociologist Amitai Etzioni. He heads the Communitarian Movement, an eclectic assortment of Third Way and global village aficionados. Etzioni, who is greatly admired by Bill and Hillary Clinton, Blair, and Jack Straw, argues that people have nothing to worry about when it comes to government invasion of privacy and that governments must put limits on privacy in the interests of “public safety.” Therefore, the Communitarians support drunk driving checkpoints, intrusive security screening of airline passengers, and mandatory drug and alcohol testing for certain professions. The Communitarians decry civil liberties groups as “radicals."
In his book, The Limits of Privacy, Etzioni argues that private companies are more of a threat to an individual’s privacy than government. However, the fact that the Third Way philosophy combines government and corporations into an unholy alliance of exploiters presents the real threat to individualism and privacy. Add to that the Third Way’s argument that people must surrender all kinds of personal liberties to fight the so-called “Drug War” and “Terrorism War” for the common good smacks of Orwellian Newspeak at its worst. The Communitarians and Third Wayers see privacy-intrusive technologies like biometrics and DNA testing as enabling mechanisms for their “brave new world.”
Six years later, we are living the effects of the complete and total lack of privacy.
To finish on a lighter note, given the recent correction in the precious metals market, here is the Mogambo Guru on gold and silver:
The Dollar Collapse
by The Mogambo Guru
Total Fed Credit was up only $1.6 billion last week, and while the custody holdings of foreign banks at the Fed was up a strong $9.2 billion last week, I chose to start off the lecture by dryly saying "The big news, to me, is that the dollar has started collapsing. There are so many ugly ramifications of this that I would not even know where to begin. So, let me merely say that the dollar falling is Unalloyed Bad News (UBN), which means that you and your family are all doomed to die horrible financial deaths, screaming in pain and anger, and let it go at that."
The room erupted in panic and confusion until they finally remembered that I am an idiot, and I obviously don’t know what I am talking about. Then they all felt better, until Doug Noland, he of the Credit Bubble Bulletin at the PrudentBear site, said "Everyone wants to believe that an orderly decline in the dollar poses few problems."
Forget An Orderly Decline Of The Dollar
Mr. Noland, if I understand him correctly (and the chances of that are pretty damned slim, given my obvious cognitive limitations and deficits), is slightly less pessimistic than I am about the possibility of an "orderly decline" in the value of the dollar. I am so pessimistic (audience shouts out "How pessimistic, Mogambo?") that security camera video footage reveals screaming in fear, actual foaming at the mouth, and I seem to have embarrassingly peed in my pants, too, out of the same fear. Now, THAT'S pessimistic!
Mr. Noland, because he is a real smart and classy guy, doesn't even mention the dark stain on my pants, but presents, instead, a lot of tightly-argued reasons why an "orderly decline" of the dollar seems improbable. I, on the other hand, am The Mogambo! And I am sure, absolutely sure, more sure than anything I have ever been sure of, and in fact, this is probably the single-most thing that I have been the most sure of in my whole horrible, wasted life, and that is that the decline of the dollar will NOT be "orderly." It will be abrupt and ugly. A quote that comes to mind, although uttered as a comment on people's lives, is "Nasty, brutish and short."
Nasty, Brutish And Short
My Infallible Mogambo Reasoning (IMR) is along the lines of "Suppose I told you that your money would gradually and continuously lose a lot of its value. Maybe half. Or more. My intuition tells me that you would not be happy."
I pause to gauge your reaction, which ranges between homicidal anger and paralyzing fear. Exactly so! Then I go on to say "But that same intuition tells me that you WOULD be happy, very happy, if I told you that I knew of a way to let you keep all your wealth, and you would not lose anything!" Ha! I can see by that smile on your face that I was right!
So how to achieve this miracle of wealth-preservation? All you have to do is sell all your dollars and dollar-denominated assets today, before the dollar is devalued further! Then you'd like to stick someone else with the whole loss!
Now you are ready for today's Mogambo Daily Pop Quiz (MDPQ). The question is "Would YOU stick around to take your share of financial lumps, of up to half of your net worth (or more), meted out month after month, year after year, in a promised 'orderly decline', or would you sell out now, and not take any lumps at all?"
From A Trickle To A Stampede
Hahaha! Me neither! And neither will anybody else! So it's a trick question! At first, a few will say "That stupid Mogambo moron (SMM) is right, for once in his miserable, pathetic life!" and they will rush to the exits to get someplace to dump dollars. And then a few more will rush to get out, as little light bulbs blink "on" above their heads. And then a few more. And then more and more and more until it is a stampede!
Hahaha! A stampede! Maybe it will be an "orderly stampede!" Hahahaha! "Orderly decline, orderly stampede! You say to-may-to, and I say to-mah-to!" Hahaha!
If, on the other hand, you answered "yes" to the question, then I am sorry to tell you that you failed the test, but I will not record your failing grade in your permanent record if you write a little paragraph or two explaining what in the hell is wrong with you, and then I will have pity on you.
Those With Gold And Silver Survived All Stampedes
And it is not just the same dreary story about too many prescription drugs, and too many over-the-counter drugs, and too many illegal drugs, or even that all these people left in a rude rush to dump dollars and dollar-denominated assets, but that the more important point is "Where did they go?" I'll tell you where they went! They went home and quickly scanned the entire course of economic history to find out where all the OTHER people in history went, when THEIR economic system started down the crapper, thanks to the same sorry stupid economic sins we have committed today.
I will save you the trouble of getting up off of your fat, lazy butt to find out, as I share your opinion about getting up off of my fat, lazy butt, and all the damned time, too. So I will simply tell you what happened: Those who bought gold and silver preserved all of their wealth as their currency and economy took a dump, and they actually ended up with a fortune in gold. Everybody else did not.
Gold Draws In Excess Fiat Money
And the reason may be contained in a witticism by reader Greg, who opines "Gold acts as a magnet to draw in excess fiat money."
…But no matter what the reason, they made money by accumulating gold, and the guys who made a fortune in gold went on to make bigger fortunes when they traded the gold for stocks, bonds, houses and real estate at the lows of the economic collapse, and they again prospered as the market values of all these things eventually went back up in the following decades after the collapse.
Get A Taste Of Hyperinflation
And if you want to see the advantage of gold in real-life action, then listen to this, from an essay written by Eric N. Young entitled "The Hyperinflation of Germany, July 1922-November 1923". He writes that in 1923, at roughly the height of the Weimar inflation and the end of Reichmark, "Although a loaf of bread cost $200 million marks in November 1923, it was possible to purchase an entire city block of prime commercial real estate in downtown Berlin for as little as $500 US dollars hard currency. The key was to have real money in the form of gold or silver, or currency backed by those metals."
An entire city block of prime real estate! Thanks to a gold-backed money! Of course, it took a long time (made even longer by WWII, which was, in turn, caused by the German people rebelling against inflation and injustice), but what is an entire city block of commercial real estate in Berlin worth today? Hahaha! A very long time horizon, to be sure, but that's how it works in real life!
Liquidate All Dollar-denominated Assets
So, from this fabulous bit of information we can generate one Fabulous Mogambo Market-Timing Tip (FMMTT) for those who are in the category of "Hyper-Aggressive Speculator", and the sub-species "All-Or-Nothing Risk Tolerance." At this stage of the cycle, the best advice to these people is liquidate every dollar-denominated asset they have (like cash, houses, stocks and bonds and everything in their retirement accounts), and use the money to buy silver and gold and commodities."
And the reason a lot of people don't do that may be for the same reason quizzical reader Roberta R. wonders about when she writes "I am writing to you about the paradigm of cashing in gold for fiat (money). I firmly believe in holding hard assets such as gold or silver; but what I have always had a hard time with is the concept of cashing in the gold. As you stated in your editorial, the Reichmark collapsed so far down that it took 87 trillion of them to buy an oz. of Au.
"This is where my brain begins to hurt. Now I am the proud owner of 87 trillion Reichmarks (FRN's) and maybe I can buy a couple loaves of bread. So, you cash out something with a real intrinsic value and you get fiat junk. But it just seems to me that you are back to square one the minute you sell."
She finished with "Working on a headache, Roberta."
I was happy to tell her that she was exactly right! She WAS back to square one! That's the beauty of gold! The answer why is contained in the problem: How much gold does it take to buy one loaf of bread, which costs $2 a loaf when gold is at $700 an ounce?
435,000 Loaves Of Bread For One Ounce Of Gold
Answer: 1/350th of an ounce. (You can buy 350 loaves of bread with one ounce of gold).
And then how much gold does it take to buy a $200 million loaf of bread when gold is at $87 trillion per ounce? Answer: 1/435,000th of an ounce! You can buy 435,000 loaves of bread with one ounce of gold! Hahaha! A little tiny flake of your gold ounce ought to do it! Hahaha!
So, Roberta, thanks to gold, your buying power has been preserved. THAT'S the beauty of the stuff! And in this particular example, you actually got wealthier, as bread became over 1,000 times cheaper in terms of gold! But notice that the bread cost 100 million times more, in terms of dollars!
****Mogambo sez: The recent $22 plunge in gold and $2 plunge in silver is just the death throes of the scumbags who have engineered the huge short interest in metals futures, and are now being choked to death by it. Every dip like that is Lady Fate smiling on you, letting you buy gold and silver at a temporary bargain! Whee! Lucky you!
The Mogambu Guru's straightforward writings are made possible by The Daily Reckoning.
Richard Daughty aka The Mogambo Guru is general partner and COO of the Smith Consultant Group and can be emailed at RichardSmithGroup@verizon.net