Signs of the Economic Apocalypse, 7-10-06

From Signs of the Times, 7-10-06:

Gold closed at 631.10 dollars an ounce on Friday, up 2.4% from $616.20 for the week. The dollar closed at 0.7806 euros Friday, down 0.2% from 0.7819 at the close of the previous week. That puts the euro at 1.2810 dollars compared to 1.2790 for the week. Gold in euros would be 492.66 an ounce, up 2.3% from 481.78 at the end of the previous week. Oil closed at 73.79 dollars a barrel, down less than 0.1% from $73.85 for the week. Oil in euros would be 57.60 euros a barrel on Friday, down 0.2% from 57.74 at the close of the Friday before. The gold/oil ratio closed at 8.55 on Friday, up 2.5% from 8.34 for the week. In U.S. stocks, the Dow closed at 11,090.67 on Friday, down 0.5% from 11,150.22 at the close of the previous week. The NASDAQ closed at 2,130.06, down 2.0% from 2,172.09 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 5.13%, down one basis point from 5.14 at the close of the week before.

Last week it was revealed that repulsive Vice President Richard Cheney is betting on a U.S. economic collapse. The following piece by Mike Whitney was run on the Signs of the Times page last week, but it’s worth rerunning:

The Veep's Curious Investment Portfolio
Is Cheney Betting On Economic Collapse?

By Mike Whitney
July 5, 2006

Wouldn't you like to know where Dick Cheney puts his money? Then you'd know whether his "deficits don't matter" claim is just baloney or not.

Well, as it turns out, Kiplinger Magazine ran an article based on Cheney's financial disclosure statement and, sure enough, found out that the VP is lying to the American people for the umpteenth time. Deficits do matter and Cheney has invested his money accordingly.

The article is called "Cheney's betting on bad news" and provides an account of where Cheney has socked away more than $25 million. While the figures may be estimates, the investments are not. According to Tom Blackburn of the Palm Beach Post, Cheney has invested heavily in "a fund that specializes in short-term municipal bonds, a tax-exempt money market fund and an inflation protected securities fund. The first two hold up if interest rates rise with inflation. The third is protected against inflation."

Cheney has dumped another (estimated) $10 to $25 million in a European bond fund which tells us that he is counting on a steadily weakening dollar. So, while working class Americans are loosing ground to inflation and rising energy costs, Darth Cheney will be enhancing his wealth in "Old Europe". As Blackburn sagely notes, "Not all bad news' is bad for everybody."

This should put to rest once and for all the foolish notion that the "Bush Economic Plan" is anything more than a scam aimed at looting the public till. The whole deal is intended to shift the nation's wealth from one class to another. It's also clear that Bush-Cheney couldn't have carried this off without the tacit approval of the thieves at the Federal Reserve who engineered the low-interest rate boondoggle to put the American people to sleep while they picked their pockets.

Reasonable people can dispute that Bush is "intentionally" skewering the dollar with his lavish tax cuts, but how does that explain Cheney's portfolio?

It doesn't. And, one thing we can say with metaphysical certainty is that the miserly Cheney would never plunk his money into an investment that wasn't a sure thing. If Cheney is counting on the dollar tanking and interest rates going up, then, by Gawd, that's what'll happen.

The Bush-Cheney team has racked up another $3 trillion in debt in just 6 years. The US national debt now stands at $8.4 trillion dollars while the trade deficit has ballooned to $800 billion nearly 7% of GDP.

This is lunacy. No country, however powerful, can maintain these staggering numbers. The country is in hock up to its neck and has to borrow $2.5 billion per day just to stay above water. Presently, the Fed is expanding the money supply and buying back its own treasuries to hide the hemorrhaging from the public. It’s utter madness.

Last month the trade deficit climbed to $70 billion. More importantly, foreign central banks only purchased a meager $47 billion in treasuries to shore up our ravenous appetite for cheap junk from China.

Do the math! They're not investing in America anymore. They are decreasing their stockpiles of dollars. We're sinking fast and Cheney and his pals are manning the lifeboats while the public is diverted with gay marriage amendments and "American Celebrity".

The American manufacturing sector has been hollowed out by cutthroat corporations who've abandoned their country to make a fast-buck in China or Mexico. The $3 trillion housing (equity) bubble is quickly loosing air while the anemic dollar continues to sag. All the signs indicate that the economy is slowing at the same time that energy prices continue to rise.

This is the onset of stagflation; the dreaded combo of a slowing economy and inflation.

Did Americans really think they'd be spared the same type of economic colonization that has been applied throughout the developing world under the rubric of "neoliberalism"?

Well, think again. The American economy is barrel-rolling towards earth and there are only enough parachutes for Cheney and the gang.

The country has lost 3 million jobs from outsourcing since Bush took office; more than 200,000 of those are the high-paying, high-tech jobs that are the life's-blood of every economy.

Consider this from the Council on Foreign Relations (CFR) June edition of Foreign Affairs, the Bible of globalists and plutocrats:

"Between 2000 and 2003 alone, foreign firms built 60,000manufacturing plants in China. European chemical companies, Japanese carmakers, and US industrial conglomerates are all building factories in China to supply export markets around the world. Similarly, banks, insurance companies, professional-service firms, and IT companies are building R&D and service centers in India to support employees, customers, and production worldwide." ("The Globally integrated Enterprise" Samuel Palmisano, Foreign Affairs page 130)

"60,000 manufacturing plants" in 3 years?!?

"Banks, insurance companies, professional-service firms, and IT companies"?

No job is safe. American elites and corporate tycoons are loading the boats and heading for foreign shores. The only thing they're leaving behind is the insurmountable debt that will be shackled to our children into perpetuity and the carefully arranged levers of a modern police-surveillance state.

Welcome to Bush's 21st Century gulag; third world luxury in a Guantanamo-type setting.

Take another look at Cheney's investment strategy; it tells the whole ugly story. Interest rates are going up, the middle class is going down, and the poor dollar is headed for the dumpster. The country is not simply teetering on the brink of financial collapse; it is being thrust headfirst by the blackguards in office and their satrapies at Federal Reserve.

Looking at the Great Depression of the 1930s, one of the biggest differences between now and then is that the stock market crash of 1929 came as much more of a surprise. Midway through 2006, we face the possibility of a world collapse that has been predicted off and on for three decades. Many people, including apparently Dick Cheney, are actively preparing for a future collapse, learning the lesson in advance. The generation who lived through the Great Depression kept saving tin cans and used rubber bands throughout the disposable consumer prosperity of the fifties and sixties. Most of us, facing a depression, are getting in one last spending spree before it all ends. No doubt it is best to learn the lesson in advance. We should have been saving tin cans and rubber bands throughout the nineties and two thousands. I stopped throwing away old clothes and shoes with holes in them.

So, if we want to learn the lessons in advance, what lessons should we learn? One lesson is to watch out for popular fascism and private armies. A new book by Newsweek journalist Jonathan Alter about Franklin Roosevelt’s first 100 days in office, The Defining Moment: FDR’s Hundred Days and the Triumph of Hope (New York: Simon and Schuster, 2006), paints a startling picture of the political climate in the United States in the dark days of early 1933. Among the political establishment, there was overwhelming support for a fascist dictatorship. Alter points out that in early 1933, the word ‘dictatorship’ had a positive connotation. It was a near miss, we almost had fascist America seventy years ago.

Here is Alter on the economic situation in March 1933:

The American economic system had gone into a state of shock, its vital organs shutting down as the weekend began. On Friday, the New York Stock Exchange suspended trading indefinitely and the Chicago Board of Trade bolted its doors for the first time since its founding in 1848. The terrifying “runs” that began the year before on more than five thousand failing banks had stripped rural areas of capital and now threatened to overwhelm American cities. At dawn on Saturday, only a few hours before FDR’s swearing in, the governors of New York, Illinois, and Pennsylvania signed orders closing the banks in those states indefinitely; which meant that thirty-four out of forty-eight American states, including the largest ones, now had no economic pulse…

As frightening as life had become since the Great Depression began, this was the bottom, though no one knew that at the time. The official national unemployment rate stood at 25 percent, but that figure was widely considered to be low. Among non-farm workers, unemployment was more than 37 percent, and in some areas, like Toledo, Ohio, it reached 80 percent. Business investment was down 90 percent from 1929. Per-capital real income was lower than three decades earlier, at the turn of the century. If you were unfortunate enough to have put your money in a bank that went bust, you were wiped out. With no idea whether any banks would reopen, millions of people hid their few remaining assets under their mattresses, where no one could steal them at night without a fight. The savings that many Americans had spent a lifetime accumulating were severely depleted or gone, along with 16 million of their jobs. When would they come back? Maybe never. The great British economist John Maynard Keynes was asked by a reporter the previous summer if there were any precedent for what had happened to the world’s economy. He replied yes, it lasted four hundred years and was called the Dark Ages.

Late in 1933, the journalist Earle Looker peered backwards several months to assess the Hobbesian states as FDR assumed office: “Capitalism itself was at the point of dissolution. Would men continue to work for profit as our forefathers understood it and as our people now understand it? This was a real question, for money was now useless. Would it be necessary soon to organize our families against the world, to fight, physically, for food, to keep shelter, to hold possessions?” (Jonathan Alter, The Defining Moment, pp. 1-3)

Most people at that time saw at only two paths out of the crisis of world capitalism: communism and fascism. A few saw social democracy as another way out. Roosevelt when he assumed the presidency was actually poised between fascism and social democracy, and, if Alter is to be believed, had enough support for either option that he was facing a free-will choice. It was a close call.

Roosevelt’s Inaugural Address had begun the process of restoring hope, but not everyone caught the new mood right away. The press coverage that morning largely downplayed or ignored FDR’s line: “the only thing we have to fear is fear itself.” The New York Times and most other newspapers relegated the line to their inside pages, while focusing instead on the vivid wartime allusions he employed five times during his speech—martial metaphors that suggested that there was, in fact, plenty to fear after all. The greatest applause line from the large crowd on the east side of the Capitol came when Roosevelt said that if his rescue program was not quickly approved: “I shall ask Congress for the one remaining instrument to meet the crisis: broad executive power to wage war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.”

The United States had not been “invaded by a foreign foe” since 1812, but this felt like it. Arthur Krock of the Times compared the mood in Washington on Inauguration Day to a ‘beleagered capital in wartime.’ For the first time since the Civil War, armed men patrolled the entrances to federal buildings, while machine gunners perched on rooftops. Editors knew that that the world war, just thirteen years in the past, had concentrated great power in the hands of Woodrow Wilson’s government. To them it looked as if FDR were proposing the same thing. And so the approving headline FOR DICTATORSHIP IF NECESSARY ran in the New York Herald-Tribune on March 5, with similar notes stuck in the Inaugural coverage of other major papers.

Exactly what was “necessary”? No one knew, including Roosevelt. Even before being sworn in, he had decided on a federal bank “holiday” (a festive term he preferred to Herbert Hoover’s “moratorium”) to give the people who now ran the country a few days to figure out what to do. Then what? Should he assume wartime authority on a temporary basis? Call out the Army to protect banks and maintain order? Mobilize veterans? Unrest was already growing in the farm belt, where mobs had broken up bankruptcy auctions. Four thousand men had occupied the Nebraska statehouse and five thousand stormed Seattle’s county building. The governor of North Carolina predicted a violent revolution, and police in Chicago clubbed teachers who had not been paid all school year. Everywhere bank runs threatened to turn violent. By the Inaugural weekend, police in nearly every American city were preparing for an onslaught of angry depositors. At least some were certain to be armed.

With so many banks involved, the U.S. Army—including National Guard and Reserve units—might not be large enough to respond. This raised the question of whether the new president should establish a makeshift force of veterans to enforce some kind of martial law. The tempation must have been strong. It hardly seems a coincidence that FDR decided that the first radio speech of his presidency would be specially addressed to a convention of the American Legion, the million-member veterans’ organization co-founded after World War I by his fifth cousin Theodore Roosevelt, Jr. (Ibid., pp. 3-4)

The American Legion occupies a special place in the history of American Fascism. Alter found a draft statement that was handed to Roosevelt before his first radio address calling for such a fascist force:

The short speech was scheduled for that Sunday evening at 11:30 p.m. EST, with all the radio networks carrying it live across the country. In preparing for the broadcast, someone in the small Roosevelt inner circle offered the new president a typewritten draft of suggested additions that contained this eye-popping sentence:

As new commander-in-chief under the oath to which you are still bound I reserve to myself the right to command you in any phase of the situation which now confronts us.

This was dictator talk—an explicit power grab. The new president was contemplating his “right” to command World War I veterans—mostly men in their late thirties—who had long since reentered civilian life. It was true that they had sworn an oath to the United States on entering military service and that the 1919 founding document of the American Legion pledged members to help “maintain law and order” and show “devotion to mutual helpfulness.” But the commander in chief had no power over them. Here Roosevelt would be poised to mobilize hundreds of thousands of unemployed and desperate men by decree, apparently to guard banks or put down rebellions or do anything else he wished during “any phase” of the crisis, with the insistence that they were dutybound to obey his concocted “command.”

That word—“dictator”—had been in the air for weeks, endorsed vaguely as a remedy for the Depression by establishment figures ranging from the owners of the New York Daily News, the nation’s largest circulation newspaper, to Walter Lippmann, the eminent columnist who spoke for the American political elite. “The situation is cricital, Franklin. You may have no alternative but to assume dictatorial powers,” Lippmann had told FDR during a visit to Warm Springs on February 1, before the crisis had escalated. Alfred E. Smith, the Democratic nominee for president in 1928, recalled with some exaggeration that “during the World War we wrapped the Constitution in paper, put it on the shelf and left it there until the war was over.” The Depression, Smith concluded, was a similar “state of war.” Even Eleanor Roosevelt, more liberal than her husband, privately suggested that a “benevolent dictator” might be what the country needed. The vague idea was not a police state but deference to a strong leader unfettered by Congress or the other inconveniences of democracy. Amid the crisis, the specifics didn’t go beyond more faith in government by fiat.

Within a few years, “dictator” would carry sinister tones, but—hard as it is to believe now—the word had a reassuring ring that season. So did “storm troopers,” used by one admiring author to describe foot soldiers of the early New Deal, and “concentration camps,” a generic term routinely applied to the work camps of the Civilian Conservation Corps that would be established by summer across the country. After all, the Italian Fascist Benito Mussolini, in power for a decade, had ginned up the Italian economy and was popular with everyone from Winston Churchill to Will Rogers to Lowell Thomas, America’s most influential broadcaster. “If ever this country needed a Mussolini, it needs one now,” said Senator David Reed of Pennsylvania, outgoing President Hoover’s closest friend on Capitol Hill. The speech draft prepared for FDR brought to mind Mussolini addressing his black-shirt followers, many of whom were demobilized veterans who joined Il Duce’s private army. (Ibid., pp. 4-6)

The propaganda machine, owned by the elite, was ready to be put into action in the defense of the property of the rich:

The most powerful American publisher, William Randolph Hearst, seemed to favor dictatorship. The Hearst empire extended to Hollywood, where Hearst that winter had personally supervised the filming of an upcoming hit movie called Gabriel Over the White House that was meant to instruct FDR and prepare the public for a dictatorship. The movie’s hero is a president played by Walter Huston who dissolves Congress, creates an army of the unemployed, and lines up his enemies before a firing squad. FDR not only saw an advance screening of the film, he offered ideas for script rewrites and wrote Hearst from the White House that he thought it would help the country. (Ibid., p. 6)

Now what would happen if the same economic conditions were faced by Bush and Cheney? In 1933, at least, the United States was lucky:

But on March 5, 1933, as astonishing thing happened—or more precisely, did not happen. The draft of that American Legion radio address was destined not for the ears of millions of veterans and other Americans, but for nothing more than the speech files of the Roosevelt Library, where it lay unexamined for more than seventy years. The five-minute speech that FDR delivered that night built on the military tone of the Inaugural. He argued for the ‘sacrifice and devotion’ of wartime and noted that it was ‘a mistake to assume that the virtues of war differ essentially from the virtues of peace.’ But there was no hint of the need for a private army.

No one knows who wrote the unused draft or why FDR discarded the suggested additions, but something inside the man kept him from moving in an extraconstitutional direction. Some combination of personal and democratic conviction set him on a different course, at once more traditional and bold. This most pragmatic of modern American presidents sensed the unworkable nature of untrammeled power, even in the hands of the only person he completely trusted—himself.

In the days ahead, FDR moved in the opposite direction, passing the word on Capitol Hill that he did not believe in a constitutional dictatorship and asking his friend Felix Frankfurter to tell Lippmann to stop hawking dictatorship and disrespect of Congress in his columns. (Ibid., p. 7)

Bush, of course, is chomping at the bit for his chance.