Signs of the Economic Apocalypse, 11/20/06

From Signs of the Times, 11-20-06:

Gold closed at 622.20 dollars an ounce on Friday, down 1.1% from $628.90 at the close of the previous Friday’s trading. The dollar closed at 0.7794 euros Friday, up 0.1% from 0.7785 euros for the week. The euro closed at 1.2830 dollars Friday, down from 1.2846 at the end of the week before. Gold in euros would be 484.96 euros an ounce, down 1.0% from 489.57 for the week. Oil closed at 58.92 dollars a barrel Friday, down 1.2% from $59.62 at the close of the previous week. Oil in euros would be 45.92 euros a barrel, down 1.1% from 46.41 for the week. The gold/oil ratio closed at 10.56, up slightly from 10.55 at the end of the week before. In U.S. stocks, the Dow closed at 12,342.56 Friday, up 1.9% from 12,108.43 at the close of the Friday before. The NASDAQ closed at 2,445.86, up 2.3% from 2,389.72 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.60%, up one basis point from 4.59 at the end of the week before.

More bad news on the housing front in the United States:

Housing construction plummets in October

By MARTIN CRUTSINGER, AP Economics Writer

Housing construction plunged to the lowest level in more than six years in October as the nation's once-booming housing market slowed further.

The Commerce Department reported on Friday that construction of new single-family homes and apartments dropped to an annual rate of 1.486 million units last month, down a sharp 14.6 percent from the September level.

The decline, bigger than had been expected, was the largest percentage decline in 19 months and pushed total activity down to the lowest level since July 2000.

Applications for new building permits, seen as a good sign of future plans, fell for a ninth consecutive month, the longest stretch on record. The October drop was 6.3 percent, pushing permits down to an annual rate of 1.535 million units, the slowest pace in nine years.

David Seiders, chief economist for the National Association of Home Builders, said he believed construction would fall by about 13 percent this year as builders scramble to deal with plunging sales.

"We had an unsustainable boom in housing in both 2004 and 2005 and now we have a correction on hour hands," he said.

The sharp slowdown in housing this year stands in stark contrast to the past five years, when the lowest mortgage rates in four decades had powered sales of both new and exiting homes to five consecutive records.

The housing weakness trimmed a full percentage point off economic growth in the July-September quarter, when the economy expanded at a tepid 1.6 percent rate.

Housing is expected to continue acting as a drag over the next year but analysts believe the adverse effects of falling sales and construction cutbacks will not be enough to pull the country into a recession.

There were signs that the steep plunge in housing was beginning to level off. The monthly survey of builder sentiment edged up slightly in early November following another small increase in October. It marked the first back-to-back improvements in builder sentiment since June 2005.

The level of building activity in October was 27.4 percent below activity in October 2005, the biggest year-over-year decline since March 1991.

Construction of single-family homes fell by 15.9 percent in October from the seasonally adjusted September level, dropping to an annual rate of 1.177 million units. Construction of multi-family units dropped by 9.1 percent to an annual rate of 309,000 units.

The drop in construction was led by a 26.4 percent decline in the South. Construction fell by 11.7 percent in the Midwest and was down 2.1 percent in the West.

The only region showing strength was the Northeast, where construction jumped by 31 percent.

As usual there has been a lot of talk about “soft landings” and “corrections.” Richard Russell is not buying it:

Dow Theory Letters

November 9, 2006
Extracted from the Nov 8, 2006 edition of Richard's Remarks

Russell Comment -- November 8, 2006 -- The verdict is in. The majority of the American people by their vote have said "enough" to Bush and the neo-cons. The House went to the Democrats and as I write the Senate is in doubt. Was it Iraq, was it the economy, was it the lies, was it the sleaze, was it the incompetence? It was probably all of these. The vote has rendered President Bush a "lame duck." The nation now faces gridlock. But Iraq will continue, and the deficits will continue.

Much power has now been transferred to the Democrats. They don't deserve it. They went along passively, cowardly, and cluelessly with the Bush caravan. Their real claim to power is not courage or intelligence, their real claim to their new power is simply that they are not Bushies or neo-cons. In all, it's a sad story. But it's a story, less sad than it was a day ago.

…Economically, the big picture will now boil down to four phenomena: (1) Iraq, (2) the continuing massive US deficits, (3) the longer-term effects of the deteriorating housing picture, (4) the incredible disparity between Wall Street and the rich -- and the great mass of struggling Americans.

Iraq will be a continuing cancer. I have no idea how it will be resolved.
The deficits will probably be ignored despite much hand-wringing.

The housing situation (in my opinion) will deteriorate and become a huge problem.

The disparity between the rich and the poor will remain an unsolved cancer -- it will also be a source of anger on the part of most Americans.

The consensus continues to be that housing is due for a "soft landing." In my opinion, the soft landing is a fantasy. I think it will be well into next year before we know what kind of landing housing is headed for. I think it's going to be a very hard landing, one that will work a hardship on the entire nation.

But even the market bears and gold bugs don’t seem to be able to grasp the true scale of the calamity. David North just published the text of a two part address entitled “War, Social Inequality and the Crisis of American Democracy” in which he uses history to give proper scale to the calamity, a calamity whose outward expression is the crime that was the invasion of Iraq. According to North, the war, the crime, was the consequence of the takeover of the United States by a two-party dictatorship designed to concentrate wealth and power in the hands of a very few.

…In 1815, two veteran politicians, somewhat past the political wars of their earlier lives, engaged in a lengthy correspondence. One of the pieces of that correspondence was a letter written by one of the parties, John Adams, the second president of the United States and one of the major leaders of the American Revolution. He was writing to an old adversary who, in the last years of the two men, became his closest friend—Thomas Jefferson.

Jefferson had posed the question in an earlier letter: what was the revolution in which we both participated and to which we had dedicated our lives and our sacred honor? Adams said something very interesting. He said the revolution was not the war. The war was a consequence of the revolution.

The real revolution did not take place after 1775. It took place before 1775—between 1760 and 1775, a period of 15 years marked by an extraordinary growth of political consciousness among the masses of colonials. The revolution took place in the minds of the people. And it was that which made possible the extraordinary development of consciousness which found its most sublime expression in Jefferson’s Declaration of Independence and, later on, in the drafting of the Constitution and the Bill of Rights.

Adams actually said that if you want to trace the development of consciousness, read the newspapers, read the pamphlets, read the leaflets which were being circulated by the tens of thousands in the old colonies, and there you will see the real development of revolution.

At a somewhat later period of history, on the eve of the Civil War, the great debates between Lincoln and Douglas took place. Lincoln’s contributions remain to this day an extraordinary summation of the issues that led to the abolition of slavery in the United States.

As a matter of fact, Lincoln himself was a candidate whose political life was, to a major extent, dependent upon his ability to articulate and explain the great issues of his age. The turning point in Lincoln’s candidacy actually came in February of 1860. The candidate from Illinois was invited to participate in a speaking tour. He went to Massachusetts, Pennsylvania and Connecticut, but the big meeting was to be held in New York, where the lions of the new Republican Party were going to take the measure of the provincial from Illinois.

When Lincoln appeared on stage in an ill-fitting suit—he was hardly the most handsome man in the world and wouldn’t pass muster with our media today—there was something of a chuckle. Then he began to speak. He laid out in the next 90 minutes an extraordinarily comprehensive assessment of the constitutional issues posed by the slavery question.

He reviewed the position of all the founders. This was a detailed, concise, brilliant analysis, which almost overnight made it clear to everyone that Lincoln was a major force. And it transformed his candidacy into something that was credible. He became the Republican candidate and, fortunately, the president of the United States.

Look at the situation today. What issues have been discussed? What questions have been raised? Let us put it somewhat differently? What has been suppressed? What can’t be discussed?

The bloodbath in Iraq

This morning the media was full of reports of the conviction of Saddam Hussein and the decision that he is to be hanged. He was convicted for putting to death hundreds of Iraqis.

Let us consider another fact that has not been widely reported or discussed. It was briefly mentioned in the press but that was about it. It was a study put out by Johns Hopkins University in October. Johns Hopkins is a major institution, and it presented a study which established, based on the most advanced statistical methods, that the number of Iraqis who have died since March 2003 as a result of the American intervention and occupation is 655,000.

Six hundred fifty-five thousand human beings have perished as a result of this country’s invasion of Iraq. Six hundred fifty-five thousand!

I have heard various reports of the crimes committed by Saddam Hussein and the number of people killed. Even if one accepts the highest figure that I’ve seen, in the area of 150,000 to 200,000, that’s less than a third of the number of people who have died in just three years as a result of the American invasion.

Six hundred fifty-five thousand people represent approximately 2.5 percent of the population of Iraq. Two-and-a-half percent of the population! Apply that percentage to the United States. A cataclysm of that scale would have cost the lives of 7.5 million Americans out of a population of 300 million.

Saddam Hussein is to be held accountable for his crimes, though I must make the point that no one can accept, if one is serious about democratic rights, the procedures that were adopted by that court. But he’s been given the death penalty—a penalty that we oppose. But what shall be the punishment for those who have carried out a war, based on a violation of international law, resulting in the deaths of 655,000 people? What level of accountability shall there be?

One has an indication in the way the media responded. One would think that the report that 655,000 people had died would produce a massive shock throughout the country. Well, there were brief reports in the press. The day after the report appeared, Bush was asked at a press conference what his response was, and he simply said that the report was not credible. There was no follow-up question, and I haven’t seen a single article in the mainstream press—the New York Times, Washington Post, Los Angeles Times—in which the statement by Bush that the Johns Hopkins University report was not credible was subjected to critical investigation.

The editor of the New York Times, Bill Keller, came to the University of Michigan, and one of our reporters asked him to explain the silence of his newspaper. He just brushed it off. The story has been simply dismissed. Yet it should be the subject of the most intense discussion and debate within the United States, especially when one asks oneself: what will be the consequences? What must follow from a nation being implicated in so great a crime? Does one really think that the United States could wipe out two-and-a-half percent of a population of another country and not suffer consequences, not just in Iraq, but in our own country?

During the constitutional debates of 1787 in Philadelphia, one of the delegates, George Mason from Virginia, addressed the question of slavery. He was a slave owner, but an opponent of slavery. He said, in words that sent a chill down the spine of every delegate, “Unlike individuals, the crimes of nations are not punishable in another world, in the hereafter. The crimes of nations are punished in this world, and the form of that punishment is a national calamity.”

Seventy-five years later, the nature of that calamity was revealed: the American Civil War. And Lincoln, in his great second inaugural address, invoked the words of Mason when he said that the scourge of the war was the punishment for the crime of slavery, in which both North and South had participated.

The bloodbath orchestrated by the government of the United States, with the full collaboration of the Democratic Party and the media, has definite implications. The state of American democracy, its visible disintegration before our eyes, is one of the forms being taken by the developing national calamity.

North again:

Social inequality in the United States

How did a situation arise where such massive and undemocratic violations of rights take place, and they go unchallenged and even un-discussed in any serious way? Life-and-death questions of democratic rights that resound through our history have emerged, yet an election campaign is conducted where they are not discussed and cannot be examined.

In order to understand this, one has to look at the nature of the society in which we live. What is the real source of these diseases—of war, of dictatorship? They must be symptoms of a deep social ill that exists within the United States.

…What has been the cause of this profound deterioration of the democratic immune system of the United States? We have to look at the nature of our society, and here we see that the most significant feature is the extraordinary level of social polarization, the extraordinary degree of wealth concentration in a very small section of American society.

A study was recently done by two economists from UCLA, Piketty and Saez, entitled “Income Inequality in the United States, 1913-1998.” It is based on federal income taxes, and it shows that in 1929, economic inequality, wealth inequality, and income inequality were at their highest levels.

Then came the Great Depression, and there was a sharp decline because of the enormous losses experienced by sections of the elite itself when Wall Street crashed. Later, particularly after World War II when the GIs came home and there was an enormous wave of labor struggles and social struggles, inequality declined and the level of social equality increased. That persisted into the 1970s, and then the process reversed itself. Social inequality accelerated during the Reagan administration. It accelerated with extraordinary rapidity during the Clinton administration, and now it is back at its highest levels since 1929.

If one looks at income distribution in America, one sees certain extraordinary features. First of all there, is a very, very sharp differential between the top 10 percent and the bottom 90 percent. People often use the phrase, “The rich get richer and the poor get poorer.” When we talk about the poor getting poorer, we are talking about the lower 90 percent of the American people. That embraces a very substantial population—270 million out of 300 million, i.e., the vast majority of the American people.

Then, if one examines the top 10 percent, one is struck by the very sharp differential there as well. The social position of those in the top 5 percent is dramatically different than those in the bottom 95 percent. And there is an extraordinary degree of differentiation between the top one percent and the bottom 99 percent. The top one percent receives approximately 19 percent of the entire income paid out every year in the US. The top 0.1 percent, one in a thousand, receives approximately 9 percent. We are dealing with astonishing levels of social inequality.

Similar figures present themselves if one measures not just income, but control of wealth, in the form of share ownership. We live in a society that has become incredibly stratified.

If history teaches us anything, going back to the days of the Roman Republic, it is that the higher the level of wealth concentration, the more eroded and unsustainable the previous democratic forms of rule. If democracy means anything, it embodies the rule of the people. But the people in their broad masses represent a great threat, a danger, to those who control the vast aggregates of wealth.

How would the democratic interests of the masses express themselves? In social policy, in a progressive income tax, in taxes on wealth, in health care programs, educational programs, programs of public works. From the standpoint of the ruling elite, all of these demands of the “grubby masses” subtract from the revenue flowing into their pockets.

What is the secret of political life in America? What is the aim of both parties of corporate America? To remove all constraints—political, economic, legal, moral—on the accumulation of personal wealth. Every social demand is seen as a threat. That is domestic policy.

What is its international expression? Militarism and war.

The ruling elite has global interests. It is striving to establish the supremacy of the United States over all other countries—to control oil, to control raw materials. The United States has a military budget that is a multiple of the combined military budgets of all other country in the world. That only tells you that the American ruling elite, arming itself like Chicago gangsters, is waging its international turf wars to make sure it has its hands on the levers of power—whether in Asia, Africa or South America.

And the American people have to pay for it—in Iraq, billions every month. Immense sums of money are squandered. That is why, when the Iraqi military budget came up last time for a vote in the Senate, it was passed 100-0, without any questions asked. That was less than a month ago.

But these problems are bigger than just American problems. Capitalism itself, that system whose assumptions we simply take for granted now, can be seen as a trick that enables concentration of wealth and power. It did it by separating the accumulation of wealth from any moral or social consideration, from conscience. It is no accident that capitalism has paved the way for a takeover of society by psychopaths.

What seems normal to us can be seen as sick and perverted if we look at it from the point of view of the past, of tribal type organization, or from the point of view of a healthy future. Tribal societies have as their hallmark the deep, systematic prevention of concentration of power. Tribal societies, in a kind of reverse causality, organized themselves toward the prevention of something that hadn’t taken place yet but what is taking place now. According to Ran Prieur, one of the ways this is done is by forbidding purely utilitarian relationships, or those we would call economic:

In a tribe, purely utilitarian relationships are forbidden! The economic is a subset of the social, and in a land-based tribe, the fundamental social relationship is between the people and the land. But in civilization, the social and the economic are carefully separated. It's uncool to accept money from your family -- you're supposed to "earn" it through a utilitarian deal with strangers. We don't want to chat with the person behind the counter -- we just want our coffee. We love people we don't depend on, and we depend on people we don't love, or even know.

This is what enables a large-scale domination system! Tribes can be repressive, abusive, even ecologically destructive, but they can't be big, or grow past a certain size, because everyone has to know everyone for them to work. And for a tribe to be mean, everyone in it has to be mean. But you can build a global hell-world out of nice people with just one trick: the purely utilitarian relationship. It's the basic chemical bond of Empire. And we can dissolve Empire, one cell at a time, by befriending the people we exchange money with, and building gift economies on our friendships.

Laura Knight-Jadczyk, in her fascinating series on John Kennedy published in her blog and in the Signs of the Times, approached the subject this way:

Monday's SOTT carried a couple of articles that caught my eye. The first one was The harmless people, an interview with Elizabeth Marshall Thomas.

In 1950, a 19-year-old girl left the elite Smith College in Massachusetts to join her family on an expedition that would change their lives. Prompted by her father's desire to visit unexplored places, the family set off for the Kalahari desert in search of Bushmen living out the "old ways" of hunter-gatherers. The girl, Elizabeth Marshall Thomas, went on to celebrate them in her 1959 book The Harmless People, which became a classic of popular anthropology. Nearly 50 years on, Marshall Thomas's latest book The Old Way revisits the story - and finds that the Bushmen's fate is more complex than it seems.

Marshall Thomas returned to her English degree at Smith College, Massachusetts...

The interviewer asks Marshall Thomas: Westerners mourn the loss of this hunter-gatherer society, but you take a rather different view...

Marshall Thomas responds : Yes, for me they are living in somewhat the same way, but with different economics. The idea that you help your own is still present. This is what kept the human race alive for 150,000 years.

The hunter-gatherers told anthropologists they don't define themselves by how they get food but by how they relate to each other. We saw that. They tried to keep jealousy at a minimum, with nobody more important or owning more things than anyone else. You gave things away rather than keep them. You wanted other people to think of you with a good feeling.

Q: Is that the "old way" of your book title?

A: Yes.

There was a time when the playing field was level and all species lived in this way. How people and their domestic animals live now is profoundly different. [...]

Q: What do you make of the accusations by some academics that your writing is too sentimental?

A: My mother Lorna also wrote about the Bushman culture and we were both accused of over-emphasising the lack of violence in Bushman culture, but we were only reporting what we had seen. In the Bushmen groups we visited, we observed that there was much emphasis on cooperation and on avoiding jealousy. The reason was that life was pretty marginal and one way to get through was to have others who help you in your hour of need. Everything in their culture was oriented to this.

So it isn't that they have a natural "niceness" - I never said that they did. They're just like everybody else. What they have done is recognise the damage one person can do to another and try to put a limit on it.

The second article relates directly to what Marshall Thomas has remarked above about how societies that live on the edge manage to survive: Survival of the nicest
ALTRUISM - helping others at a cost to oneself - has been a stubborn thorn in the side of evolutionary biologists. If natural selection favours genes that produce traits which increase the reproductive success of the individuals in which they reside, then altruism is precisely the sort of behaviour that should disappear.

Darwin was acutely aware of the problem that altruism posed for his theory of natural selection. He was particularly worried about the self-sacrificial behaviour that social insects display: how could natural selection explain why a worker bee will defend its hive by stinging an intruder and dying in the process? In On the Origin of Species, he summarised the topic of social insect altruism as "one special difficulty, which at first appeared to me to be insuperable, and actually fatal to the whole theory". But then he came up with an explanation.

Since worker bees were helping blood relatives - especially their queen - Darwin hypothesised that natural selection might favour altruism at the level of blood kin.[...]

Huxley, also known as "Darwin's bulldog", outlined his thoughts on this topic in an 1888 essay entitled "The struggle for existence":

"From the point of view of the moralist, the animal world is on about the same level as the gladiator's show... Life [for prehistoric people] was a continuous free fight, and beyond the limited and temporary relations of the family, the Hobbesian war of each against all was the normal state of existence."

For Huxley, altruism was rare, but when it occurred, it should be between blood relatives.

Kropotkin, once a page to the tsar of Russia and later a naturalist who spent five years studying natural history in Siberia, thought otherwise. In Siberia he thought that he saw altruism divorced from kinship in every species he came across.

"Don't compete!" Kropotkin wrote in his influential book Mutual Aid: A factor of evolution (1902). "That is the watchword which comes to us from the bush, the forest, the river, the ocean. Therefore combine - practice mutual aid!"

How could two respected scientists come to such radically different conclusions? In addition to being a naturalist, Kropotkin was also the world's most famous anarchist. He believed that if animals could partake in altruism in the absence of government, then civilised society needed no government either, and could live in peace, behaving altruistically. Kropotkin was following what he saw as "the course traced by the modern philosophy of evolution... society as an aggregation of organisms trying to find out the best ways of combining the wants of the individuals with those of co-operation". He saw anarchism as the next phase of evolution. Huxley was no less affected by events around him. Shortly before he published "The struggle for existence", his daughter, Mady, died of complications related to a mental illness. In his despair over Mady's passing he wrote, "You see a meadow rich in flower... and your memory rests upon it as an image of peaceful beauty. It is a delusion... not a bird twitters but is either slayer or slain... murder and sudden death are the order of the day." It was in the light of nature as the embodiment of struggle and destruction - the antithesis of altruism - that Huxley saw the death of his daughter and it was in that mindset that he penned his essay [...]

A mathematical theory for the evolution of altruism and its relation to blood kinship would come a generation later with Bill Hamilton, who was both a passionate naturalist and a gifted mathematician. While working on his PhD in the early 1960s, he built a complex mathematical model to describe blood kinship and the evolution of altruism. Fortunately, the model boiled down to a simple equation, now known as Hamilton's rule. The equation has only three variables: the cost of altruism to the altruist (c), the benefit that a recipient of altruism receives (b) and their genetic relatedness (r). Hamilton's rule states that natural selection favours altruism when r × b > c.

Hamilton's equation amounts to this: if a gene for altruism is to evolve, then the cost of altruism must be balanced by compensating benefits. In his model, the benefits can be accrued by blood relatives of the altruist because there's a chance (the probability r) that such relatives may also carry that gene for altruism. In other words, a gene for altruism can spread if it helps copies of itself residing in blood kin. [...]

While working with Hamilton on kinship and altruism, the atheist Price underwent a religious epiphany. In an irony that turns the debate about religion and evolution on its head, Price believed that his findings on altruism were the result of divine inspiration. He became a devout Christian, donating most of his money to helping the poor. [...]

Since Hamilton published his model, thousands of experiments have directly or indirectly tested predictions emerging from his rule, and the results are encouraging. Hamilton's rule doesn't explain all the altruism we see but it explains a sizeable chunk of it.

…I don't think I have to spell out the connections between all of the above and the probable forces behind the assassination of John F. Kennedy to my regular readers. But for the sake of those who are not regular readers, let me suggest that you check out my article on Ponerology which tells us that there is a statistical minority of human type beings on our planet that are quite simply not really human. As Professor Robert Hare says, they are an "intraspecies predator." Are they "alien/human" hybrids as might be inferred from the remarks of Padre Freixedo? Anything is possible. But what is important is to remember the above stated rules of Altruism; and to remember that they can apply to genetic pathological deviants as well as normal human beings. That is to say, that networks of deviants, as described by psychologist Andrzej Lobaczewski, can and do act "altruistically" toward each other to some extent, and have done for millennia. Of course, that is only so long as those "others" continue to exist that they can "gang up" against. When they finally achieve dominance, it can be seen that they are quite likely to turn against each other as the recent Neocon abandonment of George W. Bush has shown us. But even with their infighting, they still work to keep a solid front of secrecy imposed between themselves and the majority of humanity, the masses of people whose energy, blood, sweat and tears, keep them on the top of the heap. In short, more than anything else, genetic deviants survive due to their ability to induce altruistic behavior from others - self-sacrifice - by deceiving the others into believing that they are conspecific; they are parasites. And thus it is absolutely crucial for all of us to begin to learn about these matters because the very survival of humanity may depend on it. As Lobaczewski points out, the very fact that there are more normal people than deviants suggests to us that normality, having a conscience and empathy and altruism, are those things that helped humanity to evolve and survive over hundreds of thousands of years. It is going to take a lot of altruism and empathy to get us through the next few years!

Maybe the “altruism” among psychopaths led them, at crucial points in history, to encourage the development of capitalism, a system that, by freeing energies, enabled sufficient concentration of wealth to eliminate freedom for the non-psychopathic.