Monday, August 27, 2007

Signs of the Economic Apocalypse, 8-27-07

From Signs of the Times:

Gold closed 677.50 dollars an ounce Friday, up 1.6% from $666.80 at the close of the previous Friday. The dollar closed at 0.7312 euros Friday, down 1.5% from 0.7420 at the previous week’s close. That put the euro at 1.3676 dollars compared to 1.3477 the Friday before. Gold in euros would be 495.39 euros an ounce, up 0.1% from 494.77 for the week. Oil closed at 71.09 dollars an ounce Friday, down 1.3% from $71.98 at the close of the week before. Oil in euros would be 51.98, down 2.8% from 53.41 for the week. The gold/oil ratio closed at 9.53 Friday, up 2.9% from 9.26 at the end of the previous week. In U.S. stocks, the Dow Jones Industrial Average closed at 13,378.87, up 2.3% from 13,079.08 for the week. The NASDAQ closed at 2,576.69 Friday, up 2.9% from 2,505.03 at the close of the week before. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.62% Friday, down four basis points from 4.66 for the week.

Stock prices recovered last week, buoyed by news of a rise in housing starts and durable goods orders in July in the U.S. and also by the infusion of unimaginable amounts of newly created money. The problem is that the numbers were for July—before the recent market turbulence. August numbers certainly won’t look so good. Despite some short term optmism, the falling U.S. dollar (1.5% against the euro last week) has many people worried behind the scenes. Investors who feel more confident now that the U.S. Federal Reserve Board has decided to lower interest rates also should know that that policy can only go on so long: lowering interest rates on the dollar could easily push the value of the dollar over the edge. All things being equal, lowering interest rates on the dollar makes the dollar less attractive to hold, thereby lowering its value.
Dollar May Fall to Record Within Six Months, Goldman Sachs Says

Ye Xie

Aug. 24 (Bloomberg) -- The dollar may decline to a record low against the euro in the next six months because U.S. economic growth will slow, forcing the Federal Reserve to cut interest rates, according to Goldman Sachs Group Inc.

From the current level of $1.3568 per euro, the U.S. currency will weaken to $1.43 per euro in the next three to six months, Goldman Sachs said in a research note yesterday. New York-based Goldman, the world's biggest securities firm by market value, lowered its dollar forecast from a prior estimate of $1.35. The dollar set a record low of $1.3852 per euro on July 24.

Concern about losses in investments related to mortgage securities has bolstered expectations the Fed will cut its benchmark interest rate from 5.25 percent at its Sept. 18 policy meeting. Traders are certain the Fed will cut its key rate to at least 5 percent by Sept. 18, futures show.

“Financial conditions are tightening at a time when clearly there's some downside risk to the growth,” said Jens Nordvig, a senior currency strategist at Goldman Sachs in New York. Fed rate cuts “will drag the dollar lower.”

The Fed will lower its benchmark interest rate by 0.75 percentage point to 4.5 percent by year-end, according to Goldman Sachs.

The dollar will fall also because foreign investors will reduce purchases of higher-yielding corporate bonds, said Nordvig.

Goldman also said the dollar will decline to 110 yen in the next three to six months, from 116 yen at present, compared with a previous forecast of 118 yen.

Adding to fears of a slowdown was news announced last week about layoffs in the mortgage industry. News like that, coming from one of many segments of the overall housing industry, reminds us just how much of the U.S. economy has been based on the housing bubble:

Mortgage Job Losses Surpass 40,000

Ieva M. Augstums, AP Business Writer

August 22, 2007

CHARLOTTE, N.C. (AP) -- At the North Carolina offices of mortgage lender HomeBanc Corp., Archie Clark is the only employee left. But in a few days, he'll be gone, too. When Clark finishes helping movers from the company's Atlanta headquarters collect computers and other property, he'll join the more than 25,000 workers nationwide who have lost jobs in the financial services industry since the beginning of the month -- with more than half coming since last Friday.

With few exceptions, the cuts are the direct result of woes in the nation's housing market.

More layoffs are announced daily. On Wednesday, Lehman Brothers Holdings Inc. closed its "subprime" mortgage business, laying off 1,200 workers at 23 offices; Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, and Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.

Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.

It's an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

"It's far from over," said Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm. "The subprime lending collapse will continue to ripple through the financial sector."

For five years, the nation's housing market was booming and mortgage companies grew quickly, at times offering lucrative jobs to people with little experience. But as home values declined and interest rates rose in the past year, rising delinquencies and defaults -- especially in subprime mortgages targeted at borrowers with risky credit -- have pounded lenders who couldn't keep pace.

"These kind of mortgage lenders just sprung up like mushrooms and grew like men," said John A. Challenger, chief executive at Challenger, Gray & Christmas. "They staffed up and now you have a bust."

America's largest mortgage lender, Countrywide Financial Corp., began an undisclosed number of layoffs this week. Last week, Arizona mortgage lender First Magnus Financial Corp. shut down its operations and laid off nearly 6,000 workers. On Monday, Capital One Financial Corp. said it would shutter Greenpoint Mortgage, its wholesale mortgage banking business, and lay off 1,900 employees.

"It's only been weeks," Challenger said. "These companies are acting remarkably quickly, stopping on a dime."

Andy Roach didn't foresee the turmoil when he joined Greenpoint in March. As late as June, the 25-year industry veteran thought the business of making "Alternative A" mortgage loans -- geared for those with slightly better credit than subprime borrowers -- was on a solid track.

But in July, he said, spooked investors stopped buying the securities the company sold by repackaging the loans. A little more than a month later, Capital One announced that Roach and about 1,900 of his colleagues across the country were out of a job.

"It was evident that it was serious," said Roach, 46, a regional manager in the Chicago suburb of Downers Grove. "When you can't sell the loans, when there's no market for those loans, it put us in a bad, bad situation."

Clark, 33, headed information technology operations for three HomeBanc offices in the Raleigh area. He had a feeling earlier this month that trouble was lurking, as the company began cutting back on perks and made some initial layoffs. On Aug. 9, HomeBanc filed for bankruptcy protection. They kept him on through the end of the month to collect equipment and "just go in and check on things."

"It was pretty much a free for all in the office, people taking paper, stuff HomeBanc wouldn't need," he said. "I don't feel like HomeBanc did anything. It was a perfect storm of a bad housing market."

Two of Clark's friends have already landed jobs with Countrywide. Another found work with an affiliate of First Magnus, and was almost immediately laid off again. Roach plans to open his own lending business, focusing on commercial business loans and originating home loans himself.

"The mortgage business isn't dead -- there's just going to be less people in it," Roach said.

Dean Baker writes that if one goes by the official estimate that housing contributes 5% of GDP, then the deflation of the bubble could be catastrophic:
The correction of the housing bubble is likely to throw the economy into a recession and quite possibly a very severe recession. Residential construction directly accounts for almost 5.0 percent of GDP presently. Based on past patterns, this can be reduced by between 0.9 and 1.7 percentage points of GDP (between $120 and $230 billion in 2007) as the market corrects. The end of the bubble will eliminate between $4 and $8 trillion of housing bubble wealth. Given conventional estimates of the housing wealth effect, this will lead to a reduction in annual consumption of between $160 and $540 billion. Finally, the end of the housing bubble is likely to put an end to the recent wave of speculation that drove the stock market above trend levels. The loss of $4.5 trillion in stock bubble wealth will lead to a reduction in annual consumption of $135 to $180 billion, due to the wealth effect.

The total effect from the end of the housing and stock bubbles will be to reduce annual demand by between $415 and $950 billion. If this correction happens quickly, it is virtually certain to lead to a recession and quite possibly a very severe recession. The end of these bubbles is also likely to impose serious hardships on state and local governments that lose property tax revenue. It may also lead to larger shortfalls in pension funds and public employee retiree health care funds.

The feeling that something bad is in store for September, either a market crash, another conveniently-timed “incident” in the United States followed by a U.S. attack against Iran, or some kind of large natural disaster, seems to be shared by many this summer. The following story, from the week before last making the rounds lately, adds fuel to the fire:
Mystery trader bets market will crash by a third

Renée Schultes

16 Aug 2007

Carry trade unwinds as yen hits one-year high

An anonymous investor has placed a bet on an index of Europe's top 50 stocks falling by a third by the end of September, as world equity markets plunged for a third day and volatility hit a three-year high.

The mystery investor has bought put option contracts on the DJ Eurostoxx 50 index that will result in a profit if it plunges to 2,800 or below by the end of September. Based on the 2,800 strike price, the position covers a notional €6.9bn, and potentially even more using a market price of about 4,100 when the trades were done on Tuesday and Wednesday.

The identity of the investor is unknown but market sources speculated it was either a large hedge fund hedging itself against deepening losses, or a long-only fund manager pressing the panic button to protect its gains.

The investor has bought a total of 245,000 put options on the index. The September put option with a 2,800 strike was the most popular DJ Eurostoxx 50 contract yesterday, according to data from Bloomberg

In times of crisis, where a long-established equilibrium seems to be on the verge of transition to something else entirely, it may be a good time to step back a bit from our fears of collapse and see the existing order for what it really is. Henry See published an essay last week called Insiders and Outsiders in Everyday Life where he addresses basic questions of where we are, how we got here, and who is pushing us there. According to See, the fear and uncertainty we feel are more than byproducts of a dynamic, changing society. They may actually be the result of conscious planning by pathocrats, people who are fundamentally different from normal humanity, and may be designed to create the type of psychic shock that can put the public in a state of dissociation and breakdown. Such a state lends itself to dependency, the Stockholm Syndrome and other sinister reprogrammings:
We all know stories of qualified and skilled people who can't find work or who are passed over for promotion when someone who specializes in office politics gets the nod. This situation is another example of the insider/outsider dichotomy I discussed in my last article. It not only applies to Washington, it also applies to the facts and events of our daily lives. How many Americans are working for companies that are "offshoring" jobs to India and China? Ordinary people are on tenterhooks with the announcement of each round of layoffs while management have that glassy-eyed glare of bigger stock options and pay-offs when the year's profit margins improve and stock prices soar.

One of the consequences of such policies is that society loses the input and skills of its most gifted members. Positions that could be filled with people capable of bringing creative and thoughtful solutions to problems are instead filled with individuals whose only skill is the ability to play the game. They are often mediocre or incompetent and get others to do their work for them, while they, of course, claim the credit. Society as a whole loses as this great wealth of creativity is wasted.

But the losses are not only seen on the larger scale; they hit home more directly in the lives of those laid off or who live in a permanent state of fear.

Here are some quotes from email I have received recently describing just this.

One correspondent wrote:

Some life, being on the treadmill constantly trying to outrun 'redundancy'. I do not like where the 'new world order' has been herding us. A century ago I would have lived my entire life doing what I spent years training for in the first place.

Think about that. Think about what an important shift such a change is in our lives and how it affects all of us, how it puts us in a permanent state of anxiety over the future. We can spend thousands of dollars on an education and have no assurance whatsoever that we will even be able to find employment in our chosen field. Think about your fathers or grandfathers who may have had a job doing the same work throughout their careers and who believed that their children would have the same choice.

If the shift just described isn't enough to leave us anxious and insecure, what about the nefarious policy called by that whitewashed label "outsourcing" and "offshoring" of jobs?

…You have to wonder whether or not this permanent state of anxiety is one of the goals of these policies and these announcements. Read through this explanation of
Transmarginal Inhibition and see if it doesn't describe what is happening to the work force in the United States and elsewhere. Pavlovian shock methods are being used to soften us up and prepare us for the next blow. The regular "terrorist" alerts issued following 911 serve the same purpose.

…The problem is, these kinds of schemes are inherent in the logic of a system that values economic results over the lives of those doing the work. The faulty premise is that the good of the people is taken care of by the "invisible hand" of the marketplace, which boils down to, somehow, things will just take care of themselves, with the caveat: as long as you are industrious and are willing to work. You all know the great American myth that anyone can be a success, that anyone can be president.(1) This great American myth about individual success puts the burden of failure squarely on the individual. Failure is never the fault of the system or the people who benefit from the system. It is always your fault.
Convenient, isn't it? Do you think it is only a coincidence?

So how does one learn to benefit from the system, or, in other words, to succeed? By mimicking those who have already attained some success. And how does one do that? By becoming ruthless, back-stabbing, and only looking out for one's own interests. In other words, one must become sick to survive. One must encourage the propagation of the virus of pathological thought processes within oneself by killing any manifestation of consideration of others that might prevent you from getting what you want or what you have convinced yourself you deserve. Once the values of the insiders become the values of society as a whole, once their distorted and inhuman way of seeing the world becomes the accepted way of seeing and understanding the world, the only way to succeed is to become like them. You could call it the Stockholm Syndrome on a societal level.

An important element in this pathological way of viewing the world that one must internalize in order to succeed is the acceptance of the various false divisions that the insiders promote in order to hide the fundamental insider/outsider divide. Think of how race, nationality, language, and religion are all used to sow dissension and discord among outsiders. Do you think this process just happens by chance? An example that is prominent now is the question of illegal immigration and what to do with the long border joining the United States and Mexico. We see a vehement discussion on the need to close off America's borders.

But, really, what group is the problem here? Is it the Mexican workers who come to the United States, or is it the insiders who claim the vast majority of the wealth and resources for themselves? And to what extent are the insiders responsible for the large migration of workers into the US through decades of injustice and exploitation of Mexico by US corporations in collaboration with corrupt Mexican politicians and officials? And that holds for other countries in Latin America and the world. Do you think that these people would leave their homes and families if they could make a living where they were? Would you?

Which raises another question: What do you want out of life?

Probably security, as in having a home and enough money to get by, is high on the list. A safe place to raise your kids and a satisfying job that leaves you time to do other things than work and pay the bills would likely also have a place. Those are the needs and desires of normal people everywhere. Someone with a healthy psychological profile doesn't need large sums of money that he or she will never spend. He or she doesn't need multiple houses. He or she wants a job that is rewarding and satisfying and that provides enough income to pay his or her way and provide for his or her family. He or she wants to live in peace and security and not see a son or daughter go off to fight in a war overseas. He or she doesn't want to see a home-grown, para-military police force patrol the streets of their hometown, such as we saw used against the people of New Orleans after Hurricane Katrina, much less the thousands of foreign troops.

The Mexicans that come to the US want the same thing. Their goals are the goals of normal Americans. They share the goals of ordinary people everywhere. The ordinary Muslims, who we are told are the source of all of the problems in the Middle East, also want the same thing. So if this world of peace and security is what we want, why are we so far from achieving it?

We are told that it is because we all have a dark side, the animal part of our nature that breaks out every so often and wreaks havoc and destruction. In response to that, I would ask each of you, do you not see a difference between a violent act that comes out of the heat of emotion and a violent act that is coldly planned in advance? Would you be capable of planning the destruction of another country, including the deaths of over 1 million people, in a cold and rational manner, with the same emotional detachment that you would draw up the plans for the construction of a house? If you were running a profitable company, would you be capable of eliminating the jobs of thousands of workers, creating anxiety, suffering, and distress, simply to increase your profit margin by a few percentage points?

The insiders can and do make their plans in this way. They have no qualms about it. Their violence, be it physical or psychological, is not born of stress or overworked emotions. It is emotionless and calculated. They then invent slogans, theories, and excuses to justify their deviant plans, convincing us that it is done in the name of freedom and democracy or because there is a threat to our security.

The real threat to our security comes from those who can calmly make plans for war.

If normal people, ordinary people, were able to get beyond the divisions sown by the insiders and unite to claim what is rightfully ours, power and control over our own lives, the insiders would be where they belong: on the outside. Why should a small percentage of the population control the vast majority of the wealth? Why should they have the control over life and death decisions that concern the majority? Why should they impose their cold and calculated view of the world on those of us who value human contact, experience, and intimacy over money and power?

Whatever justification or rationalization springs to mind as you read these words has been implanted within you by people who do not have your best interests at heart. It is not their sons and daughters who are in Iraq. It is not their future that is put into jeopardy through downsizing, offshoring, and outsourcing. Using the media, these justifications and rationalizations are repeated over and over again until we accept them at face value, until we begin to think like them.

Certainly, groups subjected to injustice have tried to unite in the past. The problem was they were uniting over the wrong rallying point. Class, religion, nationality, none of these strike at the root of the problem, and therefore they can only go so far in achieving a working unity. The one issue that touches the root is that of conscience. How do you treat your neighbor? How do you treat your family? Moreover, without an understanding of psychopathy and other pathologies, it was easy for these types to join such movements and eventually turn them away from their original aims. People who are incapable of putting themselves in another's shoes, of genuinely feeling what it is like to be in another's position, are incapable of forming any lasting unity because they can never place the interests of someone else before their own. They are never capable of true compromise, that is, compromise that doesn't come with the baggage of self-righteous sacrifice or deep-seated and hidden resentment and their subsequent plans for revenge or retribution.

The fact of the matter is that our lives are controlled in almost every aspect by decisions over which we have no say, be it political decisions by the insiders in Washington or other centers of power, economic decisions by our bosses whose goal is to maximize profits at the expense of providing secure working environments for their employees, or decisions over what it is permissible to think and what ideas will be drummed into our heads through the media, to name but a few. Normal people, ordinary people, people of conscience live in an environment that does not express our inner nature, that is not the manifestation of our ability to empathize and care for others, and until we become aware of this fact, we, too, are infected. How will we ever be able to create a different world if we do not root out the insider virus that has taken root in us?

A blogger wrote the following that illustrates Henry See’s point that our society does not make maximum use of the creativity of it’s members. Rather it subordinates the many to maximize the power of a few:
Like Mexico

August 16, 2007

When folks ask me, "what kind of nation do the Republicans want us to be?", I point towards the Mexican border. You have the places like Acapulco where the rich and wealthy play in fabulously expensive resorts. The workers in those resorts are paid a pittance and go home to one-room dirt-floored tar-paper hovels with no electricity or running water. That is the Republican vision of the future of America -- an America with winners and losers, where the winners are filthy, filthy rich and the losers... meh. Losers.

I live down the road from Shallow Alto oops Palo Alto, where Stanford University is located. The upper-middle-class parents who live there know this future in their bones. Children there are under tremendous pressure from an early age to excel academically, play the "right" sports, do the "right" extracurriculars, that will get them into the "right" college. Some of them crack and commit suicide under the pressure -- Palo Alto has more kids committing suicide than any other community its size that I've ever heard of -- but most of them buckle down and obediently put nose to grindstone. Palo Alto has been rocked by cheating scandals also, because if it is a choice between being that peasant in the one-room dirt-floored hovel and a winner, anything is justifiable, including cheating or in some cases false accusation thereof. And while pretty much every student in Palo Alto will graduate and qualify for a decent four-year college, going to San Jose State is not good enough. You have to be accepted by the "right" institution, the institution that is number one in the field you're going into, because as the cabbies with four-year degrees will tell you having a degree nowdays isn't good enough to ensure you become one of the winners. It has to be the "right" degree.

The sad thing is that it doesn't have to be that way. There is no fundamental law of nature that says that America must invariably slide into being just another third world nation with super-rich rich and super-poor poor and nobody inbetween. There is not a scientific law that says that a poor kid cannot graduate from a middle-tier state university in a poor state and become a well-paid engineer with a six figure salary. Indeed, for a brief moment in the late 60's and 1970's it seemed that real progress was going to be made in insuring that all Americans, regardless of whether they were lucky enough to have upper-middle-class parents in Palo Alto, would have a chance to maximize the talents with which they were born. I know. I am one of the last generation of poor kids who had the total cost of his college tuition and textbooks paid for via federal grants. So where I once would have been just another construction worker adding no more value than a nailed 2x4, nowdays folks appreciate my talents enough to pay big money for it. As one of my bosses told me, "you are critical to the success of this company and the new product we are developing and we are going to pay you accordingly" (leaving unstated the "so you don't leave" bit :-).

Thing is, that's not true in America anymore. The elite figured out that they could get their technology workers cheaper by importing them from India and the rest of the world, and now poor kids can't go to college without running up gigantic debts which are not dischargable via bankruptcy if the kid can't pay it back. Who's going to go to college with that kind of burden hanging over them, unless they have a near-guarantee of a job at the end? Thus the emphasis upon the "right" college, the one whose entire graduating class of MBA's or whatever gets jobs on Wall Street or wherever. Meanwhile, millions of American kids with smarts and talent are saying "Will there be fries with that order, sir?" because they can't justify the risks of taking on enormous debt for an education when few recruiters visit the colleges that they can afford to attend, generally low-ranked state colleges. It's a tragic waste, and one that's not necessary. I know it's not necessary, because I was one of those kids, in a kinder gentler America that did not have the edge of cruelty and sadomasochism that today's America has, and America has more than made back the money it invested in my education, hell I pay more taxes in one single year than every dollar that America invested in my education, something that wouldn't be true if I were working multiple part-time odd jobs like most poor kids today have to do to keep body and soul together. But Mexico keeps sliding northward, and most Americans, it seems, have forgotten that it doesn't have to be that way -- and once wasn't.

The blogger who wrote the post above blames the Republican party, and they have spearheaded these policies, but so too, has the Democatic party, albeit more softly. The plans of the global economic plutocracy are not up for debate and are not to be decided upon in a democratic political process. Look what happened in Germany during the past ten years or so. The German voters consistently delivered left wing majorities or pluralities, and polls show strong public support for the traditional post-war social welfare state. Yet, the Social Democratic Party (SPD) has pushed through a series of “reforms” beginning during the Schroeder chancellorship when the party ruled in allicance with the Green party. Then in the last election where, once again, a majority voted left, the elites had the Social Democrats form an alliance, not with the Left Party, whose positions were closer to those of the SPD’s rank and file, but with the right-wing Christian Democrats, even making the Christian Democrats’ leader, Angela Merkel, the chancellor.

The widening gulf between official German politics and the electorate

Dietmar Henning

21 August 2007

“Wealth... for me means security. To be able to lose one’s job without falling into a bottomless pit.” Deutsche Bank chairman, Josef Ackermann

A survey of public opinion conducted by the Emnid agency on behalf of the newsweekly Die Zeit reveals broad opposition to Germany’s grand coalition government of the Christian Democrats (CDU/CSU) and Social Democratic Party (SPD). Only 16 percent of those questioned believed the government is doing enough in the area of social equality and social justice. In eastern Germany, this figure fell to less than ten percent. Discontent exists with all the parties and is very common among those voting for the government parties.

“Can it be that this country has moved imperceptibly to the left,” asks Die Zeit journalist Jörg Lau, commenting on the Emnid poll, “that today it stands much further to the left than it would care to admit?” Lau suggests this conclusion: “Large majorities in all political camps express support for more state intervention and against further privatisations, against nuclear power, against the deployment of German troops in Afghanistan and a halt to any further reforms. There are left-wing majorities for many issues—across all parties.”

At a time when all the leading political parties in Germany are moving to the right, poverty and inconceivable wealth are growing at opposite poles, the government is handing over state assets to the highest bidder and the German army is once again waging war throughout the world, the results of this opinion poll are striking in several respects.

Among other things, Emnid asked the question: “Left and right are much-used terms to mark a political position. Where would you situate yourself?”

In a poll conducted more than 25 years ago, in 1981, 17 percent of the German population described themselves as left-wing. Today, it is twice as many, i.e., 34 percent. The ratio between left and right has been reversed. In 1981, 38 percent considered themselves to be on the right, today it is just 11 percent. Even in the CDU/CSU and the Free Democratic Party (FDP), those regarding themselves on the left outweigh those who regard themselves as on the right.

This development is expressed particularly in response to social issues. Some 72 percent of all respondents think that the government is doing too little in the area of social equality. In eastern Germany the figure is 82 percent. Among those voting for the Left Party, the figure is 97 percent; for Green Party voters it is 93 percent. The figure stands at 76 percent among those supporting the SPD, and even among CDU/CSU voters, 60 percent think along these lines.

Similar trends are registered in response to questions about the social safety net. More than two-thirds of those asked support the introduction of a minimum wage. Seventy-six percent of SPD voters support such a move and more than half of CDU/CSU voters declare themselves in favour, even though the party leadership vehemently opposes a minimum wage.

The number of those rejecting the increase in the pension age to 67, championed by Labour Minister Franz Müntefering (SPD), is even clearer. Some 82 percent (in the east, 90 percent) believe the increase should be annulled, with 82 percent of SPD and 80 percent of CDU voters supporting the pension age returning to 65.

Two-thirds of those surveyed reject the privatisation of state assets. They believe that “enterprises such as the railways, telecommunications and the energy supply should remain in government hands.” This figure is over 70 percent among those voting for the government parties—CDU and SPD—i.e., the parties responsible for the privatisations of recent years.

The neo-liberal arguments, according to which privatisation increases competition and thus boosts the economy, are no longer believed. Instead day-to-day experience has led millions to draw their own conclusions. The banks and large shareholders have raked in fortunes through privatisations, whereas ordinary working people pick up the tab through job losses, lower wages, higher prices and deteriorating living standards.

A majority also believe the state has a major responsibility for the care of children. Nearly three-quarters of those polled—both men and women—think that the state should do more to support young children. This makes the demand from the ranks of the CDU/CSU for a “home-makers’ bonus” for mothers who look after their children at home seem especially desperate and retrograde. Far from being a response to ‘popular demand,’ the bonus idea is an attempt by ultra-right elements among Christian Democrats to suppress the widespread desire in the population for emancipation from oppressive conditions in the home…

Social questions move to the foreground

The Emnid poll confirms that the gulf is widening between official politics and the broad mass of the population. On questions of social equality and social justice, as noted above, the SPD and CDU/CSU, which like to call themselves “people’s parties,” receive the support of only 16 percent of the population.
Other polls confirm this result. In a recent study, the Mannheim Centre for European Social Research writes that satisfaction with the German health system has decreased from almost 64 percent in 1996 to barely 31 percent in 2002. The health “reforms” of the past five years have seen discontent continuing to grow.

The constant drumbeat from official political circles and the media about the “demographic time-bomb” and the need to “cut back bureaucracy,” the ideological assault on “sentimental social conservatism” and a “cradle-to-grave welfare state,” cannot hide the miserable reality. For years, the real wages and incomes of ordinary families have been sinking.

The number of working people with an income that guarantees a family’s survival is continuously falling. People can feel the effects of cuts in public spending where they live and work. In recent years, more than 500 railway stations were shut down, more than 10,000 jobs in youth work were destroyed and more than 1,500 public baths closed. Added to this comes the shutting of libraries, youth centres, information offices, post offices, etc.

Over a short period of time, 50,000 hospital beds were cut, while the number of patients increased in the same period by around one million.

Those are excluded from gainful employment are hit hardest. The so-called “Hartz laws,” introduced by the previous SPD-Green Party coalition led by Gerhard Schröder (SPD), cut unemployment and welfare benefits in a manner unknown since the days of the Weimar Republic in the 1920s. The measures put pressure on wages for those with jobs and created the basis for a massive expansion of cheap wage labour in Germany.

After one year, an unemployed person is now entitled to only €347 ($US 468) a month in benefits. For the long-term unemployed, whose number remains high despite an economic upturn, this is little more than a pittance. This benefit level was determined quite arbitrarily on the basis of the consumption patterns of the lowest fifth of single-parent incomes—in other words, on the basis of the consumption of the very poorest layer in society.

This benefit level is not adjusted for inflation or increases in average wages, but is pegged to pensions. These have not been increased for several years, and only this year have seen an increase of 0.54 percent. Thus the benefit level laid down by the “Hartz laws” was increased in the last three years by just €2 to €347 a month. At present, nearly 7 million people are dependent on such benefits, with 1.3 million also holding down a low-wage or “mini job.”

Die Zeit is conscious that the political vacuum opened up between working people and the political establishment can lead to intensified class struggle. Jörg Lau warns: “If confidence in society’s equality of opportunity is lost, it can become a problem for democracy.” “Democracy” here does not mean the determination of policy by the will of the people, but rather the preservation of the capitalist order.

Clearly, the solution is not with electoral politics. Something much more fundamental is required. If normal humanity arms itself with real knowledge of what it is up against, then acts together, all at once, the pathocrats would be out of a job in a moment. As an organizer of the International Workers of the World, the IWW or Wobblies, put it in the early 20th century,
If the workers of the world want to win, all they have to do is recognize their own solidarity. They have nothing to do but fold their arms and the world will stop. The workers are more powerful with their hands in their pockets than all the property of the capitalists. (quoted in Howard Zinn, A People’s History of the United States, p. 324)



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