Friday, November 22, 2013

Kennedy - 50th anniversary of death

I was in a lunch line in Chicago when I heard John Kennedy had been shot. I had not liked him much, better than Nixon was the best I'd been able to say about him when he ran for office, so I was surprised by how upset I was to hear this.  Evidently he had been growing on me.

I detested Kennedy's rich playboy style and perfect socialite wife. I was well aware of "his" FBI failing to protect civil rights workers, and his rank hypocrisy in defending the Bay of Pigs invasion.  I blamed him for the Cuban Missile Crisis, when we all stared our personal death in the face, for provoking it with his promise to the returning of the Bay of Pigs veterans to invade Cuba - little suspecting how critical his leadership had been in preventing World War III.

But over the year following the Missile Crisis I saw that something was changing.  Kennedy's stand on civil rights stiffened.  He negotiated the Test Ban Treaty.  And then there was his amazing, totally unexpected commencement address at American University on June 10 1963, proposing an end to the Cold War and the nuclear arms race.  

Take a listen:   

I heard this speech for the first time today, but read it in the newspaper then and was deeply impressed. It gave me hope. Despite the standard Cold War rhetoric it still rings true.  Even his repeating of the "lies of the Soviet leaders" was audacious - no doubt many in his audience were actually hearing for the first, last and only time of the Soviet charges that the US generals had plans to launch a nuclear war of aggression on the Soviet Union, charges we now know - and now know that Kennedy well knew - were true.

Some say that this was the speech that sealed his doom. Others that it was his 1963 executive order (now confirmed) pulling the US troops out of VietNam, or that he had already crossed the line by twice failing to order an invasion of Cuba.  Whatever its place in motivating his brutal removal, this hugely important speech lives on, a testament not only to his wisdom but to his courage.  It's message is one we still need to hear and heed. 

Yes the Kennedys were and are a wealthy, powerful and well-connected family, but no one can listen to this speech and deny that such a person can sometimes rise above his background and "pass through the eye of the needle." 

Friday, November 1, 2013

Why the Gold Standard won't fix the system

   Submitted as a comment to an article from the Gold Standard Institute
    Theory of Interest and Prices in Practice

I loved the “not even wrong” adage attributed to the physicist Wolfgang Pauli, and appreciated the review and application of market theory to the dollar and gold markets.

Missing from this essay, as many readers of Zero Hedge no doubt spotted, was consideration of manipulation of markets, including the gold/paper-gold market, by large players other than the Fed, which makes market analysis so difficult, and which always renders suspect the phrase "The Market decides..." or "The Market dictates..." 

There are deeper problems here however, to which the Gold Standard true believers can be expected to be blind but which many readers of Zero Hedge may recognize.  

Step by step, since the late '60's, the US Government and regulators, with the encouragement of the bankers and large investors and the other world financial capitals and banks, has moved away from a gold-anchored, well-protected and regulated financial system and economy to today's financial "fantazamagora" resting on a foundation of "transmogrification".   

The entire Economics Faculty at Wisconsin in the late '60's - and apparently most of the profession - were united in their commitment that a Great Depression would never again be allowed.  Yet step by step the dollar was cast loose from its foundations and all the checks and balances established for this purpose were dismantled.  

Was this driven just by greed, amnesia and short-sightedness?  Perhaps not; each of the major "wrong moves" since then, starting with abandoning the Gold Standard, was in the context of a crisis that threatened the stability of the economy.  

Had the US stayed on something like the Gold Standard, it seemed to me at the time that it have been inexorably driven into another deflationary spiral and depression.  At that moment of history, with the threat of communism still very real in people's minds and the New Deal still a fresh and living memory, it is easy to see how politically unacceptable such an outcome would have been, no matter how healthy for the system for "clearing the deadwood", liquidating excess capital and debt (to the advantage of the bigger fish) and restoring "labor discipline".  

Two underlying dynamics of the past 70 years that I would direct your attention to: 

1)  the inexorable buildup of debt, as lending creates money to cover the principal but not the interest, even in a gold standard financial system.  Ellen Brown and many others here have written extensively about this. 

2)  the inexorable depression of the wages of those actually engaging in production of real goods and services as a share of revenue as owners strive to lower costs, generating today's situation where consumer demand for goods and services can no longer justify further investment for profit in the real economy.  

With the advances in computer design and control, robots and 3-D printing we may even have entered a "black hole" where additional investment in the real economy almost immediately results in a net decrease in consumer purchasing power, and in which further expansion of credit can no longer generate increased demand because borrowers are tapped out.

The Gold Standard, as a formula for a stable market-driven economy emerging from the impending financial Armageddon, would then only be a temporarily fix.  Yet perhaps this cycle could repeat?  

My suspicion is that the present crisis marks the end of the road for economies driven by the pursuit of profit.  While the capitalist economy could perhaps be preserved through the crisis with massive government repression and re-started following a massive liquidation of paper and perhaps physical capital - and perhaps the mass-scale "die-off" of "useless mouths" of which some here speak - the costs would include civilization as we know it and probably destruction of the very biosphere.   

This moment rather calls for a much more profound paradigm shift, one that will no doubt be difficult for many readers of Zero Hedge to accept.  And millions understand this.  See: How Science is Telling Us All to Revolt, by Naomi Klein, NewStatesman (UK), October 29, 2013

There's an adage that roughly fits, which goes something like "they can't be expected to understand what their paychecks depend on their not understanding." (who said this?) 

The best of times? A perspective for the rest of us

Charles Dickens began one of his novels with the words "It was the best of times, it was the worst of times."  That could describe America today.

If you're unemployed in Worcester, if your unemployment benefits have run out or aren't coming through, if you're struggling to survive and hold a family together on temporary and part time jobs - or homeless in the streets - you might well ask: 

*  "How could anyone say it's the best of times?"  

The nightmare of high unemployment and declining wages, job insecurity and cutbacks in government help continues with no end in sight. So who would say this is "the best of times"?.  

It's now five years since the economic collapse began. Yet the economists, politicians and decision makers keep talking about "the recovery" like it's something that's happening, like it's real.  But we haven't seen that recovery, out here in our neighborhoods and on the streets!  So what on earth are they talking about?!?

  It shows corporate profits in green (in inflation-adjusted dollars) and the BLS "Employment Population Ratio" - the percent of the population age 16 and over that's working - in red, since 1956.

Notice how, beginning about 2002, corporate profits started to take off through the roof.  Then notice how the Employment Population Ratio was slowly declining since 2000, dropped sharply in 2008-2009 and has never recovered.

For the wealthy, who live in their own world, mostly talk to each other and know nothing first-hand about ours, this really is "the best of times".  See that sharp dip in profits in 2008?  For the super rich that was the recession and it lasted less than a year.  Since then profits have rebounded and are setting new records.

For us, the millions, it's a depression with no end in sight - with probably worse to come. 

The greed of the corporate rich knows no bounds.  They want lower taxes and less regulations. They hide their billions overseas to avoid taxes, and scour the earth looking for places where they can get work done for starvation wages, and where they can poison the air and the rivers with no penalty. Everywhere they scheme to take public resources and turn them into private property to milk or sell off.  

They call themselves the "job creators", but they could care less whether their investments create jobs, so long as they return more money.  

It's hard for regular folk to understand how someone who could buy anything they wanted or really needed could have such a vast, bottomless hunger for more money.  To us, greed looks like wanting fancier cars and clothes, a fancier home, access to fancy night-spots and vacations.  The super-rich already have all that, more than we can even imagine.  So why isn't it enough for them?

As Grace Ross points out in her book Main Street Smarts, for the super-rich, money isn't for the things they can buy with it.  It's about power. It's pieces on the board.  It's about mighty families building empires and struggling with each other in a great game of power. Like a giant Monopoly game, where the losers aren't allowed to quit and start over.  

Their big problem - and ours - is that the game can't go on like this.  They've already won, big time, and we've already lost.  If they aren't willing to allow a new deal and a fresh start, the game has to collapse.   When we land on Park Place now, or even on Vermont Avenue, we can't pay the rent and we've nothing left to sell to get it!  Only for us it's not just a game, not just a bad feeling, it's about survival.  

The crisis of 2008-9 was a big downward step in the collapse.  The next downward plunge in the economy is close, probably already happening, and it could be really big.  

For the super-rich, controlling the government and its resources is really important: 

*  to keep us fit and ready for work;
*  to keep us under control;  
*  to support their world-wide empire, 700 foreign military bases, three foreign wars and their ability to control the wealthy families of other lands with the threat of war;
*  to funnel ever more money into their pockets with contracts and interest payments; and recently
*  to keep their economy from collapsing by endlessly printing money and pumping it into the banks and the stock market.

As the crisis sharpens the super-rich care less and less about keeping us fit for work, more and more about what they can get out of us right now.  And they are plundering the government to fatten themselves and keep their game going.  Their view of the problem is that if they have no jobs for us, it's because there's too many people!  In private they call us "useless mouths".  They imagine if they could get rid of some of us, it would solve the problem, but they can never get rid of enough of us to stop their markets from collapsing!

In one way or another we - the millions - have to take control of the government back from them.  We're a very long way from being ready to do that, but it may be possible to get enough people acting together to change government policies, to turn it away for preparations for war and bailing out the rich and back toward taking care of our needs and creating jobs doing useful work. 

This is possible, because just about everyone out here in the world of regular folk - and even the world of professionals and small business folk - is being hurt or threatened by the hard times and government cutbacks to almost everything useful the government does. And we outnumber the wealthy by 95 to 5, or 99 to 1, or 999 to 1 depending on how you slice it. 

Can we take the government away from the billionaires, the corporate wealthy who, as Bob Dylan put it, "play with us like we're their little toys," and return control over it to the people? Not now. Probably not very soon.  We're far from ready for that.

But the effort to build a great pro-jobs anti-cutbacks anti-war coalition is what we have to do right now to survive.  And the day may come - nay, will come - when taking control is exactly what we will need to do to survive.  

Can we decide what the world will look like when the smoke clears?  Events, the choices of hundreds of millions of people, and the unfolding of the dimly-perceived logic of the situation will shape the outcome in ways we can hardly imagine; but it helps to talk about how we would want it to turn out - our vision will help guide our actions!

What we are learning and building now will help prepare us for that day when it comes.