Tuesday, December 28, 2010

Happy Christmas! "Shock Doctrine" Triumphs (Brave New Dystopia*?) Post Mortem for the World's "Reserve Currency" ($)? Blacklisted!

Have you heard anyone say this holiday season that $5 gas is just around the corner (or a little bit further in the distance to soften the blow)? Or even $10 or $15 gas? Maybe because of devaluation of the dollar (and not just supply and demand)? ______________ This could hardly be more interesting. Listen to Paul Craig Roberts expound (and I do love the word "pound" being a part of that verb) on everything that's been going on and leading to disaster. Who needs the money? Ireland or the IMF? Who's really bankrupt? US or them? Listen to all three of Dr. Roberts' videos because the third one contains some real surprises. Is it really Post Mortem for the World's "Reserve Currency"? (Emphasis marks added - Ed.)

December 13, 2010 Paul Volcker is worried about the future of the dollar and for good reason. The Fed has initiated a program (Quantitative Easing) that presages an end to Bretton Woods 2 and replaces it with different system altogether. Naturally, that's made trading partners pretty nervous. Despite the unfairness of the present system - where export-dependent countries recycle capital to US markets to sustain demand - most nations would rather stick with the "devil they know", then venture into the unknown.

But US allies weren't consulted on the matter. The Fed unilaterally decided that the only way to fight deflation and high unemployment in the US, was by weakening the dollar and making US exports more competitive. Hence - QE2. But that means that the US will be battling for the same export market as everyone else, which will inevitably shrink global demand for goods and services. This is a major change in the Fed's policy and there's a good chance it will backfire. Here's the deal: If US markets no longer provide sufficient demand for foreign exports, then there will be less incentive to trade in dollars. Thus, QE poses a real threat to the dollar's position as the world's reserve currency.

Here's what Volcker said: “The growing sense around much of the world is that we have lost both relative economic strength and more important, we have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy and a fractious political climate . . . . The question is whether the exceptional role of the dollar can be maintained." (Bloomberg)

This is a good summary of the problems facing the dollar. And, notice that Volcker did not invoke the doomsday scenario that one hears so often on the Internet, that China - which has more than $1 trillion in US Treasuries and dollar-backed assets - will one day pull the plug on the USA and send the dollar plunging.

Read the rest if you've got a strong stomach. Or curiosity about a possible future world.

One commenter likes history (and pop psychology):

Rodney E Lever · 1 week ago

American politics and economic decisions today provide uncanny echoes of the Weimar Republic. The only difference is that the US seems to think it can do anything it damn wants because it has more atomic bombs than anyone else.

Michael Hudson - 'Currency Wars' - This is just the latest installment - November 5, 2010 - Democracy Now! Want to see another great movie that illuminates our current moment in history? Yeah? Make it your (fairly easy) task to see Inside Job, which is an excellent film by Charles Ferguson, narrated by Matt Damon. Here's one review. And another. And another great one. On another pretty depressing (but not totally unexpected) note we learn that connected fellows have been approved to do business with supposedly blacklisted nations. (Makes one wonder if any of these nations are anything other than foils for secret agenda items that we'll be instructed about later, doesn't it?)

U.S. Approved Business With Blacklisted Nations

Despite sanctions and trade embargoes, over the past decade the United States government has granted special licenses allowing American companies to do billions of dollars in business with Iran and other countries blacklisted as state sponsors of terrorism, an examination by The New York Times has found.

At the behest of a host of companies — from Kraft Food and Pepsi to some of the nation’s largest banks — a little-known office of the Treasury Department has made nearly 10,000 exceptions to American sanctions rules, approving deals involving countries that have been cast into economic purgatory, beyond the reach of American business.

Most of the licenses were approved under a decade-old law exempting agricultural and medical humanitarian aid from sanctions. But the law, pushed by the farm lobby and other industry groups, was written so broadly that allowable humanitarian aid has included cigarettes, Wrigley gum, Louisiana hot sauce, weight-loss remedies, body-building supplements and sports rehabilitation equipment sold to the institute that trains Iran’s Olympic athletes.

Hundreds of other licenses were approved because they passed a litmus test: They were deemed to serve American foreign policy goals. And many clearly do, like deals to provide famine relief in North Korea or to improve Internet connections — and nurture democracy — in Iran. But the examination also found cases in which the foreign-policy benefits were considerably less clear.

In one instance, an American company was permitted to bid on a pipeline job that would have helped Iran sell natural gas to Europe, even though the United States opposes such projects. Several other American businesses were permitted to deal with foreign companies believed to be involved in terrorism or weapons proliferation. In one such case, involving equipment bought by a medical waste disposal plant in Hawaii, the government was preparing to deny the license until an influential politician intervened.

As for me, I'm gonna think it's just Christmas spirit (burbling all year long). And as for real Christmas spirit? How about the Shock Doctrine Comes Home? (I mean, come onnnn. Where did you think all this financial chicanery was leading? My own memory keeps flashing back to Pete Peterson traveling the country for decades at his own expense touting the lie that the Social Security Trust Fund was "broke" and needed to be privatized - and now they've found out how to do it with other better lies!)

Just listen!* (Emphasis marks added - Ed.)

Published on Thursday, December 23, 2010 by In These Times.

*The ‘Repo-Demo’ Party’s Three Phase Austerity Plan for America

Get ready for more of the same failed "job creation" policies, enacted by an increasingly unified political elite. The Bush tax cuts are now extended. What cost $3.4 trillion over the past decade, 80% of which accrued to the wealthiest households and U.S. corporations, will now cost another $802 billion over the next two years and a projected $4 trillion over the coming decade. But the Bush tax cut extension just passed by a political elite increasingly united on economic policy—a ‘Repo-Demo’ Party dominated by corporate interests — is only the first of three phases in a new policy offensive designed to protect the incomes of the wealthy and corporate America for another decade, to be paid for directly by middle- and working-class America. Together, the three phases represent the emerging U.S. variant of a general austerity strategy, similar in objective but different in content to other austerity programs now emerging as well in the Eurozone, Japan and elsewhere.

President Obama's deal with Republican leaders, signed into law December 17, 2010, extended tax cuts for the wealthiest Americans for another two years.

Phase Two: Draconian Spending Cuts

The second phase will likely be implemented in the next three months, before the ceiling on the federal debt has to be lifted. It will take the form of massive spending cuts in the U.S. budget, targeting Social Security and Medicare in particular. (A parallel draconian slash in spending will occur at the state level, targeting Medicaid and education).

Social Security has been a prime target since the Reagan years. Unable to cut it in the early 1980s, Reagan instead settled on a major increase in the payroll tax in 1984, creating a $2.5 trillion surplus over the last 25 years. However, that surplus was ‘borrowed’ every year by Congress to cover up in part U.S. budget deficits created annually since the 1980s to pay for war spending and tax cuts.

All that remains of the surplus in the Social Security Trust Fund are government IOUs promising to replace the shortfall when necessary — a replacement we’ll never see in our lifetimes. In 2003, Bush II re-opened the attack on Social Security by trying to privatize it, but failed. Despite the accumulated surplus having been drained, Social Security was still annually producing a surplus and was thus financially too stable to convince the public it needed basic change. In contrast, today, as a result of a chronic three year long recession, there is no longer an annual surplus being created. Social Security is just breaking even.

But implementing the pending payroll tax cuts — part of Phase One — will finally put Social Security in the red, creating for the first time the net annual losses conservatives and corporate America have always needed to push a major gutting of the program. The payroll tax cut is thus the first move in what will prove a general attack on social security that will gain momentum in the coming months.

Reagan conservatives have argued it would first be necessary to ‘starve the beast’ in order to dismantle it. For the first time, that scenario will exist.

Phase Three: Revising Tax Code to Help the Wealthy

Following the imminent draconian cuts in spending and Social Security-Medicare-Medicaid-Education about to take place in 2011, which lie at the heart of the second phase, the third phase of the new austerity strategy will follow in the summer of 2012. It will take the form of a fundamental revision of the U.S. tax code. As part of this general revision, the Bush tax cuts will likely be made permanent for the rest of the decade to come. In addition, personal income tax brackets for the wealthiest households will be reduced to no more than three, possibly two, with a top rate for the wealthy or no more than 28%, representing a return to Reagan years.

For corporations, depreciation write-offs, a de facto investment tax credit for business, will be accelerated to full deductions in the first year — a measure already just enacted for small business this year. For multinational corporations, the foreign profits tax will be restructured to their advantage. The corporate tax rate will be significantly reduced or even phased out entirely. Not least, the new 2% cut in payroll taxes could also be extended, forcing yet another round of further reductions in Social Security and Medicare benefits and still higher co-pays for retirees.

To pay for the tax code rewrite and even more concessions to wealthy households, investors and corporations, the middle class will pay more. Adjustments to the Alternative Minimum Tax, AMT, for the middle class will be phased out. And the mortgage interest tax credit will be eliminated in stages as well.

Same wine in same bottles, with new label Obama and the ‘Repo Demo’ Party have launched a PR offensive in the wake of the Bush tax cut extensions, proclaiming that the Bush tax cuts plus unemployment insurance extension plus payroll tax cut together amount to a ‘Stimulus 2’ package that will result in more economic growth and new jobs.

This is the same old tired song of the Bush administration. In fact, every one of the four major Bush tax cuts passed between 2001-04 was officially called ‘job creation’ bills.

The result of these ‘job bills’ was the weakest job creation following a recession of all the nine prior recessions since 1945. It took 46 months to recover jobs lost from January 2001, the start of Bush’s first recession.

The second recession of the Bush II era, which started in December 2007, was followed by a $168 billion stimulus bill passed in spring 2008 — about $90 billion of which was tax cuts.

The result: 4.5 million full-time jobs lost in 2008. Then another $787 billion stimulus in early 2009, Obama’s ‘Stimulus 1’ package — about half of which was tax cuts. The result: Another 6.5 million full time jobs lost in 2009.

In 2010, another half million lost jobs and dropped out of the labor market. Of the 900,000 private sector jobs created in 2010, more than two thirds were part-time and temp jobs.

At the close of 2010, now we have yet another tax cut heavy ‘Stimulus 2’. Again the claim is that it will create jobs. However, except for the payroll tax cut of $112 billion there is nothing ‘net new’ in the so-called ‘Stimulus 2.’ It’s the same old wine poured into same old bottles — just a new label slapped on the side and a brand new cork (payroll tax cut) added to the opening.

The key question: Will any jobs be created?

Corporations are today sitting on a cash hoard of more than $2 trillion, according to the business press, not investing or creating jobs. Why should increasing that hoard another $500 billion or so result in anything different? That’s the key question conservatives and the ‘Repo-Demo’ Party elite must answer — but are avoiding.

That’s the question the media should be asking, but about which they remain conspicuously silent.

Only the $112 billion payroll tax reduction represents a ‘net new’ contribution to stimulus. But is it sufficient to generate jobs? Not by a long shot. For those earning $50,000 a year to the top payroll tax rate of $106,800 a year, the payroll tax cut will, on average, lead to no more than $20/week in real spending power after adjustments for partial saving, debt paydowns and what will be accelerating costs for food, healthcare, and gasoline coming in 2011. Those below $50,000 will actually have less to spend, since the “Make Work Pay” credit is ending for them.

That’s nowhere nearly sufficient to stimulate the economy and create jobs. Obama’s 2011 ‘Stimulus 2’ will thus prove no more effective than his 2009 ‘Stimulus 1.’

The past decade has produced repeated tax-cut heavy policies targeting the rich and corporations: Bush II and a Republican Congress 2001-06. Bush II and a Democratic Congress 2006-08. Obama and a Democratic Congress 2008-10. And now Obama and a de facto Republican Congress.

The recent Bush tax cut extensions show the corporate-dominated political elite of both parties are now closing ranks as the economic crisis continues with no resolution for all but the wealthy and corporations. The ‘Repo-Demo’ Party, newly aligned around the same old failed policies, has just begun to do its work. Get ready for more of the same.

And as for that "Brave New Dystopia?" Don't stop reading yet! (Emphasis marks added - Ed.)
2011: A Brave New Dystopia

The two greatest visions of a future dystopia were George Orwell’s “1984” and Aldous Huxley’s “Brave New World.” The debate, between those who watched our descent towards corporate totalitarianism, was who was right. Would we be, as Orwell wrote, dominated by a repressive surveillance and security state that used crude and violent forms of control? Or would we be, as Huxley envisioned, entranced by entertainment and spectacle, captivated by technology and seduced by profligate consumption to embrace our own oppression? It turns out Orwell and Huxley were both right. Huxley saw the first stage of our enslavement. Orwell saw the second. We have been gradually disempowered by a corporate state that, as Huxley foresaw, seduced and manipulated us through sensual gratification, cheap mass-produced goods, boundless credit, political theater and amusement. While we were entertained, the regulations that once kept predatory corporate power in check were dismantled, the laws that once protected us were rewritten and we were impoverished. Now that credit is drying up, good jobs for the working class are gone forever and mass-produced goods are unaffordable, we find ourselves transported from “Brave New World” to “1984.”

The state, crippled by massive deficits, endless war and corporate malfeasance, is sliding toward bankruptcy. It is time for Big Brother to take over from Huxley’s feelies, the orgy-porgy and the centrifugal bumble-puppy. We are moving from a society where we are skillfully manipulated by lies and illusions to one where we are overtly controlled. Orwell warned of a world where books were banned. Huxley warned of a world where no one wanted to read books. Orwell warned of a state of permanent war and fear. Huxley warned of a culture diverted by mindless pleasure. Orwell warned of a state where every conversation and thought was monitored and dissent was brutally punished. Huxley warned of a state where a population, preoccupied by trivia and gossip, no longer cared about truth or information. Orwell saw us frightened into submission. Huxley saw us seduced into submission. But Huxley, we are discovering, was merely the prelude to Orwell. Huxley understood the process by which we would be complicit in our own enslavement. Orwell understood the enslavement. Now that the corporate coup is over, we stand naked and defenseless. We are beginning to understand, as Karl Marx knew, that unfettered and unregulated capitalism is a brutal and revolutionary force that exploits human beings and the natural world until exhaustion or collapse.

“The Party seeks power entirely for its own sake,” Orwell wrote in “1984.” “We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it.

Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power.” . . . The noose is tightening. The era of amusement is being replaced by the era of repression. Tens of millions of citizens have had their e-mails and phone records turned over to the government. We are the most monitored and spied-on citizenry in human history. Many of us have our daily routine caught on dozens of security cameras. Our proclivities and habits are recorded on the Internet. Our profiles are electronically generated. Our bodies are patted down at airports and filmed by scanners. And public service announcements, car inspection stickers, and public transportation posters constantly urge us to report suspicious activity. The enemy is everywhere.

Those who do not comply with the dictates of the war on terror, a war which, as Orwell noted, is endless, are brutally silenced. The draconian security measures used to cripple protests at the G-20 gatherings in Pittsburgh and Toronto were wildly disproportionate for the level of street activity. But they sent a clear message — DO NOT TRY THIS. The FBI’s targeting of antiwar and Palestinian activists, which in late September saw agents raid homes in Minneapolis and Chicago, is a harbinger of what is to come for all who dare defy the state’s official Newspeak.

The agents — our Thought Police — seized phones, computers, documents and other personal belongings. Subpoenas to appear before a grand jury have since been served on 26 people. The subpoenas cite federal law prohibiting “providing material support or resources to designated foreign terrorist organizations.” Terror, even for those who have nothing to do with terror, becomes the blunt instrument used by Big Brother to protect us from ourselves. “Do you begin to see, then, what kind of world we are creating?” Orwell wrote. “It is the exact opposite of the stupid hedonistic Utopias that the old reformers imagined. A world of fear and treachery and torment, a world of trampling and being trampled upon, a world which will grow not less but more merciless as it refines itself.”

Wishing you very happy holidays!

(Or else!) Suzan _________________


Marc McDonald said...

Nice piece. I do think there's a positive aspect to the prospect of the collapse of the U.S. economic model.
That is: the U.S. will no longer be able to lecture other nations and demand that they emulate our system. (At least with a straight face).
True, the likes of the IMF will probably continue to browbeat other nations into adopting "lean & mean, screw the poor" capitalism. But I think the global appeal of the Thatcher/Reagan model has been seriously damaged, forever.
True, the Europeans have been doing cuts to their social services. But they are still light years away from the U.S. "screw the poor" economic system.
For example, in Germany jobless benefits never expire. (by contrast, in the U.S. jobless benefits are truly meager and only 3 out of 10 unemployed people even qualify for jobless benefits in the first place).
The Europeans remain light years ahead of the U.S. on everything from maternity leave to vacation time to labor laws that protect workers).
Continental European leaders wouldn't dare take on the unions the way Thatcher/Reagan did---because they know they'd face violent street protests.

Suzan said...

Thanks, Marc!

Wish I could also think that the global appeal (to the wicked) of the Raygun/Thatcher policies was diminished if not exposed and horrifying to all today. And that people are willing to take to the streets to defend their rights.

If only.


the U.S. will no longer be able to lecture other nations and demand that they emulate our system. (At least with a straight face).

. . . Continental European leaders wouldn't dare take on the unions the way Thatcher/Reagan did---because they know they'd face violent street protests.