Thursday, June 28, 2007

Can We Survive A Depression?

Will there, in fact, even be another depression? One must think so given the tenuousness and overreach of the world financial structure. There is always so much discussion about the state of the US economy and prospects for growth and so much hype about the dynamism but what most people really want is confidence and reassurance about the future and stability. The current world economy is ruled by finance capital which is always looking for profit and quick turnaround and telecommunications and computers make that a very fast-moving process. Our masters thrive on instability: that is where the gaps for quick profits lie. So the interests of finance capital are at odds with the needs and desires of most people. And finance capital can't claim to offer jobs and increasing incomes as the modern trend with automation is to eliminate labor from the productive process and that is what "jobless recovery" is all about. This is not a temporary phenomenon. We, in large part, no longer have a US economy, we are just one of the states of the world economy, and just as factories were moved from Michigan to Tennessee, then to Mexico, Indonesia, China and even then to Vietnam, all moves to lower costs (hint: it wasn't transportation costs!), a system designed for maximizing profits by minimizing costs isn't suddenly about to return to home-base in our lifetimes. With the wealth and productivity extant we should all have jobs and be on easy street, though perhaps we might only have to work 20-30 hours each week with any more hours giving a surfeit of goods. But a capitalist economy is run by exploiting workers in production and selling to those with money (=jobs) so don't hold your breath waiting for Citibank or Goldman Sachs to fund your lifestyle! At different times, for varying reasons, in varying industries, the past 40 years have been a time of systemic crisis, with productivity so high and consumers with greenbacks so few that the system has teetered for decades on the brink of collapse. This happened in the Great Depression and Keynesian job creation through government spending was a response but in the post-WW II era this was replaced with the Military-Industrial Complex which gave capitalists a profitable area for investment with high and guaranteed profits and some jobs. With the Iraq war all those "bombs bursting in air" need to be replaces and the bombs' targets need to be rebuilt (Halliburton and KBR). Even so, there has not been, and there is not, enough places for profitable real investment in factories and housing to use the available capital and find paying customers. Currently worldwide auto capacity is 70 million units/year but the market can only absorb 50 million units. Given the availability of cheap labor in poorer countries there is not likely to be a resurgence of industrial investment in the US. China is the hot place these days and India may soon join it. It seems India is developing a new land policy for agricultural development that eerily brings to mind the Enclosures centuries ago in England. Apparently the Indian government is planning on displacing 400 million peasants! So, what does all this have to do with a survivable depression? With too many goods chasing too few customers the drive for profits has found its outlet in financial markets which is all about making money from money. But while many "intangibles" have value -- the service economy which has been the reality since 1940 in the US -- the real world mostly runs on "hard" goods; the service economy is mostly about servicing the hard goods economy. Unless at some time a market is found for real investment the overextension of the credit markets will collapse and the inability of people and companies to pay their debts will bring the economy to a halt. This past weekend BearStearns was in the news because of a threatened collapse of one of their hedge funds in the subprime mortgage market, a market created to keep the housebuilding industry alive when 20% downpayers had disappeared. BearStearns took in $600M in funds and lent out $6B and that fund is threatened with default. So they've had to step in to rescue, if possible, that fund and stem the fear and reality of contagion. The "collateralized" and "securitized" financial markets are built on debt, with debts having come to be considered assets. Sort of like a store which borrows using not a building or inventory for collateral but its accounts receivable. If those accounts aren't collectible then the bank can't collect from the store. From Chrysler to the Savings and Loans to LTCM (an oxymoron: Long Term Capital Management that traded in milliseconds!) Localized defaults can always be handled -- usually at the taxpayers' expense -- but if a cascade occurs there will be the crunch of depression. And with the continued advance of automation and markets growing more slowly than productivity it becomes difficult to believe such magic with money can be practiced infinitely. Being attuned only to short term profits it becomes a matter of "damn the torpedoes; full speed ahead!" The "notional" amount of money leveraged worldwide surpasses $130 trillion, or more than Earth's gross product! The Great Depression, signalled in the US by the stock market crash, was a catastrophe in all the Western countries and led to WW II. Unemployment in the US was 25% and many fortunes were wiped out. Yet, many corporations survived; in fact, AT&T payed dividends throughout the depression. And, as with AT&T, companies with mothballed real assets (a machine shop, for example) can go back into production when the "downturn" with its destruction of assets has run its course and conditions for new profitable production and investment return. But with the relocation of industrial jobs outside the US and other industries simply disappearing there may not be any industry to return to. After the depression those with both real assets and legal title enforced by the state could renew production. But if the "new world order" collapses will GM still "own" or "control" even those assets it built in China? Having spent decades abandoning basic industry in the US, could even a "socialized" post-depression US easily or quickly rebuild middle income jobs and lifestyles? The deindustrialization of the US in the hunt for lower costs might put us in a pickle after a collapse.

Friday, June 08, 2007

What Is The Greatest Danger?

For all the trouble that Iraq is causing worldwide and all the murderous deaths in Iraq itself, it is obvious that Bush has no intention of pulling out and one would be very hard-pressed to find any other politicians, Democrat or otherwise, who would, in fact, pull out of Iraq. That is why there has been no move for impeachment. Our politicians are, effectively, paid agents of finance capital and those "coupon clippers" want to smash any opposition to their international expansion and rule. Control of natural resources, open borders for investment invasion, compliant colonial governments. For all the Bush hooey about radical Islamists hating "our (ever diminishing) freedom" Osama was clear about opposing our presence in Saudi Arabia and our interference in Arab life. For a few thousand deaths on 9/11 we have managed so far to kill about one million Iraqis. As in felony murder we are responsible for deaths subsequent to our crime and our Iraqi invasion was a clear violation of international law. Thus, supporting Bush is supporting and condoning mass murder. For months there have been worried stories about when and in what manner the US will bomb Iran, and one may suppose that it will occur. However, in some ways such an act of aggression is but a small part of the picture. Official US policy is to tolerate no equals or serious rivals anywhere. The US insists on being the world despot, all the while trying to convince the people that it pursues democracy. To Dubya, Hilary, and the rest, democracy is what Goldman Sachs, the Carlyle Group, ExxonMobil, et al, want. If corporate America were patriots they wouldn't export jobs overseas, and if politicians were patriots they would tax the hell out of corporations that abandoned US towns leaving a wake of immiseration. The US was born with genocide against the native population and built up through slavery, mostly of Africans, and those who think those were merely aberrations in a history of freedom and equality are, at best, ignorant. And for those who think "it can't happen here" with the rise of fascism in America, well, fascism was born in the United States. The term fascism was coined by Mussolini and he called it the corporate state, an alliance between capital and politics and that idea came from the end of WW I where the US became Europe's creditor and replaced a world of mostly private lending to governments by government to government lending. The US of Woodrow Wilson pretty much began the era of the fusion of finance capital with political government. Benito and Adolf just pursued it with a passion born of necessity by the insistence of debt repayment to the US from devastated European countries. So, recently, we have been plied with news stories critical of Russia. Putin just today called the US's bluff by offering to accept a shared radar/missile site with the US in Azerbaijan and dropping Poland/Czech Republic. Madame Rice quickly responded that the US doesn't want to share! And that is the real danger we face: thermonuclear war against Russia. The US will brook no rivals, so a well-armed Russia must be destroyed. Yes, Bush and his cronies are that crazy. And if Americans want to put their money where their mouths are they will act to take control of politics and government in their own interests and not let those greedy, wealthy bastards destroy our very world.