Gold and the Sequester

Paul Krugman, liberal Nobel Economist, points to a huge increase in the corporate share of the economy since President Reagan: from 4-5% to 10% currently, except in the troughs of downturns. In addition, corporations aren't spending this doubled share: they're saving it.

The Roman Senatorial class in the fifth century controlled an even larger share of their economy: their capital was land, slaves, serfs, and gold. They hoarded all of them, but especially gold.

It's argued by conservative economists (non-Keynesians) that corporate hoarding (or saving), doesn’t matter, because it isn't like hoarding gold--the Roman Empire's main currency. Corporations have bank accounts: banks can turn around and lend out corporate deposits; that's their business.

Bank speculation, however, instead of lending, has become the great profit driver for big banks: they don't lend out enough during a recession like ours, because they can make so much more through playing the 'Russian Roulette' Finance game, creating derivatives, and derivatives of derivatives, betting for and against their success (hedging) and selling them to other speculators.

In the case of the Roman Senators, the effect of their hoarding gold and land was to so severely reduce the availability of money in the economy that there was long-term deflation that impoverished almost everyone.

The effect of withdrawing money from Roman society was to reduce the ability of most people to buy anything, and to increase their dependency on those with wealth. That's what precipitated the Dark Ages, AKA feudalism. The other side of this: those hoarding might have been able to buy anything their jaded hearts desired, but since there were few of them, the Empire became progressively poorer. And even marketable goods became less marketable.

The same is true of the effect of corporations hoarding: fewer goods and services are produced or consumed: hoarding intensifies lack of demand that triggers a depression or recession.

Hoarding complements austerity, the cause radical Republicans now proclaim in order to reduce dependency on government. But if people were dependent on government programs to survive or prosper, then, without them, they would be even more vulnerable to exploitation by people and corporations with money. This gets us back to the Sequester, which takes place today, cutting $85 billion in programs "across-the-board" from Defense, the big untouchable, to Head Start and Air Traffic controllers.

The radicals don't seem to care if unemployment worsens, because of the cuts they demand. If you don't have a job, you're a loser; why should we take care of you?

But look on the bright side: the cuts slash bloated Defense the most, so maybe the Sequester isn't all bad. It might force newly appointed Defense Secretary Hagel to really cut the Defense budget. He's the one who called Defense 'bloated' after all.

On the other hand, Tea-Partiers love the domestic cuts: they only hurt "takers," they're told: so far, they hear no other voices.

So, expect a down-turn by Spring.

What Is To Be Done?*

I despair the politics of this era, the lies and distortions that impel it, the money that drives it. Mitt Romney is its perfect symbol; Paul Ryan is the embodiment of its deceptive promises of reaction snake-oil.

The Economist asks, 'Who, really, is Mitt Romney?' I doubt he can answer, except: he's determined to win the Presidency; he has no goal, other than winning it. He's been both a moderate liberal as governor of Massachusetts, and an "extreme conservative," (his own words), while running for President, even after winning the nomination. He was pro-choice, and now, he'll run on a Republican platform in which even rape and incest are not exempt from its absolute ban. He insists, after Akin's blooper, that he'd allow abortion for either reason, but who knows whether he would, or could, given his party.

Romney even threatens a Gold Commission to investigate returning to the Gold Standard--presumably to mollify Ron Paul supporters.

Then Senator, George McGovern, wrote an awful forward to The Promise of the Coming Dark Age: McGovern touted the Khmer Rouge as a beacon! If Mitt is able to buy the Presidency--that's what it would be, a purchase, costing several billion dollars--then the Dark Age could be upon us: the Roman Senators of old couldn't match the callous disregard the elite bear today for the rest of us. Romney would cut services (Food Stamps, Medicaid) for the desperate and cut taxes for his (lightly taxed) class of multimillionaires and billionaires. He'd also increase Defense spending, possibly for fighting another war: Iran, probably, although he'd also start a trade war with China the day he's inaugurated.

Romney appears to have chosen "extreme conservative" over moderate liberal, although he's still claiming he lives in Massachusetts (there is a question whether he did, when he filed taxes and voted in Massachusetts, claiming residence in his son's basement, a possible felony). But Romney still resists political, as well as geographic, definition.

His party tries to rally natives against immigrants, whites against blacks, men against women--its absolutist anti-abortion position is only a small part of that--but all is subsumed in the general war against all who are not owners of significant capital.

Capital is the contemporary version of the gold, land and slaves controlled by Roman Senators in the fourth and fifth centuries. Unlike the wealth of old, however, capital is expandable, and radical. Roman Senators could do only a small fraction of the damage that can be done, is already being done, by our contemporary elites, from eviscerating the safety net, environmental pollution and impoverishing the non-rich, to global warming, global immiseration and buying this election.

Can sanity stop them? Even the sitting President, Obama, doesn't have the money to beat back their misinformation, smears, and outright lies: example, their claim that Obama is reviving welfare.

What is to be done?

*Lenin used the same title.

Dollar Collapse!

It hasn't happened yet, but financial gurus are predicting the dollar will collapse, and "your American lifestyle" with it--unless you follow their prescriptions.

These gurus are describing a real problem: US indebtedness to the rest of the world. But the Fed didn't cause this, and it's not because The Government spends too much money; it's because we all do--abroad.

"Free Trade" agreements have advantaged American corporations. They have been able to export their manufacturing and services to lower wage, lower tax countries with lax or no regulations. They've driven American wages down and unions out, because American workers can only compete by earning less: wages have stagnated since the 1970's, while corporations have earned higher and higher profits. Furthermore, everyone buys imported goods and services, even when a product claims "made in America." Most have a huge amount of imported components, even if assembled here.

So, what can workers do? Until the bust, they adapted by working two plus jobs, depending on other family members working, and when these strategies weren't enough, they borrowed from their homes. Wall Street was awash in cash, encouraging wilder and wilder speculation--before the collapse, and after. That's why so much of the economy migrated to the financial sector; workers were providing it money through debts, and corporations were providing it money through overseas profits going to the 1%, who "earn" too much money to spend; so, they "invest" it.

Free trade means freedom for corporations, not freedom for workers, and it means importing nearly everything. So, how do we pay for the goods and services we no longer produce? We borrow through fiat dollars, which have, greatly depreciated since Nixon closed the "gold window" in 1971. Gold sold for between $1,726 and $1,743 on 11/2/11; but its price was set by the US until 1971 at a guaranteed $35 per ounce. Money supply has increased 13-fold since 1971.

Fiat money is designed to inflate a little bit each year: the Fed's target is about 2%. Moderate inflation stimulates the economy; deflation would accelerate depression.

But the real problem is: we are paying dollars created by the Fed, for goods and services abroad, while not selling enough to earn the Euros/Yen/Yuan, etc. to pay for those dollars. The "Free Trade" agreements, and policies encouraging corporations to export jobs and import goods have created the huge trade debt.

The trade debt causes government budget deficits, especially when the only people enriched by "free trade" (our Roman Senators) don't pay enough taxes, while everyone else is impoverished by it and needs help: "bread and circuses."

The dollar and the economy would regain strength, if Americans stimulated domestic production, creating jobs, got off imported oil and penalized corporations exporting jobs/production. It appears, however, that the "one-percent," like the Senators of the late Roman Empire, don't want to allow such reforms.

Perhaps the OWS movement can force their hand.

Jobs, Quantitative Easing and a Capital Strike

Americans elected a Republican House because Democrats let them down, especially on creating jobs. Yet, Republicans think you can make more jobs by radically cutting Government spending, especially for the poor. That hasn't worked for the Tories in Britain, and it makes no sense: there is too little demand for new jobs, already; cutting spending reduces the demand further.

The absence of a strong fiscal policy is at the heart of the problem.

Bernanke began the Fed's Quantitative Easing II (QE 2) as a monetary substitute for the stimulus and job creation the Government should have been doing; QE2 will be completed in June. The Fed will have injected $600 billion in new money into the economy, but unemployment is only slightly lower. The more direct effects are: the stock market has been toying with a 13,000 Dow, and corporations have been meeting and beating profit expectations. The flood of money helped drive gold and silver to historic highs, oil to over $113/barrel; food and other commodity prices are soaring.

QE2 may have driven some of these price hikes through speculation, but hiring was only weakly boosted, and with QE2 ending soon, official unemployment is only a shade under 9%.

The Fed could face a capital strike if it attempted more. It's maintaining interest rates at historic lows, and Bernanke claims inflation will remain low, or even go lower. With S&P threatening to downgrade US debt ratings, with the Street clamoring against monetizing the debt, and Paul Ryan chairing the House Budget Committee, the Fed is unlikely to do more.

QE2 could only accomplish so much, anyway. Bernanke implied at its inception that he preferred a rational Government fiscal policy. QE2 was adopted because it was unlikely Obama and House Republicans would be able to reach an agreement to stimulate the economy.

Instead, we face stalemate. Radical Republicans demand the cuts outlined by Congressman Ryan and more. Speaker Boehner already faced difficulty corralling votes for the 2011 budget compromise. Democrats know they'll lose their base if they cave further to Republican demands. What is needed is what Obama and the Democrats didn't have the courage, or votes in the Senate, to push through in 2009-10: a real jobs bill, and a real takeover of the housing mortgage mess.

Will we hang on until 2013? With no jobs program, only the payroll tax stimulus, and housing markets falling further? Would corporations hire more, with falling demand for goods? Would banks resolve their mortgage mess: admit their fraud and losses? Dream on!

A deadlock on the debt could slam us into a Depression, and a likely Republican takeover. They favor putting corporations in control, much like the monopoly of power held by the Senatorial class of the late Roman Empire. Americans would be reduced to surplus labor, competing with low-wage workers worldwide.

Maybe we'll get bread and circuses?

People Don't Matter

That appears to be the predominant political economy of our day. Our unemployment rate remains high, and in fact may be much higher than the 9.5% cited by our government, but still, the movers and shakers (M's&S's) are debating how to cut the deficit.

First of all, now is not the time to cut deficits through austerity, because deficits can actually rise if unemployment, bankruptcies and foreclosures continue to rise. Austerity could contribute to higher unemployment, etc. and therefore not only lower tax revenues but also raise costs (more people looking for help).

The only way to cut government expenditures without a negative impact on jobs, housing and small business, would be to bring troops home from foreign parts, closing down foreign operations, like the wars in Iraq and Afghanistan, and some of the bases in 140 plus countries.

The M's&S's don't consider cutting our imperial adventures, however. What they are doing is: being niggardly about unemployment extensions, food stamps (Congress just cut next year's appropriation, despite a surge in applicants), and even tax credits for small business. What they are talking about are cuts to Social Security and Medicare, while Republicans are nearly unanimous about extending the Bush tax cuts, including those that have made the wealthy so much wealthier.

The argument they make about the latter: lower taxes will stimulate investment, is belied by lagging investment now, with those same low tax rates. Elites are sitting on their money, or paying $100+ million for Picassos, not investing in jobs. Investors will also invest in Brazil, or Russia, places where they'll get more of a return, until growth is restored here. Here, they'll park it in Treasuries, or gold.

Our unemployment rate may be twice as high as the 9.5% rate, when those without jobs for more than a year are included. Yet, all the (supposedly) liberal administration and Democratic Congress can do is add a little money here and there to keep things from getting dramatically worse. The Republicans' push for deficit cutting would make things worse, not better, but since Americans are unhappy with Democrats' half-measures, it looks increasingly likely that we'll go that route.

People don't matter, but corporate profits do. Big banks are now doing very well, and big corporations have found ways to squeeze profits out of job-cutting and foreign operations, so, they will resist taxes on the wealthy and government stimulus programs, and spend 100's of millions on campaigns to promote their positions.

The only hope would be if people see through the corporate agenda. Instead, millions worry about a Muslim community center two blocks from "Ground Zero!"

The global takeover by the extremely wealthy is proceeding. They are much like the Senators of Fifth Century Rome. Only an aroused populace can stop this.