Fascism or the Radical Left?

Two Stratfor articles, "Geopolitical Journey: An Empty Highway in Spain," and "Europe: Unemployment and Instability," suggest that there is an underlying problem of social distance and lack of empathy that leads political elites, and the German public, to continue to insist on austerity, because they don't feel the effects the recession is having on others. Germans, for example, can get judgmental about the shiftless southern Europeans, and insist that only they know what's good for everyone: more austerity.

The US faces a similar problem, because of the widening disparity of wealth. The call for austerity among Republicans expresses the preferences of the very wealthy, who want lower taxes and see no utility in "coddling" what Romney labeled the dependent 47%. So, unemployment is not perceived as a problem, either in Germany (as yet), nor among Wall Street bankers, or their socioeconomic cousins, the very wealthy. That's why almost all the debate in Washington centers on austerity: how to accomplish the Sequester more rationally, how to cut more from social programs like SNAP (food-stamps), so that debt and deficits can be reduced. This debate continues, even though there is stubbornly high unemployment, and especially high long-term employment. "Conservatives" see no reason to stimulate job growth, since the stock market is surging, profits are high, and housing prices are rising.

In Europe, the result very well could be radical politics--or worse. Not only has Italy given 25% of its votes to a new untried political party, The Five Star Movement, led by a comedian, but Hungary's right-wing government has passed a law banning all political opposition!

Unemployment rates of 27% (Greece and Spain), or even around 15% (Lithuania, Portugal, Ireland) begins to look really scary, especially when you have youth unemployment at or more than double those rates. As the Stratfor articles mention, this was the climate that created Fascism and Nazism after WWI. The response this time could be as radical, and of either the right or the left (Greek extremist parties are at both ends of the political spectrum).

The apparent quiescence in Spain and other European nations in recession could easily explode, given the seeming hopelessness faced by the unemployed, especially the youth. If I were in their shoes, I'd be tinder for anyone who started yelling that he/she could solve it.

Meanwhile, austerity and the Sequester are destroying the future of both regions.

What this may mean is that the economic/political system in which we exist could undergo radical transformation sometime soon, and it might not be pretty. However, our elites (European, American, Chinese) don't seem to have a clue, which makes all our political systems that much more vulnerable to upheaval.

If there is no transformation, we could go the way of the Late Roman Empire: monopolized wealth by today's equivalent of Roman Senators, and immiseration for everyone else.

A Discarded World

Sunday at sunrise I saw a car parked in our parking lot along the dirt road, not far from houses and an equestrian center. A guy got out, did something with his leg, and then, as I approached, he got back in the car and drove off. There was someone in the passenger seat.

The driver had discarded something and its foil wrapper. He was probably proud of himself: it was an oversized used condom. On his way to church?

That pretty much epitomizes relations with our social, natural and international world. We trash the natural world, we trash each other; we also trash other nations: cancer has skyrocketed in Iraq because our depleted DU munitions litter the landscape. Our military is proud of them; they're more effective than lead or steel in penetrating tank armor. Who cares about the Iraqis?

Margaret Thatcher was known for popularizing a politics epitomized by: "Screw you, Jack! I've got mine." Our "conservatives" are less eloquent.

Sequestration was meant to force Democrats and Republicans to agree to something sensible, but the first adjustment insures that flights aren't delayed, so Congressmen and Senators can get home during their break. Meanwhile, cuts to Head Start, schools, health research, medical care, extended unemployment insurance and to so many other government programs cause far more damaging consequences: lives lost, children untaught, research not done, people driven homeless: long-term costs to everyone--except the wealthy.

And for what? Both the Alesina/Ardagna article on "expansionary austerity," and the Reinhart/Rogoff article positing the economic danger of a 90+% budget deficit--Economists' arguments promoting austerity--have been proven false, while real experiments with it in Greece, Spain, Ireland, the UK and Portugal have demonstrated its destructive effects.

I sent two of Krugman's anti-austerity articles to a fundamentalist friend; he refused to read them: said they were "all false," and "ideologies will never replace the wisdom and power of the Word of God." Facts didn't matter. To him, and apparently to a large contingent of Republicans in Congress, "debt is debt," an evil--except for Defense, or corporations, or mortgages, or….

My friend made money in California real estate, The austerian agenda makes sense to him: why should he pay for losers, driven homeless, and/or jobless by the burst housing bubble; he made money, so what's wrong with them?

People like him, and those much wealthier drive the political agenda. We don't live in a democracy; the powerful listen to the one-percent, not to the rest of us--except, maybe, the 5%. Our contemporary Roman Senatorial class has conquered. High unemployment benefits them: it makes workers compliant; bosses can cut wages and raise their own salaries: life is good.

It will last until either revolution or collapse, the latter from the instability inherent in extreme inequality; it contributed to Rome's fall in 476.

Stimulus or Austerity

What do we hear from the movers and shakers? Still, austerity.

Greece is imploding, and even if moderates win this Sunday, it's unlikely that they'll be able to force Germany's Angela Merkel to abandon her stance: austerity as the solution to all their economic ills. Spain is now the problem de jour: another bank/bonds crisis, but again, European bonds, the only interim solution, are nixed by Merkel.

Merkel has her reasons. Germans have their history as justification: the Weimar Republic collapsed under inflation that saw the mark tumble to over 1 trillion to the dollar, wiping out the middle class. After that, the Nazis took over.

Ironically, but also logically, some of the beneficiaries of the austerity-driven depression that's overtaking Europe's periphery are politicians of the extreme right, like Greece's neo-Nazi Golden Dawn.

If Germans could realize that their resistance to meaningful bailouts and stimulus to create growth is creating little Weimar's all over Europe, perhaps they'd re-think their reluctance.

Angela's conservatives are in the driver's seat in Europe. In the US, conservatives are in a similar position, even though they don't control the federal government. The tea party dominated Republicans control the House, and effectively stymie any stimulatory policy in the Senate: 41 votes out of 100 = a blocking minority. Plus, by controlling a majority of states, Republicans are able to lay off public employees wholesale--partly to balance budgets, but partly because unionized public employees are the only organized group left that can counter their lock-step promotion of corporate and wealthy/selfish class interests. Conservatives see public employees as "the greatest threat" to the US economy. However, the net effect of state (and local) layoffs has been to offset any growth in employment in the private sector, one of the prime reasons why unemployment went up a notch last month.

Given their antagonism to public employees, it's not surprising that Republicans refuse to allow the major Federal grants (stimulus expenditures) necessary to prevent the layoffs or hire back the teachers and police needed.

The US doesn't have the equivalent of Greece's Golden Dawn or its left-wing Syriza, but Republican intransigence and Democratic waffling surely justify them.

Instead, we have the Koch brothers, Karl Rove and the millionaire/billionaire funded super-pacs on one side, and only the weakened Occupy movement on the other. So, our equivalent of the Nazi takeover of Weimar would put corporations and their owners in control.

Why "only" the Occupy movement? Tom Barrett, the defeated old-line Democrat in Wisconsin is your answer. Centrist resistance may win barely enough votes in the General Election against Koch-Rove billions, but what people really yearn for is the kind of policy (only more so) that Obama campaigned on but only half-delivered. Incremental measures aren't solutions.

Even with Obama, the 1%, or the Selfish Class, face little resistance to their takeover. Long-term depression could result, paralleling the history of the late Roman Empire.

Predator Banksters

Predator Banksters

There has been outsized brouhaha about Goldman's and other bankster bonuses--made possible by Fed and bailout (taxpayer) money. There has also been some attention paid to the kind of "investments" that have bloated Goldman and JP Morgan profits: huge bets using the Fed's free money.

Now, it turns out that those same kinds of bets are behind a lot of the continuing instability in international financial markets. Greece is an especially egregious example.

It is likely that the Greek government has been feckless, and its public employee unions have been unreasonable. It is also true that Greece is in the exact same position as California, New York, and many other American states: it can't create its own money, so it can't do what the US Federal government can do: issue money to cover shortfalls (and more). Its currency, the Euro, is controlled by the limited government in Brussels, itself steered economically by its two largest players: Germany and France. Both major countries are understandably reluctant to follow even easier money policy than they already have: in Germany's case, its Mark meltdown in the 1920's and '30's makes it doubly wary.

However, there is something else going on, and it has to do with the banks, or rather the banksters. An article from the New York Times, 2/25/10 pinpoints the problem: Credit Default Swaps (CDS).

"As banks and others rush into these swaps, the cost of insuring Greece’s debt rises. Alarmed by that bearish signal, bond investors then shun Greek bonds, making it harder for the country to borrow. That, in turn, adds to the anxiety — and the whole thing starts over again."

That is, CDS's raise interest rates that Greece (and Portugal, Spain, Ireland, etc.) will have to pay to fund their obligations. That will make their budget-balancing task harder, and the misery of the ordinary man/woman in the street that much greater: governments will have to lay off millions in order to pay off their debts, and will have to curtail the public services that have raised their nations' standards of living.

But Wall Street doesn't mind. Why? Because, its traders can make outsized profits on the backs of Greek (and other nations') misery.

Wall Street did the same thing to Lehman and to AIG, and its traders are probably sharpening their knives for Portugal, Spain and so on.

This is only one more reason why financial regulation is imperative: banks will only return to the civilized world, and abandon their rapacity, when deposits and Fed/FDIC guarantees are stripped from their speculative arms, when the wall between depository and speculative institutions set up by Glass-Steagall is re-established and when CDS's (and other "exotic" financial instruments) are regulated.

If the banksters succeed in defeating reform, they will eventually succeed in bringing down the whole financial system, something they almost succeeded in doing in 2007-8.

And then?