“The rats are jumping ship”

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  Merriam-Webster named its Word of the Year for 2010 based on the number of searches. That word is the 14th century noun “austerity”.

 If you watched 60 Minutes the other night, you would have heard New Jersey’s Republican governor Chris Christie tell us how we have no choice but to slash wages and benefits and lay off thousands of school teachers, police, and firefighters in every state.

 You will also hear lots of economists use the phrase “competitive”, as in “the American economy needs to be more competitive in the world”. What they really mean is that we need to accept lower wages and a lower standard of living. If we do this then it will be “good for us”, that there is economic value in this.

 What is really going on is a set of false choices that even the world’s financial leaders don’t believe.

  First of all, where do economists get the idea that a lower standard of living is a good thing? That concept was developed at the Chicago School of Economics by Don Patinkin. His theories about unemployment and lower wages leading to a healthy economy was embraced by conservative economist Milton Friedman, and caused a great deal of controversy.

  The famous economist Hyman Minsky, while he didn’t directly dispute Patinkin, voiced his misgivings about the theory.

 “If the Patinkin effect is relevant it is only in the long haul and after a large price is extracted in lost output and employment…[If the economy stabilizes] by way of the Patinkin real-balance effect, it may go by the way of Hell.

 – Hyman Minsky

 There is also the obvious problem of trying to get the economy “competitive” with the rest of the world by vicious job and wage cuts while the entire rest of the world is also engaging in similar austerity measures.  

 There are terms for this global race to the bottom. They’re called Beggar thy neighbor and Global labor arbitrage. It didn’t work when it was tried during the Great Depression and there is no reason to believe it will work now.

“economics is politics masquerading as science”

    – Hazel Henderson

 So why are political and financial leaders around the world preparing to engage in an economic agenda that is certain to lead to disaster?

 The thing you need to understand is that it won’t lead to disaster for everyone.

If you want this explained in simple, easy to understand terms, just watch this 10 minute video interview with my favorite economist – Michael Hudson.

 So the idea is basically to reverse the progressive era’s whole economic philosophy, and this involves impoverishing the economy in the process. But you have a mindset very much like you had in England for centuries that somehow thinks, if you can only hurt labor, you’ll be helping capital. That’s why England lost its industrial position. It’s the wrong mindset. It doesn’t work.



  Alan Greenspan explained this very clearly a decade ago. He said there’s something wonderful about debt: it’s cured the labor problem. The workers are now one paycheck away from homelessness. If they go on strike or if they’re fired because they complain about working conditions, all of a sudden their interest rate goes up on their credit card, all of a sudden they miss their mortgage payment, they’re losing their home. Alan Greenspan said debt is what has created stability of wages in this country, meaning steadily falling wages…

 So instead of having industrial capitalism a century ago, we have a finance capitalism that actually is stifling industrial capitalism here. So what Alan Greenspan and others call the postindustrial economy is really neo-feudalism. It’s a financialized economy where all of the surplus goes to the banks.

  You see, austerity, like taxes, are only for the “little people”. Let me give you an example.

  Remember Neel Kashkari? He sat on the U.S. Treasury’s Office of Financial Stability in 2008, and was in charge of distributing $700 Billion in TARP money to Wall Street billionaires. A few months ago he wrote an opinion piece in the Washington Post where he preached to us about the “free market” and “competitiveness”. Kashkari then makes his main point:

Cutting entitlement spending requires us to think beyond what is in our own immediate self-interest. But it also runs against our sense of fairness: We have, after all, paid for entitlements for earlier generations. Is it now fair to cut my benefits? No, it isn’t. But if we don’t focus on our collective good, all of us will suffer.

 The suffering he is afraid of is suffering by the extremely wealthy. He defends the Wall Street bailout as “the right thing to do”, somehow missing the fact that the bailouts were anti-free market, and all about immediate self-interest.

  As for Kashkari, he went to work for PIMCO, a financial company hired by the Fed to buy mortgage-backed securities with taxpayer money. No corrupt quid pro quo here.

 Even Tea Party members should be able to recognize that there is an inherent conflict with calls for austerity, in the form of cuts in Social Security, while the wealthy aren’t asked to sacrifice in the form of slightly higher taxes. Speaking of that tax deal, we all know that one-year “tax holiday” on payroll taxes is a poison pill for Social Security.

 Speaking of Social Security, why the push to “reform” it? If you go to the US National Debt Clock you can’t help but notice that Medicare liabilities are five times the size of Social Security liabilities.

  Social Security will remain in surplus for another 15 years, and will remain solvent for another 26 years.

  Meanwhile, Medicare Hospital Insurance will go into deficit in 2012. Disability Insurance will run out in 2018.

 Yes! There is an entitlement problem: It’s called Medicare, not Social Security!

  It’s simple math: if you are really concerned with entitlement reform then you start with Medicare, not Social Security.

 So where is the push to reform Medicare? There is none. All the efforts are directed towards gutting and ending Social Security instead. Why?

 It’s real simple: Social Security still has huge surpluses, Medicare doesn’t. Thus there is money that can be stolen from Social Security and not from Medicare. It all makes perfect sense when you look at it from the perspective of Wall Street, the people who control our politicians.

 When it comes to the fiscal problems with the states and cities, all you hear about are greedy, middle-class school teachers and firefighters. The 60 Minutes interview even called their benefits “golden parachutes”, as if they can be compared to the multi-billion dollar Wall Street benefits. What 60 Minutes failed to mention was how Wall Street was extracting $4 Billion from the states through financial wizardry. How many teachers and policemen could be paid with that much money?

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 You might be under the impression that this class-based theft and destruction of the working class is self-defeating. After all, the wealthy have to live somewhere too. That would be naive, because the wealthy know exactly what they are doing and have planned for it. I refer back to Hudson’s interview:

 Right now they realize that the game is over. All they can do is try to play for a little more time, as long as they can, pay themselves bonuses, pay themselves stock options.

  And most of the money that the government was creating in the form of quantitative easing recently, it’s-all the $600 billion is reported to have gone abroad. So it’s going to the BRIC countries-Brazil, Russia, India, China-Third World countries, Malaysia.

  they’re buying foreign stocks, they’re buying foreign assets, they’re buying foreign real estate, mineral rights. They’re buying everything they can. The rats are jumping ship.

 You see, if you have enough money you can go anywhere. The wealthy know that patriotism is for suckers. That’s why you don’t see the sons of the elite on the front lines of wars. War is a racket, a profitable one for a select few, and paid with the blood of the poor.

 The wealthy and financial elite don’t think in terms of nations and borders, unless it applies to labor. Just look at the recent disclosure that was forced upon the Federal Reserve. The American taxpayer is on the hook for hundreds of billions of dollars to foreign banks. The media doesn’t seem to care, and even the blogosphere has shrugged it off.

 The massive theft of America’s wealth is reaching End Game. The wealthy thieves are stealing whatever is left that isn’t nailed down. The ship is sinking and the thieves already own the lifeboats. Once they are gone, once our wealth is overseas, there will be no way to get it back.

 If this sounds familiar, look around at third-world examples such as Ferdinand Marcos, Somoza Garcia, and the Shah of Iran, just to name a few.

25 comments

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    • gjohnsit on December 21, 2010 at 8:07 pm
      Author

    but they are taking our children’s future with them.

    • Edger on December 21, 2010 at 9:52 pm

    a parallel ‘initiative’ seems to be to criminalize real investigative journalism….

    Otherwise….



    “How Ya Gonna Keep ‘Em Down on the Farm?” (Nora Bayes, 1919)  

  1. and we can get a glimpse of the future, but what is a working class family to do?

    What can we do to preserve what little we have left? Because once you lose your job, you lose your benefits: medical, dental, any term life insurance. This is followed by your home and your savings. Desperation leads to withdrawing from the 401k, creating tax liabilities and 10% penalties in the process. Once this point is reached, the continued downward spiral cannot be reversed without outside influence.

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  3. It’s real simple: Social Security still has huge surpluses, Medicare doesn’t. Thus there is money that can be stolen from Social Security and not from Medicare

    .

    Beautiful.  

  4. It’s only three generations. Language reflects this evolution, and cultural values are formed. The story tellers work hard, just like the ones who created the Homeric Epics, the Bibles and Commercialism. To paraphrase a metaphor, “It’s the Paradigm stupid.” And now we have three of these things cobbled together: War, Religion and Commerce.  

  5. …Thank you for the way you weave your information together in such a clear, readable way.

    There’s some compensation in understanding what they are doing as they take us down.

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