Sunday, August 19, 2007

The war on Iraq threatens the US Economy as mass murder ceases to be profitable

Seen yesterday on a swiss newspaper the folllowing headline: "American Dream, Global Nightmare". It is fast becoming an American "cauchemar" as well. Albert Einstein wrote that the purpose of socialism is to overcome and advance beyond a "predatory phase of human development". In Bush we have reverted to it. Bone headed GOP "trickle down economics" and imperial oil theft abroad threatens an economic train wreck, indeed, democracy itself. A new study confirms that military spending is an economic albatross, a depressing drag on the economy, that will increase joblessness, deprive millions more of an education. Military spending and Pentagon waste soak up federal monies better spent on education, infrastructure, and job creation. Pentagon waste takes monies out of circulation and depresses the economy. Only a tiny part of the economy will benefit --the filthy rich already bought and paid for by Bush's unfair, inequitable tax cuts for what he called "his base". Wealth does not trickle down. [See: The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath, Kevin Phillips; and a Hat Tip to Vierotchka re: Swiss headline]

A militarized society is a self-fulfilling prophecy. Much is made of the fact that the military provides opportunities for high school dropouts, the disadvantaged who might not otherwise get an education or a job. The military, it is said, takes these poor folk off the streets. Indeed, it takes them off the street and puts them in the line of fire in wars of naked aggression where suicide rates speak to the issue of our immoral position in Iraq. Moreover, had not the military, by soaking up the lions share of all federal spending, more monies might have been budgeted for truly productive programs like education and training. What is to be said about a society that finds it necessary to send young people off to die in immoral wars in order to get them employed and off the streets?
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

China threatens 'nuclear option' of dollar sales, Ambrose Evans-Pritchard

The Reagan/Bush Formula is simplistic and simple-minded: increase defense spending while cutting taxes for the rich. Reagan did not pioneer the formula. It had already been used to disastrous effect by the GOP cabal preceding the Great Depression. It did not work for Harding, Coolidge, and Hoover and it did not work for Ronald Reagan. Nor has it has worked for Bush. Does the GOP have an endemic learning problem that in some 100 years, they still don't get it? We would call a doctor an idiot if he told you just keep on doing whatever it is that's making you sick!

The tax cut is properly blamed for Reagan's infamous recession of some two years in which millions were out of a job and out of luck. In prosperous Houston, thousands of the recently affluent lost their suburban homes only to live under overpasses and improvised tents. Bush has made all the same blunders, all the same mistakes.

In his Decline and Fall of the American Empire, Gore Vidal called the Pentagon an "economic black hole". Indeed, there is vindication for that position in a study by the Center for Economic and Policy Research. The study makes a convincing case that military spending has the effect of depressing the economy.
  • After an initial demand stimulus, the effect of increased military spending turns negative around the sixth year. After 10 years of higher defense spending, there would be 464,000 fewer jobs than in the baseline scenario with lower defense spending.

  • Inflation and interest rates are considerably higher. After 5 years, the interest rate on 10-Year Treasury notes is projected to be 0.7 percentage points higher than in the baseline scenario. After 10 years, the gap would rise to 0.9 percentage points.

  • Higher interest rates lead to reduced demand in the interest-sensitive sectors of the economy. After 5 years, annual car and truck sales are projected to go down by 192,200 in the high military spending scenario. After 10 years, the drop is projected to be 323,300 and after 20 years annual sales are projected to be down 731,400.

  • Construction and manufacturing are the sectors that are projected to experience the largest shares of the job loss.

  • --Center for Economic and Policy Research: The Economic Impact of the Iraq War and Higher Military Spending
One is tempted to make an analogy with pre-depression America, dominated by GOP presidents Warren Harding, Calvin Coolidge and Herbert Hoover, all of whom are identified with laissez-faire capitalism. During the Roaring Twenties, Americans danced the Charleston and the Black Bottom (don't ask!) and played the stock market. Someone wrote a paper about how easy it was to get rich. When it all all came crashing down, a famous pop tune summed it all up: "Brother, Can you Spare a Dime?"

GOP regimes slashed taxes and regulations; monopolies were winked at if not encouraged. It was an era characterized, as was Reagan's administration, by great inequalities in income and wealth. The US was on the Gold Standard and the Fed maintained a tight money policy. The Great Depression is still a great source of GOP embarrassment but apparently insufficient to inspire a change of policy. Sure enough, Reagan's tax cut of 1982 benefited only the very rich.

With respect to the wars in Iraq and Afghanistan specifically, CEPR commissioned Global Insight, economic forecasting company, to create a macro-economic model that would simulate the impact that an increase in annual US military spending might have on the economy. With an increase of 1 percent of GDP, the simulation demonstrates higher interest rates, reduced net exports, depressed housing construction and car sales, and a slower job creation rate. In other words --an economic slowdown. If not stopped --recession, depression.

There is much to be learned form the Roman experience. Roman legions had not always been the professional hard core types we see in spectacular movies like The Fall of the Roman Empire in the '60s or the more recent Gladiator. Legions of the Republic were most often laborers, shopkeeper or farmers. I doubt that any of them benefited or profited in any way from Rome's increased militarism. Often --whenever a war du jour was over --a returning legionnaire would find that his farm had been confiscated by an aristocrat who had seized it for back taxes (presumably) and had converted into a villa or a vineyard or both. Eventually, ordinary jobs were out-sourced to slaves from the far flung reaches of empire and it is not hard to imagine unemployment rising as the Republic became Empire and as the empire became a military dictatorship. It easy enough to imagine Rome's poor, out of work, hungry, in need of weapons of mass distraction i.e, bread and circuses.

War was then as it is now --a racket, a lose-lose deal for everyone but the very, very rich, the military/industrial complex.

GOP politicians are known to favor military bases and local folk often think it a plus when a base locates near them. Merchants have visions of easy sales. But what hope is there for a small town having the misfortune to be the location of a nearby base as well as a nearby Wal-Mart? I would think it time to "up sticks" and move on.

Job are said to be created wherever military bases are established. Indeed, base towns often spring up around a base but disappear when bases are closed. Many have been closed over the last twenty years or so. Many not closed were scaled down. There was a time when local merchants jacked up prices upon word of increases in military pay. But, on the whole, the creation of bases leaves much to be desired as a way of stimulating or even creating an economy. Better to have a smaller town with a healthy local economy than a "tent" city following or dependent upon bases.

Nixon, upon embarking upon a federal deficit, is said to have remarked: "We are all Keynesians now". Even those politicians running on platforms of "fiscal restraint" or "balancing the budget" love deficits for the votes and financial support it buys them. It was an easy way to buy votes without having to pay for them out of your own pocket. Democrats, sadly, could never make up in sheer numbers, the dollars lost kissing up to the GOP. Most politicians are eager to run up deficits. It is instructive that the highest deficits have been run up by politicians espousing smaller government and balanced budgets. Mssrs Reagan and Bush are two out of a multitude.

I stated recently that a nation could boot strap its GDP in the short term by going to war but this a very, very cynical move. As the study cited points out, the gain is ephemeral. Alas --GDP is only a number. It doesn't tell you how many are employed in creating it; nor does it tell you to whom the benefits of higher GDP will "trickle".

If the likes of Reagan and Bush are determined to run up ever higher deficits, then, at the very least, the American people should demand a better return on investment. The point of the articles cited, however, would indicate that after about five or six years, the return on war is ever diminishing. Profits made murdering people are short lived. Past a certain point, there is nothing more to be gained by piling up more bodies. In the language of economics, mass murder will have reached the point of diminishing returns.

That there is no more booty for Bush to make with Murder, Inc raises another question that you will not find asked or answered in the MSM. That is, what was/is the rationale for Bush's campaign of torture? Are there not more effective ways of stealing oil? Certainly, a near mass torture program embarked upon by this would-be "President" has enriched but only a few perverts like Blackwater and other anonymous, shadowy friends of the CIA. Nor can it be supposed or imagined that torture has in any way made the theft of Iraqi oil easier, but rather, harder! Then --why is Bush doing it? Is it done for the sake of perversion alone? Is the American government peopled with perverts and sadists? What is the return on the investment this nation has made perpetrating sexual perversions on and to the people of Iraq? Is the Bush regime America's first whacked-out, perverted government? Is Bush the Crawford Caligula? What has the nation gotten for the jollies Bush and his GOP conspirators got off?

As Gore Vidal said of the monies spent building a tank, the Iraq war is a fiscal black hole. Even if the oil fields are seized and secured, it will benefit only Halliburton, Exxon-Mobil and other Bush partners. Little if any of this money will trickle down. Nor should you expect prices at the pump to fall. Since Ronald Reagan popularized "trickle down" thinking, wealth has consistently trickled up.

Back to Vidal's parable of the tank. Once built the economic benefits of building the tank are over. The tank never returns a dime. We have seen how US military forces have used the tank in Iraq ---to shoot at civilians at random, to run over and smash cars owned by Iraqi civilians! Where is the money in killing and harassing for pure "sport"?

The same amount of money spent building schools and educating children is a real investment in a nation's future. Monies diverted to military expenditures almost never come home but the blow-back from imperialism and torture is called "terrorism".

Even David Stockman recanted the years he spent shilling for Reagan. He eventually called supply side economics (trickle down theory) a fraud, specifically "a Trojan Horse" and blamed a "noisy faction of Republicans" for its rise.

To be sure, US production doubled between 1939 and 1944. But there is nothing in Keynes or any other economist that would support the idea that only military spending will do the trick. The issue, rather, is how are the deficits to be spent? How is the wealth to be distributed? But for a short period of time in Clinton's second term (check the Census Bureau, Dr. Daniel Weinberg), the incomes of the very, very rich have increased exponentially and to the detriment of every other group and to the detriment of our economic health as a whole.

Weinberg's brief of 1997 was the first and only good news on that front since Ronald Reagan cut taxes for filthy rich folk back in 1982. Under Bush, the bad old days are back, perhaps to stay. This is not what Keynes had in mind. The pump is not primed if the filthy rich are hoarding their gains. In the end, the house of cards will collapse.

Again--I cite Rome. I have alluded to the domestic effects of Rome's foreign adventures and occupations. Like the US since WWII, Rome became addicted to war. It is instructive that at Adrianople, Valen's army was composed entirely of legionaries from conquered provinces. The bottom line might have looked good in a very general sense but the benefits of empire were confined to a handful of filthy rich aristocrats in Rome. You may have read my allusion to Didius Julianus in a previous article. My thesis, based upon what is known about that incident and reported by Gibbon is that Rome's currency had already collapsed. When the Roman Empire was sold at auction, it was done so in Greek currency --not Roman. The smart money had dumped the sestertius. When Bush auctions off America, will it be sold in Euros? The US is most certainly at a point comparable to that of Rome of about 190 AD. China is already threatening to pull the plug on the ever weakening US dollar.

Bush also learned from his grandfather that there is big money -- a killing in fact --in the industrial murder business. Our own Treasury Department is the source for the following information about how US corporations, primarily US Steel, for whom Prescott Bush was banker, helped Hitler arm and wage war on the world while carrying out mass murder throughout Europe. US steel produced the following percentages of war munitions for Hitler and his Nazi war lords: Pig iron 50.8%; Pipe & tubes 45.5%; Universal plate 41.4%; Galvanized sheet 38.5%; Heavy plate 36%; Explosives 35%; Wire 22.1%.
George Bush's grandfather, the late US senator Prescott Bush, was a director and shareholder of companies that profited from their involvement with the financial backers of Nazi Germany.

The Guardian has obtained confirmation from newly discovered files in the US National Archives that a firm of which Prescott Bush was a director was involved with the financial architects of Nazism.

His business dealings, which continued until his company's assets were seized in 1942 under the Trading with the Enemy Act, has led more than 60 years later to a civil action for damages being brought in Germany against the Bush family by two former slave labourers at Auschwitz and to a hum of pre-election controversy.

--
How Bush's grandfather helped Hitler's rise to power

Bush also learned how to outsource murder and atrocity in ways that benefit his right wing supporters. It's called "private enterprise" but in reality it's a form of socialism, farming out work to partners, robber barons, death merchants and hired murderers like Blackwater, a gang of paid thugs whom National Public Radio charges has strong connections with America's radical, religious, fascist right wing.
NPR: The war in Iraq has been partly out-sourced to private military contractors which are performing many of the services that used to be done by the military. My guest, Jeremy Scahill, has written a book about one of those companies, Blackwater, which he describes as "the world's most mercenary army and the embodiment of the Bush administration policy of privatizing military functions." The company, which was founded in 1996, made headlines in 2004 when four of its men were ambushed and set on fire by Sunni gunmen in Fallujah. The charred remains of two of the men were hung on a bridge for public display. The families of the four men are suing Blackwater for wrongful death, raising a lot of questions about accountability and oversight when private contractors play a major role in war. Jeremy Scahill is a Polk Award-winning journalist who is a frequent contributor to The Nation and a correspondent for the radio and TV show, "Democracy Now." Jeremy Scahill -- if you wanted to write about a private military contractor, why did you focus on Blackwater?

--Blackwater: USA in Fallujah

Wars are a quick and shallow fix! The Iraq war has not had a beneficial effect on the US economy. Only a very few are paid well these days and they are paid handsomely. Everyone else lives paycheck to paycheck, doing well to pay the mortgage, to put food "on your family", and keep a car in the garage. Many throughout the world would envy that lifestyle were it not a "Truman Show" financed with borrowed money and China's evil motives for propping up the dollar. As Charles Fort once said of the possibility of extraterrestrial aliens, "I think we are property". American industry is out-sourced but there is always a slave wage to be made at Wal-Mart if you are willing to become a slave of the evil empire, if you are willing to become "property".


Brother, Can You Spare a Dime?


Donald Duck in "Der Fuhrer's Face"

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