Monday, March 17, 2008

How the GOP Will Benefit From Impending Economic Collapse

Republicans benefit from the fact that recessions are class conscious, affecting worse those who can least afford them. An era of highly leveraged US economic expansion and empire is about to come crashing down and swept away. Count on the GOP to make out like bandits.

It seems like ages ago, the US was at peace, there was a budget surplus, the economy was growing, and the unemployment rate was very low. But not everyone was happy. There was an entire group of people who harbor not good, but ill will; an entire class wished for bad times and got it.

Until now, China had an interest in keeping the US ponzi scheme propped up --they sold billions to US citizens via Wal-Mart, the economic Kudzu that ate America. But since a Chinese sub popped up undetected in the middle of the US fifth fleet, it has been apparent that the honeymoon is over. China now leads the world in dumping dollars. Everywhere, it seems, it has become a habit.

If this were mere recession staring back at us from a fun house mirror, it might be shrugged off. After all, the GOP has always loved recessions and benefited from them. A clue is found in the work of conservative Austrian-born economist Joseph Schumpeter who regaled his Harvard students in the mid-1930s with a pithy observation about how economic depressions actually benefit certain social and economic classes.
Chentleman, [sic ] you are vorried about the depression. You should not be. For capitalism, a depression is a good cold douche.

--Joseph Schumpeter, Economist, Harvard University Lecture, circa 1930s

A pattern emerged with the ascension of Ronald Reagan: the rich keep getting richer and the poor keep getting poorer. Unfair tax cuts have a lot to do with that, but, also, the nature of recessions themselves. Everyone who is not an initiate into the cult of gopperism gets douched. The administrations of Reagan, Bush and Bush are like lab experiments that prove the hypothesis: GOP policies are designed to benefit an increatingly tiny elite or, as Bush called it, "my base."

This is no mere recession but complete collapse. Mephistophes has come knocking.
As feared, foreign bond holders have begun to exercise a collective vote of no confidence in the devaluation policies of the US government. The Federal Reserve faces a potential veto of its rescue measures.

Asian, Mid East and European investors stood aside at last week's auction of 10-year US Treasury notes. "It was a disaster," said Ray Attrill from 4castweb. "We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed."

The share of foreign buyers ("indirect bidders") plummeted to 5.8pc, from an average 25pc over the last eight weeks. On the Richter Scale of unfolding dramas, this matches the death of Bear Stearns.

Rightly or wrongly, a view has taken hold that Washington is cynically debasing the coinage, hoping to export its day of reckoning through beggar-thy-neighbour policies.

--Ambrose Evans-Pritchard, Foreign investors veto Fed rescue, UK Telegraph

Bush, meanwhile, seems unconcerned, perhaps, like Nero, fiddling as Rome burns. Then again, the GOP 'class' has always benefited from US recessions, depressions, and other economic catastrophes.
  1. Recessions, though not caused by declining stock markets, are always accompanied and often predicted by a plunging stock market. Republicans sell out at the peak, taking their profits. Enough selling will trigger the plunge; less knowledgeable investors begin to follow suit from fear but too late. Last man out loses.

  2. Having taken their profits on the upside, a depressed market is but an opportunity for the rich Republican to get back in at lower prices. Guess who sells at the lower price: the poor schmuck who is 180 degrees out of phase and can only dream of being a rich Republican. In reality, those he aspires to join are exploiting him.
  3. Very knowledgeable investors make money "selling short", buying "put options". These investors get peak prices for stocks even as the price declines. Illegal insider information is executed with "calls" and "puts." The perpetrators of 911, for example, made millions, possibly billions, selling short the stocks of UA and AA. I defy anyone to come up with an 'innocent' explanation. The recipients of those profits had guilty foreknowledge of 911. The name 'Buzz' Krongard comes in connection with a known terrorist organization: the CIA.

    Now --a planned financial meltdown might have presented the same opportunities. Historically, 'elites' have always emerged richer, stronger from recessions.

    On the other side of Ronald Reagan's recession of some two years, the rich had gotten richer while the middle class was all but wiped out. The ill-effects of that recession are still seen in the decline of middle class neighborhoods, the permanent loss of manufacturing base and the jobs it created.The profits and volume were most certainly outside norms, proof that those executing the options had precise foreknowledge of the attacks. Those making those profits had "guilty knowledge" of the attacks; they were at the very heart of a murderous conspiracy.
  4. Unemployment always goes up in a recession. At the end of a longer recession, companies have the luxury of hiring from a larger labor pool at lower wages and/or salaries. Some companies --citing hard times --may reduce benefits, cut vacation or sick time.

    Big business must hate good times; it is only during times of full employment that workers have any leverage at all. Offhand I can think of only two times in history that have come close: the Clinton years, and, interestingly, Europe after the Black Death. The labor supply had been depleted by plague. Employers were often forced to accede to worker demands for better conditions, money, a place to live! Serfs had been freed and it marked the beginning of the end for Feudalism and set the stage for 'corporate feudalism', an age in which we still labor and suffer.
  5. Admittedly, many businesses go belly-up during recessions. While lip service is given to 'free markets' and Adam Smith's 'invisible hand', die hard robber barons hate the 'free market'. They prefer 'monopoly' when they can create one and 'oligopoly' when they can't. Free competition among many sellers is the last thing they want. Recessions are welcomed. It's the 'cold douche', a ruthless flush, so beloved by Schumpeter and the robber barons of American capitalism.
  6. Don't expect recessions to bring down prices. More often, higher prices are the light that is seen at the end of the long, dark tunnel. In other words, those businesses fortunate enough to survive a 'downturn' are in the enviable position of raising prices on the other side. Higher prices benefit businesses that manage, even with government help, to stay in business during a recession. So much for laissez-faire capitalism.

    Those fortunate businesses now make more money per unit produced and will do so with fewer employees. The world is not so kind to everyone else, primarily smaller businesses and entrepreneurs, freelancers, and worker bees.

    Prices, we learned in Economics 101, are determined by supply and demand. If the demand is such that the market is quite willing to pay any price for it (prescription drugs, gasoline, certain rents) then demand is said to be inelastic.

  7. At the expense of over-simplifying, consumer demand is the arbiter of price only in markets characterized by diffuse competition. Recessions militate against a market of this sort, weeding out all but 'privileged' businesses, primarily those with juicy government contracts or GOP cronies in office. Only in the textbook model, is it assumed that the oligopolist's market demand curve becomes less elastic at prices below a certain point. In markets characterized by the continuing decline in the number of 'sellers', it is obvious that there are fewer motivations for oligopolists to reduce prices. In such a market, the oligopolist (an aspiring monopolist) makes more money selling fewer units at higher prices than could be earned selling more units at lower prices. How many people are out of a job makes no difference to the American right wing for whom Scrooge is their abiding inspiration.
"Are there no workhouses? Are there no prisons...then let them die and decrease the surplus population."

It is now time to address the concerns of Scrooge. The American right wing, consulted as they are by slick, suited Madison avenue whiz kids will never call the American gulag of FEMA camps by the names 'work houses' or 'prisons'. By any name, they are presumably open and ready for those who fall through the gaping cracks. A perpetually depressed economy is a good source of slave labor. Who benefits? KBR? Halliburton?

Kellogg Brown & Root, a Halliburton subsidiary, is constructing a huge facility at an undisclosed location to hold tens of thousands of Bush's "unlawful enemy combatants." Americans are certain to be among them.

The Military Commissions Act of 2006 governing the treatment of detainees is the culmination of relentless fear-mongering by the Bush administration since the September 11 terrorist attacks.

Because the bill was adopted with lightning speed, barely anyone noticed that it empowers Bush to declare not just aliens, but also U.S. citizens, "unlawful enemy combatants."

Bush & Co. has portrayed the bill as a tough way to deal with aliens to protect us against terrorism. Frightened they might lose their majority in Congress in the November elections, the Republicans rammed the bill through Congress with little substantive debate.

Anyone who donates money to a charity that turns up on Bush's list of "terrorist" organizations, or who speaks out against the government's policies could be declared an "unlawful enemy combatant" and imprisoned indefinitely. That includes American citizens.

The bill also strips habeas corpus rights from detained aliens who have been declared enemy combatants. Congress has the constitutional power to suspend habeas corpus only in times of rebellion or invasion. The habeas-stripping provision in the new bill is unconstitutional and the Supreme Court will likely say so when the issue comes before it.

Although more insidious, this law follows in the footsteps of other unnecessarily repressive legislation. In times of war and national crisis, the government has targeted immigrants and dissidents.

--American Prison Camps Are on the Way, Marjorie Cohn, AlterNet.

There is more on the prospects of work camps, concentration camps, the illegal, unconstitutional war on dissent, and slave labor in America:

American Concentration Camps

In Bush's Orwellian dictatorship, a 'terrorist' is anyone Bush decrees a 'terrorist'. As the article points out, US dissidents are always targeted by the right wing. The Bush regime --having set aside habeas corpus --has the right wing's best chance ever of putting away the Bill of Rights for good. Bush has already done so on paper, by decree! "Stop throwing the Constitution up to me," he is reported by two witnesses to have screamed! "It's just a goddamned piece of paper!" Americans must dissent or risk being thrown into FEMA work camps forever. Bush believes that disagreement with him is 'treasonous'. I deny his authority to define 'treason' upon his unlawful, unconstitutional decree. His proclamation is, therefore, null and void, still-born bullshit!

Bush, having made free Americans traitors by illegal decree, Bush is a real traitor to the very foundation of US law: the Constitution. His war of naked aggression against Iraq, resulting as it has in the deaths of millions of civilians, is a capital crime under Geneva, to which the US is a party, affirmed by US Codes, Title 18, Section 2441, and, likewise, the Nuremberg Principles. Let's get on with the trial of George W. Bush for capital crimes.
"During the late-nineteenth and early twentieth centuries in America, as labor unions organized and gathered power, as socialism grew in popularity among working and other oppressed peoples, industries owned by Rockefeller, Morgan, Harriman, Carnegie, and others, began hiring their own police forces and goon squads to infiltrate labor unions and spy on the political and personal activities of union organizers for the purpose of bringing arrests and convictions and eliminating all socialist activity in the nation. The most notorious example was the Homestead Strike of 1892, when Pinkerton agents killed several people while enforcing the strikebreaking measures of Henry Clay Frick, acting on behalf of Andrew Carnegie."

--Carolyn Baker, PhD, US Government Targets American Dissent - Part I

It has been quipped: a conservative is never so miserable as when times are good. Certainly, miserable grinches got what they wished for. The surplus was pissed away in a series of Bush tax cuts benefiting only the very rich. Now, when the US faces the very real prospect of utter collapse, millions will be thrown out of work. What is to be said of an entire class of people who are happiest when others are miserable? I leave that to another article…
Another “benefit” of a recession is that it purges the excesses of the previous boom, leaving the economy in a healthier state. The Fed's massive easing after the dotcom bubble burst delayed this cleansing process and simply replaced one bubble with another, leaving America's imbalances (inadequate saving, excessive debt and a huge current-account deficit) in place. A recession now would reduce America's trade gap as consumers would at last be forced to trim their spending. Delaying the correction of past excesses by pumping in more money and encouraging more borrowing is likely to make the eventual correction more painful. The policy dilemma facing the Fed may not be a choice of recession or no recession. It may be a choice between a mild recession now and a nastier one later.

--Does America need a recession?

But there is, after all, only one thing wrong with the economy: our government! If Republican partisans on the Supreme Court would see fit to allow one, a free and fair election may redress this grievance. If not, then the people will have no choice but to effect the remedies recommended by Thomas Jefferson in the Declaration of Independence, specifically that part about how the people may 'abolish' the government whenever it breaks its covenant.

The plunging dollar has taken a beating lately on international markets. But at least one wealthy investor may be set to profit from the dollar's decline: Dick Cheney.

Back in June 2006, Kiplinger's Personal Finance magazine reported that Cheney's financial advisers were apparently betting on a rise in inflation and on a decline in the value of the dollar against foreign currencies.

Cheney and his wife, Lynne, the magazine noted, had between $10 million and $25 million in American Century International Bond (BEGBX). As Kiplinger pointed out, the fund "buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25 percent of assets and the fund currently has only 6 percent of assets in dollars, according to an American Century spokesman."

Assuming Cheney still holds the fund, he has done well: BEGBX returned 8.3 percent in 2006 and 9.9 percent in 2007. And if he was counting on a dollar decline, of course, he's done well in that regard, as well: in recent days, the dollar has continued to plunge to new all-time lows against the euro. The dollar has also fallen to 12-year lows against the yen. The weak dollar trend looks set to continue as the Fed continues to slash interest rates.

Economists have noted that the weak dollar stems from America's titanic fiscal deficits, which have soared as a result of the disastrous Iraq War.

It's notable that Cheney once claimed that "deficits don't matter." But by banking on a declining dollar, it's clear that even Cheney knows this is bullsh*t and that deficits do indeed matter.

-- MARC MCDONALD, Is Dick Cheney Set To Profit From Dollar's Drop?



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Ed Encho said...

Another brilliant effort Len, it has been obvious to those who truly understand the monstrosity of this system that the end game has always involved turning us into cattle for their prison gulags.

I'm tellin' you pardner, the shit is about to hit the fan and the fan is on high.

All the more reason to keep pouring it the fuck on and getting this all out while there is still time.


Unknown said...

Thanks, Ed! You are absolutely correct, my friend. Keep the heat on and keep up the great work.

Ed Encho said...

When it comes down to it I want you up there on that wall at The Alamo.

Now that this thing is collapsing there is an opportunity to inform and to as Saul Alinsky once said:

"rub raw the sores of discontent."

Time to once and for all put the blame for this exactly where it belongs - pinned right on the tail of the Reagan jackasses.


Anonymous said...

The whole deal is about obfuscation, the art and religion of building up all society ever more complex, until no one understands it, though many claim to, and a few profess educational certification that denotes them as priests who are supposed to know, BUT, who are too busy trying to and succeeding in copulating (fucking) your children you've sent off to school to be educated by these certified pedophiles.

This is the human condition. It has been the human condition for thousands of years.

Now. What to do?

Stop sending your children off to those schools for all those teachers to screw. Seems simple enough, doesn't it?

The other thing is, stop having so many god damned children, fools.

THAT is the source of human poverty, unfettered pregnancy.

The money thing will straighten itself out. It's the poverty-pregnancy thing that's going to take some real self control.

The only other alternative is the status quo.

Don Robertson, The American Philosopher

SadButTrue said...

First off, wow that is some world-class non-sequitur there Don, I just gotta say.

Great post Len. The powers that be have always had a way of skimming off the most benefits when the economy is doing well and putting the burdens on the lower classes when things are not so good. In the first case Smith's invisible hand is reaching into your pocket, in the second it forms into a fist and punches you in the face.

Jane Smiley has another great post on the same subject at HuffPo.

It's the Economists, Stupid

"And who has kept up the drumbeat for deregulation, not only here but everywhere, if not those screwy, and tenured, free-market economists? Their whole job for the last thirty years has been to prop up the egomania and greed of corporate CEOs by making that greed and ego-mania look both positive and unavoidable."

What's coming up ain't gonna be pretty, that's for sure.

Crazy Liberal said...

First the neocons steal the elections. Next they start wars and plunder our country, leaving us looking in bewilderment.

Then we get angry and vote democrats to control both houses only to have them take impeachment off the table.

I have a feeling of an impending false flag attack that will lead to martial law. Why are all those detention centers (read: concentration camps) being built by Haliburton? Bush has nothing to lose by doing this and more.

Hell, we had a nice country and Bush gleefully fucked it up by design for the haves and have mores.

hizzoner said...

I've theorized for years that recessions are in fact just another opportunity for the top 1% to make money.

An economy can only "boom" for a finite period of time. There is only so much liquidity in the system and once that has been milked out, there is nowhere to go but down.

That's when the manipulators at the very top of the pyrimid start the recession game...sell short or bail out with a big profit, wait for prices to tank and pick up the pieces at bargain basement prices...not to worry...they are above it all.

This cycle is stranger than most though...because the financial wizards figured out a way to pump more $$$$ into the system by creating false "equity" in real estate to turn that into cash to pump into the system. But of course the underlying value was counterfeit so the house of cards had to eventually collapse. This causes me to question whether there will be less or greater "depression profits" to be made with this downturn.


Anonymous said...

There is some evidence to argue, Hizzoner, that economies are never stable and will always tend to distribute assets in a skewed fashion (in fact, some simple mathematical models do exactly this). Economists might beg to differ. But a stable economy will never eventuate in Right wing, GOP, trickle-down land. The ideology is too biased. There is no acceptance of the principle that economies are meant to serve the public not the other way round. I'm not an economist but I can recognize that obliging workers to hold down 2 or 3 jobs just to stay above homelessness is an evil economy, not one befitting decent people -- and certainly not one mandated by some immutable laws of Adam Smith.

No, we are seeing plain old criminality at work here. The rich will never accept the principle of income redistribution through progressive taxation. You can ask the Libertarians and the "flat taxers" whether they accept, as a working principle, that governments should ameliorate economic disparities by redistributing income and you will never get them to accept it. It's why they reject death taxes (and insist on illogical malarkey about tax cuts increasing the overall government tax take). Their economic "wisdom" may be summarized in two principles: (1) I am allowed to receive a lot of money (preferably from a government contract or monopoly situation), and (2) I always get to keep all of my money. That's it. And right now the asset strippers and flim flam merchants who made money from the S&L's are set to repeat the process. They are seeking for the US to become like the Phillipines or Indonesia: corrupt oligarchies. It's of no consequence to them how many people suffer or die in that process. All of this was avoidable, in my view.

PS. I did read one very interesting, detailed article in the 1970s by an economist who mapped the Dow Jones to global population growth. The fit was very good. In the 1970s he predicted the asset boom of the 1990s and his graphs showed a prolonged recession/depression setting in from 2007 - 2015. He's been right so far. Sadly, I lost the article some time ago.

Unknown said...

Good post.

kelley b. said...

Chaos is the plan, Cowboy.

With Bear Stearns we got a glimpse of the future: the Feds joining Chase in giving an Offer They Could Not Refuse.

With everyone's else's credit line in the margin, of course.

The Alamo is an interesting allusion, but not one we should aspire to.

Think about it: a good guerilla never lets the Enemy chose the battlefield.

When it really hits the fan, your best move will be to be in another room, hitting the circuit breakers. Because if you try to turn it off at the switch, you are only gonna get hit.

Remember also, the first duty of a good revolutionary is to not get caught. And finish your breakfast, too.

Anonymous said...

Great column Len, did you all notice Governor Spitzer, was arrested the same day Bernanke came forward to protect Wallstreet a coincidence, I don't think so. You see our good friend Governor Spitzer was one of our few friends who had fought corrupt Wallstreet, when he was Attorney General of New York.

February 14, 2008 in the Washington Post Governor Spitzer wrote an article denouncing the Bush Administration for not allowing the 50 States to enact protection laws for the borrower when purchasing homes from these unscrupulous lenders on Wallstreet.

The evidence the Fed's used was accumulated on February 14, 2008. What do you think he gets arrested for screwing, while we are being forked. The only guy that had any guts was taken out pretty dam quick.

Now, I have a great link from a BBC radio show discussing in detail the 1933 coup attempt of George Bush senior's father and friends. some of the radio show is actual original 1933 tapes.

Anonymous said...

Sorry folks I cannot post live links
here is the link on two lines. It's worth typing in!

Unknown said...

damien sez...

There is some evidence to argue, Hizzoner, that economies are never stable and will always tend to distribute assets in a skewed fashion (in fact, some simple mathematical models do exactly this). Economists might beg to differ. But a stable economy will never eventuate in Right wing, GOP, trickle-down land. The ideology is too biased. There is no acceptance of the principle that economies are meant to serve the public not the other way round. I'm not an economist but I can recognize that obliging workers to hold down 2 or 3 jobs just to stay above homelessness is an evil economy

Well, my math is certainly not your level, Damien. Nevertheless, I tend to agree. I can read the charts and I know just enough stats to know that something has been screwed up in 'merika for a long time. Just recently, I found a recording (in fact, a redo by Bryan) of the famous Cross of Gold speech made by William Jennings Bryan. In those days, political conventions really meant something. Despite the famous Scopes trial, Jennings and Clarence Darrow were, in fact, on the same side of the equation. Both were 'commoners', both championed lost causes. My take is that the 'revolution' was lost in 1911 when the McNamara brothers --members of the iron workers union --plea bargained for their lives. They had been accused of an act of terrorism --blowing up the LA Times building. Darrow was accused of trying to bribe a juror and his reputation, already suffering, was shot to hell. All but forgotten now, it was billed as the "Trial of the Century". Samuel Gompers, who personally urged Darrow to take the defense, had a lot riding on the outcome, as did the entire labor movement. It was effectively the end of the American labor movement. The age of the "Robber Baron" still lives on.

Anonymous said...

ok, I can't speak French, but I can do some maths. Proof --

y = sin x / n
cancel the n's above and below
y = six
ans. 6

Then, there's the story of a tourist, farmer and mathematician travelling by train through Scotland. They look out the window and spot a black sheep.

Tourist: Oh look, all Scottish sheep are black.
Farmer: No, in Scotland, some sheep are black.
Mathematician: You're both wrong. In Scotland there exists at least one sheep, at least one side of which is black.

...proving once again that girls prefer football players.

hizzoner said...

Damien, thanks for the reply.

Did anyone notice E. J. Dionne's piece in the WaPo yesterday? He "gets it"...and came as close to any MSM columnist yet of saying what Len says in this post....I'll find the "linky-thing" for you but here's a "snippet":

Never do I want to hear again from my conservative friends about how brilliant capitalists are, how much they deserve their seven-figure salaries and how government should keep its hands off the private economy.

The Wall Street titans have turned into a bunch of welfare clients. They are desperate to be bailed out by government from their own incompetence, and from the deregulatory regime for which they lobbied so hard.

Unknown said...

Damien, those are great. Do that equation three times and you've got yourself an 'anti-Christ'.

By the way, that mathmatician talks like Bertrand Russell and A.J. Ayer wrote. I love it. LOL

Great stuff, my friend.

Ed Encho said...

When it comes down to it I want you up there on that wall at The Alamo.

Thanks for mentioning a vernerable site. Downtown San Antonio is one of the world's most 'inviting' spaces -- the River Walk, the Alamo, lots of nice shops and river side cafes. Lots of good music, including Tex-Mex. The food must not be missed. If you have only one city to visit in Texas --San Antonio.

Crazy Liberal said...

I have a feeling of an impending false flag attack that will lead to martial law.

That's my fear, as well. I hope we are both wrong. This fanatic right wing counts on our reluctance to think the unthinkable. Unthinkable for us, it's a modus operandi for them.

SadButTrue said...

The powers that be have always had a way of skimming off the most benefits when the economy is doing well and putting the burdens on the lower classes when things are not so good. In the first case Smith's invisible hand is reaching into your pocket

And when the invisible hand winds up in your pocket, it's not an invisible hand job --it's theft!

hizzoner said...

I've theorized for years that recessions are in fact just another opportunity for the top 1% to make money.

And you are absolutely correct. I've actually heard the bastards whining about 'good times'.

Anonymous said...

About those sheep please git yerself an EDUCATION & watch this !!!!

Unknown said...

Anonymous, good British humor. I liked the line: "Would you like to buy this house before it falls down?"

Anonymous said...

"All Republicans would gladly be Democrats if the Dems would only do as the Republicans wish."

Do I ever agree; and all that worries me now is Democrats thinking they have to be Republicans to win this November.

Anonymous said...



California bail bonds said...

I think the jury is still out on their gains. There just has not been a large enough sample pool in terms of electoral races to reasonably measure any meaningful gains.