AMERICAs GREATEST DISASTER IS COMING
EL GRAN DESASTRE IMPERIAL SE AVECINA
Hugo Adan 08/08/11
Tres factores crearon el gran desastre economico que se empieza a vivir en los EU(la crisis del 2008 fue solo la introducción): 1ro la total desregulación al capital financiero especulador mediado por el control Federal del dólar; 2do, la evasión fiscal para los ricos y los bailouts (salvatajes financieros con dineros de la nación) a los especuladores banqueros; 3rd los excesivos gastos militares (cerca de 300 bases en el mundo entero)incluyendo el gasto en diplomacia de guerra (compra de Pdtes, gabinete, senadores y de la jerarquía militar)todo esto fue apoyado con dinero falso creado de la nada, el dólar.
Aun así, el dólar siguió siendo la mayor fuente de reserva en el sistema bancario mundial. Aunque nuevas monedas entraron a disputar el monopolio del dólar, el yen japonés, el rubro ruso, el yuan chino y el euro de la unión europea y estos se han unido para crear una nueva moneda internacional. Las agencias de crédit rating o decían la verdad o morían junto al dólar. S&P dijo la verdad y en realidad no dijo nada nuevo, pues hace un anio lo dijeron los chinos: EU es un estado insolvente, las transacciones financieras en dólar no valen 3 As sino solo 2 y hoy solo una. Que ahora lo diga una agencia americana, es el final del simulacro y el inicio de un ciclo desconfianzas con efectos difíciles de predecir. Una cosa es cierta, si cae el dólar cae el tío Sam como timador y fraudulento, y si se deja existir al dólar, este ya no sería controlado por el Federal. En ambos casos, estamos frente al fin del imperio.
Mr Beers , el dueño de la agencia S&P indico que imprimir dólares de la nada no brindara tres As de aquí para adelante. Para asegurar la validez del dólar, los bonos del tesoro que se vendió a chinos, japoneses y europeos tienen que tener poder comercial y no lo tiene(un dinero prestado es útil solo si con ello se puede comprar lo que uno quiere). Pero el dólar no tiene esa capacidad de compra (por poner un ejemplo, a los chinos se les bloqueo ingreso al negocio petrolero americano). Si EU se presta dinero chino o europeo y no tiene como pagarlo, tiene que vender lo que tiene en casa para saldar la deuda. Y si eso no alcanza tiene que vender la casa. Así de simple. De lo contrario el dólar será solo basura o moneda falsa sin mayor valor internacional, quizá solo con valor interno pero por debajo del valor del dolar canadiense y otros dolares que circulan en el mundo.
Printing dollars de la nada no importo a ambos dos partidos (democ y repub) no sabian que esto podria convertirse en un boomerang. Para que el dólar siga existiendo tienen que dejar que los prestamistas compren lo que quieran de EU. Esta seria la transicion que ya se estaría negociando bajo la mesa, de lo contrario los prestamistas pondrían en marcha la nueva moneda internacional como ya antes lo sugirió el IMF.
Es la devaluación del dólar lo que esta detrás del actual downgrading por S&P. El dólar dejaría de ser la base de la reserva bancaria mundial y la mayor moneda del intercambio internacional. Cuando democ y repub apoyaron el downgrading del dólar planearon pagar menos por el dinero prestado, dinero que EU volvería a imprimir de la nada. No esperaban el efecto boomerang y la posible puesta en marcha de nueva moneda internacional. Es lo que está en curso fuera de casa. La especulación financiera en dólares esta llegando a su final y con el, el fin del imperio americano.
Quien pagara los platos rotos de esta "transición" es el pueblo americano. Los socialistas de arriba (las grandes corporaciones y la banca especuladora) socializaran sus pérdidas con los de abajo, esto es transferirán al pueblo los costos de la recuperación económica. Siempre fue así. Volvera a serlo a menos que los socialistas de abajo (trabajadores y capas medias) den un nuevo curso a la historia. Pero yo no creo en esto es posible aun. El pueblo americano ha sido políticamente idiotizado y esta prisionero o cautivo en una doble cárcel: la del sistema bipartidista.
La transición hacia un nuevo capitalismo de mercado es la alternativa mas probable a la presente crisis.
The problem is what to do with the nuclear arsenals & WMD? How to dismantle them or transferred to the UN? And what to do with hundreds of military stations around the world?, Bringing the troops home will be easy, though war mongers here won’t accept it, at the end they have to do it. What happens in Afghanistan (more than 30 elite soldiers killed) is just the beginning. The occupied territories are being equipped with small and ultra-effective missiles. A nuclear response will be contested and even if the carnage is greater outside than inside that will create an international resentment that will make difficult the re-construction of new American states in the North.
On the other hand, a new international reserve currency will be created soon, the dollar has its days counted. It is over. You wanted o not, it is the end of the US empire.
The US is a mosaic of different states with different cultures and capabilities (some of them are in real bankruptsy, the Fed didn't do nothing to save them and won't do it), the only glue that put them together now is the ideological scum of faked values that we do not have or practice, all of them loaded with chauvinism and fascistic notes (war mongerism).
The US will re-emerge faster than the Russian empire if they live alone the states that want their own economic and political autonomy. The Federal is a waste of money, their institutions and banking system connection should be dismantled. Later on (after destroying the two traps: the bankers system and the bi-partisan system) they can re-unite under new basis with a social-market oriented democracy. America has the science-tech and creativity to put forward a new democratic set of American independent states. We do not need the military mighty to reconstruct the Americas of the future. This is the real issue we should discuss now on. (Hugo Adan: 08/08/11)
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Let’s check some outlooks of the current situation in the US:
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Sanders: Obama Proposal Would Impoverish 250,000
By Erik Wasson
http://www.informationclearinghouse.info/article28526.htm
July 10, 2011 "The Hill" -- -The Social Security Administration estimates that a proposal floated by the Obama administration would put 245,000 people into poverty, according to an analysis released by liberal senator Bernie Sanders (I-Vt.) on Saturday.
That level of impact would be felt by 2050 if a proposal to change the way inflation is measured is adopted, Sanders announced. The change to the way SSA would calculate the Consumer Price Index has been floated in debt ceiling talks between Congress and the White House. The White House has suggested revising CPI for both the tax code, in order to generate more revenue, and for benefits.
Social Security Administration’s Office of Retirement Policy estimated that by 2030, according to the report prepared for Sanders, there would be 173,400 more people living in poverty in the United States.
Benefits for those who are 80-89 would drop by $960 a year. Benefits for women would fall by 3.5 percent overall while men’s benefits would drop by 2.9 percent.
By 2050, seniors in the 80-89 age bracket would see benefits fall by $1,200 a year.
"I am especially disturbed that the president is considering cuts in Social Security after he campaigned against cuts in 2008," Sanders said. "The American people expect the president to keep his word."
This week Sanders demanded that Senate Majority Leader Harry Reid (D-Nev.) join House Minority Leader Nancy Pelosi (D-Calif.) in flatly ruling out any benefit cuts to Social Security as part of the debt deal.
Reid in the past has said Social Security does not need to be reformed for decades. While Social Security is expected to be unable to pay full benefits by 2036, it is not a major driver of the budget deficit. Republicans want the program reformed now because they fear otherwise that as 2036 approaches massive tax hikes that could stall the economy would be demanded by senior citizens.
See also:- U.S. Rescue May Reach $23.7 Trillion, Barofsky Says : U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.
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U.S. Rescue May Reach $23.7 Trillion, Barofsky Says (Update3)
By Dawn Kopecki and Catherine Dodge - July 20, 2009
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aY0tX8UysIaM
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See also:
Multi-Billion-Dollar Terrorists And The Disappearing Middle Class
By James Petras
http://www.informationclearinghouse.info/article28529.htm
July 10, 2011 "Information Clearing House" -- The US government (White House and Congress) spends $10 billion dollars a month, or $120 billion a year, to fight an estimated “50 -75 ‘Al Qaeda types’ in Afghanistan”, according to the CIA and quoted in the Financial Times of London (6/25 -26/11, p. 5). During the past 30 months of the Obama presidency, Washington has spent $300 billion dollars in Afghanistan, which adds up to $4 billion dollars for each alleged ‘Al Queda type’. If we multiply this by the two dozen or so sites and countries where the White House claims ‘Al Qaeda’ terrorists have been spotted, we begin to understand why the US budget deficit has grown astronomically to over $1.6 trillion for the current fiscal year.
During Obama’s Presidency, Social Security’s cost-of-living adjustment has been frozen, resulting in a net decrease of over 8 percent, which is exactly the amount spent chasing just 5 dozen ‘Al Qaeda terrorists’ in the mountains bordering Pakistan.
It is absurd to believe that the Pentagon and White House would spend $10 billion a month just to hunt down a handful of terrorists ensconced in the mountains of Afghanistan. So what is the war in Afghanistan about? The answer one most frequently reads and hears is that the war is really against the Taliban, a mass-based Islamic nationalist guerrilla movement with tens of thousands of activists. The Taliban, however, have never engaged in any terrorist act against the territorial United States or its overseas presence. The Taliban have always maintained their fight was for the expulsion of foreign forces occupying Afghanistan. Hence the Taliban is not part of any “international terrorist network”. If the US war in Afghanistan is not about defeating terrorism, then why the massive expenditure of funds and manpower for over a decade?
Several hypotheses come to mind:
The first is the geopolitics of Afghanistan: The US is actively establishing forward military bases, surrounding and bordering on China.
Secondly, US bases in Afghanistan serve as launching pads to foment “dissident separatist” armed ethnic conflicts and apply the tactics of ‘divide and conquer’ against Iran, China, Russia and Central Asian republics.
Thirdly, Washington’s launch of the Afghan war (2001) and the easy initial conquest encouraged the Pentagon to believe that a low cost, easy military victory was at hand, one that could enhance the image of the US as an invincible power, capable of imposing its rule anywhere in the world, unlike the disastrous experience of the USSR.
Fourthly, the early success of the Afghan war was seen as a prelude to the launching of a sequence of successful wars, first against Iraq and to be followed by Iran, Syria and beyond. These would serve the triple purpose of enhancing Israeli regional power, controlling strategic oil resources and enlarging the arc of US military bases from South and Central Asia, through the Persian Gulf to the Mediterranean.
The strategic policies, formulated by the militarists and Zionists in the Bush and Obama Administrations, assumed that guns, money, force and bribes could build stable satellite states firmly within the orbit of the post-Soviet US empire. Afghanistan was seen as an easy first conquest the initial step to sequential wars. Each victory, it was assumed would undermine domestic and allied (European) opposition. The initial costs of imperial war, the Neo-Cons claimed, would be paid for by wealth extracted from the conquered countries, especially from the oil producing regions.
The rapid US defeat of the Taliban government confirmed the belief of the military strategists that “backward”, lightly armed Islamic peoples were no match up for the US powerhouse and its astute leaders.
Wrong Assumptions, Mistaken Strategies: The Trillion Dollar Disaster
Imperial Decline, Empty Treasury and the Specter of a Smash-Up
The crumbling empire has depleted the US treasury. As the Congress and White House fight over raising the debt ceiling, the cost of war aggressively erodes any possibility of maintaining stable living standards for the American middle and working classes and heightens growing inequalities between the top 1% and the rest of the American people. Imperial wars are based on the pillage of the US treasury. The imperial state has, via extraordinary tax exemptions, concentrated wealth in the hands of the super-rich while the middle and working classes have been pushed downward, as only low paid jobs are available.
Conclusion
But there is a deep and quiet discomfort within the leading circles of the Obama regime: The “best and brightest” among his top officials are scampering to jump ship before the coming deluge: the Economic Guru Larry Summers, Rahm Emmanuel, Stuart Levey, Peter Orzag, Bob Gates, Tim Geithner and others, responsible for the disastrous wars, economic catastrophes, the gross concentration of wealth and the savaging of our living standards, have walked out or have announced their ‘retirement’, leaving it to the smiling con-men - President Obama and Vice-President ‘Joe’ Biden - and their ‘last and clueless loyalists’ to take the blame when the economy tanks and our social programs are wiped out. How else can we explain their less-than-courageous departures (to ‘spend more time with the family’) in the face of such a deepening crisis? The hasty retreat of these top officials is motivated by their desire to avoid political responsibility and to escape history’s indictment for their role in the impending economic debacle. They are eager to hide from a future judgment over which policy makers and leaders and what policies led to the destruction of the American middle and working classes with their good jobs, stable pensions, Social Security, decent health care and respected place in the world.
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Greece a Dress Rehearsal for United States
By Michael Hudson
http://www.informationclearinghouse.info/article28540.htm
Greece sell off its roads, its land, its port authority, its water and sewer--is just what Illinois's been doing, what Chicago's been doing, what Minnesota's been told to do, and what American cities are trying to do.
This is a video with transcript
http://www.informationclearinghouse.info/article28540.htm
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lunes, 8 de agosto de 2011
domingo, 7 de agosto de 2011
THE TRUTH ABOUT JOBS & THE DEBT LIMIT
U.S. FACES A DEPRESSION-LEVEL UNEMPLOYMENT CRISIS
By Daniel R Amerman CFA
http://www.financialsense.com/contributors/daniel-amerman/2011/08/04/us-faces-a-depression-level-unemployment-crisis
The Truth About Jobs & The Debt Limit - By Daniel R. Amerman, CFA (8/8/11)
http://futurefastforward.com/images/stories/financial/TheTruthAboutJobs.pdf
Graphs have been skip. Go to the webs above to see them
Overview
The awful truth about deficits and this week's "solution" to the debt limit crisis in the United States is that government debt isn't actually the core problem, but rather represents the costly cover-up of the bigger problem, that of a depression-level unemployment crisis.
The private sector in the United States fell into a depression in 2008 and has not emerged since then. Absent an extraordinary level of government intervention in the economy – which cannot possibly be paid for by taxes or ordinary revenues – the depression in the private economy and a level of unemployment that rivals that of the Great Depression become impossible to hide.
When we talk about the "debt limit crisis", what we're really talking about is the price of the cover-up. The debt limit crisis and the associated Federal Reserve monetary creation fiasco represent the costs of essentially blasting the economy with massive fire hoses full of both created and borrowed money on a non-stop basis, in the (unsuccessful) attempt to make the economy look and feel normal. We can stop the debt crisis at any time by turning off the fire hoses of money that have been flowing since late 2008, but then the depression in the private sector - and the full depression-level rate of unemployment - become plainly visible for everyone to see coming into a presidential election year.
So when we look at the recent so-called disastrous employment "surprises" on the very same financial pages where the debt limit "crisis" with its vague and inadequate "solution" is being covered, we're not really seeing two separate crises, but rather two aspects of the same crisis.
Pierce through the cover-up, look at what the extraordinary level of deficit spending is hiding, and the "surprises" stop. It is then and only then, once we've seen the true nature of the problem, that we can begin to take effective action as individuals to protect ourselves.
The Source Of The Deficit
The United States federal budget deficit is currently at an almost surreal level that is so large that it becomes difficult to comprehend. But let's try. The official budget deficit is currently running about $1.5 trillion dollars per year, or about 10% of the US economy. Now this is not to say that only 10% of the US economy is going through the government (that number is 41% for all levels of government as discussed below), but rather 10% of the current US economy is created by way of - and is reliant upon - the government spending money which it doesn't have. (The vague and toothless "solution" just signed into law hardly puts a dent in this situation, even in the unlikely event that future Congresses and Presidents actually make the hard choices that proved to be politically impossible in 2011.)
Where did this explosive growth in deficits come from? How did things get so out of control, and so quickly?
To understand why this is happening, we need to go back to the financial crisis of 2008. During the end of that year and the beginning of 2009, the US private economy imploded. At high speed, it plummeted from an annual level of approximately $9.4 trillion to a level of $8.1 trillion - a loss of $1.3 trillion dollars, or about 14%. In ordinary circumstances a drop this fast and sharp would throw a nation straight into a Depression with a capital "D".
Yet when one looks at GDP, the total economy only shrank by about $300 billion, or less than a quarter of the fall in the private economy. How could that be? The answer - which lies at the very heart of the current crisis - is that the economy is usually displayed as one number, which is the sum of private and federal spending. When we stick to this one number only and call it reality, it means that a decrease in one side of the economy can be seemingly made to go away by increasing the other side of the economy. As shown in the graph below, what happened was the federal government started spending an extra trillion dollars per year to cover up and smooth over the economic damage from this fundamental, fantastic blow to the private economy, the wealth-producing core of the entire economy.
The graph below shows that the total government (federal, state and local) share of the US economy went from 35% at the end of 2007, to 43% by the end of 2009. Outside of a major war, this is unprecedented growth in government spending, and it occurred almost instantaneously. For 2011 - after three years of the federal government blasting the economy with created money - some current estimates are that GDP will be $15.1 trillion (assuming a 2.7% nominal growth rate), and that total federal, state and local government spending will be about $6.2 trillion, meaning the government sector share may be little changed at roughly 41% of the overall economy. This appears to be the new, albeit unsustainable, "normal" (estimate source: usgovernmentspending.com).
In other words, the fire hoses aren't working.
To better understand just how dramatic this change was, let's look at the relationship between private and government economies in another way. In 2007 (as the result of decades of government growth), there was $9.4 trillion in the private economy, compared to $5.1 trillion in total spending by the federal , state and local governments. What that means is that for every $1.00 in government spending, there was only $1.86 in the private economy. This was already quite questionable territory in terms of a private sector supporting a public sector, at least outside of an explicitly state-directed economy.
Two years later, by the end of 2009, the private economy was $8.1 trillion, the total government economy was $6.1 trillion, and there is only $1.34 in private economy total wealth generated (GDP) that is available for every $1.00 in government spending. As noted above, estimates for 2011 are that the total GDP will be $15.1 trillion, that total federal, state and local government spending will be $6.2 trillion, and therefore the private economy will be $8.9 trillion (not adjusting for inflation since 2007). If these estimates for 2011 hold up, then there will be a mere $1.44 in private economic output for each $1 in government spending.
If you were born in the United States after the end of the Depression of the 1930s, then what is shown in the graph above represents what is arguably the single most important economic event of your lifetime.
(These are the optimistic numbers, by the way, because they're based only on official US government spending and not the far larger annual growth in unfunded government obligations. These official deficit totals do implicitly include the money created out of thin air by the Federal Reserve when used to purchase Treasury bonds, but are deceivingly incomplete as they don't include the Fed's trillions in (effective) bank bailouts nor the previous creation of an artificial mortgage market, each of which relied upon using manufactured cash for politically motivated spending that was outside of the official deficits.)
So, we've had arguably the biggest economic change in most of our lifetimes, it's still going on all around us - but there is comparatively little discussion about it. Not directly. Instead, the symptoms of the central problem (unemployment) fill the headlines, as does the cover-up (the deficits) - but not the heart of the problem itself (the grievously wounded private economy).
We see headlines about the deficit, the debt limit, and even more seriously, the projections showing how the deficit grows without end into the future, at least under any major proposal from either party that details actual cuts. But, the supposedly impossible-to-control deficit that seemingly came out of nowhere to overwhelm the nation isn't some random fluke - the graphs above show exactly where it came from. The government needed an extra trillion a year in spending to fund the cover-up, on top of the massive annual deficits that were already in existence. So using the justification of temporary fiscal emergency, the federal government nearly entirely separated federal spending from federal revenues, which quickly became an integral part of how the government operates.
And that is the real story behind how in a very short period of time the United States jumped from large deficits to almost unimaginably huge deficits.
The Reason For The Cover-Up
There is a reason for this fantastic government intervention. Recessions or depressions with growing job losses are usually the number one reason why large numbers of incumbent politicians lose all personal power. And if there had not been a massive government intervention, that was sustained by both parties, there would have been a fall in the total economy that was a minimum of six times as great as the fall we actually experienced (before multiplier effects). This would have translated to a frightening drop in employment, far larger than what has been seen so far.
To illustrate how bad the economic carnage would have been, absent intervention, let's begin by taking the $1.3 trillion fall in the private economy into account. Next we say that if the private economy is shrinking, and if the government sector is to maintain its size relative to the private sector, then government expenditures must shrink to go along with the new smaller size of the private economy. With a roughly 14% reduction in the private economy leading to a roughly $700 billion (14%) reduction in the previous $5.1 trillion annual level of government expenditures (2007), this means almost $2 trillion dollars of the US economy would have disappeared – along with the associated jobs – in a period of months after the implosion of September 2008 (before any multiplier effects).
This $2 trillion plunge in GDP ($1.3 trillion private plus $.7 trillion government) would have been more than six times the reduction in total GDP that resulted from the "fire hose" cover up approach that is currently bankrupting the nation. Of course, this scenario was not allowed to happen.
To expand on the metaphor, the United States Treasury and the Federal Reserve effectively created a series of fire hoses, stuffed them full of money, pointed them directly at the ailing US economy and the bank system, turned them on full pressure, and these monetary "fire hoses" have been running day and night ever since. The fire hoses create the fantastic level of government deficit spending, they are the source of the debt limit crisis, and they are also precisely why we do not openly see the far greater unemployment that would otherwise be expected to accompany a financial earthquake of this magnitude.
What the deficit constitutes is a denial of reality. It is a cover-up that has been going on for what will soon be three years now – without having made any significant progress in healing the badly wounded private economy that is the true crisis. As with any cover-up that doesn't fix the underlying problem, it is ultimately doomed to failure, and its failure will likely destroy the value of the dollar and most private savings and investments in the United States.
The Problem With Balancing The Budget
On a stand-alone, fundamental basis, there never was a debt limit crisis. Stepping away from politics and returning to the fundamentals, let's keep in mind that what we are talking about is the President of the United States, the United States Senate, and the United States House of Representatives. They are the government and they are the source of the law. There are constitutional issues involved, but given the magnitude of the danger, and the previous flexibility of the Supreme Court when it comes to "interpreting" the U.S. Constitution, there is little from a legal perspective that prevents the United States government from rolling the clock back four years and doing it in a single weekend.
So why didn't they, and why won't they?
The issue, of course, is what happens next. Let's hypothesize and say that the budget is balanced in a weekend, and the economy takes that $1.5 trillion hit.
Because we are now looking at the real state of the US economy– with no cover-up in place – the true employment numbers appear in a matter of weeks or months, as the public workers and government contractors whose employment can no longer be funded, all lose their jobs. As do all the people whose jobs rely on income from those government workers and contracts. And then add in the third round of this jobs-multiplier effect as the impoverishment of the first two rounds of laid-off workers further reduces sales and economic activity. With little of the unemployment benefits to smooth things over either, as the money never really existed for that in recent years.
This wouldn't take long. The implosion of 2008-2009 only took a matter of months. What would likely happen on a quite rapid basis is that the US unemployment rate would go straight to a level of 25 to 30% (and that's a bit on the optimistic side) which means that it would exceed the greatest level of unemployment seen at the very height of the United States depression of the 1930s.
These are not arbitrary numbers or guesses.
Instead they represent the current state of US unemployment when we break it out into all three boxes, as I've previously explained in my article "Hiding A Depression: How The US Government Does It" (linked below). As documented in that article and shown in the graph below, what the government has essentially done is to take a 26%+ rate of unemployment and segment into 3 boxes.
http://danielamerman.com/articles/Hiding.htm
The first "box" is the official U3 rate of unemployment which is currently about 9.2%
The second box is based on the equally official but less often discussed U6 rate of unemployment, which adds in the discouraged, long-term unemployed as well as involuntary part-time workers, taking total unemployment to 16.2%.
The third box is the public and private workers who are effectively finding employment solely by way of the government's "fire hose" of money that is being pumped into the economy, money the government does not have and cannot be reasonably expected to repay (at least at the current value of a dollar, which is another topic altogether). If we remove the deficit, then about 10% of the economy disappears, with a corresponding reduction in job losses and at the very least (without factoring in the likely multiplier effect on job losses), the country goes to a combined unemployment rate in the 25 to 30% range.
The peak US unemployment rate of the 1930s was "only" about 25%. We are already there and worse - if the fire hoses of deficit money stop blasting.
"Then keep on blasting away and turn on some more fire hoses!" one might think, and some commentators are advocating this very approach. Unfortunately, things aren't quite that simple, and there are extraordinary dangers for this approach. For if the monetary fire hoses keep on blasting, then the dollar eventually collapses, the value of savings and most investments are wiped out, and the unemployment levels go to 25-30%+ anyway.
So the destination is the same, and the reality of depression-level unemployment hits anyway, with the difference being that the savings and the retirement accounts have been wiped out in the process of delaying its arrival. The future then is that more than a quarter of the country is unemployed, and the price of delaying the recognition of reality, is that almost everyone is broke as the value of their life savings has been destroyed by the endless, reckless monetary creation and spending without resources that is at the heart of the "fire hoses".
Seeking Societal Solutions
The United States is truly between a rock and a hard place, and the only way out is not to smooth things over, but to face - and fix - reality. The deficit is a catastrophe, but it is of secondary importance compared to the devastation that has been wreaked upon the private economy. Money is ultimately just a symbol, the scorekeeping system that we use for distributing reality, with reality itself being jobs, goods, services and resources. If a country doesn't produce the economic output that is necessary to support the national standard of living, then the real national standard of living eventually falls, regardless of how many clever boys and girls are manipulating the symbol.
In the immediate aftermath of the votes, President Obama immediately shifted the focus to jobs, which is a most welcome shift from the cover-up to the crisis itself. Unfortunately, as an administration source put it, the President doesn't have any "magic beans", in apparent reference to the need to grow a massive beanstalk of an economy.
This gets to the heart of the dilemma, because the "magic beans" are there, as they always have been, but they can't even be seen through the current political filters. The "magic beans" can be found by rewriting the laws to favor the true source of job creation and economic growth in the US. Which is simply to let a million small businesses flourish by stripping away onerous and anti-competitive government regulations. Strip away the corporate welfare that lets mega-corporations (who destroy domestic jobs) dodge taxes altogether while entrepreneurs (who create domestic jobs) pay the highest marginal all-in tax rates in the country. That needs to be turned upside down.
After decades of neglect, the anti-trust laws again need to be vigorously enforced, as we cannot afford to continue the current anti-competitive economy of oligarchies and corporate fiefdoms, locked in their deadly, economy-destroying symbiotic relationship with the political powers-that-be. Keep in mind that when a major corporation splits into four - the jobs effect is the reverse of what happens with mergers. It doesn't mean the corporate employees lose their jobs (or that the shareholders lose their investments), but rather there is a major increase in jobs, on average, instead of the layoffs on a massive scale that are the usual immediate or eventual result of corporate consolidation. (With a good number of those job increases occurring not with cashiers and cooks, but in desirable and well-paying upper and middle management positions, as well as skilled technical support positions.)
Let the free market decide where the resulting resurgent new growth occurs, instead of government micro-management on a partisan basis that is all too often effectively controlled by campaign contributions.
As this approach would involve turning the current political paradigm upside down, negating the influence of wealthy special interests even while removing the partisan and congressional district components of government-directed "stimulus" spending, it is no surprise that the "magic beans" in question remain invisible to policy-makers. Indeed, the "magic beans" are a double negative from a political perspective, as incumbent politicians lose much of the financial power coming from special interest campaign contributions, even as they lose the raw political power to reward friends and punish enemies through controlling the spending of the "stimulus". Meaning such a solution is still likely out of reach at this time, politically speaking.
Individual Implications
Because the politicians fear the personal consequences, it is unlikely that the fire hoses will be turned off. A moderate reduction in the flow seems to be the most aggressive option on the table, and if that occurs (which is far from assured) it still is simply not enough to change the outcome.
Run the fire hoses indefinitely, blasting artificial money into the economy even while politics as usual determines how the money is spent - and the value of the currency is all too likely to collapse.
Historically, a collapse in the value of a currency necessarily forces a major redistribution of wealth, and the segment of the population that is most devastated by this seems to always be the same. It’s the retirees, and the people close to retirement. When we look to Germany, when we look to Argentina, when we look to Russia – it is the pensioners who are impoverished more than any other group. Unfortunately, it appears that history could be in the process of repeating itself.
Of at least equal importance, stocks are profoundly overvalued when compared to a private economy in depression, where the semblance of earnings is likely to collapse when the output of the fire hoses can no longer be sustained.
When we look at the headlines about the destruction of retiree investment values, pension assets and so forth, we're really just seeing the beginning - because most assets are overvalued for a nation whose private economy remains in depression even while the government takes on new debt at a ludicrously unsustainable rate.
When the value of money and the value of assets are falling together, then we have simultaneous price inflation and asset deflation (in inflation-adjusted terms). It is a one-two combination that the conventional financial wisdom is simply incapable of dealing with.
The intertwined results of the crisis and its "solution" may represent the annihilation of most of the retirement dreams of the baby boom generation, even if that is not yet recognized. There is not an even cost that is being born by society as a whole, rather some segments are bearing much more of the burden than others.
If your peer group (particularly Boomers and older) is headed for disproportionate financial devastation, then happenstance is unlikely to offer a personal way out. Instead, you must take quite deliberate actions to change your personal financial position so that wealth is redistributed to you, rather than away from you.
To get out of step with your generation, and have wealth redistributed to you even as your peer group is being devastated by this extraordinary destruction of wealth, you need to start with an essential and irreplaceable step: education. You need to gain the knowledge you will need to turn adversity into opportunity.
Do you know how to Turn Inflation Into Wealth? To position yourself so that inflation will redistribute real wealth to you, and the higher the rate of inflation – the more your after-inflation net worth grows? Do you know how to achieve these gains on a long-term and tax-advantaged basis? Do you know how to potentially triple your after-tax and after-inflation returns through Reversing The Inflation Tax? So that instead of paying real taxes on illusionary income, you are paying illusionary taxes on real increases in net worth? These are among the many topics covered in the free “Turning Inflation Into Wealth” Mini-Course. Starting simple, this course delivers a series of 10-15 minute readings, with each reading building on the knowledge and information contained in previous readings. More information on the course is available at DanielAmerman.com or InflationIntoWealth.com.
Contact Information:
Daniel R. Amerman, CFA
Website: http://danielamerman.com/
E-mail: mail@the-great-retirement-experiment.com
By Daniel R Amerman CFA
http://www.financialsense.com/contributors/daniel-amerman/2011/08/04/us-faces-a-depression-level-unemployment-crisis
The Truth About Jobs & The Debt Limit - By Daniel R. Amerman, CFA (8/8/11)
http://futurefastforward.com/images/stories/financial/TheTruthAboutJobs.pdf
Graphs have been skip. Go to the webs above to see them
Overview
The awful truth about deficits and this week's "solution" to the debt limit crisis in the United States is that government debt isn't actually the core problem, but rather represents the costly cover-up of the bigger problem, that of a depression-level unemployment crisis.
The private sector in the United States fell into a depression in 2008 and has not emerged since then. Absent an extraordinary level of government intervention in the economy – which cannot possibly be paid for by taxes or ordinary revenues – the depression in the private economy and a level of unemployment that rivals that of the Great Depression become impossible to hide.
When we talk about the "debt limit crisis", what we're really talking about is the price of the cover-up. The debt limit crisis and the associated Federal Reserve monetary creation fiasco represent the costs of essentially blasting the economy with massive fire hoses full of both created and borrowed money on a non-stop basis, in the (unsuccessful) attempt to make the economy look and feel normal. We can stop the debt crisis at any time by turning off the fire hoses of money that have been flowing since late 2008, but then the depression in the private sector - and the full depression-level rate of unemployment - become plainly visible for everyone to see coming into a presidential election year.
So when we look at the recent so-called disastrous employment "surprises" on the very same financial pages where the debt limit "crisis" with its vague and inadequate "solution" is being covered, we're not really seeing two separate crises, but rather two aspects of the same crisis.
Pierce through the cover-up, look at what the extraordinary level of deficit spending is hiding, and the "surprises" stop. It is then and only then, once we've seen the true nature of the problem, that we can begin to take effective action as individuals to protect ourselves.
The Source Of The Deficit
The United States federal budget deficit is currently at an almost surreal level that is so large that it becomes difficult to comprehend. But let's try. The official budget deficit is currently running about $1.5 trillion dollars per year, or about 10% of the US economy. Now this is not to say that only 10% of the US economy is going through the government (that number is 41% for all levels of government as discussed below), but rather 10% of the current US economy is created by way of - and is reliant upon - the government spending money which it doesn't have. (The vague and toothless "solution" just signed into law hardly puts a dent in this situation, even in the unlikely event that future Congresses and Presidents actually make the hard choices that proved to be politically impossible in 2011.)
Where did this explosive growth in deficits come from? How did things get so out of control, and so quickly?
To understand why this is happening, we need to go back to the financial crisis of 2008. During the end of that year and the beginning of 2009, the US private economy imploded. At high speed, it plummeted from an annual level of approximately $9.4 trillion to a level of $8.1 trillion - a loss of $1.3 trillion dollars, or about 14%. In ordinary circumstances a drop this fast and sharp would throw a nation straight into a Depression with a capital "D".
Yet when one looks at GDP, the total economy only shrank by about $300 billion, or less than a quarter of the fall in the private economy. How could that be? The answer - which lies at the very heart of the current crisis - is that the economy is usually displayed as one number, which is the sum of private and federal spending. When we stick to this one number only and call it reality, it means that a decrease in one side of the economy can be seemingly made to go away by increasing the other side of the economy. As shown in the graph below, what happened was the federal government started spending an extra trillion dollars per year to cover up and smooth over the economic damage from this fundamental, fantastic blow to the private economy, the wealth-producing core of the entire economy.
The graph below shows that the total government (federal, state and local) share of the US economy went from 35% at the end of 2007, to 43% by the end of 2009. Outside of a major war, this is unprecedented growth in government spending, and it occurred almost instantaneously. For 2011 - after three years of the federal government blasting the economy with created money - some current estimates are that GDP will be $15.1 trillion (assuming a 2.7% nominal growth rate), and that total federal, state and local government spending will be about $6.2 trillion, meaning the government sector share may be little changed at roughly 41% of the overall economy. This appears to be the new, albeit unsustainable, "normal" (estimate source: usgovernmentspending.com).
In other words, the fire hoses aren't working.
To better understand just how dramatic this change was, let's look at the relationship between private and government economies in another way. In 2007 (as the result of decades of government growth), there was $9.4 trillion in the private economy, compared to $5.1 trillion in total spending by the federal , state and local governments. What that means is that for every $1.00 in government spending, there was only $1.86 in the private economy. This was already quite questionable territory in terms of a private sector supporting a public sector, at least outside of an explicitly state-directed economy.
Two years later, by the end of 2009, the private economy was $8.1 trillion, the total government economy was $6.1 trillion, and there is only $1.34 in private economy total wealth generated (GDP) that is available for every $1.00 in government spending. As noted above, estimates for 2011 are that the total GDP will be $15.1 trillion, that total federal, state and local government spending will be $6.2 trillion, and therefore the private economy will be $8.9 trillion (not adjusting for inflation since 2007). If these estimates for 2011 hold up, then there will be a mere $1.44 in private economic output for each $1 in government spending.
If you were born in the United States after the end of the Depression of the 1930s, then what is shown in the graph above represents what is arguably the single most important economic event of your lifetime.
(These are the optimistic numbers, by the way, because they're based only on official US government spending and not the far larger annual growth in unfunded government obligations. These official deficit totals do implicitly include the money created out of thin air by the Federal Reserve when used to purchase Treasury bonds, but are deceivingly incomplete as they don't include the Fed's trillions in (effective) bank bailouts nor the previous creation of an artificial mortgage market, each of which relied upon using manufactured cash for politically motivated spending that was outside of the official deficits.)
So, we've had arguably the biggest economic change in most of our lifetimes, it's still going on all around us - but there is comparatively little discussion about it. Not directly. Instead, the symptoms of the central problem (unemployment) fill the headlines, as does the cover-up (the deficits) - but not the heart of the problem itself (the grievously wounded private economy).
We see headlines about the deficit, the debt limit, and even more seriously, the projections showing how the deficit grows without end into the future, at least under any major proposal from either party that details actual cuts. But, the supposedly impossible-to-control deficit that seemingly came out of nowhere to overwhelm the nation isn't some random fluke - the graphs above show exactly where it came from. The government needed an extra trillion a year in spending to fund the cover-up, on top of the massive annual deficits that were already in existence. So using the justification of temporary fiscal emergency, the federal government nearly entirely separated federal spending from federal revenues, which quickly became an integral part of how the government operates.
And that is the real story behind how in a very short period of time the United States jumped from large deficits to almost unimaginably huge deficits.
The Reason For The Cover-Up
There is a reason for this fantastic government intervention. Recessions or depressions with growing job losses are usually the number one reason why large numbers of incumbent politicians lose all personal power. And if there had not been a massive government intervention, that was sustained by both parties, there would have been a fall in the total economy that was a minimum of six times as great as the fall we actually experienced (before multiplier effects). This would have translated to a frightening drop in employment, far larger than what has been seen so far.
To illustrate how bad the economic carnage would have been, absent intervention, let's begin by taking the $1.3 trillion fall in the private economy into account. Next we say that if the private economy is shrinking, and if the government sector is to maintain its size relative to the private sector, then government expenditures must shrink to go along with the new smaller size of the private economy. With a roughly 14% reduction in the private economy leading to a roughly $700 billion (14%) reduction in the previous $5.1 trillion annual level of government expenditures (2007), this means almost $2 trillion dollars of the US economy would have disappeared – along with the associated jobs – in a period of months after the implosion of September 2008 (before any multiplier effects).
This $2 trillion plunge in GDP ($1.3 trillion private plus $.7 trillion government) would have been more than six times the reduction in total GDP that resulted from the "fire hose" cover up approach that is currently bankrupting the nation. Of course, this scenario was not allowed to happen.
To expand on the metaphor, the United States Treasury and the Federal Reserve effectively created a series of fire hoses, stuffed them full of money, pointed them directly at the ailing US economy and the bank system, turned them on full pressure, and these monetary "fire hoses" have been running day and night ever since. The fire hoses create the fantastic level of government deficit spending, they are the source of the debt limit crisis, and they are also precisely why we do not openly see the far greater unemployment that would otherwise be expected to accompany a financial earthquake of this magnitude.
What the deficit constitutes is a denial of reality. It is a cover-up that has been going on for what will soon be three years now – without having made any significant progress in healing the badly wounded private economy that is the true crisis. As with any cover-up that doesn't fix the underlying problem, it is ultimately doomed to failure, and its failure will likely destroy the value of the dollar and most private savings and investments in the United States.
The Problem With Balancing The Budget
On a stand-alone, fundamental basis, there never was a debt limit crisis. Stepping away from politics and returning to the fundamentals, let's keep in mind that what we are talking about is the President of the United States, the United States Senate, and the United States House of Representatives. They are the government and they are the source of the law. There are constitutional issues involved, but given the magnitude of the danger, and the previous flexibility of the Supreme Court when it comes to "interpreting" the U.S. Constitution, there is little from a legal perspective that prevents the United States government from rolling the clock back four years and doing it in a single weekend.
So why didn't they, and why won't they?
The issue, of course, is what happens next. Let's hypothesize and say that the budget is balanced in a weekend, and the economy takes that $1.5 trillion hit.
Because we are now looking at the real state of the US economy– with no cover-up in place – the true employment numbers appear in a matter of weeks or months, as the public workers and government contractors whose employment can no longer be funded, all lose their jobs. As do all the people whose jobs rely on income from those government workers and contracts. And then add in the third round of this jobs-multiplier effect as the impoverishment of the first two rounds of laid-off workers further reduces sales and economic activity. With little of the unemployment benefits to smooth things over either, as the money never really existed for that in recent years.
This wouldn't take long. The implosion of 2008-2009 only took a matter of months. What would likely happen on a quite rapid basis is that the US unemployment rate would go straight to a level of 25 to 30% (and that's a bit on the optimistic side) which means that it would exceed the greatest level of unemployment seen at the very height of the United States depression of the 1930s.
These are not arbitrary numbers or guesses.
Instead they represent the current state of US unemployment when we break it out into all three boxes, as I've previously explained in my article "Hiding A Depression: How The US Government Does It" (linked below). As documented in that article and shown in the graph below, what the government has essentially done is to take a 26%+ rate of unemployment and segment into 3 boxes.
http://danielamerman.com/articles/Hiding.htm
The first "box" is the official U3 rate of unemployment which is currently about 9.2%
The second box is based on the equally official but less often discussed U6 rate of unemployment, which adds in the discouraged, long-term unemployed as well as involuntary part-time workers, taking total unemployment to 16.2%.
The third box is the public and private workers who are effectively finding employment solely by way of the government's "fire hose" of money that is being pumped into the economy, money the government does not have and cannot be reasonably expected to repay (at least at the current value of a dollar, which is another topic altogether). If we remove the deficit, then about 10% of the economy disappears, with a corresponding reduction in job losses and at the very least (without factoring in the likely multiplier effect on job losses), the country goes to a combined unemployment rate in the 25 to 30% range.
The peak US unemployment rate of the 1930s was "only" about 25%. We are already there and worse - if the fire hoses of deficit money stop blasting.
"Then keep on blasting away and turn on some more fire hoses!" one might think, and some commentators are advocating this very approach. Unfortunately, things aren't quite that simple, and there are extraordinary dangers for this approach. For if the monetary fire hoses keep on blasting, then the dollar eventually collapses, the value of savings and most investments are wiped out, and the unemployment levels go to 25-30%+ anyway.
So the destination is the same, and the reality of depression-level unemployment hits anyway, with the difference being that the savings and the retirement accounts have been wiped out in the process of delaying its arrival. The future then is that more than a quarter of the country is unemployed, and the price of delaying the recognition of reality, is that almost everyone is broke as the value of their life savings has been destroyed by the endless, reckless monetary creation and spending without resources that is at the heart of the "fire hoses".
Seeking Societal Solutions
The United States is truly between a rock and a hard place, and the only way out is not to smooth things over, but to face - and fix - reality. The deficit is a catastrophe, but it is of secondary importance compared to the devastation that has been wreaked upon the private economy. Money is ultimately just a symbol, the scorekeeping system that we use for distributing reality, with reality itself being jobs, goods, services and resources. If a country doesn't produce the economic output that is necessary to support the national standard of living, then the real national standard of living eventually falls, regardless of how many clever boys and girls are manipulating the symbol.
In the immediate aftermath of the votes, President Obama immediately shifted the focus to jobs, which is a most welcome shift from the cover-up to the crisis itself. Unfortunately, as an administration source put it, the President doesn't have any "magic beans", in apparent reference to the need to grow a massive beanstalk of an economy.
This gets to the heart of the dilemma, because the "magic beans" are there, as they always have been, but they can't even be seen through the current political filters. The "magic beans" can be found by rewriting the laws to favor the true source of job creation and economic growth in the US. Which is simply to let a million small businesses flourish by stripping away onerous and anti-competitive government regulations. Strip away the corporate welfare that lets mega-corporations (who destroy domestic jobs) dodge taxes altogether while entrepreneurs (who create domestic jobs) pay the highest marginal all-in tax rates in the country. That needs to be turned upside down.
After decades of neglect, the anti-trust laws again need to be vigorously enforced, as we cannot afford to continue the current anti-competitive economy of oligarchies and corporate fiefdoms, locked in their deadly, economy-destroying symbiotic relationship with the political powers-that-be. Keep in mind that when a major corporation splits into four - the jobs effect is the reverse of what happens with mergers. It doesn't mean the corporate employees lose their jobs (or that the shareholders lose their investments), but rather there is a major increase in jobs, on average, instead of the layoffs on a massive scale that are the usual immediate or eventual result of corporate consolidation. (With a good number of those job increases occurring not with cashiers and cooks, but in desirable and well-paying upper and middle management positions, as well as skilled technical support positions.)
Let the free market decide where the resulting resurgent new growth occurs, instead of government micro-management on a partisan basis that is all too often effectively controlled by campaign contributions.
As this approach would involve turning the current political paradigm upside down, negating the influence of wealthy special interests even while removing the partisan and congressional district components of government-directed "stimulus" spending, it is no surprise that the "magic beans" in question remain invisible to policy-makers. Indeed, the "magic beans" are a double negative from a political perspective, as incumbent politicians lose much of the financial power coming from special interest campaign contributions, even as they lose the raw political power to reward friends and punish enemies through controlling the spending of the "stimulus". Meaning such a solution is still likely out of reach at this time, politically speaking.
Individual Implications
Because the politicians fear the personal consequences, it is unlikely that the fire hoses will be turned off. A moderate reduction in the flow seems to be the most aggressive option on the table, and if that occurs (which is far from assured) it still is simply not enough to change the outcome.
Run the fire hoses indefinitely, blasting artificial money into the economy even while politics as usual determines how the money is spent - and the value of the currency is all too likely to collapse.
Historically, a collapse in the value of a currency necessarily forces a major redistribution of wealth, and the segment of the population that is most devastated by this seems to always be the same. It’s the retirees, and the people close to retirement. When we look to Germany, when we look to Argentina, when we look to Russia – it is the pensioners who are impoverished more than any other group. Unfortunately, it appears that history could be in the process of repeating itself.
Of at least equal importance, stocks are profoundly overvalued when compared to a private economy in depression, where the semblance of earnings is likely to collapse when the output of the fire hoses can no longer be sustained.
When we look at the headlines about the destruction of retiree investment values, pension assets and so forth, we're really just seeing the beginning - because most assets are overvalued for a nation whose private economy remains in depression even while the government takes on new debt at a ludicrously unsustainable rate.
When the value of money and the value of assets are falling together, then we have simultaneous price inflation and asset deflation (in inflation-adjusted terms). It is a one-two combination that the conventional financial wisdom is simply incapable of dealing with.
The intertwined results of the crisis and its "solution" may represent the annihilation of most of the retirement dreams of the baby boom generation, even if that is not yet recognized. There is not an even cost that is being born by society as a whole, rather some segments are bearing much more of the burden than others.
If your peer group (particularly Boomers and older) is headed for disproportionate financial devastation, then happenstance is unlikely to offer a personal way out. Instead, you must take quite deliberate actions to change your personal financial position so that wealth is redistributed to you, rather than away from you.
To get out of step with your generation, and have wealth redistributed to you even as your peer group is being devastated by this extraordinary destruction of wealth, you need to start with an essential and irreplaceable step: education. You need to gain the knowledge you will need to turn adversity into opportunity.
Do you know how to Turn Inflation Into Wealth? To position yourself so that inflation will redistribute real wealth to you, and the higher the rate of inflation – the more your after-inflation net worth grows? Do you know how to achieve these gains on a long-term and tax-advantaged basis? Do you know how to potentially triple your after-tax and after-inflation returns through Reversing The Inflation Tax? So that instead of paying real taxes on illusionary income, you are paying illusionary taxes on real increases in net worth? These are among the many topics covered in the free “Turning Inflation Into Wealth” Mini-Course. Starting simple, this course delivers a series of 10-15 minute readings, with each reading building on the knowledge and information contained in previous readings. More information on the course is available at DanielAmerman.com or InflationIntoWealth.com.
Contact Information:
Daniel R. Amerman, CFA
Website: http://danielamerman.com/
E-mail: mail@the-great-retirement-experiment.com
THE REAL RISK TO US DEBT'S CREDIT RATING by R WOLFF
THE REAL RISK TO US DEBT'S CREDIT RATING by R WOLFF
For S&P, the downgrade was rational: sooner or later, American taxpayers will rebel against austerity cuts to pay for the crisis
http://www.guardian.co.uk/commentisfree/cifamerica/2011/aug/07/standard-and-poor-downgrade
Richard Wolff. guardian.co.uk, Sunday 7 August 2011
Standard & Poor's headquarters in the financial district of New York: the firm's downgrading of US debt from a triple-A rating is a measure of the lack of confidence in the US political system's ability to reach a sustainable settlement on its budget deficit and revenue-raising.
Much verbiage is piling up on what Standard & Poor's downgrading of US debt means. Yet, it matters little that the two other giant rating agencies did not downgrade US debt as S&P did. It is likewise unimportant that all those agencies deserve the bad reputations won when their overrating of securities burst in the collapse of 2007 and took an already unbalanced economy into deep recession. Nor does the downgrade impose major cash costs anytime soon.
The S&P downgrade is important because it clarifies and underscores two key dimensions of today's economic reality that most commentators have ignored or downplayed.
The first dimension concerns exactly why the US national debt is rising fast. There are three major reasons for this: first, major tax cuts especially on corporations and the rich since the 1970s, and especially since 2000, have reduced revenues flowing into Washington; second, costly global wars especially since 2000 have increased government spending dramatically; and third, costly bailouts of dysfunctional banks, insurance companies, large corporations and the economic system generally since 2007 have likewise sharply expanded government spending. With less tax revenue coming in from corporations and the rich and more spending on defence/wars and bailouts, the government had to borrow the difference. Duh!
The second dimension concerns the "deal" just agreed between President Obama and the Republicans in Congress. That deal promises further major increases in the national debt in the years ahead. That is because the "deal" does not alter any of the three major debt causes listed above. The political theatrics of the two parties reflect the money/power of the corporations and the rich, keeping their tax cuts, subsidies and main government orders untouched. Instead, the two parties pretend concern about the debt, debate only how much to cut government spending on the people, and focus on the 2012 election.
S&P downgraded the US national debt because these economic and political dimensions of the US today guarantee a worsening of the nation's debt. Thus, a basically political problem is looming for those lenders who purchased and now own the debt obligations of the US (that is, Treasury securities). The political problem is this: how long will the mass of Americans accept not only an economic crisis bringing unemployment, home foreclosures, reduced real wages and job benefits, but now also cutbacks in government supports? When will the political backlash explode and how badly may it impact the creditors of the US?
When might that backlash demand that the people's taxes stop going to pay off creditors (corporations, the rich and foreigners) and be used instead for public services that the people need? Exactly that political danger for creditors prompted the rating downgrades for the debts of Greece, Portugal, etc. The same danger has now reached our shores and confronts our nation's creditors.
S&P decided – for reasons good and bad, noble and venal – to say what any reasonable observer knows (given that such backlashes hurting creditors have often happened in recent history). Creditors need to worry about the combination of economic crisis, growing inequalities of wealth, income and power, and political dysfunction that now defines the US. The risks of backlash against creditors rise with the national debt. Not to worry is irrational and dangerous for them. And for us?
• This article was originally published on Richard Wolff's blog and is crossposted by permission
http://rdwolff.com/content/sp-downgrade-us-debt-what-it-means
For S&P, the downgrade was rational: sooner or later, American taxpayers will rebel against austerity cuts to pay for the crisis
http://www.guardian.co.uk/commentisfree/cifamerica/2011/aug/07/standard-and-poor-downgrade
Richard Wolff. guardian.co.uk, Sunday 7 August 2011
Standard & Poor's headquarters in the financial district of New York: the firm's downgrading of US debt from a triple-A rating is a measure of the lack of confidence in the US political system's ability to reach a sustainable settlement on its budget deficit and revenue-raising.
Much verbiage is piling up on what Standard & Poor's downgrading of US debt means. Yet, it matters little that the two other giant rating agencies did not downgrade US debt as S&P did. It is likewise unimportant that all those agencies deserve the bad reputations won when their overrating of securities burst in the collapse of 2007 and took an already unbalanced economy into deep recession. Nor does the downgrade impose major cash costs anytime soon.
The S&P downgrade is important because it clarifies and underscores two key dimensions of today's economic reality that most commentators have ignored or downplayed.
The first dimension concerns exactly why the US national debt is rising fast. There are three major reasons for this: first, major tax cuts especially on corporations and the rich since the 1970s, and especially since 2000, have reduced revenues flowing into Washington; second, costly global wars especially since 2000 have increased government spending dramatically; and third, costly bailouts of dysfunctional banks, insurance companies, large corporations and the economic system generally since 2007 have likewise sharply expanded government spending. With less tax revenue coming in from corporations and the rich and more spending on defence/wars and bailouts, the government had to borrow the difference. Duh!
The second dimension concerns the "deal" just agreed between President Obama and the Republicans in Congress. That deal promises further major increases in the national debt in the years ahead. That is because the "deal" does not alter any of the three major debt causes listed above. The political theatrics of the two parties reflect the money/power of the corporations and the rich, keeping their tax cuts, subsidies and main government orders untouched. Instead, the two parties pretend concern about the debt, debate only how much to cut government spending on the people, and focus on the 2012 election.
S&P downgraded the US national debt because these economic and political dimensions of the US today guarantee a worsening of the nation's debt. Thus, a basically political problem is looming for those lenders who purchased and now own the debt obligations of the US (that is, Treasury securities). The political problem is this: how long will the mass of Americans accept not only an economic crisis bringing unemployment, home foreclosures, reduced real wages and job benefits, but now also cutbacks in government supports? When will the political backlash explode and how badly may it impact the creditors of the US?
When might that backlash demand that the people's taxes stop going to pay off creditors (corporations, the rich and foreigners) and be used instead for public services that the people need? Exactly that political danger for creditors prompted the rating downgrades for the debts of Greece, Portugal, etc. The same danger has now reached our shores and confronts our nation's creditors.
S&P decided – for reasons good and bad, noble and venal – to say what any reasonable observer knows (given that such backlashes hurting creditors have often happened in recent history). Creditors need to worry about the combination of economic crisis, growing inequalities of wealth, income and power, and political dysfunction that now defines the US. The risks of backlash against creditors rise with the national debt. Not to worry is irrational and dangerous for them. And for us?
• This article was originally published on Richard Wolff's blog and is crossposted by permission
http://rdwolff.com/content/sp-downgrade-us-debt-what-it-means
S&P CHIEF EXPLAINS CREDIT DOWNGRADE
S&P CHIEF EXPLAINS CREDIT DOWNGRADE
Introduction
S&P's powerful chief steps out of the shadows
By Stephen Foley, Associate Business Editor
Monday, 8 August 2011
http://www.independent.co.uk/news/business/news/sampps-powerful-chief-steps-out-of-the-shadows-2333592.html
Mr Beers might be the most powerful man in the world that you've never heard of. He is the head of sovereign ratings at Standard & Poor's, which means that at the world's largest credit rating agency, he is responsible for the grades it slaps on each of the world's governments. And last Friday night, his team decided the US was no longer the risk-free AAA nation that it has been for the past 70 years. That night, Mr Beers changed the financial world.
Yesterday, he was out of the shadows and on Fox News, of all places, explaining to a mystified country who he is, what gives S&P the right to pontificate on the creditworthiness of the US, and why it has stripped the US of its gold-plated rating.
The chain-smoking economist has been at S&P for more than 20 years, after an earlier career assessing government bonds for the Wall Street bank Salomon Brothers.
Although he graduated in international relations from the University of Virginia, Mr Beers lives these days in London, where he studied at the London School of Economics and has endowed a scholarship there in his name.
His emergence into the limelight is overdue, because there is a direct line from S&P's rulings to the cuts that governments around the world are imposing on their citizens. You might not have heard of him, but Treasury officials and finance ministers all over the world certainly have, and they fear S&P's judgement.
No one elected Mr Beers, and S&P's pivotal role in financial markets has grown up only over many generations, but here he is at the centre of the debt storm engulfing the eurozone and now the US – and under fire from politicians on both sides of the Atlantic.
Now that Mr Beers is in the firing line, he is – perhaps unsurprisingly – making a marked effort to play down his importance. On Fox News yesterday he defended the US downgrade and predicted it would have little effect on markets. He doesn't expect "that much impact" when trading resumes today, he said, because S&P's cut from AAA to AA+ represents only a "mild deterioration" in US credit standing.
===========================
Main article
S&P CHIEF EXPLAINS CREDIT DOWNGRADE
Published August 07, 2011
http://www.foxnews.com/on-air/fox-news-sunday/2011/08/07/sp-chief-explains-credit-downgrade-rep-paul-ryan-bill-miller-talk-economic-policy-tim-paw
America's credit rating is downgraded for the first time ever. Here sit Wall Street and Main Street. We'll talk about the hit Washington took Standard & Poor's in an exclusive interview with David Beers, head of the agency's government rating unit.
Standard & Poor's has downgraded the U.S. credit rating Friday night for the first time ever from AAA to AA-plus. That means U.S. treasury bonds are no longer considered the safest investments in the world.
Joining us now, David Beers, head of S&P's government debt rating unit. Mr. Beers, what's the practical effect of your downgrading. If the U.S. debt is now riskier, does that mean that investors can and should demand higher interest rate to buy U.S. treasury bonds?
DAVID BEERS, STANDARD & POOR'S: Well, I guess there two parts to that. One is that in lowering the rating one notch to AA-plus, what we actually are saying is this, that a mild deterioration in the U.S.'s credit standing relative to AAA and we'll find out tomorrow what the market makes with that. But based on historical experience, we wouldn't expect that much financial impact in terms of higher interest rates for example.
WALLACE: Well, let me ask you, though, about the markets. The Tel Aviv stock market, one of the few that is in operation on Sunday morning, closed -- rather opened 6 percent down and then they had to close it for a while because of the volume of trading.
Can we expect the same kind of very strong downward pressure in Asia tonight and in the U.S. markets tomorrow?
BEERS: Well, you know, I'm no better than you in forecasting the stock market. But I think it's important to put this in perspective for your viewers -- because a lot of what's worrying the markets is the unfolding story in Europe and also a perception from a global economic perspective that the world economy may be slowing down.
So, I think the markets are reacting to a lot of factors, not just what S&P said on Friday.
WALLACE: Your downgrade -- and I read it -- focuses much on the political gridlock in Washington as it did on the economic situation in this country. Do you hold Republicans or Democrats more responsible for dysfunction here? And any compromise that they end up coming up with it, do you need to see a mix, a combination, of both entitlement reform also revenue increases?
BEERS: Well, Chris, you know, in this country, Congress and the administration are jointly responsible for the conduct of fiscal policy. And -- so, this is really not about either political party. It's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices, now and in the future.
WALLACE: But do you need to see the mix? Does any compromise have to have both entitlement reform and revenue increases to be credible? BEERS: Well, we think credibility would mean that would -- any agreement would command support from both political parties because, of course, the composition of Congress and, of course, the administration could change from 2012 onwards. But the key thing is -- yes, entitlement reform important because entitlement is the biggest component of spending and they are the part of spending where the cost pressures are greatest.
WALLACE: The White House, as you know, is not happy with this decision and, in fact, they have accused S&P of amateurism. They say when they went through your numbers, they found a $2 trillion overstatement of what the debt would be. And when they pointed that out to you, they you simply changed the rationale but continued to downgrade the debt.
BEERS: Now, of course, that's a complete misrepresentation of what happened. And here, we're talking about highly technical assumptions about projecting, you know, budget base lines far into the future. And when we made the modifications that we did after a conversation with the treasury, it doesn't change the fact that in our estimation, that even with the agreement of Congress and the administration this past week, that the underlying debt burden of the U.S. government is rising and will continue to rise most likely over the next decade.
WALLACE: I got about a minute left and I want to ask you two questions. So, I'm going to try to get my questions brief and I'll ask you to do the same with your answers.
S&P is widely seen as one of the villains in the housing bubble for the strong rating that you gave for the subprime mortgage securities. Some people are suggesting that this downgrading is an effort to get your reputation back?
BEERS: Yes. Well, that's completely untrue. And as a matter of fact, the group that rate, the one that rates government ratings has an excellent track record in terms of what ratings are designed to do, which is to provide a meaningful indicator of credit risk.
So, as far as the track record of our ratings are concerned, we think they are very robust. Other people think they are robust, too. And we think that will continue to be the case.
WALLACE: And very briefly, Mr. Beers, given the economic and the political situation in the U.S., which will we more likely to see -- an upgrading of U.S. debt back to AAA or further downgrades?
BEERS: Well, we have a negative outlook on the rating and that means that we think the risks currently or the rating are to the downside.
WALLACE: Mr. Beers, we're going to have to leave it there. We want to thank you so much for coming in and talking with us today, sir.
BEERS: Thank you, Chris.
WALLACE: The S&P downgrade was one more blow in a week when the Dow Jones fell almost 6 percent. And the latest jobs report showed unemployment still over 9 percent.
Source :
http://www.foxnews.com/on-air/fox-news-sunday/2011/08/07/sp-chief-explains-credit-downgrade-rep-paul-ryan-bill-miller-talk-economic-policy-tim-paw
Introduction
S&P's powerful chief steps out of the shadows
By Stephen Foley, Associate Business Editor
Monday, 8 August 2011
http://www.independent.co.uk/news/business/news/sampps-powerful-chief-steps-out-of-the-shadows-2333592.html
Mr Beers might be the most powerful man in the world that you've never heard of. He is the head of sovereign ratings at Standard & Poor's, which means that at the world's largest credit rating agency, he is responsible for the grades it slaps on each of the world's governments. And last Friday night, his team decided the US was no longer the risk-free AAA nation that it has been for the past 70 years. That night, Mr Beers changed the financial world.
Yesterday, he was out of the shadows and on Fox News, of all places, explaining to a mystified country who he is, what gives S&P the right to pontificate on the creditworthiness of the US, and why it has stripped the US of its gold-plated rating.
The chain-smoking economist has been at S&P for more than 20 years, after an earlier career assessing government bonds for the Wall Street bank Salomon Brothers.
Although he graduated in international relations from the University of Virginia, Mr Beers lives these days in London, where he studied at the London School of Economics and has endowed a scholarship there in his name.
His emergence into the limelight is overdue, because there is a direct line from S&P's rulings to the cuts that governments around the world are imposing on their citizens. You might not have heard of him, but Treasury officials and finance ministers all over the world certainly have, and they fear S&P's judgement.
No one elected Mr Beers, and S&P's pivotal role in financial markets has grown up only over many generations, but here he is at the centre of the debt storm engulfing the eurozone and now the US – and under fire from politicians on both sides of the Atlantic.
Now that Mr Beers is in the firing line, he is – perhaps unsurprisingly – making a marked effort to play down his importance. On Fox News yesterday he defended the US downgrade and predicted it would have little effect on markets. He doesn't expect "that much impact" when trading resumes today, he said, because S&P's cut from AAA to AA+ represents only a "mild deterioration" in US credit standing.
===========================
Main article
S&P CHIEF EXPLAINS CREDIT DOWNGRADE
Published August 07, 2011
http://www.foxnews.com/on-air/fox-news-sunday/2011/08/07/sp-chief-explains-credit-downgrade-rep-paul-ryan-bill-miller-talk-economic-policy-tim-paw
America's credit rating is downgraded for the first time ever. Here sit Wall Street and Main Street. We'll talk about the hit Washington took Standard & Poor's in an exclusive interview with David Beers, head of the agency's government rating unit.
Standard & Poor's has downgraded the U.S. credit rating Friday night for the first time ever from AAA to AA-plus. That means U.S. treasury bonds are no longer considered the safest investments in the world.
Joining us now, David Beers, head of S&P's government debt rating unit. Mr. Beers, what's the practical effect of your downgrading. If the U.S. debt is now riskier, does that mean that investors can and should demand higher interest rate to buy U.S. treasury bonds?
DAVID BEERS, STANDARD & POOR'S: Well, I guess there two parts to that. One is that in lowering the rating one notch to AA-plus, what we actually are saying is this, that a mild deterioration in the U.S.'s credit standing relative to AAA and we'll find out tomorrow what the market makes with that. But based on historical experience, we wouldn't expect that much financial impact in terms of higher interest rates for example.
WALLACE: Well, let me ask you, though, about the markets. The Tel Aviv stock market, one of the few that is in operation on Sunday morning, closed -- rather opened 6 percent down and then they had to close it for a while because of the volume of trading.
Can we expect the same kind of very strong downward pressure in Asia tonight and in the U.S. markets tomorrow?
BEERS: Well, you know, I'm no better than you in forecasting the stock market. But I think it's important to put this in perspective for your viewers -- because a lot of what's worrying the markets is the unfolding story in Europe and also a perception from a global economic perspective that the world economy may be slowing down.
So, I think the markets are reacting to a lot of factors, not just what S&P said on Friday.
WALLACE: Your downgrade -- and I read it -- focuses much on the political gridlock in Washington as it did on the economic situation in this country. Do you hold Republicans or Democrats more responsible for dysfunction here? And any compromise that they end up coming up with it, do you need to see a mix, a combination, of both entitlement reform also revenue increases?
BEERS: Well, Chris, you know, in this country, Congress and the administration are jointly responsible for the conduct of fiscal policy. And -- so, this is really not about either political party. It's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices, now and in the future.
WALLACE: But do you need to see the mix? Does any compromise have to have both entitlement reform and revenue increases to be credible? BEERS: Well, we think credibility would mean that would -- any agreement would command support from both political parties because, of course, the composition of Congress and, of course, the administration could change from 2012 onwards. But the key thing is -- yes, entitlement reform important because entitlement is the biggest component of spending and they are the part of spending where the cost pressures are greatest.
WALLACE: The White House, as you know, is not happy with this decision and, in fact, they have accused S&P of amateurism. They say when they went through your numbers, they found a $2 trillion overstatement of what the debt would be. And when they pointed that out to you, they you simply changed the rationale but continued to downgrade the debt.
BEERS: Now, of course, that's a complete misrepresentation of what happened. And here, we're talking about highly technical assumptions about projecting, you know, budget base lines far into the future. And when we made the modifications that we did after a conversation with the treasury, it doesn't change the fact that in our estimation, that even with the agreement of Congress and the administration this past week, that the underlying debt burden of the U.S. government is rising and will continue to rise most likely over the next decade.
WALLACE: I got about a minute left and I want to ask you two questions. So, I'm going to try to get my questions brief and I'll ask you to do the same with your answers.
S&P is widely seen as one of the villains in the housing bubble for the strong rating that you gave for the subprime mortgage securities. Some people are suggesting that this downgrading is an effort to get your reputation back?
BEERS: Yes. Well, that's completely untrue. And as a matter of fact, the group that rate, the one that rates government ratings has an excellent track record in terms of what ratings are designed to do, which is to provide a meaningful indicator of credit risk.
So, as far as the track record of our ratings are concerned, we think they are very robust. Other people think they are robust, too. And we think that will continue to be the case.
WALLACE: And very briefly, Mr. Beers, given the economic and the political situation in the U.S., which will we more likely to see -- an upgrading of U.S. debt back to AAA or further downgrades?
BEERS: Well, we have a negative outlook on the rating and that means that we think the risks currently or the rating are to the downside.
WALLACE: Mr. Beers, we're going to have to leave it there. We want to thank you so much for coming in and talking with us today, sir.
BEERS: Thank you, Chris.
WALLACE: The S&P downgrade was one more blow in a week when the Dow Jones fell almost 6 percent. And the latest jobs report showed unemployment still over 9 percent.
Source :
http://www.foxnews.com/on-air/fox-news-sunday/2011/08/07/sp-chief-explains-credit-downgrade-rep-paul-ryan-bill-miller-talk-economic-policy-tim-paw
sábado, 6 de agosto de 2011
5 REASONS WHY THE US ECONOMY IS SCREWED REGARDLESS
5 REASONS WHY THE US ECONOMY IS SCREWED REGARDLESS
INTRODUCTION by HAZ:
Even international observers coincide that regardless whatever Democrats & Republicans do, the economy is destined to fail. The correction suppose that the root cause is removed and they cannot do it, they are part of the cause of the economic disaster (crook bankers and wars profiteers who drained the economy so bad) Democrats and republicans knew it but they servants of Wall Street bankers and big corporations who finance both parties. American face two traps: evil bankers & corporations associated to them and the bipartisan system (they are a real mock to democracy). Is the working and middle who will provide a solution to both traps if they manage to get political autonomy from both parties and open the chance for a real democracy in America.
http://rt.com/usa/columns/namenotfound/us-economy-collapse-inevitable/
Published: 03 August, 2011
WHAT DID THEY ACHIEVE BY MANAGING TO KICK THE CAN DOWN THE ROAD – JUST ONE MORE TIME?
Well, the short and honest answer is 'nothing'. And here are 5 reasons why.
1. Reason Number One: Wishful Thinking
All US debt reduction plans assume that the US economy will grow at a steady pace in the next decade. Will it? The latest growth figure is a dismal 1.3 % and nobody is currently predicting that things will get any better any time soon. Here's an opinion that seems to summarize it all: “Plans to solve the U.S. budget and the debt ceiling standoff are ''astounding'' in their presumptions of consistent GDP growth”, co-founder and Chief Operations Officer of ECRI Lakshman Achuthan told the Wall Street Journal.
2. Reason Number Two: Going "Double Irish" and other wonderful games rich play. Doom and Gloom?
Not everything and not for everyone. Just look at the big transnational corporations with US roots. They are doing better than ever – thanks to "open border" economies and creative accounting techniques.
Headlines this week:
The US Treasury officially has less liquidity than Apple Inc.
As of Wednesday, July 27, the balance sheet for the US Treasury dipped down to $73.768 billion. That compares to the $76.156 billion Apple has in its deep coffers — a difference of $2.388 billion.
Bill Gates: Richer Than The Government.
How come? For one thing, by being what the Brits call "cheeky" and in the colorful language of economists by doing a "Double Irish".
Here's Google’s way of doing it, according to Bloomberg: Thanks to the international tax strategy, which assigns income to countries with lenient tax rules and expenses to countries with higher taxes, Google's overseas tax rate is just 2.4 percent, compared to the U.S. corporate income tax rate of 35 percent…
There is another way of maximizing profits – by parking the money made abroad – abroad.
Back in 2008, USA Today estimated that ExxonMobil had $56 billion, drug giant Pfizer – $60 billion, General Electric – $62 billion in "undistributed earnings" parked offshore.
Not that all the corporations’ bosses are happy to eternally have their earnings hidden from a taxman. They are patriotic Americans, are they not? They want a tax amnesty, of course!
Matt Taibbi from Rolling Stone writes: “…the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent. Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash."
Get the drift?
3. Reason Number Three: Jobs are (not) coming back.
Sorry, Barack – you really wanted to create a better world. Here's him on the election trail in 2007: "We can end tax breaks for companies that ship our jobs overseas and give those breaks to companies that create good jobs with decent wages here in America."
There was even a bill, like four years ago, that would reward patriotic employers for not shipping American jobs abroad.
Big business had other ideas. Microsoft CEO Steven Ballmer threatened to ship employees to other countries if Obama raised taxes on corporations. The bill still languishes somewhere in Congress and Obama largely stopped talking about ending tax breaks.
The latest news? America's Last Major Athletic Shoe Manufacturer Says It Can't Survive A Free-Trade Agreement With Vietnam (link).
4. Reason Number Four "The political system has, by its behavior, already declared its bankruptcy."
Political repercussions? Huge. Approval ratings are dropping for all the players – Obama, the Congress, the Republicans and the Democrats.
John Ellis, Wall Street Journal veteran, puts it bluntly: “It's no longer clear that the "August 2nd deadline" and "technical default" really matter any more. The truth is the political system has, by its behavior, already declared its bankruptcy. And since it is the political system that has stewardship of fiscal matters, it follows that The United States' government is bankrupt politically, and as a fiduciary.…My guess is that the United States of America begins to untie, unravel. Truth is, the unraveling is already well along. The question is whether it accelerates or reverses itself with renewal."
5. Reason Number Five. The world is watching in horror.
Here's Bernd Debusmann, a Reuters columnist. “No matter how the wrangling over America’s national debt is resolved, it will leave lasting dents in the international image of a country that prides itself on its can-do spirit and its competence. “The entire whole world is watching,” as President Barack Obama put it, and parts of it are dismayed by a monumental display of dysfunction.
if you noticed a lot of quotes in this pieces – that's not a coincidence. Just a month ago, the situation with the US economy was akin to that of somebody farting at a fancy ball – everybody noticed but nobody was willing to comment on it aloud. Suddenly, everybody is talking – and the mainstream media is giving them a chance to vent.
There is lot to vent about …a $1.3 trillion deficit for the current year. That's a whopping 12 percent of America's total economic output. Or very close to the entire GDP of Canada.
The rot of consistently living beyond one's means simply went too far.
Nobody seem to be willing and able to untie that Gordian knot – or to cut it.
========================
INTRODUCTION by HAZ:
Even international observers coincide that regardless whatever Democrats & Republicans do, the economy is destined to fail. The correction suppose that the root cause is removed and they cannot do it, they are part of the cause of the economic disaster (crook bankers and wars profiteers who drained the economy so bad) Democrats and republicans knew it but they servants of Wall Street bankers and big corporations who finance both parties. American face two traps: evil bankers & corporations associated to them and the bipartisan system (they are a real mock to democracy). Is the working and middle who will provide a solution to both traps if they manage to get political autonomy from both parties and open the chance for a real democracy in America.
http://rt.com/usa/columns/namenotfound/us-economy-collapse-inevitable/
Published: 03 August, 2011
WHAT DID THEY ACHIEVE BY MANAGING TO KICK THE CAN DOWN THE ROAD – JUST ONE MORE TIME?
Well, the short and honest answer is 'nothing'. And here are 5 reasons why.
1. Reason Number One: Wishful Thinking
All US debt reduction plans assume that the US economy will grow at a steady pace in the next decade. Will it? The latest growth figure is a dismal 1.3 % and nobody is currently predicting that things will get any better any time soon. Here's an opinion that seems to summarize it all: “Plans to solve the U.S. budget and the debt ceiling standoff are ''astounding'' in their presumptions of consistent GDP growth”, co-founder and Chief Operations Officer of ECRI Lakshman Achuthan told the Wall Street Journal.
2. Reason Number Two: Going "Double Irish" and other wonderful games rich play. Doom and Gloom?
Not everything and not for everyone. Just look at the big transnational corporations with US roots. They are doing better than ever – thanks to "open border" economies and creative accounting techniques.
Headlines this week:
The US Treasury officially has less liquidity than Apple Inc.
As of Wednesday, July 27, the balance sheet for the US Treasury dipped down to $73.768 billion. That compares to the $76.156 billion Apple has in its deep coffers — a difference of $2.388 billion.
Bill Gates: Richer Than The Government.
How come? For one thing, by being what the Brits call "cheeky" and in the colorful language of economists by doing a "Double Irish".
Here's Google’s way of doing it, according to Bloomberg: Thanks to the international tax strategy, which assigns income to countries with lenient tax rules and expenses to countries with higher taxes, Google's overseas tax rate is just 2.4 percent, compared to the U.S. corporate income tax rate of 35 percent…
There is another way of maximizing profits – by parking the money made abroad – abroad.
Back in 2008, USA Today estimated that ExxonMobil had $56 billion, drug giant Pfizer – $60 billion, General Electric – $62 billion in "undistributed earnings" parked offshore.
Not that all the corporations’ bosses are happy to eternally have their earnings hidden from a taxman. They are patriotic Americans, are they not? They want a tax amnesty, of course!
Matt Taibbi from Rolling Stone writes: “…the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent. Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash."
Get the drift?
3. Reason Number Three: Jobs are (not) coming back.
Sorry, Barack – you really wanted to create a better world. Here's him on the election trail in 2007: "We can end tax breaks for companies that ship our jobs overseas and give those breaks to companies that create good jobs with decent wages here in America."
There was even a bill, like four years ago, that would reward patriotic employers for not shipping American jobs abroad.
Big business had other ideas. Microsoft CEO Steven Ballmer threatened to ship employees to other countries if Obama raised taxes on corporations. The bill still languishes somewhere in Congress and Obama largely stopped talking about ending tax breaks.
The latest news? America's Last Major Athletic Shoe Manufacturer Says It Can't Survive A Free-Trade Agreement With Vietnam (link).
4. Reason Number Four "The political system has, by its behavior, already declared its bankruptcy."
Political repercussions? Huge. Approval ratings are dropping for all the players – Obama, the Congress, the Republicans and the Democrats.
John Ellis, Wall Street Journal veteran, puts it bluntly: “It's no longer clear that the "August 2nd deadline" and "technical default" really matter any more. The truth is the political system has, by its behavior, already declared its bankruptcy. And since it is the political system that has stewardship of fiscal matters, it follows that The United States' government is bankrupt politically, and as a fiduciary.…My guess is that the United States of America begins to untie, unravel. Truth is, the unraveling is already well along. The question is whether it accelerates or reverses itself with renewal."
5. Reason Number Five. The world is watching in horror.
Here's Bernd Debusmann, a Reuters columnist. “No matter how the wrangling over America’s national debt is resolved, it will leave lasting dents in the international image of a country that prides itself on its can-do spirit and its competence. “The entire whole world is watching,” as President Barack Obama put it, and parts of it are dismayed by a monumental display of dysfunction.
if you noticed a lot of quotes in this pieces – that's not a coincidence. Just a month ago, the situation with the US economy was akin to that of somebody farting at a fancy ball – everybody noticed but nobody was willing to comment on it aloud. Suddenly, everybody is talking – and the mainstream media is giving them a chance to vent.
There is lot to vent about …a $1.3 trillion deficit for the current year. That's a whopping 12 percent of America's total economic output. Or very close to the entire GDP of Canada.
The rot of consistently living beyond one's means simply went too far.
Nobody seem to be willing and able to untie that Gordian knot – or to cut it.
========================
THE DEBT SHOWDOWN IS A NASTY "POLITICAL THEATER"
Richard Wolff: Debt Showdown is "Political Theater" Burdening Society’s Most Vulnerable
http://www.democracynow.org/2011/7/28/richard_wolff_debt_showdown_is_political
Republicans have agreed to a vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a showdown against unified Democratic opposition in the Senate and threats of a White House veto. To discuss the debt talks and economic austerity worldwide, we’re joined by Richard Wolff, Emeritus Professor of Economics at University of Massachusetts Amherst and author of several books, including "Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." "This is political theater in which two parties are posturing for the election coming next year," says Wolff. "To put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it."
-------------------------------
JUAN GONZALEZ: After weeks of infighting, Republicans have agreed to vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a [showdown] against unified Democratic opposition in the Senate. Independent Senators Joe Lieberman and Bernie Sanders are promising to block it. White House spokesman James Carney warned yesterday that time is running out to reach a compromise. Carney also said Treasury Department officials may soon have to decide who will get government checks and who won’t, if the Treasury loses borrowing authority.
PRESS SECRETARY JAY CARNEY: Among the many obligations we have, the 80 million checks that the Treasury Department alone issues, payments that it issues every month, of the 1.2 billion payments the federal government makes in a year, those include veterans’ payments, Social Security payments, disability payments. They include the bills to contractors, small businesses, big businesses, that do work with the government, the people who manufacture the ammunition that we send to our troops in Afghanistan. And choices then have to be made. And it’s a Sophie’s choice, right? Who do you save? Who do you pay? That’s an impossible situation that this country has never faced, and should never face, if Congress does what it was elected to do and does its job.
AMY GOODMAN: White House spokesperson Jay Carney.
To discuss the debt talks, we’re joined by Richard Wolff, Professor Emeritus of Economics at University of Massachusetts Amherst, visiting professor here in New York at New School University, also hosts a weekly program on WBAI called Economic Update. Welcome to Democracy Now!
RICHARD WOLFF: Thank you.
AMY GOODMAN: So we are watching this dance in Washington. The House is going to vote today around the issue of the debt ceiling. The Senate says it’s dead in the water. President Obama is vowing to veto. What does this all mean?
RICHARD WOLFF: Well, basically, your word "dance" is perfect. This is theater. This is political theater in which the two parties are posturing for the election coming next year, using this occasion—to put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it. When they ask, typically, the representatives of the other party say, "Well, you’re not managing the government real well," and then they vote for it. And that has happened over and over again. So what you’re seeing is a decision, politically, to make it theatric, out of what otherwise would have been a normal procedure.
A hundred years ago, the Congress said, in order to control the government and not to allow businesses and rich people to be able to invest in government money easily, we’re going to have the government limit how much can be borrowed. That was the idea. Now it became automatic, as we became a debt society—excuse me—and so, suddenly, the Republicans basically decided to make theater, to run their campaign a little early this year, and to slow it all down and make a big to-do.
The world expects that this will have to be undone in a few days or weeks. They’re kind of amazed to see it being stretched like this, this old, normal procedure. And the assumption is that the politics in the United States has become as dysfunctional as our economic situation. And so, that’s the danger, that this rigmarole, this theater, is really a sign that normal life in the United States has been disrupted on a scale that people haven’t seen before.
JUAN GONZALEZ: But when you say that the Republicans decided to make theater out of it, it seems to me that the Democrats also have participated in the process by making this seem like it’s—Armageddon will occur unless we get this done by August 2nd. And in essence, at times it seems almost like the Obama administration is seeking this deadline to start moving in a more centrist direction economically that it has wanted to do, but has been absent the type of crisis that it would be able to convince the American public that it needs to do.
RICHARD WOLFF: There are certainly signs of that. And they’re very troubling to many of us who are economists, right, left and center, because basically, the Democrats have said, "We will do massive cuts. They just won’t be as massive as the Republicans want." And then they will appeal to the American people in the hope that Americans will choose the lesser evil: the Democrats who won’t cut so terribly compared to the Republicans.
And the Republicans are appealing to folks that are very upset by the economic situation, don’t know who to be angry at. In the American way, they get angry at the government. It’s a little bit amazing, if you take a step back. The overwhelming majority of people who’ve lost our jobs in this crisis have been fired by private employers. The overwhelming majority of people who have been thrown out of their homes have been—have had that happen because a private bank has gone to court to get that to happen. And yet, the American people have this tendency, built into our culture, to leap right over the person who’s actually done you the damage and to blame the government. And so, the government, in general, and the particular government of Mr. Obama, is the target, and the Republicans are playing on this. And that’s their ploy.
And the Democrats are saying, "Well, we’re not so bad. We’re going to tax the rich, just a little, and the corporations a little less. And that’s something the Republicans won’t do. And we will protect your Social Security, at least more than..."
But you’re right. In the process, everything moves over to massive cutting. And besides the morals of that, it’s economically crazy. In an economic situation where recovery is very poor, very uneven, to have the government cut back, the way that spokesman for the White House just told us, is to make an economic situation that’s bad worse. So you see a kind of political game being played at the cost of worsening the underlying economic situation. And for the world, that suggests a society that’s not working.
AMY GOODMAN: Let’s go to President Obama on Monday night, when he addressed the nation, reiterating his call for what he described as a "balanced approach" to deficit reduction involving spending cuts and tax increases on the wealthy.
PRESIDENT BARACK OBAMA: The first approach says, let’s live within our means by making serious historic cuts in government spending; let’s cut domestic spending to the lowest level it’s been since Dwight Eisenhower was president; let’s cut defense spending at the Pentagon by hundreds of billions of dollars; let’s cut out waste and fraud in healthcare programs like Medicare, and at the same time, let’s make modest adjustments so that Medicare is still there for future generations; finally, let’s ask the wealthiest Americans and biggest corporations to give up some of their breaks in the tax code and special deductions. This balanced approach asks everyone to give a little, without requiring anyone to sacrifice too much. It would reduce the deficit by around $4 trillion and put us on a path to pay down our debt. And the cuts wouldn’t happen so abruptly that they’d be a drag on our economy or prevent us from helping small businesses and middle-class families get back on their feet right now.
JUAN GONZALEZ: Shortly after the President addressed the nation on the budget crisis Monday night, House Speaker John Boehner responded in a televised address.
SPEAKER JOHN BOEHNER: The President is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won’t be there for them and their kids unless significant action is taken now. And the sad truth is that the President wanted a blank check six months ago, and he wants a blank check today. This is just not going to happen.
AMY GOODMAN: Richard Wolff, economist, author, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It, I did actually hear the reference to war by President Obama, but it’s rarely, rarely raised by Democrats or Republicans. One of your colleagues, Joe Stiglitz, said, over time, the wars in Iraq and Afghanistan will cost $5 trillion.
RICHARD WOLFF: There are a number of things that are not on the table. And frankly, I’m amazed that the President refers to what he does as a "balanced approach." First of all, the war and its enormous costs, off the table in any serious way. Going back to a serious taxation of corporations and of the rich in America, just, for example, at the scale that they were taxed in the ’50s, ’60s and ’70s, off the table.
Basically what’s being done is to suggest that now, after a "recovery," in quotations, that has only recovered the stock market and corporate profits and bank reserves, that has done nothing about unemployment and foreclosure—we haven’t had a balanced economic arrangement in this country for years. So, suddenly we’re going to be balanced in what’s coming next. That’s a strange kind of logic. Why is there not facing up to the war, the fact that you’re not taxing the rich? And perhaps the worst, we’re at a crisis because we have an economic system that hasn’t worked well, and the government bailed out banks and corporations by using public money. That was done to help them. It hasn’t helped many other folks. So now is not the time to do balance. Now is the time to correct the imbalance that has built up over all these years. And I think that would be where the President really ought to start.
JUAN GONZALEZ: But you do argue, contrary to some other liberal economists like Paul Krugman, that the deficits are a major problem and that the increasing deficit spending of the U.S. government has to be brought under control. So that would seem to indicate that your main push would be to obviously cut war spending, but also to raise taxes significantly.
RICHARD WOLFF: The most amazing thing to me is that we talk about fixing a government budget that’s in trouble, and we don’t talk about the revenue side in a serious way. That is an amazing thing. If you look at what happened to the American budget over the last 20 or 30 years, the culprit is obvious. We have dropped corporate taxes. We have dropped taxes on the rich.
Let me give you a couple of examples to drive it home. If you go back to the 1940s, here’s what you discover, that the federal government got 50 percent more money year after year from corporations than it did from individuals. For every dollar that individuals paid in income tax, corporations paid $1.50. If you compare that to today, here are the numbers. For every dollar that individuals pay to the federal government, corporations pay 25 cents. That is a dramatic change that has no parallel in the rest of our tax code.
Another example. In the ’50s and ’60s, the top bracket, the income tax rate that the richest people had to pay, for example the ’50s and ’60s, it was 91 percent. Every dollar over $100,000 that a rich person earned, he or she had to give 91 cents to Washington and kept nine. And the rationale for that was, we had come out of a Great Depression, we had come out of a great war, we had to rebuild our society, we were in a crisis, and the rich had the capacity to pay, and they ought to pay. Republicans voted for that. Democrats voted for that. What do we have today? Ninety-one percent? No. The top rate for rich people today, 35 percent. Again, nobody else in this society—not the middle, not the poor—have had anything like this consequence.
So, over the last 30, 40 years, a shift from corporate income tax to individual income tax, and among individuals, from the rich to everybody else. To deal with our budget problem without discussing that, putting that front and center, making that part of the story, that’s just a service to the rich and the corporations. There’s no polite way to say otherwise. And there’s something shameful about keeping all of that away and focusing on how we’re going to take out our budget problems by cutting back benefits to old people, to people who have medical needs. There’s something bizarre, and the world sees that, in a society that has done what it has done and now proposes to fix it on the backs of the majority.
AMY GOODMAN: And the argument that you give the money to the corporations and to the banks, and they will help people? They are the generator of jobs?
RICHARD WOLFF: The Republicans say it, and President Obama has said it repeatedly. He is going to provide incentives, he said, for years now. He is going to provide inducements and support for the private sector to put people back to work. We have a 9.2 percent unemployment rate. That’s what it’s been for the last two years. That policy has not worked. If corporations were going to do what the President gave them incentives to do, they would have done it. They’re not doing it. There’s no sign they’re going to do it. You have to face: that policy didn’t work.
What’s the alternative? Well, we don’t have to look far. Roosevelt, in the 1930s, the last time we faced this kind of situation, went on the radio in 1933 and 1934, and he gave speeches. And in those speeches, he said the following: if the private sector either cannot or will not provide work for millions of our citizens, ready, able and willing to work, then the government has to do it. And between 1934 and 1941, the federal government created and filled 11 million jobs.
The most amazing thing in the United States is not that we are not doing it. The most amazing thing is, there’s no bill to do it, there’s no discussion to do it. The president of the country never refers to it, keeps telling us—and the Republicans do the same—that the private sector is where we should focus our expectations. The private sector has answered: "We are not going to hire people here. We’re either going to hire no one, because we don’t like the way the economy looks, or we’re going to hire people in other countries, because they pay lower wages there." That’s a response of the private sector taking care of itself. It’s not a responsible way to run a society.
JUAN GONZALEZ: And one issue that you raised, in terms of how the corporations and bank profits have recovered tremendously, but—and many of these companies are sitting on huge piles of cash, that rather than invest in new machinery or bring in new workers, they’re just sitting on their money, and presumably investing it, because they’re not going to put it in at the bank rates or CD rates, so they’re obviously investing the money that they have, rather than create those jobs.
RICHARD WOLFF: Well, even more interesting, and maybe a bit of a shock to folks who don’t follow this, what the corporations are doing when they hold back the money—because it’s not profitable for them to hire—in large part, is they lend it to the United States government to fund these deficits. The United States government refuses to tax corporations and the rich. It then runs a deficit. It spends more than it takes in, because it’s not taxing them. And here comes the punchline. It then turns around to the people it didn’t tax—corporations and the rich—and borrows the money from them, paying them interest and paying them back. If the United States wanted to stimulate our economy in an effective way—
AMY GOODMAN: Pay even tax-deductible interest.
RICHARD WOLFF: Right, also. But if the government really wanted to do something, go get the money from them, stimulate, which will help them, and if you tax them to do it, you wouldn’t have a national debt. You wouldn’t run a deficit. We’re running a deficit because the people who run this society would like us to deal with our economic problems, not by taxing those who have it, the way we used to, but instead by endlessly borrowing them. And now the ultimate irony, we’ve borrowed so much as a nation from the rich and the corporations, they now are not so sure they want to continue to lend to us, because we’re so deeply in debt. And they want us instead to go stick it to poor people and sick people instead. It’s an extraordinary moment in our history as a nation.
AMY GOODMAN: We have to break, but we’re going to come back. Lots of people are sending us questions. They’re tweeting them in. They’re sending it to us on Facebook. You can go to facebook.com/democracynow or twitter.com/democracynow. We want to hear from you. We’re talking to Richard Wolff, who’s at New School University here in New York. His new book is _Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." Stay with us.
AMY GOODMAN: Our guest, Richard Wolff. His book, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It. And people are sending us in questions. There is, as Richard Wolff says, an enormous hunger to understand all this. Eli Rivers on Facebook asks, "Given how the masses are getting continually and increasingly financially punished for events they had little or nothing to have caused, is it reasonable to assume that there will be major political upheavals in the near future? It seems we are almost at a breaking point." Professor Wolff?
RICHARD WOLFF: Yes, I think the—in a sense, that’s coming here in the United States, your previous guest explaining the gaps in wealth among the people, becoming more and more extreme. The signs are everywhere of a society like ours polarizing in a way that is going to undercut assumptions about what it means to be an American, expectations about realizing an American Dream. Those things are falling away, and people have to face that, and they’re upset. I think part of what we call the Tea Party is simply an expression, not so much of this or that ideological persuasion, but of a level of upset about economics and the future for their own children, that makes people look somewhere for something.
Europe also, I think, shows us the future. In Europe, where people are more organized, in trade unions, in socialist, communist and other political parties, there are vehicles that these institutions provide for public anger and public disagreement to be voiced in a reasonable and consistent way. In all the major countries of Europe, not just Greece, Portugal, Ireland and those that are in trouble, but in France and Germany and so on, there have been massive public actions in the streets showing that people do not want, to use one of the slogans in France, do not want the costs of an economic crisis to be borne by the mass of people who didn’t cause it and who have already suffered from it, and that has to stop. And that is shifting European politics. And while we don’t have the level of organization of people in this country that they do, I do think we will build them again, we will rebuild them from what they were before, because there has to be a change from the very direction that the questioner asks. And I’m sure that’s coming.
JUAN GONZALEZ: But in Europe, you have the remarkable situation that the more conservative parties are being pressured by the street to adopt more conciliatory policies in terms of dealing with the crisis, whereas in the United States—
RICHARD WOLFF: Going the other way.
JUAN GONZALEZ: —the more liberal parties are being—are seeing no pressure from the street, are increasingly moving to the right, in terms of how they see the need to deal with the crisis.
RICHARD WOLFF: It’s a wonderful case study. The German example is probably the best one—the biggest economy in Europe, the most important, run by a woman now named Angela Merkel, who runs that society. She did a remarkable thing over the last two months. She said there will be no bailout of Greece, unless banks are made to pay a part of the cost. Other governments in Europe didn’t have the courage. Why is this woman, a conservative, wanting to make sure the banks pay? Because she lost the last three bi-elections, and the critics of her are saying, "Your political career is over if you don’t stop making everyone in the society pay, except those who, A, caused this crisis, and, B, have been bailed out by the government to this point." So she actually changes. And I think that’s a sign that the pushback from masses of people, which will take many different forms, is already underway there and will come here.
AMY GOODMAN: Why are the people in the United States so different?
RICHARD WOLFF: I think it’s the question of organization. Over the last 50 years, we, the collective American people, have let the organizations that express mass concerns about economics atrophy. We’re at the end of a 50-year decline of our trade union movement. We don’t have the kinds of political parties we used to have in this country and that were very powerful in this country. And so, we don’t have the vehicles to articulate, express and bring political force to the way people feel. And so they go wherever there’s a little bit of organization—Tea Party—even if it’s a little strange and a little outside their frame, because it’s something. I think the message of other people will be, if we can form the kinds of organizations that articulate these positions, there are a lot of people out there ready, willing and able to become part of that.
AMY GOODMAN: This is another question from Facebook. Steve Cipolla asks, "Does it continue to make sense to refer to U.S. economic policy in isolation? Isn’t the real long-term threat to economic (and political) stability the persistence of increasing global income inequality?"
RICHARD WOLFF: Yes, but we are still dealing with corporations that have their bases, most of them, here in the United States. Are they more global than ever? Yes. Is that a serious problem? Absolutely. You know, 30, 40 years ago, we spoke about corporations moving production jobs out of the United States. Ten or 15 years ago, we began to talk about outsourcing, moving white-collar jobs out. The most recent addition to that is the decision of corporations, as they look around the world, to say, you know, the growth of our market, the growth of demand, it’s in Asia, it’s in Latin America, it’s in parts of—it’s not here. The American people are exhausted. Their wages are going nowhere. We have high unemployment. And the fact is, no one is going to lend them much more money because they’re tapped out. So they’re not a growing market.
So you see American corporations literally focused, for production and for consumption, elsewhere. That means they’re going to take care of themselves in the world. And if we don’t want to be left behind, if we don’t want the United States to become a backwater, then the freedom of corporations to do what they want has to be reined in. And that’s a difficult issue for Americans to confront and deal with. And we live in an ideology in which we’re supposed to believe that what corporations choose to do will magically be the best for all of us. It hasn’t worked that way. That’s why we are where we are. Basic change is the order of the day.
JUAN GONZALEZ: And in other regions of the world, that change is occurring. We’ve covered quite extensively here on Democracy Now! the changes in Latin America, where actually the income and the wealth gap is shrinking in the past decade for the first time in the memory of the political establishment of Latin America as a result of all of the socially oriented governments that have come to power.
RICHARD WOLFF: Right.
JUAN GONZALEZ: It’s a completely different path from what’s going on here in the United States.
RICHARD WOLFF: And I think it also speaks to our situation, because before that happened, before you had Evo Morales, before you had Chávez, before you had—and whatever you think of their particular policies, you had an upswelling of people saying the status quo that has got us into this dead end is not tolerable. And they developed new organizations. They rebuilt old organizations. And suddenly, basic changes in policy, which reined in the power of private enterprise, which said that capitalist enterprises are not the be-all and end-all of how to run a society, those kinds of movements attracted millions of people, gained political power. And there really is no reason to believe that our society is immune or unable to do, in its own way and its own traditions, something similar.
JUAN GONZALEZ: Well, I want to ask you about another question Brian Clifford asks on our Facebook page. "In the current moment, people in liberal democratic states seem to have internalized capitalism as a natural and unquestionable order. How does the left rupture such subjectivities?"
RICHARD WOLFF: Good question. You know, again, it’s our history. For 50 years, it has been unacceptable politically in the United States to ask what is basically a straightforward question. We have a particular economic system. It’s called capitalism. We have every right as a society to ask of that system, is it working? Is it working for us? Do the benefits and the costs balance themselves out in a way that says we want to keep the system, or that says we want to change the system, or that says we ought to look for an alternative system? We’ve been afraid to ask that question. We’ve been afraid to have public debates. That’s the legacy of the Cold War. We can’t afford anymore to not do that. We have to do as the questioner says: raise the question.
As it is put in a very powerful slogan in Germany by a new party that now gets 12 percent of the national vote, here’s their slogan—it’s in Germany: Can Germany do better than capitalism? And their answer is yes. And that has forced a conversation about this system, its limits, its strengths and weaknesses. That’s long overdue in the United States. And one of the results of this crisis, and now of this governmental paralysis, is to give a strong impetus to asking those questions. And that doesn’t mean accepting the alternatives of the past. The old efforts of going beyond capitalism had strength, but they also had horrible weaknesses. We will learn from that, as human beings always have. And we can forge a country out of an opening of the debate about this economic system. And I want to be part of that, and I think the American people are ready and interested in doing it, as well.
AMY GOODMAN: I want to thank you very much for being with us. Richard Wolff, an economist, just back actually from Europe, but teaches here in New York at New School University. His book is called Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.
http://www.democracynow.org/2011/7/28/richard_wolff_debt_showdown_is_political
Republicans have agreed to a vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a showdown against unified Democratic opposition in the Senate and threats of a White House veto. To discuss the debt talks and economic austerity worldwide, we’re joined by Richard Wolff, Emeritus Professor of Economics at University of Massachusetts Amherst and author of several books, including "Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." "This is political theater in which two parties are posturing for the election coming next year," says Wolff. "To put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it."
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JUAN GONZALEZ: After weeks of infighting, Republicans have agreed to vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a [showdown] against unified Democratic opposition in the Senate. Independent Senators Joe Lieberman and Bernie Sanders are promising to block it. White House spokesman James Carney warned yesterday that time is running out to reach a compromise. Carney also said Treasury Department officials may soon have to decide who will get government checks and who won’t, if the Treasury loses borrowing authority.
PRESS SECRETARY JAY CARNEY: Among the many obligations we have, the 80 million checks that the Treasury Department alone issues, payments that it issues every month, of the 1.2 billion payments the federal government makes in a year, those include veterans’ payments, Social Security payments, disability payments. They include the bills to contractors, small businesses, big businesses, that do work with the government, the people who manufacture the ammunition that we send to our troops in Afghanistan. And choices then have to be made. And it’s a Sophie’s choice, right? Who do you save? Who do you pay? That’s an impossible situation that this country has never faced, and should never face, if Congress does what it was elected to do and does its job.
AMY GOODMAN: White House spokesperson Jay Carney.
To discuss the debt talks, we’re joined by Richard Wolff, Professor Emeritus of Economics at University of Massachusetts Amherst, visiting professor here in New York at New School University, also hosts a weekly program on WBAI called Economic Update. Welcome to Democracy Now!
RICHARD WOLFF: Thank you.
AMY GOODMAN: So we are watching this dance in Washington. The House is going to vote today around the issue of the debt ceiling. The Senate says it’s dead in the water. President Obama is vowing to veto. What does this all mean?
RICHARD WOLFF: Well, basically, your word "dance" is perfect. This is theater. This is political theater in which the two parties are posturing for the election coming next year, using this occasion—to put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it. When they ask, typically, the representatives of the other party say, "Well, you’re not managing the government real well," and then they vote for it. And that has happened over and over again. So what you’re seeing is a decision, politically, to make it theatric, out of what otherwise would have been a normal procedure.
A hundred years ago, the Congress said, in order to control the government and not to allow businesses and rich people to be able to invest in government money easily, we’re going to have the government limit how much can be borrowed. That was the idea. Now it became automatic, as we became a debt society—excuse me—and so, suddenly, the Republicans basically decided to make theater, to run their campaign a little early this year, and to slow it all down and make a big to-do.
The world expects that this will have to be undone in a few days or weeks. They’re kind of amazed to see it being stretched like this, this old, normal procedure. And the assumption is that the politics in the United States has become as dysfunctional as our economic situation. And so, that’s the danger, that this rigmarole, this theater, is really a sign that normal life in the United States has been disrupted on a scale that people haven’t seen before.
JUAN GONZALEZ: But when you say that the Republicans decided to make theater out of it, it seems to me that the Democrats also have participated in the process by making this seem like it’s—Armageddon will occur unless we get this done by August 2nd. And in essence, at times it seems almost like the Obama administration is seeking this deadline to start moving in a more centrist direction economically that it has wanted to do, but has been absent the type of crisis that it would be able to convince the American public that it needs to do.
RICHARD WOLFF: There are certainly signs of that. And they’re very troubling to many of us who are economists, right, left and center, because basically, the Democrats have said, "We will do massive cuts. They just won’t be as massive as the Republicans want." And then they will appeal to the American people in the hope that Americans will choose the lesser evil: the Democrats who won’t cut so terribly compared to the Republicans.
And the Republicans are appealing to folks that are very upset by the economic situation, don’t know who to be angry at. In the American way, they get angry at the government. It’s a little bit amazing, if you take a step back. The overwhelming majority of people who’ve lost our jobs in this crisis have been fired by private employers. The overwhelming majority of people who have been thrown out of their homes have been—have had that happen because a private bank has gone to court to get that to happen. And yet, the American people have this tendency, built into our culture, to leap right over the person who’s actually done you the damage and to blame the government. And so, the government, in general, and the particular government of Mr. Obama, is the target, and the Republicans are playing on this. And that’s their ploy.
And the Democrats are saying, "Well, we’re not so bad. We’re going to tax the rich, just a little, and the corporations a little less. And that’s something the Republicans won’t do. And we will protect your Social Security, at least more than..."
But you’re right. In the process, everything moves over to massive cutting. And besides the morals of that, it’s economically crazy. In an economic situation where recovery is very poor, very uneven, to have the government cut back, the way that spokesman for the White House just told us, is to make an economic situation that’s bad worse. So you see a kind of political game being played at the cost of worsening the underlying economic situation. And for the world, that suggests a society that’s not working.
AMY GOODMAN: Let’s go to President Obama on Monday night, when he addressed the nation, reiterating his call for what he described as a "balanced approach" to deficit reduction involving spending cuts and tax increases on the wealthy.
PRESIDENT BARACK OBAMA: The first approach says, let’s live within our means by making serious historic cuts in government spending; let’s cut domestic spending to the lowest level it’s been since Dwight Eisenhower was president; let’s cut defense spending at the Pentagon by hundreds of billions of dollars; let’s cut out waste and fraud in healthcare programs like Medicare, and at the same time, let’s make modest adjustments so that Medicare is still there for future generations; finally, let’s ask the wealthiest Americans and biggest corporations to give up some of their breaks in the tax code and special deductions. This balanced approach asks everyone to give a little, without requiring anyone to sacrifice too much. It would reduce the deficit by around $4 trillion and put us on a path to pay down our debt. And the cuts wouldn’t happen so abruptly that they’d be a drag on our economy or prevent us from helping small businesses and middle-class families get back on their feet right now.
JUAN GONZALEZ: Shortly after the President addressed the nation on the budget crisis Monday night, House Speaker John Boehner responded in a televised address.
SPEAKER JOHN BOEHNER: The President is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won’t be there for them and their kids unless significant action is taken now. And the sad truth is that the President wanted a blank check six months ago, and he wants a blank check today. This is just not going to happen.
AMY GOODMAN: Richard Wolff, economist, author, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It, I did actually hear the reference to war by President Obama, but it’s rarely, rarely raised by Democrats or Republicans. One of your colleagues, Joe Stiglitz, said, over time, the wars in Iraq and Afghanistan will cost $5 trillion.
RICHARD WOLFF: There are a number of things that are not on the table. And frankly, I’m amazed that the President refers to what he does as a "balanced approach." First of all, the war and its enormous costs, off the table in any serious way. Going back to a serious taxation of corporations and of the rich in America, just, for example, at the scale that they were taxed in the ’50s, ’60s and ’70s, off the table.
Basically what’s being done is to suggest that now, after a "recovery," in quotations, that has only recovered the stock market and corporate profits and bank reserves, that has done nothing about unemployment and foreclosure—we haven’t had a balanced economic arrangement in this country for years. So, suddenly we’re going to be balanced in what’s coming next. That’s a strange kind of logic. Why is there not facing up to the war, the fact that you’re not taxing the rich? And perhaps the worst, we’re at a crisis because we have an economic system that hasn’t worked well, and the government bailed out banks and corporations by using public money. That was done to help them. It hasn’t helped many other folks. So now is not the time to do balance. Now is the time to correct the imbalance that has built up over all these years. And I think that would be where the President really ought to start.
JUAN GONZALEZ: But you do argue, contrary to some other liberal economists like Paul Krugman, that the deficits are a major problem and that the increasing deficit spending of the U.S. government has to be brought under control. So that would seem to indicate that your main push would be to obviously cut war spending, but also to raise taxes significantly.
RICHARD WOLFF: The most amazing thing to me is that we talk about fixing a government budget that’s in trouble, and we don’t talk about the revenue side in a serious way. That is an amazing thing. If you look at what happened to the American budget over the last 20 or 30 years, the culprit is obvious. We have dropped corporate taxes. We have dropped taxes on the rich.
Let me give you a couple of examples to drive it home. If you go back to the 1940s, here’s what you discover, that the federal government got 50 percent more money year after year from corporations than it did from individuals. For every dollar that individuals paid in income tax, corporations paid $1.50. If you compare that to today, here are the numbers. For every dollar that individuals pay to the federal government, corporations pay 25 cents. That is a dramatic change that has no parallel in the rest of our tax code.
Another example. In the ’50s and ’60s, the top bracket, the income tax rate that the richest people had to pay, for example the ’50s and ’60s, it was 91 percent. Every dollar over $100,000 that a rich person earned, he or she had to give 91 cents to Washington and kept nine. And the rationale for that was, we had come out of a Great Depression, we had come out of a great war, we had to rebuild our society, we were in a crisis, and the rich had the capacity to pay, and they ought to pay. Republicans voted for that. Democrats voted for that. What do we have today? Ninety-one percent? No. The top rate for rich people today, 35 percent. Again, nobody else in this society—not the middle, not the poor—have had anything like this consequence.
So, over the last 30, 40 years, a shift from corporate income tax to individual income tax, and among individuals, from the rich to everybody else. To deal with our budget problem without discussing that, putting that front and center, making that part of the story, that’s just a service to the rich and the corporations. There’s no polite way to say otherwise. And there’s something shameful about keeping all of that away and focusing on how we’re going to take out our budget problems by cutting back benefits to old people, to people who have medical needs. There’s something bizarre, and the world sees that, in a society that has done what it has done and now proposes to fix it on the backs of the majority.
AMY GOODMAN: And the argument that you give the money to the corporations and to the banks, and they will help people? They are the generator of jobs?
RICHARD WOLFF: The Republicans say it, and President Obama has said it repeatedly. He is going to provide incentives, he said, for years now. He is going to provide inducements and support for the private sector to put people back to work. We have a 9.2 percent unemployment rate. That’s what it’s been for the last two years. That policy has not worked. If corporations were going to do what the President gave them incentives to do, they would have done it. They’re not doing it. There’s no sign they’re going to do it. You have to face: that policy didn’t work.
What’s the alternative? Well, we don’t have to look far. Roosevelt, in the 1930s, the last time we faced this kind of situation, went on the radio in 1933 and 1934, and he gave speeches. And in those speeches, he said the following: if the private sector either cannot or will not provide work for millions of our citizens, ready, able and willing to work, then the government has to do it. And between 1934 and 1941, the federal government created and filled 11 million jobs.
The most amazing thing in the United States is not that we are not doing it. The most amazing thing is, there’s no bill to do it, there’s no discussion to do it. The president of the country never refers to it, keeps telling us—and the Republicans do the same—that the private sector is where we should focus our expectations. The private sector has answered: "We are not going to hire people here. We’re either going to hire no one, because we don’t like the way the economy looks, or we’re going to hire people in other countries, because they pay lower wages there." That’s a response of the private sector taking care of itself. It’s not a responsible way to run a society.
JUAN GONZALEZ: And one issue that you raised, in terms of how the corporations and bank profits have recovered tremendously, but—and many of these companies are sitting on huge piles of cash, that rather than invest in new machinery or bring in new workers, they’re just sitting on their money, and presumably investing it, because they’re not going to put it in at the bank rates or CD rates, so they’re obviously investing the money that they have, rather than create those jobs.
RICHARD WOLFF: Well, even more interesting, and maybe a bit of a shock to folks who don’t follow this, what the corporations are doing when they hold back the money—because it’s not profitable for them to hire—in large part, is they lend it to the United States government to fund these deficits. The United States government refuses to tax corporations and the rich. It then runs a deficit. It spends more than it takes in, because it’s not taxing them. And here comes the punchline. It then turns around to the people it didn’t tax—corporations and the rich—and borrows the money from them, paying them interest and paying them back. If the United States wanted to stimulate our economy in an effective way—
AMY GOODMAN: Pay even tax-deductible interest.
RICHARD WOLFF: Right, also. But if the government really wanted to do something, go get the money from them, stimulate, which will help them, and if you tax them to do it, you wouldn’t have a national debt. You wouldn’t run a deficit. We’re running a deficit because the people who run this society would like us to deal with our economic problems, not by taxing those who have it, the way we used to, but instead by endlessly borrowing them. And now the ultimate irony, we’ve borrowed so much as a nation from the rich and the corporations, they now are not so sure they want to continue to lend to us, because we’re so deeply in debt. And they want us instead to go stick it to poor people and sick people instead. It’s an extraordinary moment in our history as a nation.
AMY GOODMAN: We have to break, but we’re going to come back. Lots of people are sending us questions. They’re tweeting them in. They’re sending it to us on Facebook. You can go to facebook.com/democracynow or twitter.com/democracynow. We want to hear from you. We’re talking to Richard Wolff, who’s at New School University here in New York. His new book is _Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." Stay with us.
AMY GOODMAN: Our guest, Richard Wolff. His book, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It. And people are sending us in questions. There is, as Richard Wolff says, an enormous hunger to understand all this. Eli Rivers on Facebook asks, "Given how the masses are getting continually and increasingly financially punished for events they had little or nothing to have caused, is it reasonable to assume that there will be major political upheavals in the near future? It seems we are almost at a breaking point." Professor Wolff?
RICHARD WOLFF: Yes, I think the—in a sense, that’s coming here in the United States, your previous guest explaining the gaps in wealth among the people, becoming more and more extreme. The signs are everywhere of a society like ours polarizing in a way that is going to undercut assumptions about what it means to be an American, expectations about realizing an American Dream. Those things are falling away, and people have to face that, and they’re upset. I think part of what we call the Tea Party is simply an expression, not so much of this or that ideological persuasion, but of a level of upset about economics and the future for their own children, that makes people look somewhere for something.
Europe also, I think, shows us the future. In Europe, where people are more organized, in trade unions, in socialist, communist and other political parties, there are vehicles that these institutions provide for public anger and public disagreement to be voiced in a reasonable and consistent way. In all the major countries of Europe, not just Greece, Portugal, Ireland and those that are in trouble, but in France and Germany and so on, there have been massive public actions in the streets showing that people do not want, to use one of the slogans in France, do not want the costs of an economic crisis to be borne by the mass of people who didn’t cause it and who have already suffered from it, and that has to stop. And that is shifting European politics. And while we don’t have the level of organization of people in this country that they do, I do think we will build them again, we will rebuild them from what they were before, because there has to be a change from the very direction that the questioner asks. And I’m sure that’s coming.
JUAN GONZALEZ: But in Europe, you have the remarkable situation that the more conservative parties are being pressured by the street to adopt more conciliatory policies in terms of dealing with the crisis, whereas in the United States—
RICHARD WOLFF: Going the other way.
JUAN GONZALEZ: —the more liberal parties are being—are seeing no pressure from the street, are increasingly moving to the right, in terms of how they see the need to deal with the crisis.
RICHARD WOLFF: It’s a wonderful case study. The German example is probably the best one—the biggest economy in Europe, the most important, run by a woman now named Angela Merkel, who runs that society. She did a remarkable thing over the last two months. She said there will be no bailout of Greece, unless banks are made to pay a part of the cost. Other governments in Europe didn’t have the courage. Why is this woman, a conservative, wanting to make sure the banks pay? Because she lost the last three bi-elections, and the critics of her are saying, "Your political career is over if you don’t stop making everyone in the society pay, except those who, A, caused this crisis, and, B, have been bailed out by the government to this point." So she actually changes. And I think that’s a sign that the pushback from masses of people, which will take many different forms, is already underway there and will come here.
AMY GOODMAN: Why are the people in the United States so different?
RICHARD WOLFF: I think it’s the question of organization. Over the last 50 years, we, the collective American people, have let the organizations that express mass concerns about economics atrophy. We’re at the end of a 50-year decline of our trade union movement. We don’t have the kinds of political parties we used to have in this country and that were very powerful in this country. And so, we don’t have the vehicles to articulate, express and bring political force to the way people feel. And so they go wherever there’s a little bit of organization—Tea Party—even if it’s a little strange and a little outside their frame, because it’s something. I think the message of other people will be, if we can form the kinds of organizations that articulate these positions, there are a lot of people out there ready, willing and able to become part of that.
AMY GOODMAN: This is another question from Facebook. Steve Cipolla asks, "Does it continue to make sense to refer to U.S. economic policy in isolation? Isn’t the real long-term threat to economic (and political) stability the persistence of increasing global income inequality?"
RICHARD WOLFF: Yes, but we are still dealing with corporations that have their bases, most of them, here in the United States. Are they more global than ever? Yes. Is that a serious problem? Absolutely. You know, 30, 40 years ago, we spoke about corporations moving production jobs out of the United States. Ten or 15 years ago, we began to talk about outsourcing, moving white-collar jobs out. The most recent addition to that is the decision of corporations, as they look around the world, to say, you know, the growth of our market, the growth of demand, it’s in Asia, it’s in Latin America, it’s in parts of—it’s not here. The American people are exhausted. Their wages are going nowhere. We have high unemployment. And the fact is, no one is going to lend them much more money because they’re tapped out. So they’re not a growing market.
So you see American corporations literally focused, for production and for consumption, elsewhere. That means they’re going to take care of themselves in the world. And if we don’t want to be left behind, if we don’t want the United States to become a backwater, then the freedom of corporations to do what they want has to be reined in. And that’s a difficult issue for Americans to confront and deal with. And we live in an ideology in which we’re supposed to believe that what corporations choose to do will magically be the best for all of us. It hasn’t worked that way. That’s why we are where we are. Basic change is the order of the day.
JUAN GONZALEZ: And in other regions of the world, that change is occurring. We’ve covered quite extensively here on Democracy Now! the changes in Latin America, where actually the income and the wealth gap is shrinking in the past decade for the first time in the memory of the political establishment of Latin America as a result of all of the socially oriented governments that have come to power.
RICHARD WOLFF: Right.
JUAN GONZALEZ: It’s a completely different path from what’s going on here in the United States.
RICHARD WOLFF: And I think it also speaks to our situation, because before that happened, before you had Evo Morales, before you had Chávez, before you had—and whatever you think of their particular policies, you had an upswelling of people saying the status quo that has got us into this dead end is not tolerable. And they developed new organizations. They rebuilt old organizations. And suddenly, basic changes in policy, which reined in the power of private enterprise, which said that capitalist enterprises are not the be-all and end-all of how to run a society, those kinds of movements attracted millions of people, gained political power. And there really is no reason to believe that our society is immune or unable to do, in its own way and its own traditions, something similar.
JUAN GONZALEZ: Well, I want to ask you about another question Brian Clifford asks on our Facebook page. "In the current moment, people in liberal democratic states seem to have internalized capitalism as a natural and unquestionable order. How does the left rupture such subjectivities?"
RICHARD WOLFF: Good question. You know, again, it’s our history. For 50 years, it has been unacceptable politically in the United States to ask what is basically a straightforward question. We have a particular economic system. It’s called capitalism. We have every right as a society to ask of that system, is it working? Is it working for us? Do the benefits and the costs balance themselves out in a way that says we want to keep the system, or that says we want to change the system, or that says we ought to look for an alternative system? We’ve been afraid to ask that question. We’ve been afraid to have public debates. That’s the legacy of the Cold War. We can’t afford anymore to not do that. We have to do as the questioner says: raise the question.
As it is put in a very powerful slogan in Germany by a new party that now gets 12 percent of the national vote, here’s their slogan—it’s in Germany: Can Germany do better than capitalism? And their answer is yes. And that has forced a conversation about this system, its limits, its strengths and weaknesses. That’s long overdue in the United States. And one of the results of this crisis, and now of this governmental paralysis, is to give a strong impetus to asking those questions. And that doesn’t mean accepting the alternatives of the past. The old efforts of going beyond capitalism had strength, but they also had horrible weaknesses. We will learn from that, as human beings always have. And we can forge a country out of an opening of the debate about this economic system. And I want to be part of that, and I think the American people are ready and interested in doing it, as well.
AMY GOODMAN: I want to thank you very much for being with us. Richard Wolff, an economist, just back actually from Europe, but teaches here in New York at New School University. His book is called Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.
jueves, 4 de agosto de 2011
UNA AGENDA PARA LA DESCONEXIÓN
UNA AGENDA PARA LA DESCONEXIÓN
Raúl Zibechi
ALAI AMLATINA, 04/08/2011.-
Con 700 mil millones de dólares de reservas monetarias, 400 millones de habitantes, grandes reservas de hidrocarburos, autonomía energética, importantes yacimientos mineros, la mayor biodiversidad del planeta, la región sudamericana no tienen ningún motivo para no despegarse de la crisis sistémica en curso y elaborar su propia agenda política y económica.
En las últimas semanas, ministros y presidentes de la región se
pronunciaron por establecer medidas defensivas para evitar contagios de
la crisis que afecta al primer mundo. Cristina Fernández dijo que
“debemos blindar la región para no perder lo que hemos logrado”(1).
Guido Mantega, ministro de Hacienda de Brasil, se pronunció por
establecer “un cordón de aislamiento” para evitar perjuicios(2). Hasta
el conservador presidente de Colombia Juan Manuel Santos advirtió en la
Cumbre de UNASUR en Lima que se deben contrarrestar los efectos nocivos
de las crisis económicas por las que atraviesa Estados Unidos y Europa
que devalúan los ahorros de la región(3).
Son miradas positivas que muestran una toma de conciencia generalizada
de que hay que actuar pronto. Pero las medidas defensivas son
insuficientes. Mantega se equivoca cuando asegura que “la cuestión de
fondo es la recuperación económica de Estados Unidos y de Europa, porque
aquí sufrimos las consecuencias”(4). En primer lugar, esa recuperación
salvadora no va a llegar porque las economías que Oscar Ugarteche define
como “países ricos altamente enhuecados”, ingresaron en un período de
austeridad y estancamiento, o crecimiento muy lento, incapaz de
reactivar la economía mundial.
En segundo lugar, y esto es decisivo, porque estamos viviendo un
completo rediseño del sistema-mundo, no sólo de la economía. En pocas
palabras: la relación centro-periferia se ha roto y están en proceso de
conformarse nuevos centros regionales, eso que llamamos BRICS (Brasil,
Rusia, India, China y Sudáfrica) con relaciones de otro tipo con sus
propias periferias y con los viejos centros de poder en decadencia. A
eso se suma la crisis de la hegemonía estadounidense y la consolidación
de un mundo multipolar. Occidente ha dejado de ser el centro del mundo
cuyo eje se traslada rápidamente hacia Asia, un cambio de envergadura
que supera nuestra capacidad de imaginación, sobre todo en el terreno
cultural. Y a todo esto debería sumarse el peak oil, la progresiva
decadencia de la civilización del petróleo, y la crisis ambiental y
climática en curso.
La advertencia de Immanuel Wallerstein acerca del “colapso importante
que se avecina” y la necesidad de botes salvavidas para afrontarlo, debe
ser tomado con la mayor seriedad(5). En su opinión, Europa está
ensayando la creación de un fondo monetario europeo de facto, como se
desprende del último salvataje a Grecia que pasa por establecer una
estructura de gobernanza común.
China está considerando dejar de comprar no sólo bonos del gobierno
estadounidense sino activos en ese país(6). Siendo el principal acreedor
y comprador de bonos de la Reserva Federal, una decisión de ese tipo no
haría sino acercar a Washington al temido default. Asia Times publica un
excelente informe sobre el “colapso de la clase media en Estados
Unidos”, donde demuestra que la crisis inmobiliaria será de muy larga
duración por razones demográficas y los beneficios de las pequeñas
empresas, donde invierten sectores importantes de las clases medias,
están lejos de recuperarse(7).
En síntesis, “hay mucha crisis por delante y urge por tanto pensar
Sudamérica seriamente”(8). El desafío mayor es que la región no puede
pensarse en función de lo que suceda con la economía global sino en base
a sus propias prioridades y la primera de ellas es construir su propia
agenda: desconectarse del mundo rico endeudado y muy en particular del
sistema financiero y de las multinacionales. Son ellos los que necesitan
“invertir” en América Latina porque es en esta región donde hacen sus
negocios y obtienen las ganancias que ya no consiguen en el mundo
endeudado.
Para este objetivo es ineludible acelerar algunas medidas como la puesta
en marcha efectiva del Banco del Sur, redireccionar los flujos de
hidrocarburos hacia la propia región, abandonar el apego al dólar y
sustituirlo por una moneda regional y seguir fortaleciendo el comercio y
los vínculos Sur-Sur. Son propuestas largamente discutidas en la región,
pero cuya implementación se viene demorando en gran medida por el escaso
interés que vienen mostrando algunos de los países que juegan el papel
de liderazgo.
Aún así, son medidas insuficientes. Porque, en rigor, no se trata de una
o de varias crisis sino de una reconstrucción del mapa mundial que
brinda a la región la posibilidad de modificar a su favor la
distribución del poder en el mundo para que sea algo más equitativo. Las
enormes reservas de Sudamérica, casi tan elevadas como las de Japón pero
sin el lastre de su gigantesca deuda, deben ser usadas ahora para
introducir cambios de larga duración. Quizá el más importante sea dar un
vuelco en el terreno de la ciencia y la tecnología, en investigación e
innovación.
El retraso es gigantesco. Brasil, con el 2,3% del PIB mundial solicita
el 0,3% de las patentes, siendo el único sudamericano que se ha
propuesto elevar sus inversiones en la materia. Registra menos de 500
patentes anuales, frente a 45 mil de Estados Unidos(9). Los países
asiáticos muestran que es posible dar un vuelco. En los últimos 20 años
China, India y Corea del Sur experimentaron un crecimiento exponencial
en la innovación. Se estima que para 2020 China superará a Estados
Unidos como principal productor mundial de conocimientos científicos(10).
Pese a que tiene reservas de 11 mil millones de dólares, Bolivia
invierte sólo 40 millones anuales en ciencia y tecnología, el 0,1% de su
presupuesto. Por lo tanto, debe recurrir a las multinacionales para
industrializar el litio. Los demás países de la región tienen una
situación muy similar. Pero sin dar este vuelco en el dominio de la
ciencia y la tecnología, será imposible en un plazo razonable, digamos
de dos décadas, dejar de ser exportadores de commodities, dejar el
extractivismo y tomar un rumbo nuevo.
Por último, no será posible desconectarse del caos sistémico en curso
sin conflictos ni pérdidas, eludiendo desgarros internas. Eso es una
crisis. Quiebre y ruptura para cambiar el rumbo.
- Raúl Zibechi, periodista uruguayo, es docente e investigador en la
Multiversidad Franciscana de América Latina, y asesor de varios
colectivos sociales.
NOTAS:
1. Página 12, 29 de julio de 2011.
2. Valor, 3 de agosto de 2011.
3. Página 12, 30 de julio de 2011.
4. Valor, 3 de agosto de 2011.
5. La Jornada, 4 de agosto de 2011.
6. Dean Baker en Diario del Pueblo:
http://spanish.peopledaily.com.cn/31619/7560741.html
7. http://www.atimes.com/atimes/global_economy/mh02dj05.html
8. Oscar Ugarteche en ALAI, 3 de agosto de 2011.
9. Proyecto Brasil en Tres Tiempos, Presidencia, 2004.
10. http://spanish.peopledaily.com.cn/101390/7284766.html
Más información: http://alainet.org
Raúl Zibechi
ALAI AMLATINA, 04/08/2011.-
Con 700 mil millones de dólares de reservas monetarias, 400 millones de habitantes, grandes reservas de hidrocarburos, autonomía energética, importantes yacimientos mineros, la mayor biodiversidad del planeta, la región sudamericana no tienen ningún motivo para no despegarse de la crisis sistémica en curso y elaborar su propia agenda política y económica.
En las últimas semanas, ministros y presidentes de la región se
pronunciaron por establecer medidas defensivas para evitar contagios de
la crisis que afecta al primer mundo. Cristina Fernández dijo que
“debemos blindar la región para no perder lo que hemos logrado”(1).
Guido Mantega, ministro de Hacienda de Brasil, se pronunció por
establecer “un cordón de aislamiento” para evitar perjuicios(2). Hasta
el conservador presidente de Colombia Juan Manuel Santos advirtió en la
Cumbre de UNASUR en Lima que se deben contrarrestar los efectos nocivos
de las crisis económicas por las que atraviesa Estados Unidos y Europa
que devalúan los ahorros de la región(3).
Son miradas positivas que muestran una toma de conciencia generalizada
de que hay que actuar pronto. Pero las medidas defensivas son
insuficientes. Mantega se equivoca cuando asegura que “la cuestión de
fondo es la recuperación económica de Estados Unidos y de Europa, porque
aquí sufrimos las consecuencias”(4). En primer lugar, esa recuperación
salvadora no va a llegar porque las economías que Oscar Ugarteche define
como “países ricos altamente enhuecados”, ingresaron en un período de
austeridad y estancamiento, o crecimiento muy lento, incapaz de
reactivar la economía mundial.
En segundo lugar, y esto es decisivo, porque estamos viviendo un
completo rediseño del sistema-mundo, no sólo de la economía. En pocas
palabras: la relación centro-periferia se ha roto y están en proceso de
conformarse nuevos centros regionales, eso que llamamos BRICS (Brasil,
Rusia, India, China y Sudáfrica) con relaciones de otro tipo con sus
propias periferias y con los viejos centros de poder en decadencia. A
eso se suma la crisis de la hegemonía estadounidense y la consolidación
de un mundo multipolar. Occidente ha dejado de ser el centro del mundo
cuyo eje se traslada rápidamente hacia Asia, un cambio de envergadura
que supera nuestra capacidad de imaginación, sobre todo en el terreno
cultural. Y a todo esto debería sumarse el peak oil, la progresiva
decadencia de la civilización del petróleo, y la crisis ambiental y
climática en curso.
La advertencia de Immanuel Wallerstein acerca del “colapso importante
que se avecina” y la necesidad de botes salvavidas para afrontarlo, debe
ser tomado con la mayor seriedad(5). En su opinión, Europa está
ensayando la creación de un fondo monetario europeo de facto, como se
desprende del último salvataje a Grecia que pasa por establecer una
estructura de gobernanza común.
China está considerando dejar de comprar no sólo bonos del gobierno
estadounidense sino activos en ese país(6). Siendo el principal acreedor
y comprador de bonos de la Reserva Federal, una decisión de ese tipo no
haría sino acercar a Washington al temido default. Asia Times publica un
excelente informe sobre el “colapso de la clase media en Estados
Unidos”, donde demuestra que la crisis inmobiliaria será de muy larga
duración por razones demográficas y los beneficios de las pequeñas
empresas, donde invierten sectores importantes de las clases medias,
están lejos de recuperarse(7).
En síntesis, “hay mucha crisis por delante y urge por tanto pensar
Sudamérica seriamente”(8). El desafío mayor es que la región no puede
pensarse en función de lo que suceda con la economía global sino en base
a sus propias prioridades y la primera de ellas es construir su propia
agenda: desconectarse del mundo rico endeudado y muy en particular del
sistema financiero y de las multinacionales. Son ellos los que necesitan
“invertir” en América Latina porque es en esta región donde hacen sus
negocios y obtienen las ganancias que ya no consiguen en el mundo
endeudado.
Para este objetivo es ineludible acelerar algunas medidas como la puesta
en marcha efectiva del Banco del Sur, redireccionar los flujos de
hidrocarburos hacia la propia región, abandonar el apego al dólar y
sustituirlo por una moneda regional y seguir fortaleciendo el comercio y
los vínculos Sur-Sur. Son propuestas largamente discutidas en la región,
pero cuya implementación se viene demorando en gran medida por el escaso
interés que vienen mostrando algunos de los países que juegan el papel
de liderazgo.
Aún así, son medidas insuficientes. Porque, en rigor, no se trata de una
o de varias crisis sino de una reconstrucción del mapa mundial que
brinda a la región la posibilidad de modificar a su favor la
distribución del poder en el mundo para que sea algo más equitativo. Las
enormes reservas de Sudamérica, casi tan elevadas como las de Japón pero
sin el lastre de su gigantesca deuda, deben ser usadas ahora para
introducir cambios de larga duración. Quizá el más importante sea dar un
vuelco en el terreno de la ciencia y la tecnología, en investigación e
innovación.
El retraso es gigantesco. Brasil, con el 2,3% del PIB mundial solicita
el 0,3% de las patentes, siendo el único sudamericano que se ha
propuesto elevar sus inversiones en la materia. Registra menos de 500
patentes anuales, frente a 45 mil de Estados Unidos(9). Los países
asiáticos muestran que es posible dar un vuelco. En los últimos 20 años
China, India y Corea del Sur experimentaron un crecimiento exponencial
en la innovación. Se estima que para 2020 China superará a Estados
Unidos como principal productor mundial de conocimientos científicos(10).
Pese a que tiene reservas de 11 mil millones de dólares, Bolivia
invierte sólo 40 millones anuales en ciencia y tecnología, el 0,1% de su
presupuesto. Por lo tanto, debe recurrir a las multinacionales para
industrializar el litio. Los demás países de la región tienen una
situación muy similar. Pero sin dar este vuelco en el dominio de la
ciencia y la tecnología, será imposible en un plazo razonable, digamos
de dos décadas, dejar de ser exportadores de commodities, dejar el
extractivismo y tomar un rumbo nuevo.
Por último, no será posible desconectarse del caos sistémico en curso
sin conflictos ni pérdidas, eludiendo desgarros internas. Eso es una
crisis. Quiebre y ruptura para cambiar el rumbo.
- Raúl Zibechi, periodista uruguayo, es docente e investigador en la
Multiversidad Franciscana de América Latina, y asesor de varios
colectivos sociales.
NOTAS:
1. Página 12, 29 de julio de 2011.
2. Valor, 3 de agosto de 2011.
3. Página 12, 30 de julio de 2011.
4. Valor, 3 de agosto de 2011.
5. La Jornada, 4 de agosto de 2011.
6. Dean Baker en Diario del Pueblo:
http://spanish.peopledaily.com.cn/31619/7560741.html
7. http://www.atimes.com/atimes/global_economy/mh02dj05.html
8. Oscar Ugarteche en ALAI, 3 de agosto de 2011.
9. Proyecto Brasil en Tres Tiempos, Presidencia, 2004.
10. http://spanish.peopledaily.com.cn/101390/7284766.html
Más información: http://alainet.org
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