I'll Take Wall Street Plus the 3.5 Points

In 2008 the tsunami of economic disaster approached catching the American government with its pants down. While elected and appointed to manage the country’s money supply, these people were still blindsided due to their decades-long love affair with Milton Friedman’s economic theories, which gave enormous power to the capitalist class while privatizing public services and outsourcing labor to oppressed countries.

Faced with a monstrous dilemma, Congress and the president had two choices: spend $200 billion to stabilize crumbling mortgages or give $700 billion to Wall Street to do whatever it is they do with it. Since the $200 billion would only help at-risk households who can contribute a maximum of $4,800 to federal campaigns, guess which plan won?

It’s no surprise that the political establishment would follow its money supply. But it was also a sign of the special treatment we as a society have given to trickle-down economics. We were essentially saying that giving $3.50 to capitalists is more valuable than giving $1.00 to consumers. At times throughout our history, this might have been a reasonable bet, especially when capitalists were making things – back in a time when America actually had a manufacturing base.

But the Wall Street bailout money placed more bets on more derivatives, created no wealth and expanded the bubble. The estimated $200 million would have been used to cover the upside down part of the upside down mortgages, which would have led to some consumer stability and gone a long way in right-sizing U.S. currency.

We would have been out of the woods by now, instead we are going through another round of extreme piss-offery at Wall Street bonuses and corporate whore senators.

Why We Won’t Go Renewable

There is enough wind in the Dakotas to power the world. There is enough sun in Colorado to power most of North America. If we invested $700 billion in building out this infrastructure instead of bailing out the banks, without question the U.S. economy would have been recovered by now. And the banks would have been just fine as well.

This is such a blatant observation; the head-scratching question remains “why not?” There are two reasons, and they are far less obvious. First, the American dollar has been dependent on the world value of oil for nearly 40 years due to the concept of petrodollars. Secondly, and more covertly, there’s a geopolitical value to having scarce resources in the ground.

The world has been consuming oil for about 150 years and even the most forgiving forecasts assert that we’ve got at most 250 years left of oil in the ground. Basically we are at peak oil. And despite the calls to “drill, baby, drill” off the American shores, it makes more sense to simply let it be.

Globalization has never been about the world being flat, and it’s not a new phenomenon. It’s entirely about the accumulation of wealth. The Open Veins of Latin America describes how Spain and Portugal invaded and exploited Central and South America in the 16^th Century for their own accumulation of precious metals. And the story reads similar to the most critical ones we read of North American imperialism.

But as the majority of the world’s gold and silver was harvested, as that market reached its own “peak metal” oil became the next gold. In addition to being the dominant form of energy, oil is used for plastics – another new phenomenon in the modern arsenal of products.

An oil investment is far more profitable than a gold investment because oil is literally an exhaustible resource. Its value is derived from its ultimate use of burning up, being turned into both energy and a carbon emission. With every barrel of oil pulled out of the ground, its value increases. It’s a diminishing resource. Gold and other precious metals served no other purpose than to sit in stockpiles backing up currency.

As an aside, jewelry is to metals what plastics are to petroleum.

But America’s love affair with oil is a scorched earth policy. At some point, it’s simply not going to be there any more.

But this all leads to one huge profiteering machine – the military. Modern warfare is a means of protecting America’s oil interest. And while it’s always framed as a way of protecting democracy and freeing oppressed people, we fight for two reasons: to secure oil fields in Iraq for private oil companies, and to keep the American military machine active.

If we were to invest half the American military budget over the next decade, approximately $1.8 trillion, in building out a renewable energy infrastructure, we would produce enough energy to power the world. There is no shortage of silicon for photovoltaic cells, nor is there a shortage of steel for wind turbines. As a top exporter of energy, the dollar’s value would remain stable on world markets.

But the real reasons we don’t do this are 1.) because it involves cutting the military budget in half and 2.) there would be no more oil fields to secure. Once again, the Pentagon wins.

The Last To Go

I’ve made my living for the past decade, since getting out of economics school, on the technical side of the business world. My selling point is a rare ability to communicate between the business and software development types. However, that ability is becoming more and more common as the geeks have learned business, the business types have learned geek, and the production line has been exported to India.

So I struggle with changing the catch phrase on my résumé to “rare ability to communicate between India and the business.” Furthermore my ideological distaste for globalization leads to a struggle to hate myself for having exported white collar jobs to India. Unfortunately, however, it’s the way I’ve stayed alive in recent years - being on the project team that automates bits and bytes in such a way that uneducated 20-somethings can support multimillion dollar, enterprise-critical systems for dimes on the dollar.

My type will be the last to go. We were once rare, high paid geniuses who could translate business talk into Boolean logic. But now that we’ve done such a good job at automating the enterprise, every project seems to be taking what we’ve simplified and off-shoring it. The same subject matter experts with whom we shared lunch a year ago, picking their brains – and in the process learning about their kids and struggles – are rapidly being replaced by hourly labor in call centers staffed by slumdogs.

We will be the last to go because when we’re gone, there will be nobody left. The information economy, made possible by the corporate media’s love affair with “The Flat Earth” has led to a distinct class system of owners, paupers, and those with the “rare ability to communicate between India and the business.” Once we’re gone, it will be the slums for most of us.

Capitalist Labor Day 2009

Although I vow to stop doing this, I can’t help but tune in to the train wreck known as cable news. The nasty part of it is the split screen with one guy representing the left and another guy representing the right. The anchors don’t even try hiding it.

While it’s relatively new in the news business, the rift between left and right is still the same tiresome argument between the working class and the capitalist class. And just by mentioning that I accept that the freepers will label me a Marxist – have it it boys. Because labor significantly outnumbers the capitalists, the message from the right is increasingly convoluted. It has to be simply because they can’t blatantly come out and promote policies for lower wages, more tax shelters and more government protection of monopolies and oligopolies.

Let’s be clear: most people in elected office represent the monopolies. They don’t represent people. Ultimately, Democrats and Republicans alike, if they are in office, are defending the capitalist class. Let’s be equally clear that defending the capitalist class is not the same as defending capitalism. The latter is a system that requires an ownership class and a worker class. Our system today tilts the playing field toward one class.

This is how we’ve been raised for a generation – if we take care of the almighty corporation (which exists to give profits to capitalists) all will be fine. What’s good for Wall Street is good for Main Street. Right?

That’s why we’ve been so diligent in exporting our manufacturing base to third world countries. That’s why we’ve allowed the bottom to fall out of the wage market. And it’s been so successful that today we are approaching double-digit unemployment.

This Labor Day brings with it some slightly encouraging news. After decades of dismantling the country’s manufacturing base and thus its labor force, there are some signs of improvement. Wages appear to be up and the earnings gap for women and minorities is shrinking.

The CEO-to-worker earnings ratio is down from its record high ratio of 525:1 in 2000 to 317:1 in 2008. Translated: for every dollar a worker earns, a CEO earns $317.

With that ratio on the decline and other gaps narrowing, it appears the economy may be headed toward stability. More importantly, domestic manufacturing increased in the second quarter this year.

Great news. Not so fast.

While GDP growth is actually negative for this year (-6.4 percent in Q1 and -1 percent in Q2), productivity is rising at a 6.6 percent annual rate. Productivity is the value of output (market sales) per cost of input (wages and equipment). It is a leading indicator of income to the capitalist class.

So as our GDP shrinks and our wages are rising at a more modest rate, how are we going to buy all the goods that were produced so efficiently in the second quarter?

Donkey Fluff

Politics is big money. It's all about presevering the protectionist state of the corporations. There is no competition. There are oligopolies. It's pay to play and the price of admission is a contribution to a campaign.

Most of them on both sides of the ailse are corporate whores. If I have any respect for the Republicans it's because they don't pretend to be anything else. Yeah we suck the cocks of the corporations, what you gonna do about it? The Dems play the same game while pretending to care about working families. This health care debate is exposing this fact. When it comes to whoring themselves to the corporations, Republicans are flat out porn stars while Democrats are merely fluffers.

I’m So Glad The Revolution Is Here

Writing a book about American economic life during the most tumultuous financial time in nearly a century has been like digging a hole in a lake. We’ve been trying to stave off the inevitable for a generation, but it has become clear that the world economic system is about to collapse.

The new breed of gazillionaires will be born out of the ashes of today’s disaster.

Every day there is new news that would have seemed unfathomable even as recently as the summer of 2008. This makes it impossible to pick an end point. This system is in constant flux, spiraling downward. But how we got here is the story of our economic life.

We are here not because of tax rates or earmarked pork barrel spending. We are here because of long-term trends that have spanned generations. Years in the making, we have reached a boiling point.

This is the result of the following trends:
• Globalization leading to lower wages
• Disaster capitalism
• Petrodollars, the basis of a severely mismanaged money supply

The Economy’s Dirty Needles

The debate over the stimulus packages has ignited a storm of coverage of Keynesian theory, that a substantial government investment in the economy can pull a country out of recession. The proposed $700 billion plus offers that are on the table may have a short-term benefit, but ultimately it’s a sugar high.

The overarching mentality is the belief that more money in the system will grease the skids for spending and investment. This may be true in its limited scope, but there are multiple “skids,” per se. Perhaps thousands. And some skids are more effective than others when greased.

The great hope is that an abundance of money will begin to exhaust all the pent up demand in the system. This onslaught of demand will lead to job creation, because somebody needs to design, build, ship and sell all the things so many of us want but are reluctant to buy.

It makes sense that this increase in demand would require increased investment, even if investment always precedes manufacturing.

However, even if there is an aggregate increase in manufacturing, we forget that our manufacturing base has been exported, resulting in a significant drop in wages. The increase in productivity, brought on by the whirlwind support for cheap manufacturing labor in slave states around the world, has not been matched by a similar increase in wages. Wages equal purchasing power.

With diminished purchasing power in America, there is only one way to fulfill the demand – subsidies. And That’s what the stimulus package is.

But it doesn’t subsidize the masses. Rather, it subsidizes the capitalists whose productivity, meaning profits, have risen at a rate greater than wages. This system is all about perpetuating a ruling class.

When you give money to the working poor and tell them to go spend, you’re essentially giving clean syringes to the junkie. True you minimize the damage, but you don’t fix the underlying issue.

More than a trillion dollars have been committed since the fall of 2008 to remedy the nation’s economic troubles. This is quite possibly a part of the price tag of neoconservative economics. Just tack it on to the $12 trillion we’re already in debt and then we will know the value of Milton Friedman’s legacy.

This is primarily a monetary crisis, but it’s the result of awful fiscal policy. Too often we have been willing to allow our manufacturing base to slip away. Politically we’ve been too afraid to stop investing in things that do nothing except destroy.

There’s a bitter pill to swallow in a crisis like this one. The proven answer is perceived as being so politically unpopular, nearly all who have any authority in the matter would balk because they believe they’d be cannibalizing their own careers. But it’s a twofold solution that is the mirror opposite of a stimulus package.

It requires decreased government spending and moving the manufacturing base back home. By rightsizing our federal budget, we can begin to set a more realistic value on our currency. Furthermore, by going protectionist with our labor market, we can begin to ensure there will be purchasing power for all the goods and services produced within our borders.

Often we fail to acknowledge that economies are closed, self-correcting systems. Granted there will always be outside influences, and there will always be a necessary amount of importing and exporting. But like any system, economies correct themselves much easier when there are fewer external factors.

So with possibly thousands of factors at play, the stimulus swindle of 2009 must grease the proper skids if it will be effective. Specifically it must address wages and earning power in the long run.