Monthly Archives: September 2009

Plutocalypse Now: Welcome to Yard Sale Nation

I was lounging at the coffee shop, wrangling over the Gobal Meltdown with a Harvard-trained economist.

“Yeah, the pundits daily publish cheery predictions of a “recovery,” I rattled away, “you-know, blips in housing prices, output in the Asian sector, whatever.” Problem is, these predictions serve mostly to obscure a fatally flawed DOA economic model that is proving its inconsistencies and weaknesses under a growing pile of leading economists, guys like Joseph Stiglitz, he who has declared that “recovery,” will not be V or U shaped but more like an L or a W —  as in Western economic systems that are junkies for growth.

“This is part of a cycle. We have these all the time,” he said.IMGA0112

I reminded him that Friedman-ite neo-liberals Greenspan and Bernanke and other “free marketers,” the so-called Masters of the Universe, boasted they had gained scientific control over the economy, convincing themselves and nearly everyone else that steady employment and 2-percent growth could be ridden forever like a trained killer whale, demonstrated so they said by the FED mitigating the 2000 “New Economy” Dot Com collapse by pumping liquidity into the market.”

“They were either deluded … or they were lying.”

The simple story is when the seemingly unlimited more-more-more of the fifties and sixties collided with market saturation, mere replacement of products and accompanying industrial “stagnation,” the orthodox reaction was lower production costs, shift to service economy and nurture the bogus, failed alchemy of “financialization,” consisting of the creation of a vast pyramid of paper (fictional) wealth. A basic, fundamental truth of economics, that capital and cash money are very different critters, has been obscured by the enhanced use of money as a measure of wealth, when in fact money is merely an agreement of a representation, a sign of value for purposes of exchange. Capital consists of things of actual material value, land, commodities, resources. Much of the growth of the last three or so decades was based (partially) on the growth and capitalization of fictional paper wealth, the financialization of the US economy – one bubble after another, aided by spasms of deregulation following whichever disaster du annum, the S&L hustle, the Dot-Com shakedown, la-dee-da.

The rupture of last year’s bubble of bubbles exposed and ended financialization, what had become the only game in town. Your exotic financial Frankenstein monsters, Credit Default Swaps and Collaterized Debt Obligations, etc. which generated so much cash, amid stupendous risks that a clever sixth-grader could calculate on a napkin, reached the terminus of a finite system Wall Street arrogantly deluded itself into thinking infinite. The desperation has been amply displayed by the latest scheme of capitalizing not cash nor debt, but literal death, with the recent life insurance ploy.

So what do we do now?

A sort of blueprint is visible in a collapse in Peru in the early 20th century. Owing to a global spike in the rubber trade, traders and landed gentry in the upper Amazon made great profits practicing unsustainable, extractive exploitation of the rubber stores with the help of Amazonia’s indigene peons until British expansion of the rubber biz in Southeast Asia fomented a global glut — and the rubber bubble popped.  As economic diversity, i.e. native industry etc. accompanied by a local bourgeois had not been permitted to emerged during the rubber monoconomy, when the rubber biz went south, that was all she wrote. The rubber magnates’ capital lay no longer in the now-worthless rubber trees (which weren’t theirs to begin with), nor in the bodies of their now reduced-value debt-peons (which weren’t theirs either). The sole remaining capital ended up being peon debt the natives accrued via the purchase of imported and often unneeded products. A plutocrat could not legally “own” an Indian son but could own their debts, a remaining capital that was freely traded around, the debtor in tow. Any of this sounds familiar?

Remember the emergence of so-called New Economy, a term that rode in with Death Valley Ronnie (in a speech at Moscow State University)?  In that dearly departed brave-new economic world, top-down policies shunted the tiresome chore of actually making whiz-bangs and doo-dads to the poor “gap-fillers” in “emerging” nations, that is previously non-industrialized, while in exchange for our major consuming nation, the “miracle” of the 80s and 90s economic growth came via merely peddling said doo-dads at the mall or pouring beers at the local TGIF. One hears a satisfying but incomplete fiction that off-shoring was due to liability associated with greedy civil lawyers, but the truth is more complicated (or simpler). The shift was due to the raison d’etre of the modern corporation, a thirst for profits gone off the end of the scale at the ultimate expense of the citizen/laborer. Consumption became a form of capital fed by a steady stream of mass media PR, convincing the public to exchange the hours of their lives for crap they didn’t need in the first place, much as in pre-rubber bubble Peru. The only way to measure this tinsel economy was by how quickly people’s formerly glossy crap ended up land-filled or stuffed into garages of movie-set super-sized McMansions, a predicable result of a political/economy shifting to one based on the profits made via consumption.

Ok, so where do we go? Don’t look for a return to the “good ole days,” i.e. a resurgence of the mortgage fueled credit card tar-pit. The failed model, built largely on an assumption that bad debt could be invested ad nauseum has been laid to rest along with a number of complicit agencies, the ones that could not be salvaged via the sort of state/corporate socialism glossed over by “free” (for them) market types and their sycophants in the major media. The basic fundamental cultural reality is the psychological trauma wrought by mass dispossession is too deep and wide for the average Joe and Jolene to be getting over anytime soon, the era of using one’s home to finance consumption gone down a suck-hole. A nation’s live work, its collective home equity scattered coast to coast across lawns for pennies on the dollar. Welcome to the yard-sale nation.

In Iquitos, Peru, the regional capital of the Departmento Loreto, the collapse of the extractive rubber economy fostered ultimately a modern healthier, more self-sufficient economy that while still with obvious inequalities and injustices, was more sustainable than the extractive rubber bubble. My friend and I were in agreement that we are poised to witness a return to an economic system more like what existed before off-shoring via two related statistics, the first, increasing global wages, the two-edged sword of global mercantilism. In order to attain the sorts of profits endemic to  a growth-based system mercantile market the system has to eventually begin to pay their workers enough so that manufacturers and banks can reacquire the money spend on wages via products the workers themselves manufacture (remember Henry Ford). In the staggering globalized economy, the average salary for a Chinese industrial worker is now around $3.50 an hour. The other factor that has leveled the playing field is the ever-increasing cost of fuel needed to ship imports halfway around the planet. These factors (along with others) are making for a dramatically less-advantageous position for exporting nations, as well as the return of sailing ships, the development of football field-sized parachute sails for freighters.

The cost advantage of off-shore manufacturing and its gloomy accompaniment of imported toxic products is evaporating, ushering in a new era of local economies around the world. The man is out of the picture if you want it that way. But you will have to be prepared much more on your own, with the help of your neighbors.


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Biznis a usual

We’re quite familiar with the old bit about money being the “root of all evil,” right? In 2009, the global slow motion economic train wreck is attending the collapse of history’s briefest major empire amid an emerging consensus. The contentious faux politic is being shunted aside for a time by an examination of the vast sums of fictional paper wealth, the Do-ra-mi, tearing at the fabric of the United States and the entire world. Before it can begin to stitch itself back together we might consider this opportunity to seek clarity; the cash at the core of the drug/guns matrix is a fine point of departure.

That drugs and guns are inextricably linked by economics and finances, tied by the malevolent, symbiotic relationship known to smugglers as “small packages,” was amply illustrated by the War on Drugs™ precursor, the Volstead Act aka Prohibition. The financial rewards engendered by that blanket ban on a substance that enjoyed popular usage was precisely what make the biz so alluring — and bloody, as displayed by Alphonse Capone, Joe Kennedy and many others who exploited crime and corruption of authority to amass the great fortunes that often attend risk. Flash forward and the why behind how we seem to be unable to make any headway on Gunz ‘n’ Drugz are, again, the stupendous profits coupled with a firearms fixation burrowed so deeply in US culture as to seemingly have entered the people’s DNA.


The early financial and historical records of this nation recorded large sums made via narcotics. The fortunes of some major and influential northeastern families, the Roosevelts for instance, were made partially from narcotics, coinciding with the location of three statues of the Revolutionary-era spy Nathan Hale on the campuses of Exeter, Yale University and CIA headquarters in Langley, Virginia. Throughout US history, many commercial, intelligence and business leaders attended Yale, some to be absorbed into Skull and Bones, a university secret society funded by a trust amassed by the Russell family circumventing the British military-enforced Opium monopoly in China, that trade devised to reacquire western money that had ended up in China via cheap, imported goods, a precursor of today’s trade imbalances.

Flash forward to our time, the connections between banking, drugs and US intelligence continue apace. i.e. the elite intel/drug connections of Iran/Contra wherein US agents and military converted tons of cocaine into cash to pay for illegal arms shipments and support for Contra operations. The occasional piddly perp-walk would look like a day at a petting zoo were the Joe Sixpacks of the world to magically en mass come into the knowledge of how much drug money makes it through the banking business at the same time 1 percent of US citizens rot behind bars for the same activity.

In 2000, Al Giordano of the Boston Phoenix adapted a work of Mario Mendez Rodriquez, the editor of Mexican newspaper. Por Esto exposed Mexican narco-bank, Banamex and that bank’s director, Roberto Hernandez Ramirez, a one-time target of the DEA’s “Operation Casablanca.” The sensational, lurid series, backed up by ample photographic evidence and testimony by local fishermen, exposed not only that Hernandez property on Punto Gordo was a transfer point for tons of cocaine but that Banamex supplied an avenue to dispose of dirty money.

Banamex and Hernandez were unable to shake the veracity and thoroughness of the Rodriquez and Giordano claims which have prevailed in eighteen defamation lawsuits in the US and Mexico—where legal venues in the latter are not generally noted for open mindedness or sympathy for muckraking journalists who wobble elite money-making systems. The explanation as to why the scandal received thin coverage in media systems can be seen by the fact that Hernandez sits on the board of Televisa, the largest media network in Mexico.

The bank/drug hydra made small ink this January when the director of the UN’s Office of Drug and Crime, Antonio Maria Costa said, “Drug money is keeping banks propped up.” Amid this gem, it is worth noting that after Robert Rubin, Bill Clinton’s guy at Treasury, advanced his career at drug-laundering Citigroup, they then acquired Banamex, along with Hernandez, who to this jaded observer’s mild, disgusted astonishment remained on Citi’s board until this year.

Then, there is the perhaps irredeemable damage drug money has inflicted on the legal/judicial system of the US. The money associated with illegal drugs has proven too much of a temptation to law enforcement agencies who sucker themselves and get busted for dealing the same drugs they interdict. Besides that money, there are Federal grants based on raw numbers of arrests and convictions available to law enforcement jurisdictions that have fostered a silent epidemic of false imprisonment via false evidence presented during trials, sometimes up to and including lies worked out between prosecutors and defendants in exchange for reduced but still bogus charges. Then there’s the bundle in the private prison biz at the expense of justice, exhibited by two Luzerne County, Pennsylvania judges who were this year charged and convicted of accepting $2.6 million in kickbacks from private detention centers in exchange for hundreds of corrupt juvenile convictions. Savor that for a second, the ruined lives, the costs to society in downstream social and monetary costs as well as the reinforcement of primitive ethnic stereotypes.

While non-violent crime rates and drug use have relatively remained stable for decades (as calculated by statistical studies and hospital admissions), the same interval saw an explosion in the numbers of prisoners. Ethnic communities (i.e. “black”) were especially hard hit by a coincidence of harsh drug policies pioneered by New York Governor Nelson Rockefeller, lobbying by the private prison business and the 80’s media rif of “crack crazed” minorities—which lead to stiffer sentences for the lower cost per unit of crack cocaine versus the equal amount of the powdered form favored by the better-heeled (read “white”). Despite statistical studies showing equal drug use by the various ethnicities and that the large majority of hospital drug emergencies are white folks, a black person has ten times the chances of being incarcerated for drugs, or vilified as “a problem” outside prisons, illustrated by the substitution in common parlance these days of  “crack head” for “N-bomb.”

Nothing like a good, old fashioned arms race to perk up your quarterly statements. The godfather of the US PR business, Edward Bernays, theorized the best approach for increased business is not so much via an advertising bombardment, but by creating demand. If one’s business happens to be firearms, an atmosphere that scares the shit out of people will have even your more balanced sorts tripping over themselves on their way to the gun store. As evidenced by 9/11, Katrina and the US/Mexican border “drug war” (among other factors). The United State’s inability to protect its citizens has coalesced into a boon for weapons manufacturers, the latter evidenced by the military weaponry the Narcos “somehow” acquired being “countered” by Mexican authorities and spooked civilians, fears that arms manufacturers and dealers are delighted to accommodate. It is worth remembering the US small arms business is larger than all other nations combined.

The profit motive integral to this country since before we were a nation has mutated and metastasized into something even the more commerce-minded founders might even blink at were they around for a day or so, but don’t look for matters to improve via the chimera of ethics. When referenced against history, the current economic pancake reinforces what detectives call a “pattern,” in this case, profits uber alles. Faulty, dangerous consumer products, financial and banking shim-shams have enriched the already-wealthy at the expense and lives of Joe Sixpack, illustrating the thesis of Milton Friedman’s 1970 New York Times magazine piece, The Social Responsibility of Business is to Increase its Profits. One with profit as their primary motive would be daft to rock the illegal drug/gun boat that has provided so many fortunes, from the dope to the prisons users end up in.

Excluding the money made and the lives destroyed by the system put in place to mitigate the “problem,” the War on Drugs™ has had net zero effect. The US’s skewed, failed politcal/econo/financial system and its vampire-esque desperation for money insure a steady supply of fresh victims for the monster attended by a negative effect on the “problem.” Given the glaring failures of the War on Drugs™, a more efficient use of strained resources might be something akin to price-support systems as the US does with corn: pay the growers more for the raw coca and opium than they can get from the distributors, pile it up and burn it. Keep in mind the caveat that the years following repeal of the Volstead Act were accompanied by a 60 percent drop in violent crime in the US. Legalization might be worth a try as seems to be happening by itself with weed, for the same reasons Prohibition was called off, da money – tax money.

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