THE 1930s WERE JUST A WARM-UP. THIS IS THE REAL THING.
In a few words: There were no good reasons to have a depression in the 1930s, now there are many.
Abstract: I advocated long ago that we were engaged in “Great Depression III“, the mother of all depressions. The word “depression”, is starting to appear, here and there, even among Serious People, as Obama goes from cool to cold, and dissembling to disassembling. Obama thought it was smart to lower taxes on the hyper wealthy. That exploded the deficit in his own face. Now, sadly, the president’s erstwhile allies, the bipartisan republicans, have apparently informed him that he is past his expiration date.
Indeed the situation is depressing: never, ever, have many things looked so grim; Obama’s dawn has transmogrified into a parody of a sun sinking into red ink. The Federal government spends 24% and takes in 16% of GDP… And has little to show for it… Besides saving the auto industry. Mr. Obama, where is your Hoover dam?
Mr. Obama, why did you not rise taxes on plutocrats, and hedge fund managers when you controlled Congress and you had a super majority, filibuster free, majority in the Senate? (And as I asked insistently, BTW.)
But the drama is much bigger than Obama. Even the Late Roman empire’s situation was positively balmy, relative to the torrid events building up ahead. Only the Mayas faced just as bad an entanglement of evils, when a multi century drought struck, and their bickering, plutocracy riddled society, imploded in strife, wars, flames, mayhem, and the total destruction of the means of maintening alive 90% of the population. The multimillennial Mayan civilization imploded, and was still a vaporous shadow of its former self, when the Castillans showed up, six centuries later.
The governments of the West are not reacting appropriately to the present crisis. What we are truly engaged in is a war against the worst elements. All of them (but for tribal racial fascism… so far). So what we need is a tremendous effort, all together now, and just going on with the plutocracy, while depressing economic activity by cutting spending and evoking “competitiveness”, as the USA and the EU insist, is not appropriate.
Cutting which spending, and what does that mean? Ultimately, money is a signal of activity. What we need right now is more, not less, activity. And activity has to be well thought out. The free market has proven unable to manage even its own speculation, so it should be put out of its misery. make it much less free. The strong hand of careful wisdom should now steer it, just as it should steer civilization. Start by noticing that “competitiveness”, all too often, means just war against the People.
Nobody is “competitive”, no competition helps against, a rising acid sea, or competitive against ever more expensive energy. So the notion of competitiveness, drummed up by the stupid leadership in the USA and the EU is besides the point. The genus Homo is made to fight adverse elements. But recent civilization, which created them, is not.
Why? Mostly because, just as in finance, the major decisions are taken by a few self serving idiots in the shadows, using levers (such as the fractional reserve system), which are not on the radar of befuddled masses. The leaders of “representative democracy” would be acting idiotically, even if they were smart, because they do not use the major advantage of democracy, which is serious public debate.
(Obama just fakes it, as he showed in furthering the mayhem in Afghanistan, or with health care, or with financial reform, or with his non stimulating stimulus, etc.; each time the decisions were taken in secret, without public debate. The EU does not even bother to fake public debate, at least under sarkozy and Merkel.
It is no happenstance that finance is the paradigm of anti-democracy. As one of the Rothschilds, a family of bankers, noticed two centuries ago, he was the real power behind the throne, because he created money, and directed it to go wherever he wanted to. In other words he directed the (economic) activity of men for all to see. So he was a slave master, without whips and chains, having seized the muscles of the multitude.
In the present world, it’s much worse, because the likes of Murdoch not just tell the multitudes what to think and what to feel, but, even, what to worry about (celebrity, not profundity). When some plutocrats, the Koch brothers, decided to make Americans create a fake protest party, the Tea Party, supporting the plutocratic cause, it was easy. It was even easier to make a campaign against the relevance of a quickly raising CO2. The beggar in chief proclaims he will put a billion in his can, for greasing the wheels of his next election, and experience shows that he will only listen to the biggest contributors, a selection of the dimmest.
Yes, a selection of the dimmest, because the money of the plutocrats is often inherited (Murdoch, Kochs, etc.), and, or, the passion to dominate other men is their main driver. So we accept as leaders the hand of fate. and the lowest instincts. Plutocrats direct the very hearts of the minds of the multitudes, towards their master’s abode.
SEMANTIC SWITCH FROM RECESSION TO DEPRESSION, Following Yours Truly:
Paul Krugman is embarking on the depression bandwagon, in “The Lesser Depression“. He used to call the unfolding disaster the “Great Recession“. I have proudly brandished the notion that we are in a Greater Depression, years ago, for reasons I will make manifest, once again, before this essay is over.
I mention this is not because I want to crow about my intrinsic glory, but because the unfolding catastrophe was foreseeable, long ago. My basic insight is that the “Great Depression” of the 1930s was a conjunction of several accidents, like a few waves coming together, whereas what we are facing now is several towering tsunamis, barring the horizon, the result of enormous, inhuman forces unleashed. The mental dwarves who lead us understand this not, and are not up to the challenge.
What we have now is more of the fundaments of what happened in the 1930s, but we cannot say it’s accidental, this time. The way to prevent said financial accidents was deliberately removed by people acting according to an ANTI-PUBLIC IDEOLOGY. How can one have a republic when the leaders have an anti-public ideology? This is an old quandary, already blatant in Rome, 22 centuries ago.
We also have new structural disasters in the making, such as using more ecology and energy than we have at our disposal with present technology, poisoning the biosphere with greenhouse gases of several types, some of them with extravagant names and industrially manufactured. So the seas are rising and acidifying, droughts are wrecking the planet, and the poles melting, while the Earth’s climate is switching to the hot mode which brought saurians to Greenland and dinosaurs to Antarctica, 100 million years ago.
DROWNING IN CONTRADICTIONS:
Everybody knows about Mr. Obama: when he could, and should, have removed the tax loopholes of the hyper wealthy, he did not. Instead he went on a crusade, killing Afghans and Pakistanis, in violation of the laws of war, in the later case. Now he has killed lots of Afghans and Pakistanis, it cost a lot of treasure, lives, and limbs, and he has nothing to show for it, because he was engaged in one side of an Islamist civil war, which ought to be none of the business of the secular West.
If not a great humanist, Mr. Obama is, at least, a great humorist. For two years, he could have augmented the margin tax rate of the hyper rich to 99%. But, instead, he made taxes on the hyper rich lower than they ever were. So now he has a deficit, and he points at the newly elected republicans. He calls politicians “irresponsible”. But who was responsible of the USA, in the last 30 months? Mr. Obama could have taken thousands of decisions in the first few months. Instead he claimed that he was going to change Washington with cool love, and waited for the republicans to love him, and approve of all he might perhaps want to do, first, before he would try to do it.
Now that Obama cannot ask the hyper wealthy to pay as much tax as the middle class, guess what? He claims that he wants to do so, to reduce the deficit. Or so he says. Darn, he forgot to do it when he could. Is he just phenomenally stupid, as some commenters in the New York Times are now finally suggesting? Or is he greedy like Clinton, and faking his supporters out, while conducting an effective policy on the right of the Tea Party? Or is it both?
Now Obama makes noises about hitting the brakes, the middle class, Social Security, Medicare. He says that’s because, a government is like a family, and has to watch its money. I guess the adults like him and his friends the financiers and plutocrats, get to spend as much as they want, while the children, the rest of us, are on a tight budget.
Obviously, Obama does not even know that he does not how money is created in a country. Otherwise he would not claim that a government is like a country, with him as the father of the nation. Government delegates authority to private banks to create most of the money. The government itself starts the process, namely the government itself creates money. Families don’t create money out of thin air, Mr. Obama, governments do.
In truth, as Krugman says: “Even if Washington and Brussels succeed in avoiding immediate financial catastrophe, the deals being made will surely make the broader economic slump worse.”
OK, the Europeans don’t have the excuse that Obama has, to be officially financed by Wall Street. The development of the month is that the French, also known as the “Europeans” came out with another half baked (thus indigestible) plan to rescue “Greece”, that is, themselves. States will lend 108 billion Euros to Greece so Greece can pay what it borrowed before, and, this time, finally, the banks are taking a cut of 50 billion euros or so. (The latter point thanks to Merkel, who seems to be waking up).
In other words, this plan crosses a psychological Rubicon: It is a PARTIAL DEFAULT OF A COUNTRY, Greece. It’s like the first rock coming down, symptomatic of an avalanche. By the way, the private bankers were also at the EU meeting. That’s more honest. But who elected them bankers? Just in the case of France, the French national debt will augment by 15 billion euros (~ 22 billion dollars), just to rescue Greece, a little country with 11 million inhabitants.
Bankers ought to be in jail, or out of business, and their property redistributed to those they stole. Instead, they are at the table, feeding at the trough, talking big with the representatives of the People.
Somehow, what’s called “Greece” is a bunch of banks many of them in France (so France wanted a special “solidarity” tax on banks), or in Germany (and Germany found less painful for exposed banks to take a little cut). There is a French habit to have “taxes on solidarity”. The Germans fear the French imperial approach of making a super-state of the style Napoleon and his imitators visited on them in the last two centuries.
Then there is the real Greece of taxpayers, and small incomes, suffering while the super rich plutocrats, including the Orthodox Church, do not. The least the Greeks could do is to pay taxes, as they are in deep sh.., IMF director Strauss-Kahn pointed out, a few days before he himself got in deep sh…
To enhance my considerable popularity, I would propose a tax on Mount Athos, a vast private peninsula where the female gender is forbidden by the monks. Hey, please, one never knows, especially when a long deprived monk comes across one of these tempting sows, the help of the Lord could not be enough, and he could turn into a real Strauss-Kahn, grabbing whatever can be grabbed on a sow… Mount Athos is adorned with some extravagant new monasteries financed by those immensely wealthy and honestly hard working Russians…
So the Europeans came up with a Statement By The Heads Of State Or Government Of The Euro Area And EU Institutions (pdf). The fun part is, more of the old stuff, the famous 3%:
“All euro area Member States will adhere strictly to the agreed fiscal targets, IMPROVE COMPETITIVENESS and address macro-economic imbalances. Public deficits in all countries EXCEPT those under a programme will be brought below 3% by 2013 at the latest.”
Greece, is under a “programme”. The Greeks had insisted to convert the Drachma, dramatically, into the Euro, at too high a rate. That made Greeks instantaneously rich, but long term uncompetitive.
Speaking of competitiveness, Obama and the EU leaders views “competitiveness” as a panacea. Everybody will outcompete, beat up everybody else! Beating others up, is the wrong obsession. We saw what that one leads to, in 1914. If one improves competitiveness too much, worldwide, we will be at each others’ competitive throats. The improvements to be made ought to be phrased differently, from the EU to Washington.
It will be interesting to see how many European countries end down under a “programme”. The will expressed by the two big dogs, France and Germany, to reduce deficits under 3% is to be taken seriously: that is what they did in the 1990s, and Germany squeezed very hard its working class to become more competitive. It did it harder than France, and came out better.
So now we have a two speed Euro group: the big dogs pulling ahead, the colonies in tow. Nothing wrong with colonies, in my book. Better a big empire, than a big mess. (That does not mean that empires which cause messes are welcome, quite the opposite!)
SELF FEEDING FINANCE IS AN EXPONENTIAL TO PLUTOCRACY:
There are more than analogies between the crises in Europe and the USA. There is a common fundamental cause to most of the troubles of Western politics: the PRIVATE-PUBLIC MONEY CREATION SYSTEM THROUGH GOVERNMENT INSURED FRACTIONAL RESERVE LEVERAGED PRIVATE LENDING (thereafter to be called, as financiers do, “fractional reserve banking”). OK, it is more than a mouthful: it is a brainful, if you will forgive me this neologism. A brainful which made us all sufficiently stupid, so that this exploitative system can perdure.
The very fact that fractional reserve banking is a brainful explains why we are stuck with it: nobody who is enraged enough to want to destroy it, understands it, and most of those who understand it will not complain about it, because they profit from it. “Fractional reserve” is basically a banking system which makes the rich who are in finance richer, without much effort, if they are allowed to use it for their own profit without retinue, in connivance with the elected officials.
Fractional reserve leverage lending allows private individuals, unelected, unsupervised, to create money. Out of thin air. Differently from families. For some reason, those individuals, the bankers, also create politicians. That’s bad enough, but it gets worse: all the money they create is invested, not in the real world, but in a parallel universe they themselves defined, which allows them to claim unearthly profits.
Banks ought to NOT be allowed to speculate in finance, just in the real economy. Even Sarkozy said that at Davos, to the obvious rage of his audience of plutocrats (not that Sarko himself is not plutocratically connected: he is, very well, in several ways; just he was seduced by the truth for a moment).
When banks are allowed to speculate in finance, they create a self feeding loop, familiar to musicians using amplified music, when the sound of loudspeakers feeds back into a microphone. One cannot say this enough: the public has to understand it, to force their leaders to do something about it, to block the plutocracy’s conspiracy to capture civilization (whether this conspiracy is conscious or not, whether some are really plotting or not, is irrelevant: they have to be stopped).
EURO CRISIS, OR CONVENTIONAL BANKING GONE POLITICAL:
Critiques may point out that, indeed, non linear self feeding is the problem with American banking, but preventing it would have not saved French and German banks from slip shot investing in “Greece”, “PIIGS”, and the like. Correct. But the bankers invested in the European equivalent of American subprime mortgages, in connivance with the elected officials, knowing full well that bankers could do whatever, and they would be rescued by the friends they made sure got elected, by using the new serfs, the taxpayers. It was a win-win combination: the worse it got, the worse off the serfs would be, augmenting the bankers’ glory.
Because, at best, glory is most of what the plutocrats are about. Glory allows to forget the rest, the frailty of the human condition.
The self feeding financial speculation loop was the fundamental problem which led to the crash of 1929. Since then, every country has dealt with that situation differently, just as the meaning of “Central Bank” has differed in different countries. For example the safeguards in France prevented French banks to be caught in the 2008 meltdown. However, many French banks are getting caught in Southern Europe, more than banks of any other country, because of standard lending.
As the Germans went through a purgatory in the 1990s, accepting lower salaries, and lower profits, to build the future, they could to do it again. But watch France, because, if the economy cracks there, the People will rise in revolt. Also do not forget that there are large stimulus programs on, privately financed, government steered, at least in France. Thus the situation of France and Germany is not the same as that of the USA. As long as the center, Franco-Germania, holds, nothing much will happen in Europe, in the way of revolt.
WHY GREATER DEPRESSION? LET’S REPEAT SLOWLY:
Let’s revisit again, in a bit more detail, the causes of this Greater Depression.
The present state of affairs is afflicted with most of the causes of the Great Depression of the 1930s, but it is also adorned, with new ones.
An example is oil: it was becoming the new energy source in the 1930s. Right now, we have NO NEW ENERGY SOURCES. Oil will start running out badly in 2016, as both new and old fields prove very onerous. Why is it so? Because we are led by irresponsible plutocrats, and, just as many Roman emperors, they fear really new technology (not all Roman emperors were so: Hadrian, for example, was an amateur architect, who had more than an hand in the construction of the Pantheon, the world’s most advanced building; but other emperors paid engineers to not reveal their inventions, on the ground that they would be socially disruptive!).
The reasons for depression found in the 1930s that we do not have presently are the collapse of international trade, the bankruptcy of thousands of American banks, and the rise of fascism in Europe and Asia. Those were accidental circumstances and consequences, which transformed a severe recession into a sharp calamity. Right now, we have the obverse: an irresistible catastrophe, not to be saved by any accident.
True, some of the old errors have been avoided, this time. But worse errors are being committed.
Leaving in place the financial crooks , idiots, and scams who caused the crisis is exhibit number one. In the 1930s, many crooks and their thought systems were promptly evacuated. By 1935, all countries were expanding strongly. Some (USA, Germany) started in 1933, thanks to revolutionary means. Yes, FDR was a revolutionary (for the better). Hitler was also a revolutionary, for the worse (but some of the methods were the same, namely going over the money economy, directly into the activity economy, by government fiat; Hitler did the freeways in the 1930s, Eisenhower did them, in the 1950s; now China is doing high speed trains, all over, all too fast).
Under the guidance of the self interested, crooked bankers, everybody in the West has turned into Barack Hoover Obama, father of the overspending family. Activity is cut back, just when it should be spurred. As long as the White House is not set on fire, that sounds smart.
Another new error, is a rise of fascist and plutocratic propaganda within the Western democracies themselves. In the 1930s, in Britain, France and the USA, the fascists tried to seize power (in France and the USA through insurrection, in Great Britain, by having the pro-Nazis discreetly steer the British state). They were rejected with lethal force in France and the USA, and Britain came to its senses, threw out the pro-Nazis, and aligned herself with France by 1938. It is true, as I always say, that much of the western plutocracy was allied to Hitler. But that was subterraneous. American GIs were left unaware of the help American plutocracy gave to those who were trying to kill them.
Right now we have this strange situation that forms of fascism have gained traction in the USA, ever since 1979, when the White House attacked the Democratic Republic of Afghanistan. A succession of “wars of choice“, in other words, wars of aggression, where engaged in, starting with the Afghan war (I know the propagandist in chief says the opposite: he says what he was told to say). All these wars are susceptible to earn hanging to their authors, according to the precedent of Nuremberg.
The most famous propaganda feat was the attack against Iraq, which concluded a ten year siege, supported by the massive propaganda from Rupert Murderoch, CCC, and many other loud speakers of the plutocracy.
Propaganda, in the West, and especially the USA, was made against human rights, the Geneva Conventions, and for torture, injustice, and war crimes (such as strikes against civilians without due process, using robots in foreign, sovereign countries). This enormous reversal against the tradition of the Enlightenment is working: polls show that young people have been seduced by it. As Hitler put it (paraphrasing him):”I don’t care about you, your children already belong to us!“
Some will say that I mix everything. No. They would say that because they have a small, handicapped, mutilated definition of plutocracy. Plutocrats are not just about wealth. They know they cannot enjoy wealth forever, because they basically STOLE it. They can only enjoy it, and their descendants, if and only if they demolish human rights. That is why they support wars of aggression, fight human rights, and support the tabloid mind. Plutocrats have never met an instinct they found base enough, for their evil purposes. They even support the Greater Depression, because, with a bit of luck, it will bring the best fascism ever imagined.
The Patriot Act, Guantanamo, etc. threw large parts of the Constitution and tradition of the USA below the plutocratic, imperial bus. Moreover, whereas the bankers were left free to jump from windows in the 1930s, this time they are getting all the money they want from their political pals…. So that they can stay on top, and feed their pals again. Another self feeding loop.
So, although the exact same fundamental causes as in the 1920s are lined up now, differently from the 1930s, those causes have been left unpunished, at least in the leading countries of the West. In the 1930s, the bad bank managers were removed by bankruptcy, leaving banking cleaner and smarter thereafter. Nowadays the vultures are fed, and revered:”My friends!” say the president when he evokes them. (Whereas Teddy Roosevelt and his cousin FDR, were independently wealthy, and their minds had not been captured, or made, by the plutocracy; Teddy Roosevelt became president from the assassination of McKinley, by an anarchist; so Teddy was fully aware that things had to change, after a 20 years depression at the end of the 19C).
Another cause not found in the 1930s: the West is struck by globalization, which has become a weapon the plutocracy manipulates with gusto (in the 1930s, American plutocrats only manipulated Germany with gusto). Globalization is turning into colonization, in reverse. Indeed Western serfs are left increasingly with no job, but pauperization.
In the 1930s, the world’s greatest industrial and technical power was the USA, the self, but accurately described “arsenal of democracy“. Thus the “Great Depression” was just a slow-down, a momentary adjustment to a more socialist system, from unsustainable plutocracy. Right now, the USA is losing its supremacy in nearly all ways. Not just this, but it is riddled with plutocratic disease. The USA looks more like the head of the rotting fish.
That is why the present economic malaise it is a Greater Depression. It is not just economic and financial, it is moral and mental, and even cognitive. How many people are aware of the outrage of fractional reserve banking? (It’s no accident that Switzerland put the toughest conditions on its fractional reserve banking, by rising the reserve of tiers one capital to 20%; Switzerland is more of a direct democracy, that’s why it does not want to have to come to the rescue of its banks!)
Delusion and self deception only makes the Greater Depression worse. In the 1930s, president Franklin Delano Roosevelt pointed out that “we have only one thing to fear, it is fear itself“. Now the ecology is giving way, the energy is getting unsustainably expensive, the water is getting scarce, and the industrial, educational and motivation systems are failing, at least in the West. We have much to fear. And, first of all, we have to fear stupidity itself, against which, the Gods themselves contend in vain.