IT’S A DEPRESSION, FINANCE AND ITS OBSEQUIOUS SERVANTS CAUSED IT.
Abstract: I am happy to report that Paul Krugman is adopting my Great Depression III title and (a few of its) ideas (February 2009). But since I am not a seriously paid economist, I expect gratification only with further ideas, as follows.
The US Supreme Court has decided Americans ought to bear arms. Riffles and guns at home. Considering the deteriorating economy, this may become interesting.
Worst month on record since records exist:
Let’s put it in a way that even Francophobic Americans will understand: the housing starts in the USA (population: 310 million) are fewer than in France (population 65 million). Does that mean France is five times more capitalistic than the USA? Just asking, with all due respect.
Why is the economy so bad? The runaway military budget has a lot to do with it. Why that war? Oh, first of all, because it is easy: it reminds me of the story of the drunk who searched for his keys exclusively below the lamp post, because it was easier. It’s the cheapest way to run an eternal war.
I am writing a long essay on how World War Two started, and the respective roles of Britain, France and the USA, during the first few years. I am motivated, after getting personal insults for suggesting that Britain and France, who started the World War on September 3, 1939, won it on May 8, 1945. OK, Britain and France did not do the entire war alone: Hitler helped them out, by attacking his two most important allies.
By January 1942, no American aircraft carrier had fought, but five British carriers had already been sunk in combat. Allied losses, of soldiers alone, were in the hundreds of thousands killed. Millions of civilians had died. But some Americans still insist that nothing was going on. Worse, some, like the despicable Pat Buchanan, insist that all the problems of the world came from having made war to Hitler. As Buchanan, a famous, respected editorialist, richly paid by General Electric, one of the most powerful corporations in the world, said: "why would Hitler want war when, by 1939, he was surrounded by allied, friendly or neutral neighbors, save France?"
This attitude, this mental block, this refusal of examining the past correctly, as I hold, is directly related to what is going on now, namely, more of the same basic infection, deep down inside. That infection is control of thinking itself by unchained greed. On TV channels such as Fox News, advertizing of the most plutocratic or militaristic type jumps at you. It’s all about being saved by war contractors from the enemy out there. It’s more than depressing; this is the USA today.
I have insisted for years that the present economic degeneracy is a depression, not a recession. My primary factual reason was that long time averages, say 15 year slices, are already looking worse than those of the so called "Great Depression". This has been obvious since 2008. For example median real income is in a worse slump than at any time around the Great Depression of the 1930s.
Paul Krugman wrote an editorial "The Third Depression" (June 27 2010) where he did not use my preceding argument, yet (but it will come!) First he confined himself to useful generalities:
"Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew."
I am monitoring closely the progress of influential student Krugman. He has finally integrated a notion familiar to those who read these pages: "… this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is INADEQUATE spending."
I have been saying this all along. That notion is obscure in the USA, but, in a country such as France resisting inappropriate spending, while promoting appropriate spending, is the proclaimed policy (whether the appropriate pharaonic projects are actually implemented is something else!) Appropriate spending is also the main axis of British PM Cameron’s new economic and social policy in Great Britain. And Germany will insist that it is what it has been doing for at least 10 years, with a succession of austerity plans, while subsidizing renewables generously.
Misappropriate spending is where the major problem with civilization always lay. Spending is economic activity, hence determines what people do. In a plutocratic regime, all the activity is about servicing the rich, which is DEPRESSING to the rest of the public. Depressing, like in economic depression, and mental depression. So most of the population is content with just surviving. Since wealth rules, meaning it takes all the decisions (see "Government Sachs" in the USA, for 3 decades running), the people does not just survives, it is despondent.
Blocking plutocracy is why Western Europe has a tradition of rebellions. Those rebellions were all over: Italy, Germany, France, Britain, and everywhere in between. Although there were wars, much of the time, it was to divert the energies of the rebellious people away from throwing out their lords. And the lords themselves were not always of the highest lineage: the mother of Guillaume Le Conquerant was a commoner, a business woman who cleaned animal skins.
The tradition of rebellion came from the Germans. It certainly did not come from the meek and submissive trains of thought having originated with Socrates! Starting under Constantine, the Franks, a pair of confederations of Germans, became the elite of the Roman army, and they revolted much and often.
In the first enormous rebellion, the overall commander of the Roman imperial army named some Roman intellectual, emperor, and decided to do away with Christianity. He went to battle emperor Constantius II, son of Constantine, but was unexpectedly defeated in a closely run battle. A few years later, revenge was granted as the philosopher Julian, with his Franks, took control of the entire empire (he was unexpectedly and mysteriously killed in Mesopotamia).
The same story happened again in 387 CE, when the Frank Argobast, under the rabid Christian Theodosius, became more powerful than the emperor himself. Emperor Valentinian, who succeeded Theodosius, tried to get rid of Argobast, so he was smothered in his pillow, and Argobast put Eugenius, who had been a school master, on the emperor’s throne.
Argobast himself took the highest position next to the emperor, calling himself "Mayor of the Palace", a title promised to a great future. In 394 C.E., Argobast, who was a pagan, like all Franks, before they decided they could be Catholic too, led the emperor’s forces to battle against the Christians in Gaul. A battle went wrong, and one had to wait another generation before Childeric, Clovis’ father, finally wore the purple (for all we know, Merovee may have worn the purple too).
The constant rebellions in Europe, deeply misunderstood in much of the planet, especially the USA, are the source of European genius, because they insure that plutocracy never smother civilization. If rebellion is a duty, submission is a fallacy. (Yes, double meaning! but with a deep historical reality.)
Presently, the root cause of the depression is the growth of the vampirical financial sector, which sucks the economy dry, as using prestidigitation, it has the impudence of producing bads and disservices, ever more, while starving real goods and services.
This clear and present cancer had not metastized to that extent in the 1930s, on the territory of the USA itself. The worst financial and corporate actors in the 1930s tended to invest with their creature, Adolf Hitler (some of the plutocratic worthies supporting Hitler were German, many were Americans, and the Americans were much more enabling). Anti-monopoly laws in the USA (gift of Teddy Roosevelt), and FDR and his Banking Act (separating speculation from banking) blocked the financial and corporate sharks in the USA, so they concentrated overseas, on manipulating Germany, a more hospitable environment that they had themselves created (I am out Buchaning Buchanan, except it’s the truth, which is of course worse.)
So what to do now? Clearly appropriate spending ought to be implemented. Obama’s real "stimulus" was no more than 200 billion dollars, as I have argued in details at the time, making it proportionally smaller than the French real stimulus. Now Obama wants to spend more, while the Europeans have started an austerity program that Obama, Krugman (and Geithner, etc.) whine about.
They can whine, because those influential worthies claim not to understand a major technical point. Many of the EU major governments have government spending around 45% of GDP (or a bit more, France is at least at 50% of GDP!) So that those governments want to reduce government spending is understandable. They want to free the animal spirits. The automatic stabilizers are still in, refurbished or not.
But the case of the USA is completely different. In the USA, government spending is around 33% of GDP. Moreover, the US military spending is baffling in its enormity ($750 billion with the "intelligence" agencies, and counting). Hence the real government spending stimulating the CIVILIAN economy in the USA is just a FRACTION of what Britain-France-Germany spend, stimulating their civilian economy. So as Britain-France-Germany reduce government spending, they come down from a huge mountain with flowing streams and rich towering forests, whereas the USA civilian sector is a low lying desiccating desert where little grows, besides hot air.
Hence let Barack rises in his thermal of hoped for spending, preferably by others overseas. Barack had the chance to embark the USA on a Very High Speed electric train network construction program, but he decided to not even try that. Better to listen to Dimon, Buffet, Goldman. The Deameon Gold Man had a Buffet, while Sacking everybody, indeed. Whereas many countries, including China and gigantic Russia have such Very High Speed train programs, using West European trains and technology transfers. Instead, Obama made it so that the Too Big To Flail Banks made huge profits again, using the derivative universe. Some may not know calculus, but they know derivatives, or so they think. It’s a great comedy, it has not turned to great tragedy yet. Just more than 5,000 US soldiers killed in the Middle East, for no good reason (and I will not bore anyone with dead indigenes).
Far in the distance of the American desert of the civilian economy, an inner Afghanistan, the green mountains of Europe laugh in the coolness of the fresh humid air of their rich fields. For example French non financial companies are more indebted than their competitors in the USA, because they have plenty of great projects. They will deliver them with the help of the lower Euro. Instead in the USA, we have ridiculous spectacles like Tesla, a company of the connected plutocrat Musk, selling car for hyper rich people (more than $100,000 for a two-seater!) which get enormous subsidies from the government. Why? Because Musk looks good, and he walks by the side of Barack. Barack also finances, through NASA, Musk’s ridiculous replacement-NASA-by-myself amusing adventure. Besides being young, tall, lean, and neat, does Musk have musk? Like the influential Murdoch, he is not even American, just playing one at the plutocratic trough.
In Rome, in the Third Century, we had the barrack emperors: several dozens emperors, all military, in a few years. Unrelated, except in the arbitrariness of empire gone mad, and the same sorts of sounds.
What’s the way out? Is there a way out? Well, what about a bit of central planning? Not necessarily Soviet, or Chinese style. That would make laugh most serious people in the United States. Indeed they know that the money is with Goldman Sachs. Only fools would not be obsessed that way, many good Americans have learned to feel. But central planning would help to compensate for the Goldman Sachs guys who have ruled the White House for decades. Actually, come to think of it, France has had a very official "Commisariat" of the plan, since 1946.
The root of the present crisis is income inequality. Plutocracy in the making, in other words:
The economic rise of Europe in the Middle Ages was caused by the domination of independent, or quasi independent cities, loosely overviewed by political power. This is well known with Italian republics (Florence, Genoa, Venice, etc.), or with the Magna Carta in England, but is also true throughout the Alps, Germany and much of France (especially Southern France, where, after the Crusade against the Albigeois, the cities were pretty autonomous, since the representative of power was often an officer of the distant king, and not local potentates). These cities were pretty much democracies and republics onto themselves.
Before the Mongols rolled in, independent cities were found all the way to the republic of Novgorod, in Northern Rus’. All the Rus’ cities were submitted to the Mongol yoke, though, and, when the invaders were chased out three centuries later, it was to be delivered by the fascist Grand Duchy of Moscow, the Mongols’ obsequious but perfidious servant, just prior.
Much of that independence of the commons was obtained through revolts, some massive: Cathars, Magna Carta, French jacquerie (1358 CE), etc. The creation of England itself, by French lords was a revolt of smaller lords against bigger lords. And so it was again when French lords, many based in England, decided to go to war against their overlords in Paris. Those revolts were transmutated into definitions of human rights. Or the independence, of Switzerland, the Netherlands, or, as I said, England. Spain’s reconquista was a rebellion.
Money is an abstraction of power. Much money, much possessions, much power onto others. When all the power is in a few hands, so are most decisions, and intelligence in the commons is useless. Not only does society, overall becomes stupid, but the commons actually have interest to become stupid, so that they make no waves, and suffer less, since the animal without a brain suffers less. Economic activity is then reduced to survival. Such was the difference between Western and Eastern Europe until modern times.
Survival of serfs in the East, with its attendant paucity of intellect, contrasted with the wealth of intellectual, and thus economic activity in the West. Some will scoff, and extol the greatness of Russian literature, science and music. Sure. But most of Russia, with its enormous population, was illiterate and more or less still in serfdom. Empire building was the main diversion from their sorry fate.
Ultimately Russia bled during the First World War with Germany, and the losses were so enormous that the Bolsheviks came to power, just because they were ready to capitulate to Germany. This was a direct consequence of plutocracy and decerebration. If not for the catastrophes after August 1914, Russia would have 300 million people now. Instead it has 140 million, shrinking by 800,000 a year. Still bleeding, because its culture has been unable to find mental balance (Putin has set up a carefully planned circle of national and nationalized companies headed by people close to him, in an effort to get an economy which can produce something real, instead of just having the entire country being a northern version of Venezuela; we will see…)
Some will say that the USA is not Russia, and not exsanguinous yet. Sure. But the USA has been playing a very dangerous game with India and Pakistan, by helping to arm both sides, with nuclear weapons. Even Russia does not play this sort of games anymore. And the USA is weakening itself by spreading itself militarily as no power has ever done, ever. While the plutocracy leads away from greater opportunities for all, towards ever more power for itself.
It does not take many exploding nuclear devices to ruin a good civilization. Considering how nervously the USA reacted to 9/11, just one nuke may be sufficient to institute a fascist regime. After all, many characteristics of an authoritative regime are already in place. Maybe a nuke or two exploded in anger is all what the plutocrats are looking for. No wonder they can’t find bin Laden.
Technical explanation; for more than 2,100 years of the history of empires and strong regimes in the West, all the way back to Jugurtha, there was never a case of a major rebel eluding capture, as bin Laden has done, so far. The only case would be Hannibal, who, 2,200 years ago, evaded the Romans by fleeing to the Middle East. But he was no rebel, but an enemy general. Osama bin Laden was in American employ (as king Jugurtha was in Roman employ, before he used corruption and other means to betray the Romans). Not having caught bin Laden is a strong indication of the weakness of the USA. But is it real, or deliberate?