Posts Tagged ‘Borrowing’

Understanding Naught.

September 18, 2011

ONE LENDS ONLY TO THE RICH. THE POOR NEED JOBS.

Here is my good friend Paul Krugman, hitting on Europe again, while unknowingly burying the USA in its errors deep down further.

Krugman and I are in very strong agreement about some points, and in just as spectacular disagreement about others. It’s complicated. Be it about his hatred of the euro, or his love of borrowing, Krugman is much more of a reaganophile and reaganobrain than he may think. (But this is not surprising: after all, president Reagan was his first employer…)

So as not to be accused of deforming Krugmania into silly putty, let me quote him in extenso:

 ” September 18, 2011, 10:59 am

Stimulus, Austerity, and Double Standards

Just a quick thought: in much discussion of economic policy these days, the presumption is that stimulus had its chance, it failed, and that’s that. Never mind those of us who say that we actually didn’t do nearly enough — and were saying that from the beginning, not as an after-the-fact rationalization. It’s one strike and you’re out.

Meanwhile, the pain caucus keeps telling us that austerity is the way to restore confidence; and confidence keeps not being restored. Ireland, for example, has imposed savage austerity, yet the interest rate on its 10-year bonds is still 6.7 percentage points higher than Germany’s, down from recent peaks but still far above its level when the austerity program began.

Yet somehow nobody in the pain caucus says hey, this was supposed to work but it didn’t, so our theory is all wrong. Instead, they just insist that we double down, continuing the beatings until morale improves.

Just saying.”

 Some say, some sink, others think. Here is my answer:

 Krugman and me agreed, at the time, that the real stimulus was tiny, and would not restart the economy. Most of what Obama called “stimulus”, something like 90% of the thing, was not a stimulus at all. See “Stimulating-the-erroneous-zones“, July 2009.

 So doing, boasting of a stimulus which was not one, Obama made no favor to the economy, while doing plenty to his rich friends he venerates, and obsessively talks about. Some are born to make others’ beds. Nothing beats making the beds of the Rich. Obama’s policy was more of the same bold, same old that Bush had got us used to. It was obvious that the rabid right would scream, further down the line, that stimulating the economy did not work. So Obama accomplished a double whammy: he called onto an impotent stimulus, calling it mighty, and now unsurprisingly the Tea Party say that mighty stimuli don’t work.

 In truth, mostly the hyper Rich had been stimulated, not the economy as a whole.

 Supposedly left-wing Obama provided less of a stimulus than arch conservative Sarkozy in France. And the French recession had been much less deep than the American one. That means that, in truth, Obama is much more right-wing than Sarkozy. And yes, at the time Obama had a super majority in the Senate, and in Congress.

 To eschew any debate on something really useful, Obama had chosen to create long drawn out fake debates on a bank-Afghanistan-Obamacare drama. After months of shooting the breeze, the decisions came down, and they had all been taken behind close doors, with the powers that had trampled the USA, if not the world, for so long. The decisions were all rabidly right-wing: banks were offered the world, no questions asked, Afghans were offered a tripling of the occupation force, the healthcare industry was offered a mandated public.

 A problem in the USA is that Obama and his (!) Tea Party find tax cuts stimulating. So they want to cut taxes, ever more. Hey, don’t their contributors, like Goldman Sachs or the Koch brothers, precisely pay those taxes? If they paid less taxes, would not they give even more to those who took care of them?

 The more Obama cut taxes, the more stimulus he thought he was doing (that’s in the stupid version of Obama). Or he claims he thought he was doing (that’s in the crafty Trojan horse version of Obama). Most of Obama’s “stimulus” consisted in diminishing taxes, indeed. And that meant further diminutions of the taxes on the rich, since most taxes are paid by the rich. (Not proportionally, but in absolute value.)

Thus Obama made an abominable situation more abominable, as the real cause of the crisis was that the rich had got too rich… We need a new adjective for this grotesque situation: ever more obaminable.

 Abominable, or obaminable? That is the question Obama and his handlers hope not too many people are going to ask. But they will.

 How did the Rich get richer, ever more, besides having Clinton, Bush and Obama making them all what they could be? Well, Clinton, Rubin, Summers, Greenspan took out the bothersome laws from 1933 of president Franklin Delano Roosevelt. Greenspan and Bush let the Rich borrow ever more. Then Obama bushed us up further, not to say ambushed us, ever more, obaminably.

 Hence the borrowing trick, beyond the reasonable, has been central to making the Rich richer. Obama made this worse by lending, or giving to the hyper Rich even ever more money, claiming that was ever more stimulating (certainly stimulating to him and his family, and their friends, as they will be, and are, well rewarded).

 In the end, the latest numbers show a government and individual debt totalling 36.5 trillion dollars, in the USA. That is 275% of GDP, far above the norm, and barely off the peak. The kiss of debt. Why would Krugman think that Ireland would be better off, imitating that?

DEBTHERD

 The European instinct has been the exact opposite: augment taxes, so that the governments will have more means to respond intelligently to the crisis. After all, if there is a lesson of the 1920s and 1930s it’s that the German government did not find the means to stop the decomposition of society and finance. And the lesson of the 1930s was that the French and British governments had not given themselves enough means to stop Hitler in a timely manner.

 The esteemed Paul Krugman then comes and says: what are the poor Irish going to do, now that they cannot borrow long and get rich that way, as easily as Germans do? Well, the answer my friend, is that Germans did not get rich that way, and it’s time for the Irish to learn that lesson. It is actually well organized austerity which made the Germans rich.

 Anyway, why would the Irish want to borrow more when their entire country is sick of having borrowed too much, and having entire housing subdivisions, brand new, scheduled to be destroyed?

 If European banks need more money, they can be “recapitalized“, and then directed (with or without nationalization) to lend to profitable economic projects only. It’s unlikely that those will be found in Ireland at this point (the Irish, per capita may still be richer than the Germans, or, even the French; however the island has to deleverage).

 To equate the ability to borrow with the opposite of pain and beating, is to have understood nothing. Serfdom was, in a way, the result of too much borrowing.

 Make no mistake: I am for a real stimulus, and I am an enemy of austerity. But the Rich is killing the world economy, and grabbing all they can from the dying body. To stimulate the world economy for real passes by removing first the predator from the patient while the ferocious beast is still eating its innocent victim alive. The Rich needs to be austerified, and destimulated. And the more they are rendered innocuous, humble and unnoticeable, the more the rest of the population will thrive (I will exhibit a graph soon which shows that finance steals directly from manufacturing.)

 To fight austerity means to have the middle class live as it used to. 

 In Greece ship magnates are actually not taxed, nor is the immensely rich church. Not taxing the Rich is what Obama and the Greeks have been calling stimulating, and it’s wrong. It is not stimulating, it is wrong. To illustrate, Obama’s budget director, Mr. Orszag, slept with a Greek shipping magnate, and had a child with her (between marriages), sent 60 billion to Citigroup, and then went to work there. All very stimulating, no doubt, and thoroughly obaminable. When I say they sleep with the rich, I have to admit they do it literally.

 Last week the socialist Greek government, following orders from Merkozy above, announced a real estate tax. What is the greatest landowner in Greece? The church. Later, however, one learned that tax would not apply to the church. There are, officially 700 million euros of church property in Greece (and this is a vast under-evaluation, as Mount Athos, per se, has got to be worth billions). So what should the French, German and Finnish taxpayers do? Instill some more modern sense to the Greeks.

 There are churches, monasteries and cathedrals in France. They are all properties of the state. So why should France give money to the Greek church? No wonder 68% of the French are against “helping Greece” at this point.

 Oh, and how did Ireland become so rich? First, massive European help (that is taxpayer money from, at the time, much richer European countries), and then tricks. One trick has been the corporate tax rate. It’s 33.33% in France. And about the same 33% in Germany (although it varies slightly locally). In the UK it’s between 20% and 27%; it’s 31% in Italy. In Ireland, the corporate tax is only 12.5%.

 So European companies flocked to Ireland to be taxed lightly (or, more exactly they nominally put their headquarters there, while raking the money from the rest of Europe). That was excusable when Ireland was the poorest country in Europe, per capita. But now Ireland is richer than France and Germany, per capita.  

 Economy is house management. Obama doubled down on the rich. However, we don’t need to improve the morale of the rich. The high morale of the Rich, their hubris, and their capture of the political process is at the core of the civilizational problems we are encountering. The beating of the lower classes has gone on long enough.

 As a much elaborate incoming essay will show, augmenting the taxes on the Rich is not just possible, but necessary. Be it only to stop them to harm the economy further, as they do with those financial markets that they have harnessed. A good way to remove the Rich from exploiting exclusively the financial markets as they have been doing, is to tax them at the average middle class income (at the very least!), and to institute a financial transaction tax. Merkel and Sarkozy have proposed it. Guess who is against the transaction tax?

 Well, Obama, of course. Next time, he is keen to see Goldman Sachs being his greatest contributor, again. It just does not bring a lot of money in, it also shows that Obama is the anointed one. Meanwhile, if you have got $5,000, maybe you can see Ms. Obama. Or Valerie Jarrett. The ladies are on sale, apparently.  

 Whereas Governor Perry is on the rise. Says he: “I raised 30 million; if you’re saying that I can be bought for $5,000, I’m offended.

 No kidding.

***

Patrice Ayme


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because all (Western) philosophy consists of a series of footnotes to Plato

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Striving For Ever Better Thinking. Humanism Is Intelligence Unleashed. From Intelligence All Ways, Instincts & Values Flow, Even Happiness. History and Science Teach Us Not Just Humility, But Power, Smarts, And The Ways We Should Embrace. Naturam Primum Cognoscere Rerum

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GrrrGraphics on WordPress

www.grrrgraphics.com

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because all (Western) philosophy consists of a series of footnotes to Plato

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