Posts Tagged ‘Core’

Plutocracy Hollows The Core

May 20, 2011


Abstract: the Obama’s administration attempts at resurrecting the economy of the USA are in the “too little, too late” category, due to a lack of understanding of the real problem. Neither understanding, nor resolution, are helped by the likes of the honorable Paul Krugman singing the praises of dollar devaluation.  

The problem is actually much more general than the one found in the USA. Devaluation of a currency hides the real problem, which is general civilizational devaluation. (The former tends to imply the later too.)

General civilizational devaluation is not incidental to plutocracy, but it is its very principle. So it is when plutocracy takes over: civilizational devaluation is not just a symptom, but the socio-economic method looking forward. Yes, in other words, as any mathematician worth its salt would point out, an exponential phenomenon feeding on itself.

The plutocracy empties the core, because it is its safest course.



Krugman looked at the trade balance of the USA in manufacturing. He found it much improved. His conclusion? “The weaker dollar really has made a big difference.”

Indeed, recently the euro had risen 50% above its very long term average on the French Franc (the reference for the long term value of the euro versus the dollar). The weak dollar has been manufactured by keeping very low interest rates for cash. So international investors have no interest to keep earning American interest. 

This has two consequences:

a) American savers, the little grandmothers, lose money by keeping money inside saving accounts (as inflation is higher than the interest earned).

b) Big banks make like bandits, risk free; they borrow from the government at zero interest, and then turn around and reinvest with long term bonds of the government at 4-5%. (This is risk free, as long as the whole pyramid scheme does not come crashing down, but the government has no interest for this to happen, once again, so it will keep interest at zero as long as possible.)

The preceding holds in one sentence: the government of the USA has found a new method to transfer trillions from the poor to the rich, without the poor noticing. You can’t fool all the People all the time, in the same way, so the masters had to find new tricks.

The manufacturing deficit is not as bad as it used to be. Says Krugman: Crucially, the manufacturing trade deficit seems to be coming down. At this point, it’s only about half as large as a share of G.D.P. as it was at the peak of the housing bubble… major U.S. firms like Caterpillar that once shifted production abroad but are now moving it back. At the same time, companies from other countries, especially European firms, are moving production to America.

And one potential disaster has been avoided: the U.S. auto industry… has weathered the storm. In particular, General Motors has now had five consecutive profitable quarters…”

Well, Obama’s task is not easy, especially since he did not do much when he could have done something because he controlled the Congress and the Senate. The GM rescue, one of the rare things done, cost 49.5 billion dollars.

Imagine: saving GM cost nearly as much as the Goldman Sachs (total) rescue. GM makes car, Goldman Sachs makes trouble… And makes American politicians. Especially with its perverse influence on American politics. History will not view it as a coincidence that the Wall Street District Attorney indicted the short, fat, sick, on oxygen, grandfather at the head of the IMF, a respected university professor, for assaulting a six foot tall, 200 pounds Diallo, thirty year his junior, and in great shape from her physically demanding job.  The DA Cyrus Vance Jr, not to name him, son of his influential dad, has just prosecuted a construction company for abusing… Goldman Sachs. Naturlich. 

Krugman concludes:”while we still have a deeply troubled economy, one piece of good news is that Americans are, once again, starting to actually make things. And we’re doing that thanks, in large part, to the fact that the Fed and the Obama administration ignored very bad advice from right-wingers — ideologues who still, in the face of all the evidence, claim to know something about creating prosperity.” In the end, the government of the USA did not spend much on the reindustrialization of the USA. Its main policy remains the cheap dollar.

Krugman, and most American economists are great believers in devaluation: they would fix all the problems of Greece, Spain, etc. by devaluation relative to France and Germany. Extending the reasoning, one would expect the American Rust Belt,  Detroit, or Nevada to devalue relative to Manhattan. But that would break the great American nation… Not fun. Whereas breaking Europe, that’s a moral duty. Same as the time before that. 



Krugman admits that: “The manufacturing revival isn’t going to make health reform unnecessary or obviate the need for a strong social safety net.” The USA has of course other problems. Education is one of them: there is not enough public funds to insure the quality of yesteryear.

Inequities have also made the USA into the world’s most repressive country, at least if one looks at the numbers of people incarcerated, or under active judicial punishment (for an astounding total of 10 million).

Inequities also are demotivating, and make people fearful of expressing the sort of ideas which could help fight the descent into submission, and its attending despondency. The author of this set of essays has lost most of his American friends and family as those worthies expressed that president Obama can only be displeased (although most of them do not know Obama personally). I know it sounds unreal, and pure insanity (especially in a supposed democracy). Sometime in the future, I will give details (right now I am too shocked to do so).

One can easily imagine that, if this sort of fear permeates society, not much significant progress will happen. That also explains a lot of Obama’s caution. Obama, by telling Israel to reintegrate its 1967 borders took an enormous risk, political, and even personal (remember what happened to Isaac Rabin!) Now that he has done in bin Laden, the Islamist-in-Chief, the Commander-in-Chief plays the agent provocateur…



Devaluation relieves symptoms of de-industrialization, but it does not treat the decease. It’s like a shot of adrenaline. It will not fix the underlying decay at the heart of the USA.

Moreover, the problem with devaluation is that, as Germany, or Argentina, and many other countries found long ago, devaluation can get out of control. Or it can become an addiction. 

The dollar has devalued at least 40% versus the euro. Still the Eurozone has stayed, by far, the world’s greatest exporter. How? By making manufactured products of the highest quality. The higher the euro goes, the greater quality the Europeans are forced to endow their products with. European know-how is forced to become ever more awesome. It’s a virtuous spiral, up.

Reciprocally, the lower the dollar, the more shoddy American products can be, and still be competitive. It’s a vicious spiral, down.

The real question is how come the manufacturing of the USA, which used to be second to none, became so bad? An ant sees the details, but the baboon can scan the horizon. The very nature of American economists prevents them to see the big story.

The sort of decomposition which seems to affect the USA is found in any large plutocracy in history. The plutocracy always hollows the core (and this has been the problem of Muslim countries, as Islam can be instrumentalized to favor tyranny).

One out of six worker in the USA is foreign born, with much higher proportions in the most plutocratically weighted states (California has 35% of foreign-born workers, New York and New Jersey are at 27%; nobody cares about the boondocks, where little U.S. GDP is generated, and direct descendants of those who used to make much of the industrial strength of the USA, the Rust Belt, the new native Americans, live).

Plutocracies do this, even militarily. Eschatologically, Rome depended upon entire German nations for its military (the Franks being the most famous). At some low point, Rome even recruited the Huns (until the Roman-Hun army got defeated in south-west Gaul). Muslim regimes  were particularly good at this: Egypt, the Ottoman, and even the Iranians depended, at their core, upon foreign-born militaries.

Why so? Why do plutocracies fear the natives? To ask the question is to answer it; it makes the truth self obvious. Plutocracies fear the natives because the plutocrats fear revolution. So they do what they can to make the People at the core weak, dumb, impotent, in other words, not too competent, employed, or irreplaceable. That way revolutions are easy to contain. Hence the “Panem et circenses” Juvenal noticed, 19 centuries ago. Give them bread and circuses. But don’t give them employment.

As plutocracy has interest to weaken the core, it can only reinforce itself by using the periphery (thus making it stronger). That is why great plutocracies always engage in heavy immigration and foreign mercenaries (look at the Ottomans, the Achaemenids, Rome, China, etc.),

If this is all correct, the USA, by employing the Chinese, while bringing in hordes of unsophisticated immigrants, reacts as a typical plutocracy, and the old middle class and its descendants are in the crosshairs of the masters of America. The last thing masters of finance and oil, and health care, and the dark arts, want is a People of engineers who know where all the levers are.  

Thus the worsening of unemployment and the general melting down of all the civilization supporting factors, such as investing in progress, industrial or educative, are no accident. It’s the system the plutocracy needs to survive and thrive. It’s not a disaster, it’s a conspiracy. (Reminder: I use the word conspiracy not as “plot”, but in its etymological, original sense: the fact of breathing together, and they do more than that: they drink, eat, sleep, think, feel and work together.)

The USA is victim of a plutocratic metastasis, devouring all in its way. Lowering the dollar for ever has no future as a valid strategy. If anything, it makes the problem worse, as pain relief disguises the real disease. The only way out, is for average citizens to realize that they are manipulated into impotence and submission before they become too decerebrated  to notice anything significant beyond sports. The basic problem is nothing new. It was already in full view  at Marathon. When a small army of free men defeated the world’s largest plutocracy.

In the case of the “Oriental Part” of the Roman empire, the realization never came. By the Sixth Century, sports were reigning supreme, and the serious rebellion against emperor Justinian (“Nikka Riot”) started in the sport arena. People were afraid to think, let alone to see what was wrong. Justinian stayed in power, barely so. And proceeded to massacre much of Anatolia, millions dead, to make triumph, he said, his interpretation of what Christ said (he was just warming up, he devastated Italy later). In truth he was just the typical follower of Pluto.

In the “Occidental Part”, by then the renaissance had started because it was again the land of the Free, or, as they said, the land of the Franks. (And those were the only ones Justinian did not dare to attack.)


Patrice Ayme