Posts Tagged ‘Great depression’

Trade Wars, Divisions, War War: It Happened Before, In The 1930s

March 10, 2018

Stupid Is Depressing:

Trump plans to institute tariffs which have made the European Union angry. Jean-Claude Juncker is the head of the European Commission, the part of the European executive which heads the European administration, 32,000 strong, of 500 million souls. Juncker retorted to Trump: ”This is stupid. We can do stupid too.” Juncker has been around: he is quadrilingual French, English, German, and Luxembourgeois. Also, as PM of Luxembourg for two decades, he masterminded the transformation from its bovine economy to onshore tax haven. In any case, Europe is drawing a list of symbolic US products to be struck with tariffs too, from motorcycles to liquor. Let’s backtrack a moment here. This sort of madness is how the crash of Wall Street in 1929 and the Great Depression were engineered.


Crash of Wall Street & Great Depression:

A massive, and deliberate overheating of the economy happened in 1920s. The Anglo-Saxon elite had decided to inflate out of the British World War One debt. US car production reached level in 1928 it won’t see again until 1948. When overheating became blatant, the US central bank decided to raise interest rates, the economy started to falter, and the US Congress decide to get real smart, the way idiots do it. Simply, Washington reasoned, why don’t we reduce imports? When investors with a modicum of real economics heard this, they understood an economic war was pointing its ugly snout, and they pulled out.  

After the markets crashed, they recovered, as the US Senate hesitated. However, the situation became catastrophic in 1930. Then the Smoot-Hawley tariffs were finally imposed, and Europe retaliated in kind. It would have been better to keep European production in Europe, buying the cars from government money , and selling them at a loss. That would have been socialist, and only the USA would have suffered. European tariffs made US exports collapse, companies went bankrupt, banks followed, and people lost all they had, as bank deposits were not insured either privately, collectively, or by the government itself. The economy greatly depressed.    


The questions are: what is China doing right, and what are we doing wrong? Of these sorts of graphs, world wars are made. Notice that, in a few years, China got the world top GDP. Our crafty leaders say China has built too much! It’s going to crash! I say: go look at the homeless in US streets, it’s sickening. I say: contemplate that Paris didn’t build one skyscraper in… forty-four (44) years. They say: it’s to keep Paris pretty! I say: they deliberately don’t build, and it’s like that all over the West, more or less… Why? Keep it expensive, elitist. That “austerity” extends to activities such as scientific research (where China spends enormously). Actually Trump just wants to eliminate the world’s main existing thermonuclear research facility, and even European scientists are screaming that’s an outrage. 


The Great Depression Brought The Mood Of War:

In Germany, the Great Depression brought Hitler to power. In the USA, Roosevelt. Both decided to reflate their economies at all costs, using similar methods (following Keynes all too much; Keynes had advocated make-belief work, if need be). The much richer USA for example decided to build 24 “Fleet Aircraft Carriers”. For comparison, and giving an idea how expensive fleet carriers were, Germany planned to have two such carriers by 1945. The US carriers, were helped by an enormous fleet of more than 200 “fleet submarines” (each nearly 100 meters long). The US subs sank 60% of the Japanese merchant navy, and eight “Jap” aircraft carriers.

Roosevelt put also millions to work, employed by the government. Hitler tried similar tricks, forgetting small details, like that Germany had no oil, and that much of its miracle economy was actually the province of US plutocracy. All the more self-contradictory as the Nazis officially hated so much those plutocrats they were the humble pigeons of.

Meanwhile the French Republic didn’t like the Hitler circus, seeing world war painted all over it, and went to Washington to protest the collusion of US plutocrats and Nazi demoncrats.That didn’t sit very well with old family plutocrat Roosevelt, who hated France anyway, as he saw in France both a juicy prey, and a threat to the plutocratic order, especially of the US sort. In any case, the relationship between France and the USA became execrable in 1934, and would stay that way for the duration, until 1945, and much beyond.

From the French point of view, the easy money, frantic spending on the military of the Anglo-Saxons and the Nazis was wrong in all ways. So the French economy relatively shrank, as France grimly prepared for world war. Sure enough, by 1937, the German economy was in deep trouble, and Hitler had no choice but rob Jews and others to create an appearance of wealth to his millions of increasingly rabid supporters.

Thus we see that the Great Depression did more than depress economies and psychologies: it put the French Republic on a collision course with the USA and the UK. The UK realized its mistake by 1936, and threw out its young Nazi king. By 1939, the UK, having seen Spain fall to Hitler, aligned itself with France, but the USA kept aligning itself, de facto, through its plutocrats and a diplomatic service helping them, with Hitler. (By 1944, though, the top US generals, whom Roosevelt couldn’t control, allied themselves with the French military, because they saw the valor, and had the need. Besides they were in palatial arrangements at the Versailles castle…The relationship stayed tumultuous, though…)

So question: does Trump want to renew with the mistakes of the past? Germany is now solidly allied to France and is a republic too. The only “oiseau de mauvaise augure”, actually a well-defined vulture, is Putin… However recently US forces in Syria eliminated 50% of a force of Russian “volunteers”…


Divided We Can’t Stand:

The trade wars of the 1930s brought division to Europe. Nazism and the “Axis” would never have happened as they did, complete with holocausts and world wars, had the three big representative democracies of the West stayed united. (But of course, Roosevelt, like Hitler, wanted to grab the world; he was just much more crafty about it! Thus much more successful.)

For example Belgium would have built the segment of the Maginot line it was supposed to build, and that would have blocked, or slowed down the Panzers long enough for the superior French forces to regroup where needed (US influence pushed Belgium to suddenly become “neutral”, thus betray France, following that way the pernicious queen of the Netherlands, who digged the grave of her own country, with her love for Kaiser and Germany…)

More prosaically, German generals wanted a pretext to kill the Nazis. Instead Hitler showed them an isolated France… The US attitude was to play all sides, until the American Century got firmly established.

Nowadays, France and the USA are solidly allied. They are fighting side by side in Africa, something which started long ago, in 1978, when the French paras dropped on Kolwezi (the US provided some airlift, and the go-ahead). The war against the Islamists in Africa is long, intense, unforgiving. The Trump administration rightly denounced China’s maneuvers in Africa (suck all the juice, and ever more encroach…)


And the Truth Is That The US and EU Elites Are Lying:

The US deficit is fundamentally caused by the exportations to China, Mexico, etc, of US production. So the slaves overseas are doing the work, while the higher class in the USA does not have to deal with pesky, expensive US unionized workers. Increase profit, decrease labor, grow plutocracy. What isn’t there for plutocrats, our lords and masters, to like?

Otherwise Trump is bluffing. Trump is trying to cut a deal about NAFTA/ALENA. To threaten tariffs is Trump’s dangerous and silly negotiation mode. Europe should ignore his craziness, but Europe, like Trump, is trying to make the peons believe it is doing something, when actually it’s doing even less.

So both the EU and the US elites are having a disingenuous argument. They play for the gallery of the naive out there, while the play is getting a life of its own. The right way out is to implement, throughout the West, a version of what Roosevelt did in the 1930s which was right: not the fight with France, that was wrong, not the support of overseas US plutocrats machinations, that was even worse. What was right was the rearmament program (developing and deploying more advanced weapons), and putting people to work, while cleaning up finance. And going to school, more than ever (as French president Macron just promoted in India). But schools all over, and everybody going to them is not enough: we need to put intelligence to work. And work, in the incoming age of robots, especially talking robots, of the sleek type I had on the phone today, means research. Nowadays scientific research should be promoted to the max. If not for us, and our children, for the planet… Can we please, believe in something, for a change?

Patrice Aymé


Depression’s Causes: Righteousness & Viciousness

October 14, 2014


Slowly rising consensus: in some important ways (evolution of relative GDP; employment rate; public investment; education’s relative performance), the economies of the leading countries are doing worse than during the “Great Depression” of the 1930s.

That’s why I prefer the expression “Greater Depression” to “Great Recession”.

And we have seen nothing yet: the cause of the “Greater Depression” of the 1930s was a chain of errors, which were easy to avoid.

(First a splurging in the 1920s, especially in the USA and Britain, and its unavoidable attending crash compounded by the American Senate’s arrogance that the international economy could be tweaked through tariffs, to profit only the USA, the whole thing followed by collapse of international trade and then by “liquidating everything” (as was said at the time).)

Thus, the roots of Depression of the 1930s were shallow, easy to avoid next time: avoid splurging, keep international trade going, use public money to avoid 9,000 bank failures (in the USA alone), and institute a FDIC (Federal Deposit Insurance Corporation: Europe’s “Banking Union” is trying to mimic that).

There are serious problems now, much more serious than in the 1930s. Including a lack of seriousness.

Serious reasons for collapse caused the long decline of the Roman Empire, or struck shortly after 1300 CE, when entangled ecological, climate, demographic, and plutocratic crises, with an attending plague, combined to kill half of Europe, and brought five centuries of war.

Indications are that the world economy, having not really recovered from the 2008 crisis, is stumbling. Especially Europe. Population: more than 750 million (EU + Russia, etc.).

Why? Why not?

In the 1930s, the government of the USA, first under Hoover, and then much more spectacularly under Roosevelt, starting in 1933, made Herculean efforts (in public spending, and legislation). Nowadays, it’s quite the opposite.

Paul Krugman suggests that righteousness is the cause of this decline: see the obstinate Merkel, and the refusal to do away with high debt levels.

In “Revenge of the Unforgiven. How Righteousness Killed the World Economy”, Krugman observes that:”…now [world] growth is stalling, and the specter of deflation looms.

If this story sounds familiar, it should; it has played out repeatedly since 2008. As in previous episodes, the worst news is coming from Europe, but this time there is also a clear slowdown in emerging markets — and there are even warning signs in the United States, despite pretty good job growth at the moment.

Why does this keep happening? After all, the events that brought on the Great Recession — the housing bust, the banking crisis — took place a long time ago. Why can’t we escape their legacy?

The proximate answer lies in a series of policy mistakes: Austerity when economies needed stimulus, paranoia about inflation when the real risk is deflation, and so on. But why do governments keep making these mistakes? In particular, why do they keep making the same mistakes, year after year?

The answer, I’d suggest, is an excess of virtue. Righteousness is killing the world economy.”

Notice that brandishing righteousness diverts attention away from full blown viciousness (which I believe is dominant). Then Krugman presents a small fraction of the problem, affecting to believe naively that high debt is the cause of everything:

“What, after all, is our fundamental economic problem? A simplified but broadly correct account of what went wrong goes like this: In the years leading up to the Great Recession, we had an explosion of credit (mainly to the private sector). Old notions of prudence, for both lenders and borrowers, were cast aside; debt levels that would once have been considered deeply unsound became the norm.

Then the music stopped, the money stopped flowing, and everyone began trying to “deleverage,” to reduce the level of debt. For each individual, this was prudent. But my spending is your income and your spending is my income, so when everyone tries to pay down debt at the same time, you get a depressed economy.

So what can be done? Historically, the solution to high levels of debt has often involved writing off and forgiving much of that debt.”

This is a solution I have advocated since 2008. See “Reforming World Finance”, from November 2008, when I naively still hoped my friend Obama would grab the bull by the horns, as if he were courageous, or something. None of these obvious reforms was implemented, but at least now an economy Nobel was given roughly in this direction (see yesterday’s essay).

The 2011 version is: “To Save The World, Please Default (And Grab Capital From the Conniving Plutocrats)

Iceland and Greece did write-off some debt. They had no choice.

However, debt forgiveness is only part of the problem (Oh, by the way, full disclosure: I have zero debt, so if I were biased, it would be the other way!)

The nature of the old debt, and the nature of the new debt are the core problems.

Debt because housing prices are through the roof comes from lack of building. Debt because of enormous leverage by public-private banks and companies involved in financial horror to steal We The People, is still something else.

The erroneous nature of the debt has misaligned the entire economy. We live in a world where there are master sommeliers. And where millions of people are tickled pink by the idea of being waited by a master sommelier, somebody who can look through a bottle thanks to the light of a candle, he expertly lighted, to stop exactly before the deposit at the bottom gets into the clear wine.

But then there was not enough money, or interest, to invent an ebola vaccine. Civilization is drunk, Bacchus is god, and Death invited to the party.

The entire debt machinery is stuck. Banks have lent to financial conspirators for decades, and are still doing it ever more. This sort of debt ought not to exist. (Bankers have been conspiring to steal on the currency markets, the administration of the USA claims to have just discovered, hinting that this time some bankers may be prosecuted personally. Maybe. Perhaps. We will see… But that sort of outright criminal activity is different from stealing by giving money only to one’s friends and co-conspirators.) What is needed for civilization to survive, is debt that brings new high Return On Investment for We The People. That could be new tech, or new housing, new, sustainable energy sources (my eye being on thermonuclear fusion, a field where power is growing according to its own “Moore Law”, that means, exponentially; to provide clean BASE energy). Plutocracy naturally is not interested by We The People flourishing. Just the opposite: Pluto thrives on misery. That’s the part of the economy which no one very serious, and part of the oligarchy, wants to see.

Even normal people do not want to see it: it’s too depressing, and they don’t know what to do.

Moreover plutocracy is entangled with a more far-out explanation of the present economic distress: the world is getting old, as the Romans used to say. The Romans needed to transit from the old economy, to a new one. As we do. Paralyzed, mesmerized and occupied by plutocracy, the Romans could not even conceive of the notion (all the more as some zones of the empire, especially in the Orient saw their GDP climbing all the way until the barbarians invaded, archeology shows). Roman mines got exhausted, regions which used to produce lots of food became poor, Return on Investment of many activities collapsed,. there were not enough slaves, nor small farmers to support production, or the army, the economy and security organized until then by the state faltered, from too small tax revenues, and finally the middle class and local government (the “curiales”) were destroyed by taxation, while plutocrats went on a rampage, grabbing most powers. Romans had to make transitions (new tech, no more slavery, less plutocracy!) They didn’t. We are in a similar crisis. ROI is collapsing, so is the biosphere. Robots are threatening to destroy much employment all together. The notion of productive activity, thus productive debt, has to change, forgiven or not.

Krugman himself concludes that the debt crisis will not abate. He does not say why. I will: it’s not just out of mental inertia, it’s out of viciousness.

Some will say I exaggerate. Not so. Look at Italy. The government debt is around 145% of GDP, and pays more than 3% interest. So it augments at the clip of around 5.5% a year. To diminish that debt, nominal Italian GDP ought to grow at more than 5.5% a year. But guess what? Not only is Italy not growing, but Italian GDP is smaller now than 14 years ago (with a larger population).

There is only one way out: default. That is tell the plutocrats that they can forget their money, or, more exactly, treating We The People as if we were indentured servants, or serfs. I rest my case.

Patrice Ayme’

Economic Tech Wreck

July 25, 2013

Paul Krugman: “Both Steve Benen and Ed Kilgore get annoyed at fellow journalists complaining that there aren’t any “new ideas” in Obama’s latest. But why should there be?

It was clear early on that this was a crisis very much in the mold of previous financial crises.”

Well, sort of, but not really. True, the USA population had filled up to the rim in subprime mortgages, and could not afford anymore. True, the USA population ignore both mathematics and the fact that big bankers can conspire, big time (in jacking up interest rates after mortgages had been acquired: ARMs; or through securitization, selling lies to the unawares; or by hyper leveraging themselves against all of society through financial derivatives). Result? A Great Depression, probably the greatest of them all.

Comparing Two Great Depressions

Comparing Two Great Depressions

What triggered the crisis, though was a spectacular rise in the price of oil. People suddenly had to choose between paying for the house, or fueling the car. As the USA is car dependent, it was not really a choice: without a functioning car, there is no getting to work, or even food, let alone school.

Moreover, ever since, in spite of frantic fracking, the price of oil has stayed high in the USA, depression or not. California gets most of its oil from Texas now. It’s back to the past. Except for one important detail: all of this oil is fracked oil.

Now please observe that the world economy, and world food production, let alone trade, is completely oil dependent. Without oil, the world population would quickly collapse by 90%.

We do not have an acceptable mass energy replacement. We are in the situation of Europe (and Japan!) in 1300 CE: dependent upon a waning asset (then, wood, which was used for everything; although England switched to coal then).

So what’s the idea? The big idea is always missing from the loud economists who dominate the USA, and, thus, the world in general: they view the economy as just about money flow. According to them, if money flows, everything is fine (never mind all the money goes to the .1%!).

This was basically the reasoning Roman emperors wanted their economists to believe, and advocate, too. So I sent the following to Krugman who published it right away:

“What is new in present day economics is the possibilities new technologies offer that were not within reach before, and the problems old technologies are causing, as they become waning assets.

We are living in a science-fiction world, highly dependent on technology. Not to realize this is a lethal condition.”

To this, John from Hartford replied:

“I’m not sure this is true. If you look at the period in the 20’s and 30’s when people like Keynes were evolving their theories the world was being flooded with new technologies like radio, mass ownership of automobiles, silent/sound movies, aircraft, proto computers, etc. etc. which were probably greater in their affects than those were currently undergoing. What was much more important was that it was a period of intense global economic disruption which essentially provided real life laboratories for examining and testing economic hypotheses. And back then the consequences of economic mismanagement really were lethal on a scale we’ve never experienced since.”

In turn I answered to this very conventional reply with more of my advanced details (a condensed version of which was published by the NYT):

John: I do not dispute that the flood of new technologies getting in everyday life in the 1930s was not higher. Right now such a flood is very high in China. Yet, the technological flow has been deliberately slowed down in the West by a plutocratic conspiracy (as happened in Rome, when the government consciously paid inventors to NOT develop their inventions).

As I have explained in the past, plutocrats hate disruptive technologies. New technology introduces new ideas (witness the so called “Arab Spring”). It’s only natural to apply the “new ideas” mood to the established (plutocratic) order, as plutocrats and plutophiles, correctly, fear.

An example of technology not deployed is single payer health care in the USA (Germany introduced one more than 150 years ago!). Instead Obama introduced a new technology, Obamacare, friendly to plutocrats like the old one, but with even more subsidies from taxpayers. (For what the word “technology” means, see the comments.)

I just said the possibilities of higher technological disruption exists now… and that’s a good thing. And that proper economics, well done, would look into disrupting for the best the established economic order. At the governmental level (and not, as is done now, just at the Bill Gates level!… Bill Gates is financing new nuclear technologies.).

To claim, as Hartford John does, that “the consequences of economic mismanagement really were lethal on a scale we’ve never experienced since” is saying that devastating the entire machinery of the biosphere on a planetary scale is not “economic mismanagement”.

As I have long argued, we are in much more global danger now than in the 1930s. Fascism in Europe and Japan in the 1930s was a man-made disaster. Now we have much greater disasters waiting in the wings, driven not by human maniacs, but by physics, such a methane belch (that could turn overnight global warming into global heating!). ‘Massive methane eruptions’ is not a question of “if”, but WHEN.

Massive methane belching is actually already happening, in my not so humble opinion. How else to explain that the North Siberian sea route (“North East Passage”) is already now open for business? The topography makes it possible for much more methane to erupt there than in the North West passage… as observed!

(An interesting aside is that Total is investing many billions in a gas liquefaction  plant along the Siberian shore, obviously expecting the melting of the ice to accelerate! The idea is to send the liquefied… methane to China; Putin said it was OK with him, and he would remove the Gazprom monopoly…)

More prosaically, the ROI (Return On Investment) of fossil fuels is going badly, and the search for new mass energy is reaching emergency levels (however new energy technologies cannot be invented from one decade to the next!)

Europe knew a comparable situation twice: in the Late Roman empire, and then around 1300 CE. In the former case, civilization nearly crashed. In the latter case, European governments took successful, but drastic, measures (yet population collapsed by 2/3).

The only obvious new, potentially massive, technology we have is nuclear energy. By “nuclear energy” I mean all imaginable fission (there are about 100 of these) and fusion technologies. some will scoff. Yet, by 1330 CE, England had switched to coal to such an extent that Edward III’s government had to pass laws against coal, to limit the pollution of London.

This energy independence may help to explain that ‘England” was winning the war against “France” (for want of a better word) for a century… (Until the southern French developed the world’s first field artillery.) The abundance of coal with high ROI certainly explains the economic ascendency of England for the next six centuries… Until the age of oil. Oil with high ROI was in the USA, Arabia, and Mesopotamia.

Right now, many of the conventional, ignorant ecologists are certainly culprit not just of the impending ecological collapse, but also of the present depression. Jim Hansen, the ex-NASA scientist who did more than anybody else to provide the world with catastrophic insight on the degradation of the biosphere, shares this opinion:

“Can renewable energies provide all of society’s energy needs in the foreseeable future? It is conceivable in a few places, such as New Zealand and Norway. But suggesting that renewables will let us phase rapidly off fossil fuels in the United States, China, India, or the world as a whole is almost the equivalent of believing in the Easter Bunny and Tooth Fairy…

I think the only hope we have of phasing down emissions and getting to the middle of the century with a much lower level of fossil fuel emissions — which is what we will have to do if we want young people to have a future — we’re going to have to have alternatives and at this time nuclear seems to be the best candidate.”

Screaming against first generation, 1950s nuclear reactors, as those in Japan is entirely justified. The Japanese reactors use French-made recycled MOX for fuel. But for that, they are time-wraps. Let alone carefully installed in the way of a 30 meters (100′) tsunami… that had already happened 12 centuries before.

By now Fourth and Fifth, super-safe, super-efficient fission reactors should have been massively deployed. But the research was carefully not funded, because the reigning political class is fossil fuel fueled.

Survival, not just the economy, is all about energy.  

Patrice Ayme.

Banksters Saved, Jobs Lost

April 16, 2013

[Considering my preceding essay on bombing semantics, I was happy to hear Obama pontificating that: “Any time bombs are used to target innocent civilians, it is an act of terror!” Wow, what a change! Does that mean no more drone bombings on civilians? Apparently the White House mood of “targeted killings“, “untargeted killings” or “signature strikes” is getting discombobulated by what happened in Boston. More on this White House mystified soul searching, in the future.]



Readers who are not fascinated by economists’ debate about the Great Depression of the 1930s (GD30), and  lessons therein, can jump directly to the paragraph: “Banksterism Should Have Been Liquidated”. The plutocrats got their attack dogs, the professional economists and politicians, to blissfully conflate providing a financial system for the People, with sending to the richest of the rich ever more money. Here is the result, a collapse of jobs:

Epic Fail: Banksters Saved, Jobs Lost

Epic Fail: Banksters Saved, Jobs Lost

Basically, the real economy got starved of money. Notice the tremendous drop under great democrat Obama. All the great economists advising great democrats have to greatly explain this. Obama and his great adviser Larry Summers thoroughly approved the great Goldman Sachs plan to save the Goldman Sachs (and tax free big corporate USA) that had brought the crisis.

Then the banksters’ plan was pursued inexorably. After some hesitation, European parrots duplicated the plan. So here we are.

The red line in the graph above, the EMPLOYMENT RATE, the “Labor Force Participation Rate“, to give it its official title, is now as low as it was at the bottom of the deepest Volcker recession (the worst between GD30 and the present Greater Depression 2008). And we are plunging deeper. Much deeper, trust me.

Why much deeper? Because all those Very Serious People above trust in the great free market god, called Supply-Demand, to pull the economy through. But Supply-Demand is itself an artefact from mind control. So what needs to be controlled is mind control, and only regulations, and debate, democratically imposed, can do this.

Thus the employment situation, disastrous in Europe, is also disastrous in the USA (even though the USA is in full fracking boom, with its resulting, probably ephemeral, abundant oil and gas, that brings back to the USA lots of hydrocarbons dependent industries).

Thatcher and Reagan lowered the taxes of the rich. Now we have gone much further: the rich are outright financed by the poor. (To confuse the victims, that outrageous financing of the rich by the poor is nebulously called “Quantitative easing”, or “The Twist“, or simply “providing liquidity“.)

Far from allowing an exit of the system that caused the 2008 financial crisis, the present strategy, this Transfer of Assets to Rich People (TARP), has only made matters worse for the common economy, and for common people.

The latest twist being “austerity” programs, in Europe or the USA, supposedly to solve an alleged debt problem. But truly austerity makes it easier not to raise taxes on the hyper rich, be it only by changing the debate from the hyper-rich-are-not-taxed-enough to the poor-abuse-the-rich-with-their poverty (the latter was Thatcher’s line of personal business). 



A superficially seductive, but greatly erroneous, prescription to avoid another Great Depression was publicized by Milton Friedman, and officially embraced by many, including the present Fed Chairman, and its central bank.  Contrarily to what those worthies affect to believe, throwing money at the problem, or, more exactly, at the same exact banking system that caused the problem, is no panacea. Quite the opposite. A misreading of what happened in the 1930s presides to the present disaster. Basically, Friedman said one could run on one leg. He forgot about the other leg, the one that was on the ground before.

Friedman’s “explanation” of the Great Depression of the 1930s (GD30) is that the Central Bank of the USA (“Fed”) did not provide banks with enough “liquidity” (cash). So the banks went bankrupt by the thousands, people lost their savings, business lost access to money, and the economy of the USA faltered. That’s all entirely correct, as part of the picture. Yet:

One can tell lies, just by focusing exclusively on part of the truth.

Lying by ommission is what Milton Friedman did about GD30. His bit of truth is not an “explanation” but a sample of  observed facts. Clearly bankruptcies of the banks was a disaster. All he said above is true, but does not provide enough of a context for revealing the real truth in its full splendor.

In mathematics local minima do not have to be global minima. Same in the theory of theories: local maximal truth does not a global reality make.

Friedman’s quarter truth has come to be viewed by the economic theory in power in the USA as the be all, cure all (panacea).

A few years back, the head of the “Fed” turned to Friedman sitting in the first row and told him, flippantly, for the ages:”You are right, we did it!“. Bernanke meant that the Fed caused the Great Depression, by being too austere.  (Bernanke did his PhD on GD30, showing that some PhD are provided to reinforce the bankster managed banks.)

Let me quote from Friedman (since I quote Hitler occasionally, I may as well quote Friedman):

 “at the London School of Economics… the dominant view was that the depression was an inevitable result of the prior boom, that it was deepened by the attempts to prevent prices and wages from falling and firms from going bankrupt, that the monetary authorities had brought on the depression by inflationary policies before the crash and had prolonged it by “easy money” policies thereafter; that the only sound policy was to let the depression run its course, bring down money costs, and eliminate weak and unsound firms.”

Paul Krugman says that Friedman viewed starving the banks as evident nonsense, and advocated instead the (THEN) Chicago view that banks should have been rescued, government should have acted to reflate the economy, and moreover, that there was a strong case, as Friedman wrote: “for the use of large and continuous deficit budgets to combat the mass unemployment and deflation of the times.” I agree with all this… However…

However as many have noticed, the doctrine Friedman considered self-evident nonsense is now more or less the official doctrine of the Republican party, just as it was under republican president Hoover, and of the European Union, as it was under the French governments of the 1930s. Meanwhile the views Friedman advocated from Chicago are now, according to American conservatives, tyrannical socialism, and according to European leaders, not an option.

The wheel of opinion has turned completely… Why? How? Krugman says it’s because they are all idiots, they just don’t know the basics of macroeconomics. Yet, reality is more instructive.

The passage of Friedman above quoted was a quarter of the truth, the fourth quarter of the truth, what became the truth after Roosevelt closed all the banks. That there was excess, and it had to be wrung out of the system, prior to that, that was another quarter of the truth, the third quarter of the truth. Now conservatives are focusing on that third quarter of the truth, in the USA, and in the EU. 

What was the second quarter of the truth? International trade fighting with tariffs (started in September 1929-July1930, by the USA). The modern equivalent of this deleterious international fighting is competitive devaluations, what the honorable dear professor Paul Krugman always advocates. (And which Japan has recently borrowed from the USA, making Washington all yellow in the face.)

Oh, and what got everything launched? A drastic boom in the 1920s, engineered to drown British WWI debt. That led to inflation (real estate, Florida, say) and overproduction (cars). That was the first component of the Great Depression quartet. 

Before I explain the obvious, let me veer towards what’s wrong in the presently attempted method to get out of this unfolding Greater Depression.



Saving a bank and saving a bankster are two different things. Two completely opposed things. It’s like confusing saving a victim and saving who murdered the victim. The banksters leveraged the banks they headed, to the max, because the larger the profit, the more money they got. Some built international airports in the middle of nowhere in Spain.

Some made bets with each other, using the fake currency of financial derivatives.

The more they bet with tremendous leverage, the more leveraged the system got, ready to collapse at the smallest loss.

Meanwhile banksters had bought jets, yachts, mansions, islands (Example: Paulson, Bush’s Treasury Secretary, bought himself an island large enough for several villages).

When the banks collapsed the banksters’ properties were outside of the disaster zone. Politicians left them there. Taking care of their own providers.

Example: Lehman Brothers, a bank, an investment bank, was not saved, but its head banksters saved for themselves the billions they made, driving it into the ground. The three top guys, including CEO Fuld, retired with five billions among them.

Starting in 2008, the structures, ways and means of banks, including the derivatives and banksters leading them were saved (see Citigroup, JP Morgan, Goldman). Everything that had caused the disease was saved, thanks to the public (taxpayers, low lives, etc.)

Whereas in truth and full morality, all that should have been saved were the small deposits (as was done in Cyprus below $130K accounts). The entire businesses, the entire bank holding companies, which had failed, should have been left to fail (free market theory).

From the ruins, banks serving the real economy ought to have been founded. Instead,  the exact same holding companies that had failed were refounded, again, same as they were before, and generally around the same imaginary activities, with the same managers. Citigroup, Goldman Sachs, were saved modulo gifts exceeding 50 billion dollars;  JP Morgan got a giant gift (Bear Stern) and got in trouble because of its “London Whale” (highly leveraged government bond derivatives).

Providing liquidity, that is aid and comfort, to a thief, or a system that steals the real economy, does not provide with an optimal outcome, especially if one is poor, because one has already been robbed by the same thief or oppressive system. But such is the business model since 2008.

A financial system that caused such a crisis, should not just be provided with liquidity, but should have been liquidated as a self serving financial entity.



So what happened during the Great depression of the 1930s? Was the view that all the excess should have been liquidated, that the depression should have done its job, correct? (The view held first.) Or is the view that the banks should have been saved correct?

Well, both views were correct. What Friedman and Bernanke do not realize is that there was serious liquidation, for four years, before Roosevelt launched his recovery program. And Roosevelt launched recovery by closing all the banks, first, just as was done in Cyprus recently. Banks were then reopened, provided with liquidity, according to their viability.

So Roosevelt’s New Deal provided liquidity… after a tremendous liquidation. (In the preceding 4 years.)

Right now, there is obvious excess, that should be liquidated. All over the West. It spans the whole landscape of spending. From the picturesque but highly symbolic, to the vast and deep.

I will give examples of what needs to be liquidated in another essay. There is just plain too many dimensions of excess, from “poor” Greeks or Italians with secondary residences, driving expensive Porsches although they have no income, to our self glorifying leaders spending on themselves public money like crazy, while sleeping in plutocrats’ beds. and of course transnational corporations paying no taxes so that they can swallow all and any creature or business in their way. Yes, there is much to liquidate.


Patrice Ayme

Real Doom

September 26, 2011


As The Going Is Getting Tougher, The Weak Is Saying Whatever, But The Tough Will Propose Harder Things:


 Abstract: The Central Bank of the USA, Obama, Krugman and much of the left of the USA, let alone its banksters, claim that the present Greater Depression is a combination of over-production and lack of demand. Perhaps unbeknowst to them, this is straight out of Karl Marx. Although not without some superficial merits, that explanation comes very short to explain the extent of the crisis, which has more to do with the capture of democracy by banking.

 The resulting idiocy has blinsided us about even larger problems waiting in the wings, which are making their presence felt. Thus, it’s not about demand, as Obama, Krugman, the GOP, and the Fed believe(d). And providing more money to bankers will not change a thing, if that is all what is done. 

 A real change will come by reigniting the technological drive behind a worthy project. Yes, that will require a massive effort in better public schools, all the way to the highest research level.

 I propose a new technological drive, which is both completely feasible, and will be a game changer in what economy and survival are all about: energy. And no, it’s not about charging towards wind mills. And yes I propose this, because it will be hard, precisely. (We propose it because it is hard is what president JF Kennedy said, correctly and deeply, about his moon project. What I propose will be also much more useful.) 



 A funny development is afoot: as the severity of the crisis reveals itself, the propaganda machine, unable to deny the existence of a depression, is trying to wrestle control of the discourse by reorienting it towards safer ground… In this case… Karl Marx (as we will see).

 A well connected anointed personalities of the left, John Judis, wrote an essay “Doom!“, quoted approvingly by Krugman. As I will show below, it looks good, and many of Judis’ arguments are excellent, all the more since they are well known, and that all the way since before Karl Marx. However it is still a sly manipulation, as the Marxist conclusion (“too much over production“), while partly correct in the 1930s, eschews the real problems. Then and now. Now being way worse than then.

 Curious times when Marx’s ideas can be manipulated into serving the plutocracy. True, Marx did not have that concept. The concept of plutocracy. Marx believed in the struggle of the classes, I believe into something much more sinister.

 “Doom!”was approved by Paul Krugman as can be seen in the following post, which is revealing in other ways… Krugman’s post is remarkable by his honesty (see the parts I underlined).

 After quoting Krugman, I will explain why “Doom!” is a dangerous whitewash full of disinformation. Truthiness is at its worse when it is carefully laid down to lead us astray.



 Here is Krugman,September 20, 2011, 4:39 pm


 That’s the title of a new article by John Judis about how policy around the advanced world is now aggravating the slump — and how things look likely to get even worse looking forward. It’s not very different from what I’ve been saying, but Judis offers more historical depth in the comparison with the 30s.

Actually, I’ve been thinking about that parallel — and how truly remarkable it is.

I was recently asked to give a talk on “capitalism and democracy”; that’s bigger-think than I usually do, but I gave it a try. I took as my starting point the famous Fukuyama thesis that liberal democracy — meaning basically a market economy plus democratic institutions — was an end state, a final resting point for state organization.

I always had my doubts about that, largely thanks to the 1930s: what we saw there was that a severe economic crisis could put liberal democracy very much at risk. And it was a close-run thing: slightly better strategic decisions by the bad guys could have made totalitarianism, not democracy, the end state.

It seemed to me even when Fukuyama first wrote that this could and probably would happen again, that there would be future crises that would put our system — which I agree is a very good system — at risk.

But one thing I was sure of was that the next great crisis would be different. It would be environmental, or about resource shortages, or about runaway technologies, or something; it wouldn’t be about a banking crisis and a collapse of aggregate demand, aggravated by bad monetary and fiscal policy. We’d learned too much to repeat that performance — right?

Wrong. The amazing thing now is not that we’re having a crisis, it’s the fact that we’re having the same crisis, and making the same mistakes.

A lot of the blame goes to the economists, by the way, who abandoned what they used to know — and many of whom are giving bad advice now, I firmly believe, based more on ego and political affiliation than on analysis. That is, I believe that we’re looking at a moral failure as well as an intellectual failure.

Anyway, awesome. And depressing.



 Bigger-think than I usually do? Bigger admission than those people with fancy credentials usually make. Honnesty in top thinkers who are after the truth allows them to perform better (but does not help their friendships, so there is a complementarity between depth of discovery and influence in one’s lifetime).

 Let’s analyze in more detail Krugman’s assertion above: “slightly better strategic decisions by the bad guys could have made totalitarianism, not democracy, the end state.”

 This has been one of my points, over the years. I will not go into much details here, just a few illustrations. At Dunquerque (“Dunkirk”), the French army made a successful defensive ring which allowed the professional British army to escape. Had that not been the case, Britain would have been defenseless… The next big Nazi mistake was not to have pushed a few more days in its attempt at destroying the Royal Air Force… Because it was succeeding. Instead the enraged Nazis switched to city bombing, which spared the RAF. And so on.

 Anxious to keep himself popular with his adoring German supporters, Hitler did not switch the German economy into a command economy until well after major disasters, in 1943. The Soviet (of course), British (unobviously), and American economies (spectacularly) had been switched to command economies years before. So Germany, after a jump start into militarization after the Nazis came to power, was slow in mobilizing all its resources.

 By the way, the necessity of this switch from market to command, shows that COMMAND ECONOMIES CAN BE VASTLY SUPERIOR to free markets. What Krugman calls “our system” was not “our system” when it really mattered, during WWII.

 Had Hitler not personally slowed down the development of the Me263 jet fighter (to make it into a bomber to bomb my dad), by more than a year, Germany would have regained air supremacy by Spring 1944, which would have changed everything (it’s not me saying it, but the U.S. Air Force).

 It is intriguing to know that the obverse is even more true: slightly better strategic decisions by the GOOD guys could have defeated totalitarianism quickly. Or just less bad luck, or fewer grave tactical errors. As when that Spitfire pilot saw Nazi armor jammed in the Ardennes’ forests. But he was not believed. Indeed stuffing all of one’s army on one road in one forest was considered an insanely demented mistake, and the Franco-British command could not possibly imagine that the Nazis were that stupid and crazy. Just what Hitler and a handful of generals hoped would happen, to the disbelief of their less mentally imbalanced colleagues. 

 Morality: never underestimate the insanity and stupidity of your lethal adversary. And the more fascist, your adversary will be, the more insane and stupid.

 BAD LUCK: the French army had fully anticipated the obvious German offensive (“Case Yellow“), down to the fact that it would have two main axes through Belgium, and exactly where those axes would be. They were ready for it, and knew they would cut off German armor from behind.  However a plane with the plans crashed in Belgium, and the Nazis switched to a wild and crazy plan concocted by Hitler and his friend the Duke of Windsor (a Nazi fanatic judiciously made inspector general of the British, hence French, defenses, and whose keenest reader was Adolf Hitler himself; Hollywood was correct to make a movie about a king’s speech impediment instead, to help cover the sordid truth).

 Now, of course, when the French high command sent its armored, mobile, seven division reserve to the Netherlands, while smartly keeping no less than half of the French air force out of France, the strategic mistakes were bewildering (there are reasons to believe it was not all accidental, just like with the duke of Windsor, the ex-king who was not tried and shot as he deserved, and it is better to make movies about his successor’s voice. Anything to avoid exploring what really happened in 1939-1940!)

 And, of course, if the USA had gone into the war by the side of France and Britain in 1939, instead of joining Hitler (under cover, but de facto), the Nazis would have been promptly defeated.

 The grand conclusion is this: World War Two was a highly unstable, chaotic adventure (in re-runs of the Battle of France in 1940 and the battle of Midway in 1942, the Nazis and the Americans lose nearly every time, so both were lucky, very lucky, and chaos going just a bit differently would have brought a different world society, now.).



 Another statement of Krugman is worth pondering:“I took as my starting point the famous Fukuyama thesis that liberal democracy — meaning basically a market economy plus democratic institutions — was an end state, a final resting point for state organization.”

 This Fuk. thesis is of course the grave mistake, self serving to the oligarchies, that civilization is making: instead of having a real democracy, Athenian style, namely direct democracy, as in the paleolithic cave, for the last four million years, we have a system now closer to elected fascism. A few elected people, in connivance with at most a few thousands, completely unelected conspirators, worldwide, decide for everybody, in connivance with a much larger body of plutocrats, who would be convicts, should justice be applied to them.

 OK, it’s not anywhere as obvious as in Russia, where Putin will be dictator president until 2024 (he just announced boldly; OK, at least in the USSR, I mean the Russian Federation, one knows who is the boss, whereas in the West one knows who the puppets are).

 The result of the representative fascism we have is an increasingly deeper lack of intelligence, as the handling of the crisis demonstrate.

 There is not much serious debate of the whole population in the system we have, in contrast of what happened in ancient Athens. Only polls are consulted, but polls are the fruit of public opinion, itself heavily manipulated by plutocratically controlled media. “Greek” crisis: in truth, it’s mostly a foolish lending crisis. “Subprime crisis”: in truth it was first of all a derivative crisis. Still is. “Euro” crisis: mostly the dismantlement of a system devised by private banks for private banks, were dangerous investments were disguised as AAA+, in the guise of Euro unification.

 And so on. Palestine not a state: no problem, let’s make Palestine the object of a final peace process, that’s the final solution, for however long it takes, American style (hint about what that means: look for the Cherokees!)

  So all depends upon Obama, thinking in his king size cherry bed (which is particularly comfortable, “The Economist” told us.)



 The thesis of Judis of the New republic is repeated by Krugman faithfully:

 “The amazing thing now is not that we’re having a crisis, it’s the fact that we’re having the same crisis [as in the 1930s], and making the same mistakes.” But Judis, and apparently Krugman, make the mistake of believing that the crisis is only about that, being an exact copy of the crisis of the 1930s.

 Let me quote Judis extensively (as the article is only for subscribers):

 “TODAY’S RECESSION does not merely resemble the Great Depression; it is, to a real extent, a recurrence of it. It has the same unique causes and the same initial trajectory. Both downturns were triggered by a financial crisis coming on top of, and then deepening, a slowdown in industrial production and employment that had begun earlier and that was caused in part by rapid technological innovation. The 1920s saw the spread of electrification in industry; the 1990s saw the triumph of computerization in manufacturing and services. The recessions in 1926 and 2001 were both followed by “jobless recoveries.”

In each case, the financial crisis generated an overhang of consumer and business debt that —along with growing unemployment and underemployment, and the failure of real wages to rise— reduced effective demand to the point where the economy, without extensive government intervention, spun into a downward spiral of joblessness. The accumulation of debt also undermined the use of monetary policy to revive the economy. Even zero-percent interest rates could not induce private investment.

Finally, in contrast to the usual post-World War II recession, our current downturn, like the Great Depression, is global in character.”

  Well, yes and no. Yes, all the preceding is true. But, THIS TIME, it’s only a small part of the story, and not the worst.

  However, this simplistic a minima analysis is what has led the Obama administration, and others, to believe that demand is the only problem, just as in the 1930s: augment demand, and the crisis goes away. so Judis’ interpretation is not different from Bushama, or Krugman, or many others: just the depth of the crisis changes.

  Lowering interest rates thus was viewed as essential. But it’s not. Jobs are essential. There is no need for interest rates to be manipulated to get jobs. Command economies have demonstrated this before, ever since (Consul, general and imperator) Marius’ legions dug a canal from Arles to the Mediterranean sea (102 BCE). Or, before that the Chinese, the Mesopotamians and the Egyptians built massive canals, in what were, obviously, huge government programs.

 The first Egyptian canal is 6,000 year old. Egypt built another large canal in 1,700 BCE. The Shatt-el-hai Canal was built, linking the Tigris and Euphrates rivers, in 2,200 BCE. Command economies work, and they work more.

 My interpretation is not that interest rates are too high. Anyway, interest rates  are basically zero, and so they have been, basically zero in Japan for 21 years, and the crisis is still there, there.

 My interpretation, instead, is that we suffer from a misallocation of capital, not so much quantitatively, than qualitatively. Krugman, instead, like Obabla, believe that if we send just so much more money to their banksters friends, a miracle will happen, and the bansters will walk on the water, make bread, distribute fishes, and offer the wine.

 But the bread is laden with pesticides, the fishes soaked in mercury, the wine is just a rising acid sea, and banksters make only gifts to Obabla, and the other friends they have.  



 Judis forgets a number of details, each planetary sized. There was no worldwide energy crisis in the 1930s, nor CO2 poisoning, nor a demographic crisis. Weapons of Mass destruction did not exist, and the biosphere had not started to die. Neither the Nazis nor the Soviets ever advocated extra judicial treatments and torture (as the super bully did recently, and practices worldwide for all to see, and learn). OK, Nazis and Soviets were not tender footed. But they did not dare being that devolved for all to see.

 Conveniently, Judis forgets also other ecological dimensions, completely. Among them:

 The USA decided to make food into fuel, so food prices jumped, worldwide, and have reached a permanent higher slope. Which has already led to the starvation of many, and dozens of millions, very soon, according to the specialists. But never mind: the USA has lowered the percentage of its oil exports from around 60% to 47% (with lots of “fracking”: finding oil and gas for an inefficient economy is well worth fracturing the entire USA!) And then, of course there is the cost of fossil fuels, which has thrown economies in recession, more than once.

 Judis also forgets the military element: in the 1930s, the USA was at peace. Right now, the USA is at war, all over, and in a very expensive way. Aside from the official soldiery, the Pentagon employs no less than 291,000 private mercenaries. With the intelligence agencies, one gets to about all the budget American taxes pay for, one trillion dollars. Making war against the world is expensive, as Hitler found out. Of course, as he was the first to point out, he did not have the means of the USA. Thus what we have now, mad bull losing its way, in more ways than one, is the real thing.

 In the 1930s, Americans could afford health care. Right now, thanks to (industry) gold plated Obamacare, health spending relative to GDP is climbing vertically: I saw a graph where, in the latest year, health care spending went from 16% of GDP to 18%. At this rate, before the end of Perry’s first presidency, only Congress, the White House, and plutocrats will be able to afford health care.

 Judis also forgets the democratic deficit: Obama, in his star struck simplicity, goes around, quoting the richest men in the world, calling them “my friends“. We are all supposed to be on our knees, swooning with love, as most of disposable GDP is sent towards the superrich, and we are told to follow spiritually the superrich, and tax them more, just as they said.  if Buffet says so, teaches Obama, so it ought to go, because who knows better. If Obama knew a bit of history he would not have waited Buffet and gates to teach him that taxation has to be progressive, just to stay in place. This has been known, and practiced, for 10,000 years. Except in plutocracy. Thus plutocracy was the apparent state of Obama’s nominal reign, so far, since the plutocrats themselves had to tell Obama that it looked bad.

 Next: wolves to come to the sheep pen, and Obama informs us that those quadrupedic wells of wisdom are coming to be shorn. And he shall recommend to do as they said.

 Judis claims the entire problem is over production. As in the 1930s, he says. But that is a complete misinterpretation of the crisis of the 1930s, first of all. That was more caused by the wrong decisions, coming from hubris, rather than by anything else. Now this master cause we have come to enjoy again. Stupid hubris to the point of dementia.

 The interpretation a minima of the crisis by Judis, claiming meekly that it is just as in 1930s, is very convenient to the plutocracy.

 It stands Marx on its head: you see, according to Judis and al., the problem is that workers worked too much! I hope Judis gets invited to a lot of parties in Manhattan, and the Hamptons, by the superrich and influential: he has done well for the malefactors of great wealth.

 Let’s fire more workers, indeed, Mr. Judis. Before they get angry and set fire to that “democratic” ultimate state Fukuyama was paid to be so proud of. 

 In truth preisdent FDR refused an over-production interpretation of the 1930s crisis. According to FDR, the real crisis emanated from the “money changers“. In other words:



 The more they lend money they do not have, with the benediction of their conspirators in government, the richer the bankers get. It’s as simple as that.

 Krugman seems to have been converted to this view two days ago, as in a rare seizure of truth about Europe, he reveals the “Origins Of The Euro Crisis“. …”it is very difficult in real time to convince people that capital inflows pose a threat, no matter how obvious the numbers seem.”

 In other words, money created in arbitrarily large quantities causes large tsunamis, tearing all societies in their way. We are far from Karl Marx’s critiques. But Krugman fails to see the connection with the fact that Judis is wrong, and that it is also wrong to use the Fed to send arbitrarily large flows of money to giant private banks, which are themselves permitted to use as much leverage as they want, directing those tsunamis each time they see a new landscape primed for devastation.

 This is why Japanese banks lent to real estate speculators and “zai tech” artists before 1990, and frantically all over South East Asia in the 1990s. Big banks all over EU and the USA duplicated the method in the late 1990s and 2000s, with the complicity of central banks and governments. A flood of money was for all actors to have. That is the influential actors, those who can invite the president of the USA for a sleep over.

 Then the president will invest half a billion in your society (say a solar company financed from those friends who had him at dinner, and made him feel important). Don’t worry: now that these solar companies are bankrupt, the venture capitalists will be the ones to see their money come back (contrarily to usual usage of venture financing where early investors lose all). Thus, they will be able to get their “democratic” president re-elected. No the taxpayers will not see their money come back, it’s lost for good, and this is only justice, they are only suckers, what are they going to do? Vote for Perry? Really? 

 The money rushed particularly towards untapped markets: derivatives, subprime, and European periphery. There was no cause of worry: in 1996 various indicators were as bad as in 1929. What did the head of the Fed do? Greenspan provided more money so that the party could keep on burning the house. He used as pretexts, a whole succession of crises: South East Asia collapse, Russian collapse, and LTCM. Long Term capital Management was a hedge fund full of friends and Very Honorable People.

 Then there was the year 2000 crisis (no kidding), and the Internet Bubble. Greenspan kept on forking the money. Naive creatures such as Nobel Paul Krugman have asked for more of the same, and I am all for it.

 However the way the American Central Bank has been sending the money is through the private banks. Or more exactly the same small conspiracy of bankers, a gang of banksters. Look at Rubin and Summers to see what I mean: already ultra powerful under Hollywood actor Ronald Reagan, those financial manipulators reached even higher even before the ignorant, but surprised Bill Clinton was elected. Then they took control of their Obamabot, a tele prompted device: a more advanced technology than Clinton. If one is to believed recent revelations, Rubin, Summers and their Geithner device, outright ignored the Obamabot, as happens in star Wars with idiosyncratic robots, when they scoffed at his erratic orders.

 What happened since 1996 (which was in many ways like 1929, as far as the indicators were concerned, as I said) is that at each episode, at each crisis of liquidity, the banksters were encouraged by the governments to throw more money, more investment. The correct course would have been, instead to regulate tightly the money flows according to higher principles. That is what the PRC, the People Republic of China, does.

 But how do banks create all that money? Through leverage. So the leverage got globally ever worse, at each further step of curing over lending by more money creation. Derivatives have reached more than ten times world GDP. The superrich and their servants in government loved it, as they became ever richer (since they serve themselves as the giant cash flows pass below their noses). This points immediately to the most obvious aspect of major problem: the super giant leverage is private. That, in turn, points at the solution, as I point out in conclusion.

 As the conditions become adverse, the latest leverages, most giant, most adventurous, more leveraged than ever, have to be inverted. As Kash Mansori (approved by Krugman) points out, in the case of the European debt crisis.



 As usual when there are crises, opportunists move for easy pickings, and the kill. American plutocrats and their supporters see an occasion to “explode” the European Union, for example.

 So what to do with all this insanity? There is a number of simple measures which are in the air in France and Germany, or even the UK and the USA:

 a) Getting rid of those who say we don’t need a Financial Transaction Tax, like Geithner. A FTT will discourage banks from engaging in fake trades with each other, and from extracting all profits or capital from legitimate investments in the real economy. It has to be implemented right away, as Merkozy says.

It’s a torpedo to fire at plutocracy that even European conservatives agree should be fired. European conservatives like money, they don’t like to hang from lamposts.

The Eurogroup should not hesitate to use the threat of force (by forcing a lot of financial euro business to be conducted in the Eurozone, and also by threatening to facilitate a lessening of euro valuation, as I said in the preceding essay).

 b) Getting rid of those who, like the German Vice chancellor, Rösler, ironically head of the “Free Democratic party”, want to abrogate the rights of completely innocent people and nations’ rights. OK, like Hitler, Kaiser Wilhelm, Stalin, Sarkozy or Obama, there are some doubts about his true origins, at least in his mind, so he is anxious to show he belongs, because he is more patriotic, and no patriotic act is high, or hard enough, for him to commit in front of the admiring crowd.

 Krugman is now mellowing a bit about the euro, saying that the “the euro is going to have a chance of working only if the ECB delivers much more expansionary and, yes, inflationary policies than the market now expects. If you don’t think that’s a possibility, say goodbye to the euro project.”

 “Euro project“? What about the “dollar project”? How is that doing? That would also be helped by small inflation, too, as long as capital is well allocated. But, to do this, gross misallocation of capital by itself, for itself, should be stopped, and that means a FTT. and also, for the USA, a Value Added Tax, to foster savings (total USA debt, including “Government Sponsored Enterprises” is well above 400% of GDP, arguably only less than the total debt of the UK and Japan).  

 c) Push fundamental research and development, give society a project, indeed, and a dream that will bear fruit.

 Improbably president Kennedy ordered the USA to land on the moon, with exalted firecracker technology. It worked. It was sort of useful , be it only by broadening humankind’s vision.

If Obama were really smart, he would have proposed a similar project. He should. The prime candidate is laser triggered thermonuclear fusion. It’s not plausible that it will not work on an efficient industrial level. (The USA, UK, and French programs are already talking to each other; one should make it into the next moon like project, an occasion to teach Krugman the difference between “project” and “currency”.)

 Some of the naive will say: thermonuclear, what for?

 Well, don’t believe the propaganda that there is plenty of oil and gas. We are past peak cheap oil. Now, indeed, we can have centuries of unbearably expensive (financially, socially, ecologically) oil, and gas and coal. But unbearable is the word. Starting in 2016, the prices will augment vertiginuously.

 Meanwhile demand is exploding: cars are supposed to quickly double to two billions, as emerging countries get to drive. China and India build four coal plants, a WEEK. Soon there will so much mercury vapor deposited from burning all that coal, that fish will be inedible, anywhere.

 The 30% more acidic oceans are now rising 5mm a year. Yes, the rise of the waters has accelerated.

 We need a new massive energy source, and it’s going to be nuclear, one way, or another. No more of that Roman energy stuff. We can do better than Inuits 1,000 years ago, who already burned oil. Because the superior Viking did not copy Inuit technology, they disappeared from Greenland. Our case is worse: we have nobody to copy. OK, maybe the Inuits, if it comes down to that. But don’t forget that mercury fish. Well, when one’s brain is full of mercury, one has forgotten what forgetting means, good point. Long live coal, down with nuclear, as completely idiotic pseudo ecologists say.

 And don’t tire me with the obsolete 50 year old plant at Fukushima hit by the giant wave after the giant quake, and without having done any of the mandated work on emergency generators: pictures show that the raccoon dog, the Tanuki, is back, frolicking among the reactors… Same in Chernobyl. Maybe we could explode a few thousand nuclear reactors, so wildlife would thrive? just wondering. Won’t happen with mercury, though, indeed… Actually a low level of radiation is well known to improve health, through the triggering of subtle repair mechanisms…

 Thus the number one strategy ought to be to declare a state of socio-technological emergency, and push for more brains in science, and shower the whole area with all this money the Financial Transaction Tax will send in the direction of common sense. With a clear target: tame thermonuclear fusion in 10 years, for power generation. It can be done (it’s just a question of augmenting a firing rate, and receiving the neutron efficiently).

 Late Imperial Rome died, in part, from its devastation of the ecology having caught up with its mostly stagnant technology: the “malefactors of great wealth” (as president Theodore Roosevelt called them) hate thinking (and rightly so, from their point of view of greedy crocodiles!) Rome was mastered by, submitted to, malefactors of extreme wealth. Some Roman bishops had 400 slaves. Malefactors of great wealth hypnotizing the People into superstition, away from reason, knowledge and wisdom.

 The Franks and other Germans developed more appropriate renewable technologies than the Romans had (wooden constructions and water wheels everywhere), and soon completely new technologies the Romans never even dreamed of (deep ploughs, massive labor horses, beans, etc.)

 A massive technological project to pull us up is bigger-think than Krugman, or Obama, and a fortiori the rest of the government of the USA usually do, but that is (part of) what is needed.

 Ah, and what of the super giant private leverage now incapable of supporting its own weight? Well default it, thanks to public funds which will acquire title and control (what Obabla did not do… yet). Once the European public fund for stability (etc.) is deployed and massively leveraged into many trillion dollars, one will have such a (trans)national public bank, which, under the People’s control, will be able to return banking to the real economy, and maybe even sanity. As it will crush all the hedge funds in the way, especially after a Financial Transaction Tax has been instituted.


Patrice Ayme


To answer a reader, just now: There are about 100 potential nuclear fission technologies all much safer than the present ones. China has a national Liquid Thorium Reactor project (project: learn, Krugman, learn…). France also finances a bit such research. The advantages of LTR reactors are enormous (they were studied initially as engines for planes). But of course nothing would be fusion (besides ITER, and the laser approach, there are other realizable fusion technologies within profitable energy production grasp.)

Too Big To Fault, Say The Immoralists.

December 4, 2009



In a nutshell: the present crisis consists in a whole succession of crises imbricated like Russian dolls within each other, when they are not entangled in even more complex ways. Many of these crises are much graver than in those in the 1930s, because they belong to the philosophical, or very deep psychological, realms .

An advantage we have, though, is that we know how bad it went in the 1930s, and that the application of more brainpower and solidarity would have allowed us to go through, then… except for the problem there was with the basic mentality of all too many Germans, who, at the time, thought that war was a panacea… of course no such thing would happen again now that the USA, the dominant military power (just as Germany used to be the dominant military power), is led by a Nobel Prize.

The USA could start pulling out of its dive by acknowledging that American institutions and American individuals are not to big to fail, and are not too big to fault, and acting accordingly. That would be a significant difference with the Germany that flew into WWII as a butterfly of hubris into the flame of civilizational collapse.


The present crisis is way worse than just a financial crisis, such as the Great Depression of the 1930s. Even during that one, the median income over a period of, say, twenty years, always went up. But this is not the case now: the average real median income in the last 20 years has been, at best, stagnant, in the USA.

On top of the financial crisis, there is now a serious economic crisis. It is caused by several factors: the so called "globalization", caused by average developing country workers doing the same work at a very small percentage of the salary of the developed country workers, is part of it; another part is the collapse of lending, the usual problem in a big financial crisis. Nationalizing the management of the banks would have insured lending to the real economy, but, instead, the Obama administration used nationalization instead as a gift to the entire oligarchy which caused the crisis, thus comforting them in the errors of their ways.

On top of the economic crisis, there is such a deep corruption crisis that it has become a cognitive crisis.

Indeed, instead of calling bankers, "banksters", as F. D. Roosevelt did, Obama embraced them, calling Jamie Dimon, head of JP Morgan "my friend" and professing his admiration. Then Obama went on to make derogatory, nationalistic, hubristic declarations on the Swedish bank sector, celebrating the superiority of the American one, thus demonstrating no conceptual awareness.

This all the more remarkable that the bankers Roosevelt accused to be “banksters” were not the prime causal agents of the Great Depression of the 1930s. Instead, the crisis of 2008 was entirely caused by the bankers. Thus the 2008 bankers deserve much more than the 1933 bankers the title of “banksters”. And what do we observe?

Obama’s chief of staff got more than a 16 million dollar bribe in two years, between stints in various public-private banks. Summers and Geithner were on formidable payrolls of various financial conspiracies for years (Congressman Ron Paul and Al. want the Fed to reveal what it has been plotting about, year in, year out, and with whom).

On top of the economic crisis there are energy crisis and a CO2 crisis, entangled with it, which put the biosphere at bay. The encroaching water crisis is part of the energy crisis (a lot of energy could allow to desalinate and transport).

Finally there is a scientific and value crisis. We need more rationality to get out of all the crises, but all what the "Nobel Peace Prize" can propose, is the eternal peace of killing all his enemies, real or imagined, plus untold numbers of completely innocent people.

And "Nobel Eternal Peace Prize" kills people with robots, in video games, at a distance, without even bothering with any semblance of due process. "We kill who we please, therefore we work for peace" seems the new modus operandi of the USA.

In other words, we are observing a moral crisis, the total collapse of the most basic legal and moral orders, breaking through various moral floors that even the Nazis did not dare break through, officially speaking.

Some will scoff, others will scream: the Nazis did worse, they will gloat, in their naivety. Sure, they did worse, at the end of their tether. The Nazis cycled through: they had to swallow their own poison, they collapsed with the holocaust they had organized for themselves. The Nazis went criminally insane, because they were losing the war, and they had been losing the war all along. Hitler confided this to Goebbels, as early as before attacking the USSR. The Fuhrer said to his propaganda minister, that they had already committed so many crimes, they were condemned to win, or die.

All along, the Nazis, even Hitler himself, pretty much knew that it was curtains for them after France, Great Britain and their enormous empires, Commonwealths and influences, declared war on September 3, 1939. Hence their weird, hyper criminal rage, as early as 1939 (they bombed flour mills in Poland before winter, so that the Poles would starve to death).

The Nazis were despaired all the way down their ranks. Even, as they looked at the height of their glory, vanquishing France in May 1940, Nazi engineers had to resort to suicide charges, carrying high explosives on their backs, Jihad style, to break through fortifications held by a second rate French reserve division (the Nazi armor, army and air force were concentrating on this point of the front, and they had to break through, or die, because there was no coming back through one narrow Ardennes road, while losing hundreds of planes, as only a fraction of the French and British air forces had been engaged yet).

So the Nazis were desperate, all along; they knew they would lose the war, and their hatred was the only thing that could grow without bounds. Thus, what the Nazis did secretly in their despair, the holocaust, is another matter entirely, from the further moral collapse of killing arbitrarily for all to see, with obvious immoral arrogance. The crucial point about the Nazi extermination: it was secret.

U.S. terminator robots manned by underlings of "Eternal Peace" guy is an official extermination program all too many Americans approve, whether they like it or not, as they morally collapse down the black hole that is engulfing their decaying civilization.

If one compares with the early 1930s, one sees that the problem then, was that enough Germans had understood nothing about the philosophical shortcomings and errors of their society. That guaranteed a disaster. For reasons I will not get into here, the basic fascist attitude of Germany led, or pushed the USSR, Italy, Spain, Japan, and many other countries into somewhat similar fascisms, either by direct impulse, or reaction (the later, in the case of Stalin).

Right now, it’s the USA and its long encouraged killer boy, Muslim fundamentalism, which don’t get it. The fact that they fight each other is no encouragement: Stalin justified his ways, killing millions of Soviet citizens, to his colleagues, by what he saw as the future, coming extermination war with Germany (as it turned out, Stalin was right, in more ways than one!) Stalin even allied himself with German fascism, for tactical advantage (although not as long as Qaeda was allied with Washington).

Some Americans may scoff, seeing no Soviet Union for them to invade, but that is to forget that the Bush’s government financed the Pakistani thermonuclear bombs, AND that it will not take many Islamist bombs exploding in the USA to incite the USA to verse into total fascism, even at home, as a remedy…

So there is a lot of work to do, just to conserve the world, and the peace we have now, and we are not heading that way, as the deference with whom the financiers and their perverse tools (derivatives) have been treated as "Too Big To FAULT".

Patrice Ayme.


P/S: it will not escape the astute that German real median income had not gone up for 20 years, as Hitler rolled in…