Posts Tagged ‘Taxes’

Supply Side Epic Fail

November 24, 2013

Comments made on the world wide web show that some don’t get what I say in economics.

Liberals with a self defined “conscience”, such as Krugman, Obama, and pretty much the entire democratic establishment in the USA have promoted a loose monetary policy, low regulation, and the redeeming values of the “marketplace”. Ever since 2008, those self described “liberals” have sent more money to the biggest bankers, their “friends”, in charge of reviving the economy that said bankers had just collapsed.

This strange methodology has a name “Supply side economics“. It has not been effective at all in increasing demand and lowering unemployment. But it has propped up the fortunes of the wealthiest people to new heights.

How could that have happened? Simple: the money, the “liquidity” goes to the biggest banks, exactly those which caused the bubbles and crashes. Why? Bubles are their financial breathing; inhale, buy; exhale: sell short. Trouble? Threaten the governments, and force them to fork more money over to the big banks way too big to fail, through the central banks, or the sort of debt “relief” extended to the likes of Greece.

(That pattern was slightly broken with Cyprus, but then Russian plutocrats occupied the vacuum).

A reason for asset inflation is that the return on investment for increasing production capacity is close to zero in an environment characterized by low demand, excess production capacity, zero CPI inflation, and low innovation. New factories are not built when the existing ones cannot sell at full capacity, and when there is no reason to completely retool.

The low innovation is related to the attitude of governments. Government have to create innovation demand by introducing new technology. A country researcher-in-chief ought to be the government.

Just look at France. Over the last few centuries, the push of government to innovation was crucial… To bring worldwide innovation. After all, even Louis XIV financed the Dutch Huyghens (who invented, among other things, the wave theory of light).

French government demand created the first cars (in the 18C), the fist hot air balloons, better explosives (1790s), first planes (Ader and company), and the first nuclear program (Paris January 1938). Also in the 1830s, the government bought the patent for photography, so that “all of humanity could profit“. In England, it was decided, early on, by the government, to finance trains, instead of the sort of freeways for individual cars Mr. Macadam and his friends wanted to build. (At the time cars were steam driven.)

Nowadays, instead investors, deprived of meaningful pursuits, chase one another to higher returns in speculative asset trading including art, stocks and real estate. Thus the world ugliest triptych was sold for the greatest price ever.

In the USA, government encourages fracking. A “bridge fuel” said Obama. Clearly a bridge to nowhere: as it is, with existing technology, the ecological impact of fracking is so nefarious, that it is, clearly a Ponzi scheme. (Yes, banks are feeding it, similarly to the subprime bubble, and similarly to that, with the full support of the present government of the USA, and that is why fracking is happening, on such a massive scale, in the USA alone; the technology has been around for decades, although horizontal drilling has improved it.)

To cut down this meaningless activities, asset speculation ought to be mitigated by increasing taxes on higher incomes and short term capital gains. Also a wealth tax on land and properties should be cranked up (they are already so, in places such as France, but certainly not in the UK and USA; the latter exemption makes the former uncompetitive!).

Meanwhile meaningful innovation, like figuring out the details of large Thorium reactors, ought to be pushed… in government research programs, something private industry cannot do.

(Instead Obama financed things such as electric car and battery companies, something private industry can do; the money thus diverted was not available for more fundamental pursuits.)

Government spending on innovation, health, education, infrastructure, and housing ought to be increased, paid by the 93% tax on income republican president Eisenhower had instituted.

This has to be done in a subtle manner. For example the Pelosi style Demoncrats have argued Obamacare augmented health spending. And it does, straight into the pockets of plutocrats. It’s not because one knows how to push on the accelerator, that one knows how to drive.

If the 99% had more money in their pockets, consumer demand would increase.

In any case, the so called “supply side theory” and its attendant bubbles have been fully repudiated. Supply Side economics is another name for plutocracy rising. It has completely infected the economy of the USA, starting 20 years ago (that is, under Clinton).

Supply Side Economics believe that the “marketplace”, if left completely free, lower prices on “consumers”. So it is also the theory behind “Obamacare”, and why Obama transformed patients into consumers exerting their free market choice. Supply Side, just as Obamacare, neglects corruption and human nature and its attendant greed (that’s why the Obamacare website failed).

A central feature of Supply Side is the tax rate. In the USA in recent decades the concept has been named after a right winger, Arthur Laffer. However it originated with a French economist, and engineer, the polytechnicien Arsene Jules Etienne Juvenal Dupuit, in the 1850s. (As a good USA right winger, Laffer is careful not to attribute to a Frenchman the invention of the concept that bears his name.)

Kennedy reduced taxes from a top marginal rate of 91% to 65%, high on the Dupuit Curve and hence increasing government revenue. But Reagan reduced taxes from a top marginal rate of 50% to 28%, lower on the Dupuit Curve and thus decreased government revenue (as part of his government killing program). Obama, of course, lowered taxes much further, and, although a very rich man, pays only a 174 or so overall tax rate.

That Krugman and Summers loudly return to their Reagan roots, and advertize bubbles as the way out for the economy, for all to see, something that Reagan himself may have frown on, is truly amazing. The impudence. The bull headedness.

The problem in the USA is not the Tea Party. After all, it did not get to power. Yet. The problem is that democrats implemented Supply Side Economics, namely lowering taxes on the rich to the point deficits could be used as an argument to destroy the Great Society that Kennedy and Johnson put in place.

A mathematically interesting self feeding vicious loop.

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Patrice Ayme

No Ideology But Greed

November 8, 2013

Standard & Poors, the most prominent USA rating agency, which pretends to rate, if not rule, the world, has downgraded France. Same S&P which used to give AAA ratings to banks too big to flail… until the moment they went bankrupt in 2008. Same reason, as we will see, to downgrade France than there was, and is, to praise the banksters.

Because France hurt the plutocrats, and threatens to hurt them much more, insults are in order. Warren Buffet, America’s own grand father, owns S&P, S&P barks. Good doggie.

S&P (Sadist & Posh?) claims that  “France hasn’t carried out the reforms that will enhance its medium-term growth prospects“. Another factor is the inchoating agitation of the French plebs, says S&P. The Sans Culottes are rising, S&P disapproves. Meanwhile Great Britain keeps it AAA rating. Although Britain has clearly performed less well. Here are the French and British per capita GDP:

Britain: Lower GDP Than France, Absolutely, Comparatively, Overall & Also Recently

Britain: Lower GDP Than France, Absolutely, Comparatively, Overall & Also Recently

The plutocrats are the party of no taxes to themselves, hence no government by and especially for, the people. They can only hate, with all consuming passion, that the French Republic has brought up taxes to 75% on those earning more than a million euros.

The truly abominable French idea behind this was to enforce equality and decrease debt. As it is France has a lower deficit than the USA. The USA is suffering sequestration, a slash and burn cutting-into-the-muscle of the country, reduction in spending. Whereas France suffers indignities from a few anxious soccer stars and one demented actor with, apparently, an alcohol soaked trunk, in the middle of his face.

British total debt (98% GDP) is worse than France’s. Amazingly the British and USA deficits (= the rate at which debt grows) are about 6%, or nearly TWICE the French deficit. Here is the evolution of French & British Debt Per GDP:

Britain: More Debt Than France In Spite Of Astronomical Tuition "Public" Universities

Britain: More Debt Than France In Spite Of Astronomical Tuition “Public” Universities

What the plutocrats are afraid of is that such tax margins on high salaries will spread. And then what? With heavy taxes all over, plutocrats would just disappear. That would be the extinction of the species that has come (erroneously) to define itself as the pinnacle of civilization, the very engine of creation (insisted Ayn Rand, and her bleating followers).

And why is Great Britain so valued, although it performs worse than France?

The Tax Justice Network came up with the answer: with its overseas territories (Isle of man, Anglo-Normand isles, British Virgin Islands, etc.), Great Britain is the world number one tax heaven. This explains why plutocrats love London. The plutocratic mayor of new York has a 50 million dollars residence in London; he pays just $3,000 in taxes (yes three thousands; meanwhile schools close in London, from lack of funding).

I of course, beg to disagree, I think the USA is an even worse tax haven… for worldwide plutocrats.  It’s a den of thieves, and no propaganda is too low, too base, too outrageous. As a German Chancellor who came to incarnate the Dark Side put it: “Make the lie big, make it simple, keep repeating it, and ultimately they will believe it.”

What mainstream economy has been hammering, that big, simple lie, is that the market decides everything, and decides it for the best, it’s god. However, most of the “market” power is held by the plutocrats, either directly through their increasing purchasing power, or indirectly, through their paid propagandists and pet politicians. So indeed, it’s all ideology. Plutocratic ideology. And the ground state of plutocratic ideology is that it hates the French Republic.

Says Krugman in “Ideological Ratings” (thanks Kroog for the graphs!):

…”where is this coming from?

I’m sorry, but I think that when S&P complains about lack of reform, it’s actually complaining that Hollande is raising, not cutting taxes on the wealthy, and in general isn’t free-market enough to satisfy the Davos set. Remember that a couple of months ago Olli Rehn dismissed France’s fiscal restraint — which has actually been exemplary — because the French, unacceptably, are raising taxes rather than slashing the safety net.

So just as the austerity drive isn’t really about fiscal responsibility, the push for “structural reform” isn’t really about growth; in both cases, it’s mainly about dismantling the welfare state.

S&P may not be participating in this game in a fully conscious way; when you move in those circles, things that in fact nobody knows become part of what everyone knows. But don’t take this downgrade as a demonstration that something is really rotten in the state of France. It’s much more about ideology than about defensible economic analysis.

Amen.

Why is the French Republic so frightening to plutocrats? Because, as France is the sister Republic to the USA, they are afraid that French solutions too friendly to equality will be applied in the USA too (something about 1789).

Ever since May 1, 1914, a flood of venom and viciousness has been directed at the French Republic by all too many USA based plutocrats. Result: two world wars, a few holocausts, and counting. But it will not be over, until the fat lady sings.

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Patrice Ayme

Welfare Generalizes Savings

October 24, 2013

Welfare Does Not Just Save Bodies & Souls, But Also One’s Pocketbook.

Systems of governance, systems of thoughts and emotional systems, be they of institutions or of individuals, are all closely related. A case in point is the relationship of the private savings rateversus the rate of social expenditures in various nations .

The more the social expenditures, that is, the welfare state, the greater the private savings.

We Socialize, Therefore We Save

We Socialize, Therefore We Save

Notice that FR (France) spends socially way more than any other country. Part of France’s lower savings rate relative to her sister republic “GE”, Germany, is no doubt related to the fact that France has now a third more youth than Germany (instead in 1940, the fascist Germanoid “Reich” had twice more youth than the French Republic). Young people save less.

France, thanks to colossal taxes, spends socially about twice more than the USA, but the French saving rate is also 50% higher than the saving rate in the USA.

Oblivious to facts, Alan Greenspan, plutocratic propagandist, ex-central banker, friend and governmental czar of financing the hyper rich with trillions, is out spewing more of his plutophile mental poison with a new book. Krugman denounces the insults to reason it consists of:

“Greenspan thinks he has discovered a new law: transfers to individuals, even if fully paid for with taxes, reduce national savings one for one. You can bet that this claim will soon be popping up on the right as an established fact… as a reason to weaken the safety net.

The obvious answer is to look cross-country: European nations have much bigger welfare states than we do; do they have lower savings? No.

A quick-and-dirty version: I compare social expenditures as a share of GDP (from the OECD Factbook) with national savings rates for 2010 (from the IMF WEO database). “

This is the graph above (thanks Paul Krugman for doing the research; you search, I explain!).

Where does the positive correlation between welfare and savings come from? Simple: Both the will to savings and the will to welfare are motivated by the same mentalities.

The more welfare the state, the more considerate the People of that state. That’s obvious. Now, where does the will to welfare comes from? Consideration. The more considerate to others, one is, the more for a welfare state one is.

Now, if one is more considerate to others, one, naturally, will be more considerate to oneself. Where does the Latin word “considerare” comes from? It meant to look closely, observe carefully. In other words, to look at something as one does to the stars

This, by the way is in full consideration of the flaw in the much touted “Golden Rule” of treating others as one would treat oneself: treating others as one treats oneself does not help others if one wants to kill oneself, or abuse oneself!

Hence the Will to Welfare involves more than sheer reciprocity, and “love” of others. It involves consideration. In particular consideration to the potentiality of changing circumstances, and their fluctuating nature. Thus to will and implement the welfare state, people have to be informed, serious, and well intentioned to others and themselves.

The same emotional system lead people who want welfare to all, to complement it with even more welfare to themselves. the more serious the People, and the more savings oriented they are.

Thus that countries with a greater welfare state save more is no accident, but direct psychological causality.

La Fontaine’s famous fable “La Cigale et La Fourmi” (Ciccada and the Ant) acknowledged part of this, four centuries ago. It is mandatory reading and memorizing in French elementary school.

Propaganda by the likes of Greenspan is part of the collapse of the United Stasi of America down the black hole of plutocracy unchained. Stasi? Merkel, October 24, 2013: “To spy between friends that does not work at all.” The colossal NSA spying is in violation of European, French and German law.

Meanwhile Norway, with its 3% unemployment, GDP per capita more than twice that of the USA, superlative infrastructure, one billion dollar national wealth fund (100 billion at the scale of the USA), is inaugurating an anti-Islamization government. The right wing spokesman of the new right wing government rightly points out that immigration without integration is only ruin of civilization (as the Romans found out). He said what was at stake was the colossal Norwegian welfare state, the necessity to defend it.

Meanwhile France is facing a strike of the soccer clubs. A 75% tax on income above one million Euros has brought the ire of the rich.

Yet, polls show that 85% of French people approve of the 75% tax on income millionaires. And why should some ignorant who kicks a ball be paid a fortune, and an engineer or nurse very little? This is also a question Brazilians have as they face cuts in social services, while circuses are going up.

If we want a human society, we have to make sure that plutocracy is kept in check. and only thus can welfare, hence savings, and consideration, thrive. Taxes is the way to do it, lest the core rots away (as it did in Rome; by 400 CE, the empire could not even afford to defend its borders, as I have explained many times).

Be it only to brandish a sword, one needs a heart, and a soul. And having a soul also means not to intrude with all the powers in other people’s souls: down with the United Stasi of America!

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Patrice Ayme

Government Defines Profit

May 24, 2013

Abstract; Free market fundamentalists ignore a paradox of economics: defining what a “profit” is can only be done by the government! Thus, when only profit seems to reign, as now, the real government is hiding. Hiding in plain sight, just as the Saudi criminal organization, manipulating the absence of global legal jurisdiction to implement criminal propaganda, or grand theft. Thus, Apple, Google, etc. have all too much in common with terrorist networks. Understanding much of this, the Japanese PM is suddenly behaving as if he led China. (Precisely because he has his eye on the PRC…)

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Sometimes progress is all about rediscovering what was known for millennia. Sometimes progress is all about unlearning outrageous propaganda. An example? The public is increasingly stuck in the West. From a very deep lack of understanding.

The richer the lords, the poorer the commons.

The richer the lords, the poorer the commons.

The degeneracy of the public is directly related to a lack of philosophical definition of what “profit” means. If one does not have a philosophical definition, one has no practical definition, either.

The graph of profits above is, in a sense, a joke; Apple, to single the typical case of the most prominent corporation, has tremendous profits in one sense, for would-be share holders, and none for fiscal authorities.

That lack of definition of “profit”, in turn leads to fiscal imbalances, that lead to rising plutocracy, its accompanying rising unemployment, and general impoverishment of the commons while our lords thrive ever more.

There are still more than four times as many long-term unemployed workers in the USA as there were before the 2007-2008 financial crisis. Europe’s economy is back in recession, and has grown less over the past six years than it did between 1929 and 1935 (yes, that includes Thatcherian Great Britain!), while hitting ever higher highs for unemployment.

Yet there is no major change in policy in sight. Savage, even criminal, austerity programs are imposed by Brussels and Berlin on the most indebted nations. Children go hungry, life expectancies are going down.

Why the unfolding disaster? The way the role of government in economics is looked at is key.

In his first inaugural address, Ronald Reagan said: In this present crisis, government is not the solution to our problem; government is the problem. From time to time we’ve been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. Well, if no one among us is capable of governing himself, then who among us has the capacity to govern someone else? All of us together, in and out of government, must bear the burden.”

Neofascists have misused that quote ever since, extracting from it the aphorism that government was the problem. Worse: under Clinton, Bush Jr., and Obama, they put that scheme into action, deciding that finance would be self regulating.

Ever since the Medes-Persian empire of Darius and contemporaneous Athens, all serious countries acknowledged the overwhelming, domineering role of government in economics. The rise of Frankish Europe of the High Middle Ages, England 1066, or the Italian republics, France in 1600 (Henri IV’s “chicken in every pot”), or Great Britain, later, were all tied in to massive redefinitions of the socio-economy by the government.

(Anglo-Saxon academics love to throw in the word “Keynes” at this point, but Keynes’ suggestions were minimal relative to what serious governments have done in economics for millennia before him, or even since! The only thing about Keynes is that he lived in the 20C and spoke English, enough for simple minds to adulate.)

The government does two things, ever since serious civilization has been instituted: first, government insures enough fundamental economics, to make the basic functions of society possible: defense, police, justice, and basic food and water procurement possible.

Secondly, the government determines and regulates the arena of the “free” market. In other words, there is no “free” market, just a market the government decides is free.

Unfortunately, rogue economists, in the last 35 years have imposed a view, in South America, the USA, and the UK, and then Russia, and worldwide, according to which the free market determines everything, including the government, that it, somehow self generates. One may as well let a headless chicken guide us all.

Mr. Abe was Prime Minister of Japan seven years ago. Illness forced him to resign after a year. Now he is back, with more impulse. Although a conservative politician, he understands well that, when the economy is stuck it needs to be stimulated directly by the government. Abe’s 100 billion dollars stimulus would be equal to roughly 300 billion in the USA. That big stimulus does not contradict a loose monetary policy. Nor does it contradict extinguishing Japan’s more than 200% debt/GDP, because for governments, only growth (or default) can extinguish debt.

The first results of Mr. Abe’s policies have been very encouraging (after a 55% rise, a sharp correction in the stock market was caused by fears that the central bank would not keep on giving enough money to the financially starving economy.)

So why does not the rest of the Western world copy Mr. Abe? After all, is not Mr. Abe just trying to do what China has been doing ever since Deng Tsiao Ping decided that “getting rich was glorious“? That has worked splendidly: open the free market in full, and the governmental stimulus too. It’s actually what the Western governments did after 1945, for thirty years, when they were obsessed by growing the economy (before getting obsessed by fighting inflation).

Why is the rest of the Western world insisting upon guidance by the headless chicken of the free market? Simply because plutocracy is the new world order, and that’s best insured by restricting access to money to the very richest. Austerity is not about balancing the books, as much as it is about restricting the money going to the populace (hence the power it disposes of).

The “Chicago Boys” (followers of Hayek and Friedman) proclaimed that profit was the optimal organizing principle of society. Their students were the perfect decoys for neofascist plutocrats to take control in Chili, Argentina, Brazil. in the 1990s Jeffrey Sachs and Larry Summers went to Moscow to teach that greed was the royal road to progress, and they had an eager audience among the new potentates, who loved to hear that plutocracy was morally correct, and economically optimal.

However, this is all hogwash. The foundational work has not been done well enough.

“Profit” means augmenting “property”. Yet, “PROPERTY” CAN ONLY BE DEFINED BY GOVERNMENT.

For example, the Babylonian state, the Roman state, 15 centuries later, and the USA, 33 centuries after, allowed to own people as “property”. However the rights of those slaves were vastly different: Babylonian slavery was not “racially” based, and slaves could become immensely richer than their owners…

In the Roman Republic, for five centuries, “property” was defined as land, and as such, it was limited, by law. In other words, Roman plutocracy was strictly limited by law. Thereof the secret of the success and longevity of the Roman republic.

However, the rise to Rome into a global empire, beyond the jurisdiction of the city of Rome, exploded both the application of the law and its relevance. Plutocracy got unchained, and wrecked its natural enemy, the Republic.

The present situation is technically similar to what happened to Rome when it went global: armed forces, finance and the economy have gone global, but NOT LEGAL JURISDICTION.

Western civilization has got global, but not its root, the rule of democratic law. One may as well transplant a giant tree in the desert, leaving its roots behind where they grew. This is not going to work.

The problem of international terrorism has two faces: international finance and the bombs it (indirectly) plants.

Indirect action can be extensive, along vast causal chains. For example giant kelp forests are disappearing off Alaska. Why? Because of (over)fishing.

How does that work? Extensive indirect causality. Human overfishing makes orcas hungry. The killer whales then go eat sea otters. Then urchins, now uneaten by sea otters, proliferate, and eat the kelp. hence the apparition of a lot of clear coastal waters off Alaska. Pretty, but not what the ecology used to be.

Indirect causality chains relate and entangle religious and financial terrorism. And they have a common cause: no global legal jurisdiction.  

Consider Salafist terrorism, as exemplified in Toulouse, France (killing of Jewish children and adults by a Salafist fanatic), or in the USA (killings by Salafist fanatics within the army, or in Boston), or in London (several times). How is it related to the tax terrorism practiced by Apple Inc, or Google, IBM, etc.?

In all these cases, it’s the limitation of legal jurisdiction that allows the growth of the criminal activity. The Salafists get their ideas according to what plutocrats in Saudi Arabia want them to have. The ideas the Saudis, a family of gangsters who have given their name to a country, wanted people to have are conveyed by considerable amounts of money. The Saudis pose as the guardians of Salafism (the way of the old ones). They actually seized power, 90 years ago, by spilling oceans of blood.

The promotion of bloody ideas and ideals the Saudis extol should all be illegal, and those instigating plutocrats ought to be put in prison. However, Western law does not reach within Saudi Arabia, for the exact same reason that it does not reach within global corporations.

The Saudis are, arguably, the world’s largest and most criminal corporation. (Qatar is only an also ran.)

Global corporations’ main business model consists in claiming to have no, or little, profits, outside of tiny jurisdictions that basically don’t tax them. Others claim to be made of subsidiaries that are citizens of nowhere (that’s Apple’s method).  Apple ferries more than 100 billions of profits through the British Virgin islands. The British Virgin islands have 20,000 citizens, and more than 500,000 global companies registered there.

As the Wall Street Journal just noticed, global corporations are now even hiding the thousands of subsidiaries they own, and through which they ferry profits, thanks to new USA laws. Many of the biggest USA companies have removed hundreds of offshore subsidiaries from their publicly disclosed financial filings over recent years. They are taking advantage of SEC rules that demand disclosure only when subsidiary operations are “significant” (meaning siphoning 105 of the business)

Oracle, for instance, disclosed more than 400 subsidiaries in its 2010 annual report. By 2012 the list had been whittled to eight—five of which were located in Ireland. Similar decreases in the number of disclosed subsidiaries were found in filings by Google, FedEx, Raytheon and Microsoft. Presto, no more traceable profits!

In the European Union alone, tax evasion by large crooks is evaluated at more than a trillion dollars, much more than all the national deficits combined.

Apple makes billions in the United Kingdom, while using services there provided by British society, still does not contribute to pay for any of what it exploits. It apparently pays a 2% global tax in Ireland alone. Amazon does something similar, paying basically no tax, while devouring local bookstores, which, submitted to local jurisdiction, pay huge taxes (thus have to sell their books at a much higher price).

Governments, all over the West, having learned their masters’ lesson well, have defined profits of said masters are inexistent, fiscally, while the masters are making the greatest profits ever, and unemployment is at a fifty year high in the West.

 It’s also striking that, although the greatest heists ever, have been revealed since 2007, no one, absolutely no one, has gone to jail for this. A striking example is the LIBOR CONSPIRACY. Many billions were stolen, however, none of the bosses of what is, therefore, twenty of the world’s largest criminal organizations, went to jail. It seems the largest thievery is perfectly profitable. 80% of financial derivative trading is through tax havens, and thus is hidden too.

Who profits from the new world order is becoming something to hide, and that has gone deep underground, all the way to Hades. The Sicilian mafia does not behave any differently.

Thus one can see that the neoconservatives advocates of predatory finance harbor contradictory notions; they claim profits should rule, but then their heroes, wealthy corporations and individuals, hide them as much as they can, just as predators hide their excrements. So what are profits about? Heavenly stuff, or something one cannot speak of?

The economy should not rest on what its beneficiaries want to hide.

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Patrice Ayme

Decapitate Plutocracy

April 15, 2012

BY DECAPITATING THE WRONG PHILOSOPHY

Guillotine The Obsession With Making The Gold Man Richer.

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Abstract: Plutocracy and democracy are, by definition, incompatible. I give perspective on how and why decapitating wealth would help to restore civilization. I answer a question from one of the commenters on this site, Old Geezer Pilot: …“if the 99% were to CONFISCATE ALL THE WEALTH of the 1 %, would it amount to very much?”

In financial wealth, it would amount to only 42% (in the USA). In philosophical and civilizational import, infinitely more. It would change the atmosphere of civilization. From unbreathable, to life sustaining.

One cause of the Greater Depression is economic inequality, which has risen to the level of the late 1920s. Economic inequality, in turn, has led to strident philosophical and even cognitive imbalances. In part because that is the ecology wealth needs to survive, in part because wealth bought universities, and the media (even in France, see below).

Mad bull plutocracy needs to be decapitated, before it causes further mental imbalance to civilization. So what would confiscation of the properties stolen by the plutocrats bring? Well, it would bring a change of mood, back from worshipping the Golden Calf, plutocracy, back to democracy.

Trashing the Goldman Calf is not just important philosophically and emotionally, it’s even important for daily life. officially, since 2008, the west has spent 8.9 trillion dollar on private banks, while cutting everything else, including fundamental scientific research (something neither India nor China has done, quite the opposite!).

The coming victory of the French Socialist party will change everything. Hollande declared that: “My true enemy has no name, no face, no party. He will never stand for election and will never be elected. Despite all this, he is in charge. My enemy is the world of finance.”

paris-gargoyle

To think well, don’t forget the Dark Side (view from Notre Dame Cathedral. Paris).

This ought to remind Obama that, having governed as if he were Romney, complete with Romneycare, there is little incentive for those who wanted change to go vote for Romney again, so they may well stay home. Just to whine that the real Romney is more scary, may not carry the day.

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FRANCE: HEADING OUT OF PLUTOCRACY IN 3 WEEKS?

Spanish bulls for corrida are from a special, hyper aggressive breed. I saw a funny scene on video: a bull came into the still deserted arena, totally fuming. He was furious to have been deported from the wilds he enjoyed the last few years. So he charged, at an amazing speed, in such a straight trajectory that he hit the wall on the far side of the arena without deviating or slowing down any. His head went one way, its body another, and he flipped upside down in the air like a crepe.

There it laid in the sand, half dead. This is a good metaphor for plutocracy. it will not stop, it makes no sense, it is just inhabitated by Pluto. Trying bipartisanship with that, it’s Sarkozy and Obama. The former may soon jump from the Elysee palace to a judge’s hot seat.

That soon to be ex-president of France, Sarkozy, is in the same spiritual family as Thatcher and Reagan: be ever kinder to the rich, they will employ you.

True enough: ex-British PM John Major made a fortune working for the Carlyle Group, an international arms’ and financial conspiracy that makes the interface between corrupt Western politicians, the wars they organize, and the banks they feed. Tony Blair’s immense fortune is entirely made of pay-backs for his work on behalf of international plutocracy. He shows up at hedge fund, they give him enormous sums for opening his mouth, that’s how he does it. No prostitute was ever so expensive.

Same for Bill Clinton. It is thus difficult to wag the finger at Putin (who does the same, while not even waiting for the end of his rule, which, he announced modestly, will be around 2024).

Putin has to do the work all by himself, he cannot depend upon the vast pre-existing network of Western plutocracy, going all the way back when Hitler was just a wet dream, JP Morgan had, when he plotted with his young pet, the German Schacht, a quarter of a century later, one of Hitler’s creators. (Yes Schacht, one of the great criminals of history, was exonerated by the Nuremberg tribunal, although he had to attend that formality.)

The brother of the French president, Olivier Sarkozy, heads the Carlyle Group: international plutocracy is well organized. Sarko, bro of Sarko, is immensely rich.

In three weeks, Mr. Hollande, the candidate of the Parti Socialiste will be elected president of France. He will raise the top margin tax rate to 75%, he will yank the French army out of Afghanistan. That’s going to be a shot across the bow of world plutocracy. A little shot: the top USA tax rate under president Eisenhower, was 92%.

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DOES FRANCE MATTER? YES, BUT WAS MADE INTO A PLUTOCRATIC TROJAN HORSE WITH EMU:

Cynics will laugh that one has seen that movie before. Mitterrand was elected in 1981, in the teeth of Thatcher and Reagan’s revulsion back to stone age (still unfolding, as the crash that never ends). Mitterrand, a pseudo socialist, ex-Vichy, soon had to revert to smaller objectives.

Mitterrand supported Thatcher on day one about the Falklands, while Reagan dithered, and had nothing to offer. Mitterrand trained the British military against the French weapons Argentina had, Super Etendards, Mirages, Exocets cruise missiles.

The British knew how dangerous Exocets could be: they had the world’s largest stock of them.  Mitterrand gave secret codes and counter-measures, secret factory stuff. During the war the Argentines were very courageous, and capable, but often of their weapons mysteriously failed at the second of impact. Many British ships got hit with bombs that did not explode. Even the warhead of the Exocet that sank the Sheffield did not explode.

It’s highly likely that, without the secret French help, enough of her Gracious Majesty’s Navy would have ended at the bottom of the Atlantic to make the recovery of the Falklands, a really ugly affair. Lady Thatcher owed the “Sphinx” (Mitterrand). So she consented to the tunnel under the Channel, and, more importantly to the Single European Act. She also did not obstruct the European Monetary Union (EMU), probably Mitterrand’s greatest achievement.

Little did Mitterrand realize that the crafty plutocrats had infected the architecture of the EMU completely with the poisonous idea that they, the plutocrats, and they alone, could finance the EMU. And that they, and they alone, could be financed by the European Central Bank. Somehow, they imparted upon their victims that the notion that putting banks in control of the states was the most moral, most economically correct position.

That nightmare had been put in place by French socialists viewed at the time as very smart (such as Jacques Delors, Mitterrand’s finance minister, and then grand master of European construction, making Thatcher eat in his hand). In retrospect those French socialist experts were, at best, incompetent fools.

It did not struck them that the initial law passed in France in 1973 prevented the Banque de France to finance the Treasury, was passed under president Pompidou. It’s similar to Obama and his democrats not being alarmed that the health law they pushed for was a product of the right wing Heritage Foundation, and his Romney (a “private equity” quick buck artist).

Pompidou was hired in 1953 by Guy de Rothschild to work at the bank Rothschild. In 1956, Pompidou was appointed the bank’s general manager, a position he held until 1962, when president De Gaulle  made him Prime Minister. This Pompidou banker became president in 1969. Naturally enough, he passed a law that has now subjugated all of Europe to the banks’ good will.

Except Britain, where banks have been nationalized in 2008.

And the French socialists understood nought, and still don’t seem to have. The socialists instituted their European welfare state as a wholly subsidized subsidiary of the banking sector. Obama seems to harbor a similar hope. The advantage is that, doing so, one does not antagonize plutocracy. The disadvantage is that history will know one was on the Dark Side, someday to be judged as roughly as the Roman Principate.

Even more remarkably, the mystification of plutocracy as socialism, economic and moral rectitude, keeps on going.

There was a debate of the ten French presidential candidates against a panel of journalists, one of them, Longlet, specialized in economy. Marine Le Pen, the National Front candidate complained that the Banque de France had lost the ability to buy treasuries. That ought to be a well known fact, at the core of the European sovereign debt crisis.

However, unbelievably, the economic journalist told her dismissively that buying treasuries would make France into Iran, or Zimbabwe. Le Pen, a lawyer by training, correctly told him that buying treasuries with its central bank was exactly what the USA has been doing. Instead of admitting that this fact was indeed a fact (that’s called Quantitative Easing), the economic specialist scolded Le Pen for knowing no economy. That Longlet was obviously paid for being lying so outrageously.

Another candidate, the highly educated Cheminade, made charges similar to le Pen, and all journalists ganged up on him because they said he had claimed that some in Britain and the USA had supported Hitler. They told him, and dozens of millions of watching French viewers, that he was a lunatic to entertain such notions. (reminder: Great Britain signed in 1935 a treaty with Hitler that explicitly violated the Versailles Treaty, as it allowed Hitler to rebuild a Navy and expand to the east, in exchange for setting up a trilateral trade system between Britain, the Empire, and Hitlerland).

The next day,  Jean-Luc Mélenchon, the most prominent candidate of the three from the “left of the left” is Le Pen’s fiercest adversary. She had walked off a debate with him a few weeks before (and he passed her as the third most popular candidate as a result; together they pull more than one third of the electorate!) However, confronted to the same journalist gang the next day, he condemned them for lying to Le Pen, and all of France about the Fed. Yes, Mélenchon said, Le Pen was right, and you were wrong. The gang did their best to change the conversation.

I was left with a weird impression: here were ten candidates, from the extreme right, to the extreme left, and none of them said anything really outrageous (OK, Philippe Poutou admitted that imprisoning bosses was a past time of his; but, in France this is a time honored tradition). However the journalists were deeply outrageous: they supported the established order, national or international, tooth and nail, and even provided Hitler’s sponsors with the shade they have always enjoyed.

Just as no Anglo-Saxon super capitalist could have ever helped Hitler in any way, according to those media super stars, it was also Zimbabwean for a national central bank to lend a dime to the national treasury.

Believe it or not, this is the conventional wisdom in Europe. Years ago, I was kicked out of a web site called the European Tribune, because I opposed these views. The site was managed by a highly successful, you guessed it… banker, and plenty of his colleagues on the site were enraged as I evoked all the American banks which financed Hitler, and how the USA government seized German property after WWI, to redistribute it to its plutocratic friends, and their German interface came to be known as the Nazi Party. (Conveniently the building where the records of the transactions were kept burned down: who needs fiction, when we have reality?).

Mélenchon accused the journalists to received outrageous salaries. My personal impression was worse: they are clearly paid by the financial plutocracy to utter counter-truths. All of this, notice, in France. it is of course much worse in the USA or briatin. Actually the Guardian ran an article on how scandalous it was to see Philippe Poutou, and his kind on TV. Whines the Guardian about these terrible things, equality and democracy:

“…why the equal billing?… We are seeing a lot more of Poutou, candidate for the New Anti-capitalist party, these days thanks to one of the quirks of French presidential elections that means as voting day approaches, a law kicks in giving every candidate equal air time on radio and television. It’s not just the length of time they’re given, but the quality … meaning no shunting the no-hopers off to midnight slots… Poutou stands no chance of being elected, and doesn’t want to be. Like the other no-hope candidates he is using the election to air his party’s political views..

In the USA, there are no democratic “quirks”. Hope is for sale, after being bought. Actually, there is just one party, the bipartisan party, and the president lauds it. Plutocrats give more money to whom they favor, and, in 94% of the cases (House of Representatives, Senate), the candidate who spends more get elected. In 2008, for the first time since public financing of candidate existed, a candidate refused to it, to gather much more money through private donations. That was Obama, and he out-spent, not just Clinton, infinitely, but his final opponent two to one. Wall Street fat cats financed Obama massively, while Obama  hid behind millions of tiny contributions to claim it was not what it appeared to be, whatever it was (personal disclosure: I did finance Obama massively; however, to my dismay, I found out he preferred to socialize with the meowing fat cats; differently from me, they have millions to offer him, after he gets out, if he is a good boy, and that is apparently what he prefers, following in this the despicable Bill Clinton).

***

1930S: WHEN “DEMOCRACY WAS FINISHED

The other time France went against the grain was in the 1930s. France refused to let her central bank allow banks to create massive money (a policy that was replicated as the ECB’s vicious mandate). All other leading countries did the opposite, and the Great Depression hit France longer. Economics were secondary, though, as everybody could see that another war with German fascism was looming, and war preparations were more important.

By 1936, France elected Léon Blum as socialist Prime Minister. A socialist of Jewish ancestry was the perfect answer to Hitler’s anti-Judaism. Blum passed a lot of far reaching legislation later adopted throughout the West, and now the world. 

On his second time as PM, in 1938, Blum sent heavy weapons to the Spanish republic under assault from the fascist conspiracy. However it was too little too late. American plutocrats, such as the oil company Texaco, had been supplying Hitler’s and Mussolini’s armies invading Spain. It was difficult for France to fight Germany, Italy, a rebel Spanish army, and, basically, those who ruled the USA. At that point, having got rid of its strong pro-Nazi elite, Great Britain was becoming more aware of the necessity to align herself with France, instead of the sort of plutocratic  propaganda of the American ambassador, Joe Kennedy.

Said Joe, on the record:”Democracy is finished in England. It may be in the USA.” Plutocracy at its best. The guy was obsessed by becoming the first Catholic president of the USA.

***

WHEN SOME OF THE RICHEST JEWS NOURISHED NAZISM:

So are we getting in a similar situation? Yes, and no. Yes, in the sense that plutocrats, hysterical at the sight of one of the leading countries freeing themselves from subjugation,  are going to do their best to sabotage French socialism, in the hope to stop any momentum that way in other countries. This is what happened in the 1930s.

However this time is different. In the 1930s France, from the People to the secret services, was well aware of the conspiracy between international plutocracy and fascism (some, even in France, loved it; many of these traitors met their demise in 1944-45, when dozens of thousands were executed, more than were during the French Revolution of 1789, or the Commune’s annihilation). The secret services tried a sophisticated operation to expose the connection between Nazis, international financiers and industrialists, and even Jewish-American billionaires. That Simon Warburg affair backfired as Dutch “justice” ordered the book destroyed, worldwide (only one copy survived in Switzerland).

To this day a colossal amount of disinformation exists about the Warburg family. Although some facts are in plain sight: two of his members, for example, served on IG Farben’s board.  IG Farben was the giant Wall Street created chemical monopoly that was behind Hitler, Auschwitz, and Zyklon B. It was part of a giant conspiracy set-up by Wall Street to turn around the anti-monopoly laws of Teddy Roosevelt, with the full support of the government of the USA.

The conspiracy behind Nazism boggles the mind. It extended, it extends, well after the death of the participants. In a few days I will be in Washington’s airport: it’s named after one of the main Nazi collaborators in the USA: the Dulles brothers. Now celebrating Martin Luther king’s dream is excellent, but celebrating it too much leaves no passion to condemn the implicit celebration of the triumphant duplicity of the supremacist Dulles. In other words, the martin Luther King cult, poorly executed, becomes a cover-up for the plutocracy underneath. MLK would have been the first to call attention to that.

All of this shows the importance of moods.

***

THE 1% IS NOT THE PROBLEM, THE .1% IS:

Another point, and very practical: the 1% is not really the problem. The bottom half of the 1% retire on a post tax income roughly equal to the average family income in the USA. Most of them have worked very hard all their life on a post tax income of around $250,000, out of which they can invest at most $100,000, as they live typically in expensive area where it cost $150,000 to live in mediocre life (try to live in New York or San Francisco on $150,000: you will live less well than with $30,000 in, say, Montana).

The real problem is the top .1%. Their worth is above 100 million dollars. They can go anywhere, borrow for nothing (their preferred method to avoid tax). They use tax heavens, worldwide. They go to politicians, tell them what to do. To illustrate, see Barak Obama using Warren Buffet as a piece of his brain (Obama is now going around in circles with what he calls a “Buffet rule“, which says that the richest of the richest shall be taxed at 30%, half the upper margin rate of the upper middle class).

To defang the top .1% is very simple: index the capital gains tax on income (and in particular so called “carried interest“). Leave it as now for less than a million dollars, and then bring it up to 90%. also make tax heaven unlawful.

Some say that the rich would leave if taxed and hounded throughout the West. Where? China? Siberia? Iran? North Korea? Mars?

***

PLUTOCRACY IS NOT JUST A CLASS, IT’S A MOOD, AND A HOPE:

Old Geezer observes and asks: The 1 % have treed the 99 %. So, I ask as a thought exercise, if the 99 were to CONFISCATE ALL THE WEALTH of the 1 %, would it amount to very much? Other than making us all feel better for seeing justice done, would there be much of a change? I am asking this question because I really don’t know the answer. It is NOT rhetorical.”

Excellent question. Confiscation will address vengeance and justice. Redistribution of property can have also a very positive effect on the economy, and on society.

The reason why Che Guevara failed in Bolivia is that he had not weighted enough the impact of the redistribution of land that happened in Bolivia in the 1950s. Thus the proletariat was not anxious to support him. Redistribution did not happen in Rome when the Gracchi asked for it, but something a bit like that happened under Tiberius (among the middle/upper classes). Tiberius intervened with national banks created for the occasion.

Morality: we should not believe we have nothing to do with imperial Principate Rome. By the way only 52 individuals were executed in Tiberius’ times for treason. Many were obviously very culprit, in a sordid plot, more than a decade long, that resulted in the death by poison of Drusus, Tiberius’ son. The crime was found out only 8 years later. 

Confiscation can have two dimensions:

1) confiscation of wealth

2) confiscation of power.

Wealth is power, but not all power is under the form of confiscable wealth. When Putin reigns as a tsar, he uses his power. His considerable wealth is for his retirement.

Both wealth and power need to be confiscated from the plutocrats. The top 1% owns 40% of property in the USA, observes Stiglitz (Nobel Prize eco 2001). They leverage that into enormous power because they completely dominate intellectually the representatives of the PEOPLE, and the media class. .

The foremost positive effect of confiscation would be to change completely the philosophical guidance of civilization.

Take health care, USA. Obama claimed his plan, Obaromcare, is about insuring 30 million Americans not insured now. Sounds good, but not fixing the main problem, and that is the health care plutocracy, and it sucking ever more of GDP. The plan was mostly devised for those. So Obamromcare was an elaborate con job.

Look at the banks: nine trillions were given to the managements that caused the crisis, or their brothers, to invest more into “financial products”, and keep the hedge fund “industry” afloat.

So was Afghanistan: first of all, a profit for the military-industrial. So, in France, was Sarkozy cutting the taxes on the hyper rich. (Instead of having an industrial policy, as Merkel had.)

In all these abominable plots, one sees that the overall philosophy was that making the rich richer was a meta-value: from it all goodness will flow. Once that philosophy, that the key economic strategy is to make the rich richer is guillotined, one can put a completely different philosophy on the throne.

***

Patrice Ayme

Market Is No Civilization.

April 16, 2011

BARE MARKET REDUCES MAN TO GREED & GRIND. CIVILIZATION IS RICHER.

[[A security problem at WordPress prevented reproducing half dozen graphs crucial to the essay below; hopefully at a future date. Better a mangled publication than none! Essays explaining with historical maps and reproductions of incriminating documents how Turkey’s and Germany’s poorly digested pasts caused their friendliness to the Libyan dictator and his family of murderous thugs, are delayed.]]

***

Abstract: The USA used to be mainly composed of “whites” and “blacks“. (“Black” in the USA is (still!) defined as any, even the smallest, contribution of African ancestry. Is it the Mark of Cain? According to the Pope, yes.)

The USA was mostly made of “whites“, and still is. There are 196 million of “whites” in the USA, according to the latest census. Now the largest and fastest growing minority, by far, is “Hispanics” (54 millions).  The “whites” used to comprise the middle class, and they have been suffering: their real income has been going down, while the cost of accessing to the upper class, education, has become stratospheric. So “whites” are getting poorer, less educated, the latter feeding back on the former.

A consequence is that the deeply unhappy, insecure “whites” are collapsing demographically. The latest census shows that the total population of white children (0 to 18 years) has gone down 10%. In a decade. In other words, the population of what used to be the United States of America is collapsing. Extrapolating these rates, the USA will turn soon into Mexico. Indeed this seems to be the aim of the plutocrats: is not it true that the world’s richest man, Carlos Sims, is Mexican?

Serious: the Mexican tax income is 10% of GDP. The US federal tax income is 9% of GDP, the rest is borrowed from the objective accomplice of American plutocracy, the Chinese dictatorship (hey, what are friends for?)

I will argue that the Will-To-Lower taxes is actually the expression of the will to go down, indeed. Lowering taxes to nothing is an attempt to reduce man to fear and greed. It is a will to reduce man to crocodile. In the guise of reducing the deficit, the American right wing is reducing the USA to increasingly nothing. Reducing man to fear and greed is no way to have a sustainable civilization. It is an ominous fate. It has no future value.

***

***

PAUL RYAN, SCREAMING TODDLER FROM THE ABYSS:

The American right wing is frighteningly stupid. Its leitmotiv, as Obama pointed out, is to give even more power to its sponsors, the hyper rich. Obama took the case of his own tax cuts, as proposed by the US Congress headed by Ryan and company: 33 seniors would see 6,400 dollars more in taxes, so that Obama could play with another 200,000 dollars. That, Obama rightly points out, is outrageous.

The American wealthy love to claim they are philanthropists. Let’s help them by enforcing that (Obama presented that idea in a more sneaky, psychologically correct way: the rich want to give, if we only would let them do it).

Europe’s richest person is Frenchman Bernard Arnault, a self made man, formed as an engineer at Polytechnique. He is worth $41 billion, making him the fourth richest man in the world (excluding despots, such as the Mubaraks, Kadhafis, and other Putins). Ryan the ignorant would say that Arnault is the victim of France, a welfare state: Arnault pays more than 50% in taxes. He thus has the satisfaction to have the French state provide him with the service of being made more philanthropic than his American colleagues.

Plutocrats have names. Two Wall Street housewives, Christy Mack and Susan Karches, got 220 million dollars from the Federal Reserve bank (which they did not have to reimburse: the loans were “non-recourse”).

Their husbands were big guys on Wall Street, getting even more money from the government of the USA. Dozens of hedge funds with Cayman Island addresses (so paying no US taxes) got billions of dollars. From the always so generous, albeit unknowing, US taxpayers. Basically, all the richest people in the USA were given free money from the Federal Reserve bank. To support the economy: in the USA, according to the operating wisdom, the rich is the economy. All this was supposed to stay secret, but an act of Congress (thanks to Senator Sanders from Vermont, the Senate’s lone socialist) just revealed the enormity of what is going on.

I have talked about this for years, as indications here and there, showed that this was the case. The same holds in Europe, with the deliberately mislabeled “Euro Crisis”, which is, in zeroth order, simply a money grab by the plutocracy. Thugs grabbing candy from children, ready to eat whatever from whoever. Hopefully the Icelanders have called off that charade, and normal people, in the rest of Europe and America, will realize that they don’t have to pay for plutocrats. Twice. And that it is time to force obdurate oligarchs to join their role models, the Mubaraks, in jail.

Why the American crisis? Here:

[Non reproduced graph showing a collapse of taxes on the richest in the USA in the last 20 years. Krugman’s “Tax Facts” has two of the graphs I used.] 

Notice the drastic lowering of taxes under Clinton, from 30% down to 22% for the 400 richest. So much for Clinton being a democrat. Correct spelling: demoncrat. Then Bush, from a billionaire family, in an ambush, lowered the tax rate of the hyper wealthy down to less than 17%; by comparison in high tax areas such as New York City, the upper middle class can pay 50% or more, in taxes… making the middle class a shadow of its former self, and the tax burden not much different from that of European “welfare” states… without the advantages.

***

IS THIEVERY  WHAT FASCISM WAS ALL ABOUT?

So say some recent analyses of the Nazis; they mostly killed the Jews, because they wanted to steal them. Hatred was a convenient truth, but not the strongest motivation.

One has to remember that German fascism was essentially an alliance of the hyper wealthy, and hyper powerful, among the Prussian aristocracy, other grandees, and some industrialists. After trying to grab Europe in 1914, that constellation of arrogance was defeated in World War One. Those worthies then allied themselves with American plutocrats, thugs, children of criminals against mankind, such as Hermann Goering,  and revanchards low lives such as Adolf Hitler, creating Nazism.

Meanwhile in Italy, Mussolini, a repented socialist, made explicit the alliance between corporations and the state, a version of plutocracy he called “fascismo”.

Fascism is not always a product of plutocracy, and is far from being always bad, as those who invented the concept, the republicans of Rome, would be the first to point out. For the genuine Romans, fascism was the symbol of the judicial power of the republic, and the French republic still uses the concept in that exact way, 25 centuries later.

Fascism is the ax of the People’s ultimate power, when the many wind around the force of simplemindedness. However an ax can be misused.

Plutocracy always use fascism, and uses it badly, deliberately. What Paul Ryan and company propose is a naked version of what Mussolini implemented in Italy, and what laid subterraneously in Nazi Germany (as Ernst Julius Röhm found out in the last few hours of his life).

***

ONLY THING THEY KNOW IS THAT THEY HATE THE STATE:

There is no deficit problem in the USA. There is a plutocratic problem. True the Federal government takes 18% of GDP while the Federal tax receipts are 9% of GDP. But that is deliberate. The plutocracy does not want to pay taxes, just as it did not want to pay taxes in the Late Roman empire. Plutocracy wants wealth to rule. And only wealth. And Pluto. Plutocracy does not want the law, or the state to rule. To kill the state, plutocracy kills taxes. This is why, in the Late Roman empire the law, the state, and even the army collapsed (instead the Franks, Visigoths and huns were privateley contracted).

Just like in the Roman empire, plutocracy has created an ideology to sabotage the country, the state, whatever does not satisfy its cult of personal power. In the Late Roman empire, rabid Christianity was the ideology that plutocracy used. Now the ideology is the so called “free market”. According to that ideology, only the “free market” produces anything of value.

Ryan and the right wing economists who support him are amazingly ignorant. Being scoundrels, as Krugman pointed out, no doubt further their ignorance. They know nothing about a few dozen European countries, and still other countries, such as Japan, which completely contradict his ideas, with explicit examples, here, there, and everywhere. For example the Swedish health care is much better than the American one, and is much cheaper. As soon as one studies the Swedish system, one understands why.

And why is it that Germany, with 45% of GDP as state spending is doing better economically than the USA, with 18% of GDP for Federal spending? Overall, Europe is doing great economically (except for some overextended peripherals), and all European states have an AVT of at least 15%, and state spending between 40% and 55% of GDP. Way above the global state spending of the USA of 30%. One also has to keep in mind that the private sector in the USA is very inefficient, which bloats GDP: energy usage in the USA is only 33% efficient, whereas it is above 80% or 90% in the Western Europe, or Japan.)

***

TAXING FACTS SHOW THAT HIGH TAX STATES DO BETTER:

[Absent graph showing the tax rates of many countries, the total tax load of the USA being near the bottom, between half and two-thirds of the European tax loads.]

I have harped for many years that taxes are not high enough in the USA.  Moreover, they are skewed very badly. To advantage the rich. To encourage waste, and discourage savings and conservation. As energy costs have increased recently, the French government was able to reduce by 10% the tax loads of poor professionals who depend upon transportation. High tax countries have freedom of financial engineering. If production oil prices doubled, European governments would be able to swallow the increase. Not so in the USA.

Aside from the low-tax status of the United States, it’s interesting to note that all the European debt crisis countries have relatively low taxes by European standards. This is a causal relationship. and it is well understood in Europe. To help fix its crisis, Greece has augmented its VAT up to 23%, and is now trying to tax the (rich) Church.

This puts the lie to those claiming that big welfare states were somehow responsible for the crisis: the four countries at the top, the top welfare states, with the highest tax rates, are doing splendidly. According to the IMF and the CIA, Norway, Denmark and Sweden have higher GDP than the USA.

This, in spite of the high inefficiency of the economy of the USA, which augments the ratio GDP/AWE. (AWE, Absolute Worth Energy, my own concoction, measures the efficiency of energy usage according to its true worth, as its name indicates.)

***

SOCIETY DOES NOT REDUCE TO THE MARKET:

Adam Smith, building on the French physiocrats, and Dutch financial engineering, mentioned the “invisible hand” of the market. Four times. And he wrote more than one big book. Smith was not obsessive about the “free market” as the American plutocratic propaganda has been. The latter is obsessive, because it wants to hide the fact that the plutocrats are  government sponsored, government financed, and government owning. They are foxes complaining of being pecked by the chicken they eat.

The market responds to profit. But what does the rest of society respond to? Should a doctor be primarily motivated by greed or survival? Or should a doctor be primarily motivated by care?

Do these people who talk about “free markets” all day long know what they are talking about? The free market? Do they know what a market is, have they seen one? I advise them to go to France this summer, say Southern France. All cities and villages there have exuberant markets, generally twice a week, half a day. Really free markets, in the street. OK, not completely free: emplacements in a free market are in high demand, and each spot is tightly regulated.

In the USA, the French have the reputation to be welfare addicts. In truth, the French know real free markets very well: they are wildly popular, and all French in good standing use the market; produce are fresher, direct from the producer, and often of higher quality, and, or, cheaper. However, precisely because they use the market so much, the French know that the market is not the one and only place to run a society from. Financial profit as its only motivation carry a civilization only that far. Because, by definition, it can only be concentrated on the richest. The rich became more than twice richer in the last thirty years in the USA: after-tax income of the richest 1% went from 7% of total income to 17%. 

The plutocratically inspired, misleadingly labeled American “republicans”, though, demand that only the profit motive would move society. Thus they want to reduce all and any emotion to greed. Or a somber struggle for survival. But no civilization reduced to greed survived very long.

***

MONEY IS JUST ONE MOTIVATION AMONG OTHERS FOR A FAIR AND BALANCED CIVILIZATION:

People are active for some reason(s). It is often simply because otherwise their basic needs would not be satisfied, and by working enough, they can get enough money to satisfy those needs. Call that the survivalist motive. People can be also be active out of greed, when their needs are satisfied, but they want more money than they need.

However, some people act from parental love. So it is for all and any parent in good standing. People can also act out of the goodness of their heart, or because they have passion for a task, be it engineering, a sense of justice, curiosity, poetry. These motivations don’t have a price, and they are not engaged into because they bring money. People can act out of a mix of the preceding motivations, with one of them dominating, or not. In any case, all these motivations contribute to economic activity. It is non financially rewarded economic activity, thus, it is not measured by GDP, but it is economic activity.

People do not, in general, make a financial profit of of curiosity. So in France, for example, the state had to step in to pay archeologists. Otherwise the archeology would not get done. A country such as France is heavily covered by not-for-profit “associations” which practice a myriad of activities, and which are somewhat supported by the national collectivity known as the “state”.

To all this, the fascists reply that only greed and survival are motives worthy enough, to be encouraged, and even paid for, by the government. Hence the extravagancy of welfare for billionaires in the post-Bush USA. As the historian Fernand Braudel pointed out, the capture of the state by a rich minority has been a classical feature. Most of the time, Egypt was organized that way, starting with the times of the pyramids. Tellingly, some of the best Egyptian science was done before that. When all you think about is greed and survival, or submitting to the masters, you don’t think much.

When the right wing friends of the plutocrats proffer economic advice, they claim that economic activity comes exclusively from greed and survivalism. It tells something about them that these are the only motivations they can imagine people to have.

It also mean that they reject a society where anything else than greed and survivalism reign.  Historically, though, such small minded, selfish, man eat dog societies have not proven sustainable. By contrast, the Oriental Part of the Roman empire, Constantinople, survived very well with absolutely enormous taxes, for more than a millennium.

The other motivations for activity do not depend, cannot depend, upon making a profit. By definition. But they are necessary to have a society open to all the motivations of the open heart, and the open mind. Thus they have to be supported by the public. That public support is the government sector. An open question is how much of GDP it needs. The answer  of the post Reaganites who reign now has been 9% of GDP, while spending 18%. The answer of the European governments has been above 40%.

Why so much more? The greedy have become more greedy, as greed has been brandished as the way. There is a competition of greed, in an ecology where greed gets no competition. More greed means more profit right away. Thus anything bringing profits later, even if more considerable, long term, is eschewed to the profit of profits now. Hence all serious infrastructure projects have been spurned in the USA. But not so in Europe. Or China. Hence the need for more government spending in Europe. (China’s banks are much obedient to the government, so their private goals coincide with government goals.)

To get to 40%, to get to a fully open economy, the economy of the open mind, the USA will have to raise new revenue, out of taxes on energy and consumption, like in the EU. In the EU a minimum 15% Added value Tax is the law. Anyway, that is the price of the mind, and heart, in full. Otherwise the USA will keep on shrinking, in mind and heart, as it reduces increasingly just to survivalism, and greed.

***

RACIAL FRAGMENTATION PREDIGESTS SOCIETY FOR PLUTOCRACY:

Why is the USA so vulnerable to plutocracy? It is a consequence of racism. Let’s not forget that the USA had the world’s most racist society (by comparison Rome had slavery, but was not racist: Septimus Severus, who founded the dynasty which bears his name, was a Libyan, and Rome had at least one Arab emperor, Philippe). Genetically founded slavery is rare, although India was submitted to it for 35 centuries, until the British colonized that primitivism with their advanced Western European civilizational ideas, and outlawed the infamy of the genetic caste system.

The fragmentation of American society is at the root of the crisis of the USA, and even of the world’s plutocratic crisis. (As American plutocracy has been busy finding itself allies overseas, yesterday Nazism, today China.)

The plutocratic effect always fragments a society, by definition, as it increases the gap between haves, and have-nots. This is what caused the morbidity of republican Rome. But the racial past is an aggravating ingredient at play in the USA, which did not exist in Rome.

As plutocracy appeared in the USA in the late nineteenth century, plutocratic fragmentation was at play. It was decisively corrected by the two president Roosevelt. Now, of course plutocracy tended to surface also in France, Britain (and was particularly nasty in Belgium, as the king went berserk with Congo).

In Germany plutocracy pushed Europe straight into world wars, various holocausts, and racial dementia. The plutocratic insanity had been amplified by something in common with the USA: institutionalized racism.   

“Black” in the USA is (still!) defined as the smallest contribution of African ancestry. African ancestry was generally felt by “whites” to be a powerful poison. So a dividing principle was instilled in the society of the USA. It became institutionalized, venerated.

Barak Obama’s mother was white as snow, but his father was from Kenya, so he dutifully classifies himself as “black”. The Bible calls this sort of things a “Mark of Cain“, an indelible mark placed there by God to warn of the criminal past of the perpetrator. Having a few genes of African origin is the Mark of Cain in the USA. (Another gift from the Bible which was applied to the Jews in the Middle Ages, by Christians and Muslims alike! In the same spirit, in the Middle Ages, the Pope decided that it was OK to enslave “blacks”)

A symbolic detail: “Blacks” use the word “nigger” among themselves (and do it all the time), but if a “white” uses it, it’s an unbearable insult. This cultural apartheid fragments society, and makes fragmentation honorable. Thus, when plutocracy imposes its own fragmentation, it can plead that fragmentation is honorable, and those who resist it are “class warriors”, who are implicitly equated with “race warriors”. The Wall Street Journal editorial board, and the giant Fox and Newscorp machinery attached to it uses this argument many times an hour, day in, day out.

An idiotic and dishonest story on CNN claimed that France had 12 million hidden Muslims and Africans, and they breed frantically and will overwhelm France by 2025. France’s situation is quite different, because apartheid is not venerated there, but republican integration is (see the “Burqua”/face mask law). By the American definition, some of Napoleon’s generals were “black”, and so was Alexandre Dumas. But most French people are unaware of that, and if they were, they would ask you what’s your problem. In a non racist society, Négritude is not like Plutonium, and a little bit does not change everything.  

***

 

BESIDES LOSING ITS MIND, IS THE USA DYING OFF?

The Nazis claimed to be patriots. Their fascism killed a bit more than 10% of ethnic Germans, in 12 years. The collapse of the white population in the USA is just as swift.  But its cause, American plutocratic fascism, differently from the German fascists, has not been extirpated.

A state such as California, essentially white a century ago, is now majority minority. In California one can meet American citizens who speak less English than a French peasant. This is compounded by the fact that the public school  system is collapsing, to the racist satisfaction of the plutocracy (remember, they dream of Mexico). This is what lays under  the American socio-economic crisis; it’s a plutocratic crisis multiplying a racial crisis. Basically the few rich whites don’t feel any solidarity for the colored tide of low lives that their very policies have brought about. All they want is private jets, gated communities for their servants, more than two millions incarcerated, and about eight million others under judicial supervision. Hundreds of millions walloping in misery will only augment their glory, the way they look at it.

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SURVIVAL OF THE SMARTEST:

Obama understands all this, all the more since he has one foot in it. Now that he has proven a great warrior in Libya, fighting for justice, in spite of everything, he seems more bellicose. The fight in Libya is not fundamentally different. In Libya a small clan of thugs captured the state, and then the country, 42 years ago, with minimal bloodshed. Then. No wonder that Qaddafi was upset when he saw his plutocratic colleague in Tunisia, ben Ali, come down, and flee to plutocratic Saudi Arabia. Now he and his eight children killed more than 10,000. Instead of fighting a few resistance fighters, the murderous thugs now confront the might of the leading democracies. No wonder that Putin is upset. No wonder that those who captured Tibet are upset. No wonder that those who kill indigenous peoples to get rare earths are upset. No wonder that those who spoil the Indians of Amazonia worried that democracy may come after them too.

Leading democracies cannot be the world’s police force, nor should they leave democracy undefended.

It was not easy for Obama: as he landed on planet Washington DC, he landed in Plutocracia Magna. Forgive my neo Latin. When surrounded by wolves, it is difficult not to howl with them. However, as he engages in real combat, Obama is growing, and may be will turn into a tiger: He does need to meekly howl with inferior canids.

Obama just brought to bear some logic on the ignorant Paul Ryan and his associated scoundrels. Obama’s liberal base may be ready to see again in him the courageous leader, the friend of sanity, it thought it voted for in 2008.

Thus it may come to vote in November 2012, after all. Then the decerebrated servants of the infamous Pluto will go back to the well deserved abyss they belong to, walloping in their reductive view of man. The ignorant can bellow. History does not listen.

The People of Rome did not wake up in time and numbers when plutocracy took over. Maybe “We The People of The United States Of America” will do so, after all. Hope is good, when it shows up.

***

Patrice Ayme

Not Enough Taxes, Not Enough Republic

December 14, 2010

 

OBAMA’S REAGANOMICS ARE AS WRONG AS WRONG CAN BE.

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Abstract: Obama, hiding behind the republicans, as usual, is pushing for a second round of cutting taxes to alleviate the suffering of the hyper rich. This will make the situation better short term, and much worse, long term. The failure of the emotional intelligence of the so called democrats is, once again, epic.

A quick revisitation of the basic idea of the republic, as invented by the Romans, is in order.

***

LET THE HYPER RICH PAY NO TAX, THEY WILL BE KIND:

This is the second time that Obama is cutting taxes lower than Bush for that exalted group, and calling this butchery a stimulus for the economy, to the great applause of most clueless American economists (sorry about the pleonasm). Overall, 69% of Americans support the Obama tax deal, as if they decided to overlook the gift to the hyper rich (69% is also the approval of the plutocratic Clinton: the USA loves its plutocrats). But the same crowd of the gullible used to approve the invasion of Iraq with even greater enthusiasm.

The deal with the hyper rich is grievously wrong on taxes, wrong on the economy, wrong to the republic, and against the tide of civilization. But Americans have been so brainwashed, they cannot understand it. Obama, as a good Reagan admirer, gloats that "all economists" agree that this second stimulus will create jobs. They probably all got the Nobel Peace Prize too. And all write children books and invented biographies, while cutting their own taxes on their own multi-millionaires’ fortunes.

Sure, the latest Obama tax cut on the hyper rich will create jobs, Reagan style. But a country’s economy does not grow on hamburger flippers and valets for the hyper rich. The bone marrow of the states are the schools, and they are getting gutted.

Brazil, under Lula, gave money to the poor, as long as they sent their children to school, and to the doctor. That injection of public money in the economy boosted educational level, consumption, and the Brazilian industry. So Brazil has been growing at an enormous rate.

In the USA, the increasingly impoverished population is watching their worth wilt. Because the state does not have enough money for the public where it matters. A good example is idle construction workers and machinery, when there is so much to build. This lack of activity is what tax cuts into the bone of the state fabricate. This is why the US median income is going down more, and more durably, than during the Great Depression of the 1930s itself (on most, if not all, 10 years time slices).

Obama and his apologists have found reasonable word assemblies to justify their ignominious cave-in to the richest. But passion can see further, and better, than reason. It is because the Germans were microscopically reasonable, and emotionally disconnected, that they goose stepped in perfect cool discipline behind the Nazis.

It is emotionally disconnected to give so much power to the rich, and more of it, the more they mess up. It is not just about the money, it is also about the respect that flow of money implies. It’s typical of an abusive relationship, that the more the submissive is abused, the more submissive that victim gets. (A variant is the Stockholm syndrome hostages go through, and, incredibly, Obama quasi admitted to it, as he used the concept of “hostage”!)

This so called second "stimulus" , Obama style, will bring a very short term lift, as when a plane stalls, and rears on its tail, gaining altitude while losing all forward momentum. Ultimately, though, what the present leaders of the USA keep on cutting is the republic itself. After spending trillions of public money on private banks, the pattern is clear: the politicians of the USA have chosen the plutocracy over the republic.

Why? The plutocracy make the politicians ultra rich: look at Clinton, or the just resigned director of budget of Obama. He is 41 year old, and will earn millions of dollars from Citigroup, towards which the government just "directed" more than 45 billion dollars.

The enormous income and estate tax gift to hyper rich Americans, will make the situation of the American economy, even worse than it already is. In truth, it is the American republic, the public thing, which is being devoured by the hyper rich.

The government of the USA could have done differently, and swiftly: the European Union is cracking down on banker bonuses, worldwide, effective on January first, 2011: financiers will get between 20% and 30% cash, The rest will be locked in shares for the long term (to prevent them to suck up all of a bank money, and then ask for taxpayer money). It is a first step. Let ignorant American pundits be reminded that there are 500 million European citizens (and that Great Britain is part of the EU). Of course the democratic president, the democratic Congress and the democratic Senate could have taken such a decision long ago. Funny how the mighty USA is more indecisive than the 27 countries European Union.

Democratic or demoncratic? Plutocratic is the word, and demoncratic, its translation.

***

WEALTHFARE IS COSTLY:

Total government spending (Federal, state, local) in 1950 was 24% of GDP. Under Bush it went up to 35% of GDP in 2003, and then 37% of GDP in 2008. It is projected to be 44% of GDP under Obama 2010 (which happens to be exactly the same ratio as Germany).

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Notice the peak caused by WWII. Also notice that the squeeze in spending FDR is often accused of in 1937 does NOT show much (the 1937 downswing is one of Krugman’s pet fixations). The explosion of spending under Obama is due in great part to economic stabilizers (for example welfare, extending unemployment benefits, etc.), but also to military spending, the highest ever, with two very expensive defeats in the making. The explosion of spending is not caused by investment (whereas the World War Two budget ought to be viewed that way).

A really horrible graph would include all the money the Federal Central Bank has "printed" for the private banks. We cannot draw this graph. It’s a secret graph. it would involve trillions of dollars secretly sent to these money losing operations which lost so much of it because they divert it to the worldwide plutocracy (the Fed also made direct payments to foreign banks). In any case, not enough money has been left for trains, schools, and cutting edge businesses, so the entire socio-economy of the USA has turned into a wasting asset.
***

ROTTEN FISHES HAVE NO BRAINS:

In his autobiography, Obama mentions using a "little blow". Well, Obama’s vision of the economy is a big blow to civilization, as it promotes its enemy, plutocracy.

OK, may be deep down Obama is a revolutionary, as demonstrated by trying his best to make the USA blow up (this is a theory pushed by some employees of the plutocrat Murdoch, or even some ex allies of … Obama). Would not that be ironical…

Last Friday, Obama rolled out Bill Clinton, who gave a press conference at the White House to explain how good the latest Obama idea on taxes was. Clinton is an American politician who made more than 200 million dollars in apparent pay-back from his good service to the plutocracy.

What else? What is his job? He goes in front of various plutocrats, and they give him money. Lots of money. In a variant on that theme, Clinton arranges business deals between worldwide plutocrats and various local potentates. Sometimes Clinton carries a rice bag on his shoulder for worldwide propaganda, a bit like Hitler promised to only wear a grey uniform as the war was going on. Both Clinton and Hitler became very popular in their respective realms, and the worst the consequences of their actions were, the more popular they got. All too many people hate to admit they are wrong, and the more wrong they look, the more they insist they were right.

Under Clinton several Goldman Sachs employees (Rubin, Summers, etc.) destroyed the legislative achievement of Franklin D. Roosevelt, the separation of banks and financial speculation with the public money the banks are trusted to create.

Clinton went away, but not the men and policies he had put in place. A systematic pursuit of the exact same policies that created the bubble of the 1920s has been pursued under Bush (in the 1920s, the Fed printed money, while taxes on the hyper rich were crushed down from 70% to something insignificant, exactly what has happened since Reagan).

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ROME BECAME SUPERLATIVE BECAUSE OF ITS INVENTION OF THE PUBLIC THING:

Obama and company are children of Reagan style economics: they believe a tax cut, especially to the hyper rich, is all what it takes to get the economy to restart. They think the economy is all about private parties, and especially those private parties having the most money having even more money. It is as if the meaning of the word "republic" had totally escaped them.

The Romans were all about private enterprise. The Romans had private companies hunting for escaped slaves (as the USA did, 2,000 years later). Rome even had private companies punishing and torturing slaves, for a fee, privately. Anything that could be privatized, the Romans privatized.

However the Romans also discovered something else, which was the opposite, complementary concept. The Romans discovered that the economy of a civilization is also about public spending on infrastructure. Thus, the Roman state was organized to take into account that some crucial parts of the economy would not exist if all they had was a profit motive. Crucial parts of the Roman socio-economy were nationalized.

Indeed, what financial motive would an individual find in drafting good laws? What financial motive would an individual find in having a national army of free citizens? Or in having a national fleet? What would be the financial motive of individuals for building a road network that everybody could use, from armies to the poorest of the poor, free of charge? Or aqueducts, or theaters, public latrines, theaters, administrative buildings and the like?

Rome had typically a family, private tutoring system (often using expensive educated Greek slaves). However some Patricians families came upon hard times, and some families sponsored by the higher ups could not afford such luxuries, hence the Roman state decided to fund public schools.

The Army, and especially the Navy, even in Athens, had been a private-public partnership (and that was Athens’ undoing!). Rome, instead, went all the way, making the Army completely public, with national factories making standardized weapons. Roman military surgery, a public service, was so advanced that both its knowledge base and instruments were used for 2,000 years (and have been fully integrated in today’s medicine). The Roman republic also invented free food distributions for the poor, and welfare.

The Romans summarized all this public structure in one neologism: respublica. Res publica: the public thing. The Romans discovered that one could not have civilization without it. they also discovered one would get a better, superior civilization with it.

All these collective services characterized Rome, above and beyond civilization prior. The Roman PUBLIC THING allowed the Roman state to do many things, and to be endowed with a culturally superior population, that no other state had.

Then the Romans proceeded to destroy all the plutocracies around them, starting with the enlightened plutocracies the Etruscans were governed by, and going on with Carthage, an unbalanced plutocracy, and the Hellenistic kingdoms (plutocracies which had dispossessed the Greek City-states).

Reciprocally though, as the plutocrats became too powerful, pieces of the state became their thing, and civil war started. It would not really stop. what is known as the Roman empire was a long war between the army (more or less representing the people) and the Senate, fief of the plutocracy. Ultimately the hyper rich refused to pay taxes, and protected themselves with private thugs. The state had to use cheaper foreign bands for defense (including the Huns!) The Roman republic’s last remnants faded away.

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THE EUROPEAN MIDDLE AGES BUILT THE REPUBLIC FURTHER:

As centuries passed, the public thing regained importance in Europe. After the Late Roman empire theocracy, the Franks re-established the primacy of the state over religion, and created their own Church of Francia (which enraged the impotent Pope Gregory "The Great", a pyromaniac). The Franks financed monasteries to help preserve knowledge, especially as the Muslim devastation of most of the empire cut them off from paper, scholarly exchanges and libraries.

The Franks passed a law that forced religious establishments to teach all the children. That went much further than the loose arrangements the Romans had in education.

Meanwhile the Franks took under their wing official republics such as Venice, which were autonomous, but protected. In theory, and sometimes in practice, the kings and emperors of the Franks were elected.

In the Middle Ages guilds and corporations were officialized to marry professionalism and democracy (a pretext for Plato’s hostility to democracy). Corporations such as the law and police became pillars of the state. The law became soon as powerful as in the Roman republic. Public hospitals were created, complete with windows to drop unwanted infants, no questions asked.

The Great Fire of 1666 in London brought the realization that only a public fire brigade would be respected enough to be able to blow up houses to stop the fire (that is how the Navy stopped it).

This sort of public services are undone in the 21C USA, as the fire brigade may not come if it has not been paid, or the police may not come if only a burglary is in progress (the official policy in Oakland, California).

***

STRUCTURE IS NOT A STRICTURE: DESTROY IT, AND ALL WILL GO.

In 1862, California was isolated from the rest of the USA, by the Civil War. So the US Congress authorized public spending to build a railway across the USA. It is still used today, same as 150 years ago, and most of New York salads are brought by it in winter. If the US Congress had waited for private profit seekers to build the railway, it would have never happened.

As it was, it was heavily subsidized. One could even say, astronomically subsidized. The "Pacific Railroad Act" of 1862 was a "land-grant railroad". The government gave each railroad company 6,400 acres of land and up to $48,000 for every mile of track it built (it seems that was one million in 2010 dollars). The difference with Obama and Bush giving trillions to banks, as is done nowadays, is that, first, no money was given to the banks.

Banks are indeed intermediaries. giving a message to intermediaries make sense. Giving them the house does not. Roosevelt did the same as the Congress of 1862. Under the WPA, the work Progress Administration, he used government money to provide directly millions of jobs. The same strategy ought to be used today.

When the Roman army did not have to fight, it was used to build vias, canals, and other public utilities. No doubt that if American soldiers were brought back from the Middle Eastern butcheries, they could be used profitably too. Profitably in a non financial sense (Israel uses its defense establishment to push high tech much higher than it would be otherwise).

Under republican president Eisenhower, the top tax margin rate was 92% (starting at $400,000 of income). It was a time of giant work programs, as the USA was covered with freeways, airports, and education was free in the omnipresent public schools, and second to none. .

Nowadays, the richest Americans pay the lowest rates (say above the median income). The infrastructure of the USA, including public schools and universities is crumbling, and that is augmenting the crisis. The infrastructure is starving because it is not getting enough public money (which, instead, is going to the hyper rich).

The Obama administration is even destroying NASA. Why not? let’s replace NASA by a South African billionaire; a young divorcee called Musk, to whom three billions of dollars of NASA money is presently diverted. He looks good: Musk is tall, dashing, a Silicon Valley money manipulator, he looks good in photo ops next to the president. Musk also gets plenty of money from the government for his laptop batteries luxury cars.

Eisenhower, an old style republican, had created NASA, precisely as a public service. Eisenhower knew it was important to have an organization motivated by cutting edge rocket science, instead of having only organizations which were motivated by profit (as private companies such as Boeing, Lockheed, Northrop, Mac Donnell, North American, etc. were). NASA is an asset of the USA that Europe does not have (ESA being much less financed and restricted to space).

This is a crucial point: public service has a different motive from private profit, so it can explore and exploit avenues which are barred to the profit minded. It is the essence of the difference between the crocodile, the shark, and other lower predators, and man. Lower predators look only for profit. Man looks beyond the hills, beyond self interest, beyond where the eyes can see. An entrepreneur operating for profit operates like a shark. Calling him a philanthropist does not make it more reassuring. An enterprise founded on something else than private profit can reflect more, all what the mind of man is capable of.

A country or regime refusing the full wealth the human mind is capable of is diminished, and will fall off history, if confronted to fully democratic republics.

The rockets Musk is building use oxygen-kerosene engine, decades more primitive than the oxygen-hydrogen engines used by the American space shuttle or the European Ariane V (and which have never failed).

As NASA goes down, vampirized by Musk, the cutting edge is lost, and it is lost on the public dime. The result will be the irreversible loss of this American know-how (and thousands more forever jobless in some of the more advanced jobs; meanwhile India and China are pushing for advanced space programs, publicly financed; they are going to the moon).
Another flaw in giving more power to the hyper rich is that too much power and money in the CEO class and the financial class have created the present crisis.

The health care plutocracy even enticed the delusional Obama administration to violate the Constitution’s commerce clause by forcing individuals to purchase for profit health insurance (this has just been struck down yesterday by a federal judge). The power of the CEO class ruins democracy, ruins profitable investments for the entire country, and even now the Constitution (the Supreme Court, mesmerized by the hyper rich, just like Obama, has decided to allow secret campaign contributions by the richest organizations, giving its full depth to the "Pluto" part in the word "plutocracy").

The CEO class is so powerful that it can divert investment money towards itself, and the derivatives crooks and their valets (for some of course obscure reason, thousands of these are not in jail, keeping company to Madoff).

The stimulus, as it is, one more tax cut for the hyper rich, and it augments their money and power, so it will augment the power of what caused the crisis, and thus will augment the crisis.

Eisenhower in his farewell address told Americans to “avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow”. It seems instead that Americans live mostly for the ease and plunder of the hyper rich. I have seen on European TV, Versailles sized estates built by Iraq war profiteers on Long Island. These estates speak volumes. But only on European TV. The US propaganda is careful not to show the same aerial pictures.

***

CRITTERS SWIMMIMNG ON THEIR KNEES, AGAINST THE TIDE:

Obama and company are in for a shock, like lemmings at sea. Their trickle down plan will not work anymore than giving more power to the state enterprises in the USSR as it collapsed worked. In both cases, the basic mechanism is the same, and will fail, again, for the same reason. A class, an oligarchy, is in power, and has so much power that the rest of the economy has not enough power left to function properly. In a way, it’s an application of the principle of the conservation of energy.

During the Spanish Civil War La Pasionara declared: "the Spanish people would rather die on its feet than live on its knees".

It is conventional wisdom, in modern, cynical America to view such an attitude as naïve and un-American. But it is not. At the Alamo, Crockett and his friends made a hopeless stand, but thanks to such a stand, Texas became independent. La Pasonaria’s uncompromising principle ultimately led to the fall of the fascist regime in Spain, because it inspired enough people to resist fiercely, or craftily.

Had no one ever taken such an exemplary position, Spain would still be fascist. In truth we would all still be subject to the most brutish regimes. The only reason we are standing up, is that heroes in the past refused to live on their knees. To be a hero starts with the proper cognition, though. And it is very tiring to be right, much more so than to be a bleating sheep. Plundering with ease and convenience the most trivial considerations is definitively the coolest way for those for whom "cool", the absence of passion, is the highest compliment. I think Nietzsche called that the "last man". "Lowest man" may fit even better.

Nor is it All-American to be on one’s knees in front of creepy billionaires who insist to be called "philanthropists" at every turn. If they are so much in love with the rest of mankind, why don’t they start by paying 50% tax? Instead of promising crumbs after their death, while letting most of their money locked in tax free foundations, for the exclusive use of their class, or their descendants?

Remember; the 400 richest have an average income of 348 million and pay only 17% average tax. Obama did not suggest to the democratic Congress and democratic Senate to tax these people 50%. That would bring in 50 billion. Better: it would suck out power from this vulture class. At the Eisenhower rates, 150 billions would be brought in. And the best young minds would stop being corrupted by the idea of extravagant riches. (In France, a billionaire had forgotten to declare, among other belongings, a private island she owns in the Seychelles and to which she regularly jets in onto her private giant runway; don’t worry, she is not going to jail; such is the extravagance of riches). Obama has no excuses.

Until the very end of the nineteenth century, the USA had NO BILLIONAIRE (in 2010 dollars). So, if anything, BILLIONAIRES ARE UN-AMERICAN.

The Obama republican tax cut will provide a transient lift, from one more tax cut to the hyper rich. It will be followed by an economic deterioration, worse than ever before. Because the infrastructure, the public thing, will have deteriorated further.

To give more power to those who organized the crisis, reminds me of drug addicts buying a little more blow from their dealers. One will need more imagination than that to get out this pathetic descent to hell. The time has come to become as tough as the opposition. And it’s not just China, but those who pull its strings, the same sort of strings that their ancestors pulled 80 years ago. The lucrative strings of foreign fascists.

The leaders of the USA are at sea. They can swim all they want; they understood nothing of the tide of history. They are swimming against it, and many who are forced to follow them will drown too.

***

Patrice Ayme

***

Note1: In "Block Those Metaphors" Paul Krugman explained that " The idea that the economic “engine” is going to catch encourages policy makers to settle for sloppy, short-term measures when the economy really needs well-designed, sustained support."

This erroneous metaprinciple ("the economy engine" will come on line on its own) is typical Voodoo economics (as Bush I put it; Bush I was not a bad economist, but ironically lost the election because of the economy and the giant sucking sound of Ross Perrot). In truth, there is no "engine", and it’s not automatic. Nor is there a car in the ditch, as Obama likes to say. In truth, there is Obama, a multi millionaire who lives like the world’s richest man, and partakes to a system which sends too much money to his friend Dimon (a super banker, and a central banker, thus thief, judge and executioner) and his friend Buffet. Hey, if, like Clinton, he wants to be invited at the billionaires’ table, in a short six years, he better be nice! Change is what you make it be, as he likes to say!

Well designed support means up to date Colbertism. It will also entail appropriate protectionism, in cooperation with the EU. China, and others, use protectionism, and should be paid in kind. In particular imbalances on fighting the carbon dioxide problems ought not to be tolerated anymore (they are intrinsic to the Kyoto treaty, and a pretext for the USA to stay out).

***

Note 2: Why is the abused inviting more abuse? As In Obama’s relationship with the republicans, or the Stockholm syndrome? Because psychobiology has to be seen in a global ecological context. two points: a) the prey ought not to resist too much, lest the predator be damaged. b) among humans, intellectual certainty is rewarded by leadership, because presumably the more correct ideas bestow more certainty. Thus those who are not too sure, those who are mentally divided such as the progressive Reaganite cold caring oxymoronic Obama, are psychobiologically primed for submission to those who are sure of themselves. And this explains a lot of Obama’s floundering presidency.

***

HOW OBAMA COULD LOSE.

June 29, 2008

TAXES, OR HOW OBAMA COULD LOSE.

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Warning, abstract, and update Nov. 3, 2008: The text below was written in June 2008. Its gist is that Capital Gains are way overtaxed, especially for the middle class. This has very detrimental effects on national welfare and security, besides being very unfair for the little guys. Thus, we were happy to hear Senator Obama, in October 2008, claim that he would not rise capital gain taxes on people earning less than $250,000 (in other versions Senator Obama apparently suggested to put capital gains to zero for this category, and that is obviously what should be done, especially in light of the catastrophic drops of the markets, which will insure that people will be taxed in the future for gains that they did not make at all: see below for the mechanism at work). Private capitalism cannot work in combination with democracy if investing gets systematically punished for people who do not belong to the plutocracy. (By the way the only alternative to private capitalism is State capitalism, aka Stalinism, and it is unlikely that can work without the Gulag.)

***

The threat is in one word indeed: TAXES. Or more exactly: tax expectations. Unrealistic tax expectations is how conservatives have been winning. 

In recent years, conservatives were elected in Germany, France and Italy (they all had big deficits, like the USA). Each time the conservatives proposed to lower taxes. They were not believed as much as their opponents, who proposed to raise them. People prefer to elect who proposes less punishment. Moreover, it’s easier to raise taxes than to lower them, and so it’s more likely that those who propose to raise them will raise them rather than those who propose to lower them will.

In Italy, the billionaire Berlusconi, in his seventies, and thoroughly despised for his preceding years heading the government, unexpectedly crushed the left, vanquishing in a landslide. In France, the conservative Sarkozy promised a “fiscal shield”, according to which nobody could be taxed a total of more than 50% of their income. He was elected, and considerable checks were sent to some of the “rich” (although France has a wealth tax, so the truly rich can’t escape as easily, see below).

On June 26, Obamawas interviewed on Fox TV, and promised unambiguously to raise taxes on the top 5% of taxpayers. He was also asked to associate one word to “Wall Street” and he said: “money”. With a big smile. Within minutes the stock market collapsed, breaking multiyear lows. More than 50% of US voters hold stocks worth more than US $5,000.

Right now the US voters who hold stocks, fed up by years of neofascist reasonings and facts from the Bushmen, barely favor McCain. That may change when they become aware of the plans Obama has for their (at this point utopian) capital gains. Right now the long term (more than 18 months) capital gains tax rate is low, as it should be. It’s only 15%, much less than the income tax rate. This is justified because people who use their capital for investment are not using it for their immediate enjoyment, but for a more common good, and are not just insecure about their return on capital, but also about the return of the capital itself. So a return on invested capital, when there is any, should be rewarded more to compensate for the considerable deferment and losses investing leads to.

It is true that the present 15% rate on capital gains has been grossly abused: some of the richest US taxpayers have been using it… for their income (a gross violation tolerated by Bushmen and democratic Congress alike).

On the contrary, hyper rich people should be proportionally taxed more than modest taxpayers, because the richer one is, the easier it is to become richer. That later phenomenon, which is purely mathematical, has to do with the defining characteristic definition of the exponential function. It has been known for at least 10,000 years (and is the root of various wealth taxes, or even human sacrifices of most old cultures, from Vikings to Carthage).

Barack Obama has been listening to some of the world’s richest men (such as the world’s richest investor, Warren Buffet), and they told him (now that they have made gigantic fortunes), that a capital gain tax rate of up to 29% would be OK. The problem, though, is that capital gains are NOT indexed on inflation. As an asset is held for years, it has to augment in nominal value, just to stay as valuable. (Now how inflation is measured is another exasperating can of worms entirely; in the US the official inflation rate is tweaked so as to undercount it, by careful selection and so called “hedonistic” adjustments.) The practical result is that one has to add the 15% of taxes to how much inflation has occurred while the asset was held (several years in the average). Thus assets held years are affected by two taxes: the one on capital “gains” and inflation. RIGHT NOW THE EFFECTIVE CAPITAL GAINS TAX RATE IS 35%. It is not 15%! It’s much higher!

Except for the hyper rich who have devices to roll continually their money. Indeed, the capital gain tax rate the rich profit from is closer to a true 15%, because hedge fund managers, for example, have only to hold their income 18 months (at the present 4% inflation rate, that means they are taxed 21%). Assuming today’s inflation, and the average holding period of assets, Obama proposes to tax capital gains of the small, average, not to say ridiculous, stock holder at 50%. Assuming the present inflation rate; with an inflation of 6% (which is entirely possible, considering the stratospheric rise of oil), Obama’s tax would be well ABOVE 60%.

This was tried before, in the sixties and seventies: high tax rates on capital gains, and high taxes on income. Investments stopped, stagflation reigned, Reagan got elected (ultimate catastrophe). To this Obamareplies that this time will be different, because he will not tax venture capital (!). Venture capitalists are typically extremely rich people who finance a few ideas on the side to get even richer. It is dubious that they will bring more serious innovations if they are taxed zero. So now the very richest, instead of having a loophole at 15% will have one at 0%!  That change was proposed by Obama! Change you can believe in: the plutocracy will always have a new tax loophole at the ready, if the regime changes.

All McCain has to do is to point out the enormous capital gain tax augmentation Obama proposes for the little guy. This is added to the augmentation of social security tax of 6.2% (starting at $250,000), Whatever the reasons for that augmentation, it will bring US taxes well above 60% in many places. That would be 20% more than the maximum taxation rate in “socialist, welfare state” France!

Right now, because of the housing bubble (still not shrunk), one can earn $300,000 in one of the expensive places (New York, San Francisco), and being unable to afford (decent) housing. The political risk for Obama is clear: people will wonder why he would stop at $250,000 (and anyway that number is not indexed by inflation, either; within a year, it will be already below $240,000 in constant dollars (at 4% inflation, soon to be 6%… in which case it would be only $235,000…)).

WHICH TAXES SHOULD OBAMA PROPOSE?
Obama should propose to leave intact the “Bush tax cuts” for the little guys. The 15% capital gain tax rate should be kept as is (and, better, be indexed on the CPI). For the little guy. So Obama will have to define what “RICH” means. One MILLION DOLLAR in interest and dividends, and/or TWO million dollar in income should define “RICH”.

The question arises of how the government would compensate for the loss of income that not increasing direct taxes on the non rich will bring. Of course, INDIRECT taxes (energy taxes in particular) could be introduced (they would bring huge income, and decrease the US splurge of consumer spending and energy waste; besides, they would bring down the price of crude oil). More simply, the hyper rich (such as some of Obama’s advisers) should be hyper taxed. First a higher tax bracket for the rich should be introduced; if Obama wanted to tax the little guy’s capital gains 50%, he should be even more open to tax the rich 50% on their income (remember the richer one is, the easier it is to get richer, the exponentiation argument).

There is a recent precedent of the crack down by conservatives on the rich, and not just in France. Obama should do as Merkel, the conservative German Chancellor, did: IMITATE FRANCE, AND INTRODUCE A WEALTH TAX. That’s a special tax on the rich that looks at total assets (another tweak on defining the rich).

EUROPEAN CONSERVATIVES RULE BY TAXING MASSIVELY WASTE AND THE RICH (the left, when in power, does the same, overall). That recipe, TAX WASTE, TAX RICH, has proven highly successful for the European economy. The Obama tax program, at this point, does not do either. It punishes the upper middle class, though. Since the later is highly influential, McCain is in better position than he looks.
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Patrice Ayme,

https://patriceayme.wordpress.com
http://www.patriceayme.com/
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“Wonkish”, technical addenda:

0) Ever since there has been trade, there has been capital (archeological studies in Australia have uncovered proofs of currency usage and trade on distances in excess of 1,000 kilometers, more than 40,000 years ago already). Systems where the little guy could not invest were tried before: plutocratic imperial Rome on one side, Stalinist imperial Russia on the other. Capital from the little guy is crucial not just to the economy, but to democracy. It’s not just about “money”. “Money” is about power; give no “money’ to the little guy is equivalent to leaving him powerless. But the “cracy” (from Kratos) in democracy means power.

1) Italy, France and Germany together have more voters than the USA. Polls show Great Britain could go “conservative” too (the just elected mayor of London is a maverick conservative). All these European conservatives clamor for change, to the point of making the left look … conservative. But European conservatives all claim to want to alleviate direct taxes on the little guy, and the definition of the little guy includes the upper middle class income earner (who often cannot afford decent housing in cities such as Paris and London, since the truly rich global worldwide plutocracy has driven the prices up).

2) The US total tax receipts are less than 30% of total US GDP (or so they were, before the Bush administration brought them higher, when local taxes are included). The OECDaverage was 36% in 2007, and it’s higher in Europe. Europe is clearly doing better economically than the USA at this point, so one could argue that the total US tax receipts should be brought up. The world’s record in taxation is Sweden, witharound 50% of GDP. France is below 44% (with an individual “shield” at 50%). Italy is at 42%. Obama is talking about raising the upper middle class tax rates at levels that are known to have caused, time and time again, total revulsion in Europe (anything above 50%). Europe can generate high tax incomes without taxing wages and salaries and capital gains too much by using consumption and user fees taxes. The Added Value Tax, in particular, and very high energy taxes make tax evasion impossible, and represent MOST of the tax income, and TWEAK THE ENTIRE ECONOMY IN A WISER, MORE EFFICIENT DIRECTION. The income tax system is used in reverse: half of French income earners de facto pay no tax on income. Besides education and health care are free, and public transportation heavily subsidized.

3) The so called “Laffer curve” says that as one increases the percentage of taxed income too much, economic activity goes down (because people are less motivated to work), and so the total tax revenues go down. As Ibn Khaldun, a 14th century Muslim philosopher, puts it: “It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.” This observation was at the heart of the so called “supply side economics” of Ronald Reagan’s era. The “Laffer curve” was drawn and explained by French economists (Bastiat, etc.) in the mid nineteenth century. That is why the modern French economic planners invented the AVT and heavy energy taxes: those taxes turn around taxing income directly, that is too dispiriting. An interesting warning: the upper bracket of US income taxation was brought up from 29% to 62% by the Hoover administration in… 1929, and the Great Depression started within months.

4) The US economy is actually full of subsidies, and will do much better when many of these are transmogrified into taxes instead. One has to distinguish what is in the common good (say, trains) and what is not (subsidized corporate jets serving the rarefied plutocracy; corporate jets are heavily subsidized by common taxpayers, but they don’t know about it).

5) Why are Obama’s advisers seemly unaware of the preceding? Well, maybe some have hidden agendas. Trojan horses were not invented yesterday. Some may want to stake their leftist reputation; others may outright act as double agents (wanting Obama to fail by giving him subtly poisonous advice, like Buffet, or amused Venture Capitalists, or subtly directing taxation away from themselves); others, like those who suggest to tax the innocent middle class hard, and the hyper rich venture capitalists not at all, have no decency whatsoever (but this bold tactic worked well for top Clinton/Obama plutocratic adviser Rubin, so why not?). The University Of Chicago economy department has been known as a friend of the Hyper Rich, and Obama main economy tax adviser is a professor there (just as Obama was). That individual justified the Venture Capital loophole, boldly, and completely, by calling it “The Future”.

And what of the Obamas themselves? What is their relationship to work and money, and investing? Well, as Michelle Obama herself pointed out, they could not make ends meet until Obama’s juicy book contracts (of the sort politicians get: big money in advance, complete with ghost writers). Mrs. Obama herself financially appears to have profited from her nomination on a corporate board (another usual arrangement in the environment of a politician). I do not say she did. But she certainly appears. And appearance is all what can be ascertained in such a case. When money and power has grown out of magic “community organizing”, why not persist with the magic? Well Europeans don’t believe in magic anymore, and, someday, Americans will join them: change we can believe in.

6) Some pundits on the right have been surprised that McCain has been talking about other things rather than the obvious subject above. The reason pertains to the sort of elementary Machiavellism fishermen are familiar with. McCain is waiting, just like the fisherman who feels that the fish is taking the bait waits. The fish should not be hooked too early. If Obama persists with his hare brain tax plan, he will be stuck with it. When he realizes his mistake, it will be too late to pull out without being accused of major flip-flopping. Let’s notice than in Italy the electorate misled the pollsters: their hearts were beating strongly on the left, but their pocketbooks were on the right, and they voted with the later. Indeed, why not?