How Steinbeck 'Predicted' a Decline and Fall of America

by Len Hart, The Existentialist Cowboy

There are MANY differences between the GOP and Democrats! Enough to write books about! Why, then, has the meme taken hold that there are no differences between the parties?

That's found in 'Right Wing Campaigning 101', better known as a GOP 'Campaign Manual'. There exist such manuals, produced for candidates by their highly paid consultants. At one time, I had several of these large tomes. Lesson no 1 states (in effect): in appropriate situations, it is to your candidate's advantage to BLUR the distinction between the candidates. Generally, the GOP is a minority party. It is often to their advantage to convince the public that Dems are just GOP-lite! It "ain't" necessarily so! For a start: EVERY Democratic President since WWII has enjoyed greater GDP and JOB CREATION rates than has any GOP President.

No one was surprised recently when some 227,000 NEW Jobs were reported. Those were among many more that had disappeared under Bush Jr. That the Shrub lost and/or destroyed jobs put Obama in the position of having to regain lost ground and add to the baseline! The cycle is repeated whenever a Democrat assumes the White House; he must create jobs and quickly. When a Republican assumes the White House, he or she will promptly destroy them. If there were NO differences between the parties then HOW is that pattern explained?

Clue: STOP buying the bullshit! Check the official numbers.

The great motion picture --The Grapes of Wrath --was all about the disastrous, often heart-breaking loss of jobs that began with the incompetent if not evil policies of a GOP administration, that of Herbert Hoover and the GOP administrations which preceded him --Harding and Coolidge. The GOP OWNS its creation: the GREAT DEPRESSION.

Daring to tell the truth about the Great Depression and the GOP which created it earned John Steinbeck numerous death threats, an FBI investigation, and --to be expected of the nation's moronic/crooked right wing --charges of 'Communist sympathy', charges never proven. They were not proven because they were not true! What if they had been? Are we not guaranteed freedom speech? Are we not free to vote as our consciences dictate? Are we --in fact --NOT free?

The actions of the GOP/right wing define them thus: 1) they are liars who know their 'economic policies' are disingenuously conceived and promoted;the GOP knows its 'theories' are hooey but does not care; 2) the GOP are ruthless and will rig elections in order to seize power.

In the meantime, we have no choice but to exercise free speech until it is denied us by a tyrant. We narrowly survived one recently --George W. Bush who might have parlayed a success in Iraq into a 'triumph' perhaps with laurel wreaths and a parade of slaves from conquered nations.

That the GOP is utterly incompetent may very well be our only salvation --so far! It may be dumb luck that things worked out in our favor. In the aftermath of Bush Jr, we should be thankful that we are still --on paper at least --guaranteed freedom of speech and, by extension, the freedom of conscience that inspires it.

Not surprisingly, it was an Oklahoma Congressman who labeled John Steinbeck's novel --The Grapes of Wrath' --a "dirty, lying, filthy manuscript”. Nevertheless, it remains one of America's great novels, one of America's great motion pictures starring Henry Fonda. Predictably, the GOP despises it because it dares to tell the truth and depict it realistically.

Tragically, a 'sub-stratum', i.e, the right wing inclined, has refused to evolve, progress, grow or, in any way, transcend a disastrous mental constipation that has --it seems --forever retarded our nation's best but utterly lost dreams and better aspirations. One fears that America will be remembered as Rome is remembered, that is, as a repressive, failed, cruel empire remembered most often for its cruelty, its obsession with spectacle, it's neglect of anyone not of 'noble' lineage.

Robbers of the world, having by their universal plunder exhausted the land, they rifle the deep. If the enemy be rich, they are rapacious; if he be poor, they lust for dominion; neither the east nor the west has been able to satisfy them. Alone among men they covet with equal eagerness poverty and riches. To robbery, slaughter, plunder, they give the lying name of empire; they make a solitude and call it peace!

--Tacitus: Calgacus' Speech to His Troops (A.D. 85)

Dust Bowl --a 1950s Documentary

---

---

How the Great Depression Inspired a New View of 'Economics'

by Len Hart, The Existentialist Cowboy

Irving Fisher (February 27, 1867 – April 29, 1947) was an American economist, inventor, and health campaigner, and one of the earliest American neoclassical economists, though his later work on debt deflation is often regarded as belonging instead to the Post-Keynesian school.

Fisher made important contributions to utility theory and general equilibrium. His work on the quantity theory of money inaugurated the school of economic thought known as "monetarism." Both Milton Friedman and James Tobin called Fisher "the greatest economist the United States has ever produced." Some concepts named after Fisher include the Fisher equation, the Fisher hypothesis, the international Fisher effect, and the Fisher separation theorem.

Fisher was perhaps the first celebrity economist, but his reputation during his lifetime was irreparably harmed by his public statements, just prior to the Wall Street Crash of 1929, claiming that the stock market had reached "a permanently high plateau." His subsequent theory of debt deflation as an explanation of the Great Depression was largely ignored in favor of the work of John Maynard Keynes. His reputation has since recovered in neoclassical economics, particularly after his work was revived in the late 1950s and more widely due to an increased interest in debt deflation in the Late-2000s recession.

Fisher produced various inventions during his lifetime, the most notable of which was an "index visible filing system" which he patented in 1913 and sold to Kardex Rand (later Remington Rand) in 1925. This, and his subsequent stock investments, made him a wealthy man until his personal finances were badly hit by the Crash of 1929. He was also an active social and health campaigner, as well as an advocate of vegetarianism, Prohibition, and eugenics.

Then we may deduce the following chain of consequences in nine links:

(1) Debt liquidation leads to distress setting and to (2) Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes (3) A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be (4) A still greater fall in the net worths of business, precipitating bankruptcies and (5) A like fall in profits, which in a " capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make (6) A reduction in output, in trade and in employment of labor. These losses, bankruptcies, and unemployment, lead to (7) Pessimism and loss of confidence, which in turn lead to (8) Hoarding and slowing down still more the velocity of circulation. The above eight changes cause (9) complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest. Evidently debt and deflation go far toward explaining a great mass of phenomena in a very simple logical way.

I have been both a central banker and a market regulator. I now find myself questioning whether my early career, largely devoted to liberalising and deregulating banking and financial markets, was misguided. In short, I wonder whether I contributed - along with a countless others in regulation, banking, academia and politics - to a great misallocation of capital, distortion of markets and the impairment of the real economy. We permitted the banks to betray capital into “hopelessly unproductive works”, promoting their efforts with monetary laxity, regulatory forbearance and government tax incentives that marginalised investment in “productive works”. We permitted markets to become so fragmented by off-exchange trading and derivatives that they no longer perform the economically critical functions of capital/resource allocation and price discovery efficiently or transparently. The results have been serial bubbles - debt-financed speculative frenzy in real estate, investments and commodities.

--London Banker,Fisher's Debt-Deflation Theory of Great Depressions and a possible revision

James Tobin argues that the intellectual breakthroughs that mark the neoclassical revolution in economic analysis occurred in Europe around 1870. The next two decades witnessed lively debates in which the new theory more or less absorbed or was absorbed in the classical tradition that preceded it.[13] In the 1890s, according to Joseph A. Schumpeter[14] there emerged A large expanse of common ground and ... a feeling of repose, both of which created, in the superficial observer, an impression of finality -- the finality of a Greek temple that spreads its perfect lines against a cloudless sky. Of course, Tobin argues, the temple was by no means complete. Its building and decoration continue to this day, even while its faithful throngs worship within. American economists were not present at the creation. To a considerable extent they built their own edifice independently, designing some new architecture in the process. They participated actively in the international controversies and syntheses of the period 1870-1914. At least two Americans were prominent builders of the "temple," John Bates Clark and Irving Fisher. They and others brought neoclassical theory into American journals, classrooms, and textbooks, and its analytical tools into the kits of researchers and practitioners. Eventually, for better or worse, their paradigm would dominate economic science in this country.  

Fisher's research into basic theory did not touch the great social issues of the day. Monetary economics did and this became the main focus of Fisher’s work. Fisher's Appreciation and interest was an abstract analysis of the behavior of interest rates when the price level is changing. It emphasized the distinction between real and monetary rates of interest which is fundamental to the modern analysis of inflation. However Fisher believed that investors and savers —people in general— were afflicted in varying degrees by "money illusion"; they could not see past the money to the goods the money could buy. In an ideal world, changes in the price level would have no effect on production or employment. In the actual world with money illusion, inflation (and deflation) did serious harm.

Also see: The Top 10 Most Influential Economists of All-Time

---

---

How the GOP Will Bring About the End of Capitalism

by Len Hart, The Existentialist Cowboy

The GOP gets away with a big lie! The GOP has convinced millions that the GOP is the party of smaller government coupled with smaller debts and deficits. The fact is: EVERY Democratic regime at least since World War II has presided over smaller debts and deficits than any GOP regime and --at the same time --has created more jobs and greater growth in GDP.

These are facts that can be confirmed at the U.S. Commerce Department B.E.A. and the Bureau of Labor Statistics to name just two. There is a table [Wikipedia] that lists the gross U.S. federal debt as a percentage of GDP by Presidential term since World War II. As the detailed version of the graphic above, it PROVES my point with detailed and verified numbers.

Now if you happen to believe that creating fewer jobs and --worse --exporting them to China is a good thing, then, by all means, vote GOP! Like clockwork, jobs will migrate and GDP will, naturally as a result, take a dive. And, by voting GOP, you will have helped bring about that outcome. Live with yourself! The GOP, in the meantime, will routinely lie to you about this issue if they cannot avoid it. I often wonder why it seems never to come up in debates.

At present, the gross federal debt as a percentage of GDP (83.4% at the end of 2009) is higher than it has ever been since the late 1940s. This is the Bush Jr legacy. By way of background, the debt briefly reached over 100% of GDP in the aftermath of World War II.

Debt of any type increases when money is borrowed. The Federal debt, likewise, increases whenever the government borrows money, whenever the Treasury or other agencies issue 'securities', very literally a 'promissory note'.

The public debt increases or decreases as a result of annual unified budget deficit or surplus. The federal government budget deficit or surplus is defined as the the cash difference between government receipts and government spending; it ignores intra-governmental transfers.

Some recent history

That outcome is clearly by design and by definition it is not Marxism. Nor ---as the 'brown suit' says --is wealth created by so-called 'free market capitalism'. Rather --it is unrestrained, free market capitalism that has, in fact, created every depression since the Great Depression which began with the stock market crash of 1929.

At the same time, the GDP, i.e, the annual gross domestic product, to the end of June 2011 was $15.003 trillion. That means that the 'gross debt' is about 98% of GDP; debt held by the public is about 67% of GDP.Elsewhere, one can expect the 'libertarian' CATO institute to shill for the upper, upper classes, i.e, the ruling elite of just 1 percent of the population.

The disaster Bush left Obama

The facts are clear enough and available to anyone who will bother to access the U.S. Commerce Department-B.E.A., the Bureau of Labor Statistics, and non-partisan think tanks. That rules out Brookings! In the video below, the CATO spokesman ignores the lessons of history and the stats I've posted above. The right wing would rather not mention these numbers. The right wing would rather you had never read or accessed them; the right wing would rather you remain uninformed, in the dark, ignorant! The right wing cannot sell its bullshit to informed and intelligent people.

With respect to the following video specifically, the 'battle ground' is imprecisely chosen. Progressives must take the higher ground while forcing the enemy into a boxed canyon. Liberals err by giving liars the benefit of doubt and letting spin doctors and their liar clients 'off the hook'. The GOP, rather, should be reminded of how wrong they are every day if not every hour. Perhaps --eventually --in the face of mountains of verifiable data, they will surrender or be buried.

With respect to the video, someone should include among their talking points that the transfer of wealth upward to just 1 percent is just as destructive to the economy as would be the utter destruction of all that wealth in a nuke, just as destructive as loading up dollars and assets on a ocean liner and shipping it abroad. It matters not where. That's true because the very, very wealthy invest their moneys offshore. The do not put the money back into a local economy as the Building and Loan had done in the classic film with Jimmy Stewart: "It's a Wonderful Life".

Wealth transferred to the elite --by way of unfair GOP tax cuts benefiting only the upper 1 percent --is, in effect, a transfer of wealth outside the economy. In other words, it is, by definition, a contraction of the economy.

The transfer of wealth occurs in numerous ways. Offshore bank accounts are typical and most often exploited by the elites. It is unfortunate that is is CAPITAL ---not labor --which controls U.S. wealth though it is labor that creates it. Every economist knows the truth of that. It's called the 'labor theory of value'.

That capital has acquired a de facto ownership of the 'state' does not support any defense of 'capital', NOR does it disprove Marx whose views with regard to the 'labor theory of value' are mainstream despite the radical reputation that right wing morons have ascribed to Marx. The empirical evidence, meanwhile, proves that Marx was absolutely correct and is repeatedly confirmed --ironically --by GOP regimes.

The End of Capitalism? [video h/t Vera Narishkin]

---

How the US Became a Vassal State of China

by Len Hart, The Existentialist Cowboy

China owns the United States --or, at least, holds a 'mortgage'. China props up the dollar just enough to ensure that its excess production can be dumped here by way of its US retail outlet --Wal-Mart! The value of the US dollar is almost entirely dependent on China. When it ceases to be advantageous for China to prop up the dollar, the dollar will collapse.

The decline and fall of the American empire is a sorry, tragic saga. It is the story of betrayals of this nation by the likes of Richard Nixon, Ronald Reagan , Bush Sr., the Shrub, and many lesser known 'agents' of the increasingly tiny cadre of ruling elites. It is the story of how GOP administrations paid off its elite base with tax cuts which have had, in fact, the effects of impoverishing the poor, enriching the rich, exporting the US manufacturing base, and exporting the jobs that it had supported.

There are many versions of the 'supply side' story, but the most famous one involved a napkin and a Pizza Hut. While Ronald Reagan still occupied the White House, an alleged "economist" is said to have drawn a fictitious curve on a napkin. [More about this 'curve' to come.] As a result, millions lost their jobs, tent cities sprang up across the country, the nation plunged into a great recession --the deepest, most severe, the longest since Herbert Hoover's "Great Depression! I saw some of those 'tent cities' in 'boomtown' Houston. I was inspired to publish an essay in a local magazine. My essay was entitled: "What happened?" In a word, the bulls had gone bear if not 'bare'; the captains of capital cashed out at the top and left many another holding real estate that was declining rapidly in values. The least fortunate were those whose interest in Real Estate was simply that of keeping a roof over the heads of family members. Many of these folk lost their homes and moved into the 'tent city'.

Under the occupancy of George W. Bush, the folly was repeated and the harmful effects left to Barack Obama whom it is hoped will take the rap.

Called "preppies", they consulted Republican political campaigns and were in a position to spread economic dogma like 'supply-side' or 'trickle down theory'. Economists Arthur Laffer and Milton Friedman lent an imprimatur of respectability. Laffer, for example, drew a "curve" on a napkin which some believed proved the preposterous idea that reducing taxes for the elite classes would reduce debt and deficit. In fact, when Reagan put the theory to work with his infamous tax cut of 1982, the opposite occurred. Both debt and deficit increased. Supply side, i.e, 'trickle down' theory was proved wrong. Sadly, the GOP has not gotten the memo.

• Wealth might have 'trickled down' IF the wealthy had invested tax cuts domestically!
  But they don't and probably never have! They squirrel away their windfalls in offshore banks, havens, shady investments or other ways which do not create new jobs, do not raise wages or stimulate capital investments or growth! The opposite has always occurred, i.e, the economy, rather, has always contracted with each GOP tax cut! If the government wishes to stimulate an economy by stimulating spending, it should just cut out the 'middle man' or, as John Maynard Keynes suggested, it should put bucks in mason jars, bury them in a landfill and let 'labor' dig them up! There is no point in letting the very, very, very rich SKIM OFF the top with idiotic schemes like 'trickle down theory'.
• Lower income citizens do not bear smaller tax loads as claimed.
In fact, their taxes are always higher as a percentage of income because the working classes do not have access to most forms of depreciation, offshore tax havens, capital gains, tax credits, etc. Because they have dodges which salaried people don't, elites pay much less tax as a percentage of total gross income.

Unfair tax cuts always make the rich richer. Reagan's tax cut, for example, benefited only the upper quintile. [See the GINI Indices at the Bureau of Labor Stats later published by Brookings ] Bush Jr's cuts benefited an elite of just one percent which, as a result of his policy, owned more than 90 percent of the US population. By the end of his reign of terror, this elite of just one percent had increased its share of total wealth, owning more than 95 percent of the rest of the population combined.

I told ya so!

During the 1920s, the wealthy accumulated such exorbitant stocks of cash, they couldn’t spend it all. Instead, they played the stock market, fueling a rapid run-up in stock prices. Lower and middle income households, on the other hand, lacked wealth enough to meet their daily needs and were forced to borrow heavily. Today --the elites have squirreled their tax cut windfalls offshore, effectively removing wealth from the US economy. That is called a 'contraction' and it is the source of many recessions or, more properly, depressions.

Many historians believe that a combination of growing personal debt and a widening wealth gap destabilized the economy and precipitated the Great Depression, characteristics that define the current collapse. Not so long ago, the media touted rising economic growth and a soaring Dow Jones. Those 'signs' of wealth likewise preceded Herbert Hoover's Great Depression. Certainly, the 20s are remembered for vast inequities of wealth financed by growing consumer debt. Neither 'elephant' has left the room.

Welfare for Wall Street

The lessons of Enron and WorldCom were not learned. The GOP still schemes to PIRATIZE your Social Security and are, perhaps, even more motivated to do so now than during the Bush years. PIRATIZING Social Security i.e, letting Wall Street speculators play with YOUR money is the ultimate 'bailout' of crooks who brought you the current 'financial crisis'. There is simply no rational justification for allowing Wall Street to 'speculate', play the markets with your money.

What are 'private accounts' but a government give away, welfare for Wall Street? You already have the right to open a private account of your own anytime you wish. Giving Wall St speculators carte blanche to play the markets with monies you earned by working is foolhardy, stupid at a time when taxpayers have already underwritten a national debt of several trillion bucks. Privatizing Social Security means that when the next collapse occurs, you will pay for it twice --once with an immediate bailout out of tax revenues and --again --with your hopes for a comfortable retirement, the Social Security which you may never see again!

How right wing policies have robbed the US population with "trickle down theory" and other nonsense utterly unsupported with fact or evidence:

• In the late 1970s, the top one percent of the US population held 13 percent of the wealth; in 1995 it held 38 percent. [Source: Source: Levy, Frank. The New Dollars and Dreams ].
• The top ten percent of the US population owns 81.8 percent of the real estate, 81.2 percent of the stock, and 88 percent of the bonds. [Source: Federal Reserve Bank data in Left Business Observer, No. 72, Apr. 3, 1996, p. 5].
• One percent of the US population owns sixty percent of the stock and forty percent of the total wealth. [Source: Hawken, Paul, The Ecology of Commerce: A Declaration of Sustainability. New York: Harper Business, 1993].
• The top fifth of households saw their income rise 43 percent between 1977 and 1999, while the bottom fifth saw their income fall 9 percent....
• Since 1973, every group in society except the top 20 percent has seen its share of the national income decline, with the bottom 20 percent losing the most. They have just 3.6 percent of national income, down from 4.4 percent a quarter century ago.
• Indeed, the top fifth now makes more than the rest of the nation combined...
  Rebecca Blank, who recently left the President's Council of Economic Advisors, pointed out, ‘We've gone back to levels of income and wealth inequality that this country hasn't seen since the teens and 1920s.’" [Source: Merrill Goozner, Crash of '99?, Salon.com, Oct. 1, 1999; addendum: since 1999, the date the source was published, the situation is much, much worse. Today --just ONE PERCENT own more than 95 percent of the rest of us combined. GOP incompetence and criminality moves so fast these days, it's hard to keep up!].
• The top one percent of Americans receive more income than the bottom 40 percent. [Source: Korten, David. When Corporations Rule the World, p. 108].
• Federal Reserve median family net worth by percentile for 1992, 1995, 1998, 2001 (Federal Reserve Bulletin January 2003, pp. 1-36). Note the small gains for the bottom 75% of the population and larger gains for the upper 25% and that the 1998 to 2001 gains were largest.

  --US Wealth Distributions 1989-2001

Republicans bought the scam because it made them feel good about being greedy, shallow bastards. The appeal is obvious: trickle down rationalized greed but only after the fact; it made one feel good about one's worst impulses, motives, and elitist bigotry.

To his credit, the Sr Bush called the Laffer Curve 'voodoo economics'. Two politicians, however, bit big. One of them was Ronald Reagan . The other was the Jr Bush, the Shrub, the idiot left behind!

It is a GOP promoted myth that the GOP does not pay attention to 'polls'. That they promote it, proves it's a myth and that 'trickle down' itself is a deliberate lie by which wealth is transferred upward. It the mechanism by which GOP pays off its base! Not surprisingly, trickle down tested well in focus groups. Everyone likes pie in the sky and greedy bastards will always support any measure that is sure to enrich themselves at the expense of those who must work hard for a living.

Republican campaigns are driven by polls, focus groups, and market research. They're rich; they can afford it. Modern sophistry --the teaching of politicians how to lie, how to con the media, how to couch a phrase or deflect a point --was and most surely remains a growth industry.

The Laffer 'curve' was worse than fiction, it was a fraud. But the 16 month long depression which resulted is a disastrous effect that is still with us.

• New job creation under Reagan was 2.1% per year compared with Bill Clinton's 2.4% job creation rate.
• Reagan's showing, however, may be misleading; almost half of those jobs were in the public sector. In other words, Reagan , though he had promised the opposite, added nearly 2 million jobs to the Federal Bureaucracy. Reagan GREW the government --but NOT the economy.(Incidentally, job growth under Bush Sr, was a mere 0.6% --the worst performance since World War II. ) Reagan tripled the national debt and left huge deficits to his successor --Bush Sr whom Reagan blamed for what can only be called the Bush/Reagan recession.
  
• The disparity between rich and poor grew during the Reagan regime, narrowed somewhat during Clinton but exploded nova-style under Bush Jr.
• Almost one half of all American taxpayers were victimized by Reagan 's so-called tax reform; in other words, over 40 percent of those workers had a bigger chunk taken out of their check at the end of Reagan 's misrule than was taken out at the beginning of his regime.
• And what about "real wages", i.e, income adjusted for inflation? That declined as well.

The Presidency of Jimmy Carter is often tarred with a made-up, focus group word that has a GOP stench about it: 'stagflation'. Diplomatically, 'stagflation' is a myth and will remain one until I find the memo that proves that it was all just made up, validated, perhaps,by a focus group. In any case, it is a GOP fabrication with which the GOP would forever tar the Carter legacy. In fact Carter is among the best US Presidents in economic terms. Here are the FACTS that the paid liars of the GOP will not tell you:

Job Growth Per Year Under Most Recent Presidents⁸

Johnson   3.8%
Carter    3.1
Clinton   2.4
Kennedy   2.3
Nixon     2.3
Reagan    2.1
Bush      0.6

-- Bureau of Labor Statistics, Current Employment Statistics Survey

Stagflation, my ass!

How the GOP Exported Your Job

But, it is objected, the 80s were a period of great prosperity and, surely, Reagan 's tax cut must be credited! The quick response: the 80s, adjusted for inflation, were, in fact, a period of stagnation, increased poverty, and lost job opportunities defined by the export of US jobs, primarily Japan and China.

This was a point about which Milton Friedman reacted very testily, defensively when pressed about it in the grand ballroom of one of the luxury hotels in Houston's famous Galleria. I know. I was there! Friedman said that US jobs are not exported. He was either wrong or excessively pedantic! It was not --after all --a meeting confined to professional economists. For those who must work for a living, Reaganomics represented in a very real and practical sense the export of his/her job! For the real story about the phony 'prosperity' in the 80s, check out: Playing with the Numbers, How So-called Experts Mislead Us about the Economy, Richard A. Stimson

Reagan 's legacy lives:

• US manufacturing is all but non-existent as the shelves of Wal-Mart remind every shopper!
• Labor never regained a pre-Reagan living standard
• wages never kept pace with inflation
  
• 'good paying' and/or skilled jobs never rebounded.

The US had only begun to recover in Clinton's second term. [Bureau of Labor Statistics, BEA; summarized by Kangas, Economic Performance] It was left to Bush Jr, then, to finish the job that had begun with the administration of Ronald Reagan, that is, the collapse of the US economy.

The US boasts the world's largest NEGATIVE current account balance while China boast the world's largest POSITIVE current account balance. [CIA, World Fact Book, Current Account Balance] China owns us! China props up the buck because it is still in their interests to do so. China will pull the plug on the buck when it is in their interests to do so! As a result of the GOP policies of Ronald Reagan , Bush Sr and Bush Jr, the US has become a vassal state even as it indulges the delusion of empire! Pathetic!

Supply side --though discredited --reared its stupid head again some twelve years after Bush Sr. failed to grasp the simple maxim:

It's the Economy, Stupid!

For measuring the economic welfare of individuals rather than the strength of the nation, it is necessary to convert the national measure to the amount per individual, family or household. Otherwise, a nation could double its GDP and its population without anyone benefiting. Such an individual measure is real per capita GDP, obtained by dividing real GDP by the population, and this can be very useful for comparisons over time, although it contains the same weaknesses as GDP itself.

Another such measure is per capita personal income, which is the share each individual receives, on average, of total personal income. The latter parallels GNP and GDP, differing only moderately because of adjustments explained in first-year college economics courses (for example, corporate retained earnings and some taxes are deducted, while Social Security benefits, private pensions, and welfare are added).

A paradox almost always arises during recessions. Wages are stagnant, unemployment grows, and yet the media broadcast and print government reports of increasing per capita personal income.

This misleading result can be explained by considering the average income of a population of two: namely, billionaire Bill Gates and almost anyone of the rest of us. Take the total, divide by two, and you have an enormous amount. If Gates adds another billion it raises the average but does nothing for the other individual.

Rising per capita personal income during recessions reflects the gains being made by a small fraction of the population, which are enough to offset the losses of all the rest and thus bring up the average.

A per capita figure has the characteristics of a simple average (the arithmetic mean), but people’s economic well-being depends on how evenly or unevenly the fruits of production are shared in the population. For this reason, the median (that is, the value at the middle of the range, with as many lower instances below as there are higher instances above) is a better measure. It is available statistically in the form of median family income and median weekly wages and salaries.

Another complication is that when a household has more wage-earners and/or people work longer hours, often taking more than one job at a time to make ends meet (as has been happening to an increasing degree), a given amount of real income is not as beneficial as when it came from fewer hours.

--Playing with the Numbers, How So-called Experts Mislead Us about the Economy, Richard A. Stimson

Die hard, embittered supply-siders tried to effect a coup by impeaching a popular President who presided over the creation of some 35 times the number of jobs than were created under Bush Sr! The coup didn't work, of course, but the die-hards failed to get the message.

It's the Stupid Economy!

Following the closest election in the history of the nation, an election in which the winner was defined [by Scalia's 'majority opinion'] as the one getting the fewer number of votes, a mediocre, self-described 'retail politician' of few achievements and fewer ideas presumes to lead a nation while declaring:

"This would be a lot easier if this were a dictatorship...and I was the dictator!"

Those are the words of a someone who places loyalty to his ideological party and his corporate constituents above his loyalty to his nation. This is the kind of man who subscribes to "supply side" economics because it justifies his largesse to his corporate sponsors --the Enrons who bought him a public office.

But --it is hard to comprehend the near mass hysteria that accompanies debate on this issue --exploited as it was by Bush Jr's hero, Reagan, who somehow managed to make people feel good about themselves, when, perhaps, they should not have.

Reagan, Bush Sr and Bush Jr, indeed, the GOP, must take the responsibility for the US debt which was, last time I checked, some 7.4 trillion dollars, the highest in US history, perhaps World History. Since Ronald Reagan bankrupted the nation, the US has been a net debtor nation which survives, literally, at China's whim.

You can pay off your old credit cards with new ones for as long as you can find another card willing to extend you credit! Eventually, however, someone will refuse, and you will have to cough up the cash --and, if you can't cover what's due by selling off your assets, you must declare bankruptcy. The US is bankrupt!

Why was the US able to sustain the fraud for so long? Europe was willing to buy our T-Bills because the world's fuel --oil --was traded in dollars. Nations wanting to buy oil, had first to exchange their currency for dollars as oil producer nations demanded payment in US dollars. A crack in the dike was the creation of the Iranian 'oil bourse' where oil would be traded in currencies other than the dollar. That and other less publicized moves explains US antipathy toward Iran and US determination to seize the oil fields of Iraq, specifically, the Bush/Cheney/Carlyle/Halliburton attempted "oil grab" in the Middle East --the raison d'etre for war, the plan behind the convenient pretext called '911'. The history of the US since 1980 is the history of US attempts to seize and/or dominate the world's oil resources and markets.

This was all predictable! It was shortly after the US attack and invasion of Iraq that I posted the following comment on one of NPR's long defunct 'How's Bush Doing Board'.

The most absurd invention in the history of technology --the SUV --will go out of fashion overnight --and so will jobs!

It will make the Great Depression of Herbert Hoover --another GOP charlatan --look like a casual walk in the park.

Nixon Ends US Agreement with Bretton Woods

---

Why this Crisis May be Worse than the Great Depression

by Len Hart, The Existentialist Cowboy

About one percent of the nation owning more than about 90 percent of the rest of us combined not only foresaw the impending crash but planned to benefit from it. GOP types have traditionally gotten rich by playing 'last man out loses'! A race to be first to 'get out' has triggered many a panic creating bargains to be picked up, fortunes to be made on the inevitable upside. The big difference now is that --this time --there may not be an upside.

The sheer size of this crisis is worrisome. During the Great Depression, the US still had viable industries that had not yet been exported to China by way of the Bushes and Wal-Mart. The US manufactured automobiles, refrigerators, radios and, later, televisions sets. The steel industry created Pittsburgh. Autos made Detroit. America's work and labor were the sources of its wealth. The right wing exploitation and export of that wealth is the source of our current poverty, the financial collapse and our impending slide into third world status. An increasingly tiny elite is the cancer upon the body politic and economic.

The US oligarchy demonstrates why it so foolhardy to transfer so much wealth to so few so quickly. These 'few' foresaw the crisis and triggered it by bailing out early. It is left to the rest of us to pick up the tab.

Something like 50 trillion dollars in derivative debt is far bigger than even the stock market. Derivatives are collateralized debt obligations, leading to the erroneous conclusion that 'debt is money'. The current crisis is proof that it is not. Moreover, anyone who has ever taken a course in accounting knows the accounting equation: net worth = assets - liabilities. That the money changers swapped these instruments did not change the accounting equation. Money owed you is not money in the bank --a lesson that is, of late, very expensive.
Many have said that 'we are doomed'! Our borrowing will be financed by our own savings. Already, Beijing is poised to become the financial capital of the world.

We can thank Wal-Mart and GOP policies for that outcome. In previous articles, I have traced the rise of the Axis of Wal-Mart/China to the faustian bargain Bush Sr cut with Chinese poohbahs as he paved the way for Nixon's infamous visit to the Forbidden city back in 1973. The quick rule of thumb: whenever the US is betrayed, you can be sure to find a GOPPER in hiding whenever the shit hits the fan.

Lately, it has become fashionable to 'spread the guilt' around! What's up with that? I suspect another scheme, another right wing tactic. Fact is GOP 'trickle down' policies have had the measurable effect of enriching just one percent of the nation's population. When the GOP has been caught holding the blood-dripping dagger over the corpse I am in no mood to listen to crap like: 'but Democrats are 'bad' too!' Not this time! Democrats were in office but eight years out of thirty! But in those measly eight years the trend in which wealth flows upward was reversed only to be undone by Bush Jr.

So --if you wish to dilute the open/shut case against Reagan/Bush/Bush Jr cite me some facts and spare me the bullshit!

It was not so long ago that a Democratic president had left to his incompetent GOP successor a whopping budget surplus, a growing economy, the lowest unemployment in decades, and --for Republicans --the most worrisome trend of all: the rich were no longer getting richer as they had done during the Reagan/Bush years. I can think of only one group of people who are most miserable when times are good! REPUBLICANS!

Historically, Republicans have always benefited from recessions.

1. Recessions are not caused by declining stock markets but seem always to be accompanied by them and are often predicted by them. Republicans play the game of 'last man out wind', taking their profits in numbers that often cause the panic. Only insiders benefit. Others are forced to take their losses.
2. A depressed market becomes an opportunity for the elite oligarchs to get back in. This elite, in fact, controls the market. Everyone else is exploited by the oligarchs.
3. It is easy to make money 'selling short' if you have an insider's knowledge of the market. That fortunes were made short-selling subsequent to the 911 attacks seems to me persuasive, perhaps conclusive evidence that 911 was an inside job. What was known by whom and when? No wonder Bush covered up 911. The answer to those questions would have exposed a murderous conspiracy, perhaps 'insiders' inside Bush's criminal and treasonous administration.
4. Unemployment always rises during times of recession. Should they survive, companies will hire from a larger labor pool at lower wages, lower salaries, reduced benefits, and less vacation or sick time. The GOP despises the Clinton years --not because they were bad but because they were good years and fondly remembered. Europe after the Black Death has that much in common with the Clinton years. The labor supply had been depleted by plague. A would-be employer often had to accede to a worker's demands--better working conditions, more money, a place to live! The serfs had been freed and it was the beginning of the end for Feudalism. I had hoped that a less traumatic cataclysm would have already freed modern day "corporate serfs." Alas! My hopes are dashed. If the US survives at all, you can rest assured that the ruling elite will hire from an impoverished and growing labor pool. Wages and salaries are sure to be inadequate and, as a result, the 'recovery' (should there be one) will be slower for it.
5. Only the oligarchs benefit when many businesses go out of business during depressions which have the effect of 'weeding out' the competition, consolidating oligarchical gains. A conservative, therefore, is someone who supports a free market when it benefits him and the oligarchy at every other time.
6. Recessions are not always accompanied by a decline in prices. As many businesses fail, competition is decreased and higher prices result. Given the demand for a particular product, a company may actually earn more money selling fewer units. The difference comes out of your ass. Such demand is called: inelastic, i.e. revenues increase as prices increase --even if total sales should fall.

Unless someone blows the whistle or exercises some clout, the increasingly tiny elite of just one percent of the US population will be even richer at the end of this ruinous and tragic financial collapse. You can be sure the oligarchs foresaw the collapse and hastened it. You can be sure that they alone will benefit from it as they have benefited from every other such crisis in US history.

Depressions are defined by a 'contraction' of the supply of money. It has been asked: 'where did all the money go?'. Much of it was exported to offshore bank accounts in anticipation of a domestic collapse. But much of that money didn't really exist. It was just paper. It became fashionable to consider DEBT as money. But debt is not money and never was. Anyone who has ever considered the significance of the accounting equation --capital equals assets MINUS liabilities knows the truth of it. Nor is 'debt' money for those holding the paper. Loans are good only when backed up by collateral or, in some cases, one's earnings and ability to re-pay. As in all crashes, a 'bill' has come due but cannot be paid.

If debt is not money, what is? A question that was debated just prior and during the Great Depression and, again, in the 1980s. At that time, there were attempts to create a stable ERM --an Exchange Rate Mechanism for European currencies. A gold standard was also discussed. In both cases, it was 'labor' that sucked up the costs of implementation which consisted of efforts to force manufacturers to keep costs down. Again --it is not wealth that trickles down. It is 'costs' that always trickle down and labor is always expected to suck up the costs and consequences of such schemes.

More recently, a 'gold standard' was discussed. Who would have borne the costs of such a scheme when it became clear that the US cannot back up but a fraction of its 'currency' with gold? Ron Paul, I believe, advocated a tax rebate for precious metals purchases. That would have hastened the collapse by encouraging a run on the dollar! But, in fact, the ordinary working person does not invest in precious metals and, if he had done, the decline in consumer spending would have brought about the collapse of our economy even sooner and, arguably, the effects would have been even worse.

Following is a PBS NEWS HOUR Interview with Nassim Nicholas Taleb of October, 21, 2008. A Famous economist, Taleb authored "The Black Swan". Also appearing on the video is Dr. Mandelbrot, professor of Mathematics. Both point out several reasons that make the current crisis worse, more serious than the Great Depression.

Worse Than the Great Depression

---

---

What Happens When Your Paycheck Comes from China

by Len Hart, The Existentialist Cowboy

In the 1930s, millions of Americans lost hope of getting a paycheck. Utterly disillusioned, Americans might have embraced full blown socialism. Now Americans may have no choice but to accede to the ownership of their country by China. Has there been another instance in history in which one nation has foreclosed upon another? Americans have two options: utter collapse or become slaves to your new Chinese landlords!

As the US emerged from the Great Depression, the 'right wing' was spooked as it often is and should be. The FBI considered 'It's a Wonderful Life' to be a subversive film because it "deliberately maligned the upper class" and demonstrated that "people who had money were mean and despicable characters". Aren't they?

Indeed, 'It's a Wonderful Life' was a subversive film. It threatened to subvert the lies and claptrap that is sold us by the Axis of Wall Street, K-Street and the GOP. 'It's a Wonderful Life' threatened to reveal the consequences of lies and perhaps worse the implications of truth about an entrenched establishment that is premised upon a pack of lies and propaganda. In the words of Albert Speer who should have known, the Third Reich was literally built upon 'meaningless platitudes'. The same is true of the US government, especially the fraudulent reigns of Ronald Reagan about which the right wing still lies. The truth about Reagan threatens the self-esteem of every stupid GOPPER and/or right wing knee-jerk who supported him and the Bush crime family.

A rational discussion of the Great Depression is still feared by the right wing because it will expose to the world the economic sand upon which is built their house of cards. The right wing and its willing culprits fear the implications of truth but cannot escape the consequences of their many lies.

The bad news in today’s jobs report is pervasive.

• Private and government payrolls combined have shrunk for 14 straight months, and net job losses since the start of the recession total 4.4 million. (Private sector payrolls have shrunk by 4.6 million jobs over the same period.)
  
• Job losses have averaged almost 650,000 a month over the last four months.
• The official unemployment rate, which was 4.9 percent at the start of the recession in December 2007, reached 8.1 percent last month.
• Other indicators show the breadth of labor market weakness. For example, the percentage of the population with a job (60.3 percent) has fallen to its lowest level since early 1986.
• The Labor Department’s most comprehensive alternative unemployment rate measure — which includes people who want to work but are discouraged from looking and people working part time because they can’t find full-time jobs — stood at 14.8 percent in February, up 6.1 percentage points since the recession began and the highest level on record in data that go back to 1994.
Well over one-fifth (23.1 percent) of the 12.5 million unemployed have not been able to find a job despite looking for 27 weeks or more. (Regular unemployment insurance benefits typically run out after 26 weeks.)

For the recovery law to stem the tide of job losses and lay the groundwork for a strong recovery as quickly and effectively as possible, federal, state, and local governments have to get programs up and running quickly. In particular, states must use the money that Congress provided to them as intended so that it will have maximum effectiveness as stimulus.

--CBPP Economic Recovery Watch: Statement on February Employment Report

Right wing cheerleaders for 'laissez-faire' economics must be chagrined by recent 'Marxist' bailouts of so-called 'free enterprise'. As economists conduct post-mortems on the ongoing crash and dive, economists read the 'bones' left in the wake of the earlier 'crisis', the stock market crash of 1929.

However, in 1963, Milton Friedman and Anna J. Schwartz transformed the debate about the Great Depression. That year saw the publication of their now-classic book, A Monetary History of the United States, 1867-1960. The Monetary History, the name by which the book is instantly recognized by any macro economist, examined in great detail the relationship between changes in the national money stock--whether determined by conscious policy or by more impersonal forces such as changes in the banking system--and changes in national income and prices.

--Ben S. Bernanke, The Federal Reserve Board, Money, Gold, and the Great Depression

What Bernanke fails to mention is that Friedman --despite his great reputation as a 'conservative' economist --leaned heavily upon the work of John Maynard Keynes in his analysis of the Great Depression. But, on the whole, he most certainly got it wrong.

[John Maynard] Keynes seemed to be the right man for the time as he was reflecting the increasingly common view that blamed the capitalists themselves for the situation. In the General Theory Keynes rejected the view that the boom-bust cycle was due to over-expansive government monetary policy and that the stubbornness of the Depression was due to government interference with market mechanisms. He labeled all economists who believed such views as “classical”—in other words, hopelessly out of touch with reality. Instead, Keynes proposed a “general theory” that he thought capable of explaining not only the good times but also the bad.

According to Keynes, what drives the economy is aggregate demand or aggregate expenditures. Aggregate demand can be broken down into three main components: personal consumption (C), private investment (I), and government expenditures (G). The relationship can be summed up with this formula: AD = C + I + G. If Aggregate Demand is strong, the economy will be strong. However, if Aggregate Demand falters, businesses will end up with large unsold inventories and will cut back on production to avoid surpluses in the future. As they cut back they will of course need fewer inputs—including labor—and high unemployment will result.

The culprit in this story, the element that throws the entire system out of whack, is private investment. Private investment consists of business expenditures on machines, buildings, factories, and so on. In other words, investment is capital formation. Keynes claimed that private investment is inherently unstable due to what he called the “animal spirits” of businessmen/capitalists. He believed that businessmen are ultimately irrational and prone to herd-like behavior. Like sheep that blindly follow other sheep in the herd, it is easy for businessmen to become “irrationally exuberant”—as well as irrationally lethargic. Investment lethargy would trigger a large decrease in private investment, thus decreasing aggregate expenditures and triggering an economic downturn.

--Ivan Pongracic, Jr, The Great Depression According to Milton Friedman

In the motion picture 'It's a Wonderful Life', George Baily represents the 'private investment' part of the Keynes' equation. Had he jumped off the bridge, the picture of Bedford Falls as "Pottersville" might have come true. This is a picture of wealth benefiting the community. Potter, by contrast, represents the Axis of Wall Street/K-Street/GOP. This is wealth 'trickling up' by way of Reaganesque tax cuts that benefit only the ruling elite. Contrary to the lies with which this scheme is sold, this is wealth that finds its way to 'offshore' tax havens where it does not and cannot benefit the people of the United States by way of jobs or opportunities.

Here's how the model works. Unfair tax cuts are a windfall to rich elites. Despite the sales pitch, this 'windfall' is not re-invested in ways that will create new jobs or higher wages. The 'windfall' is instead invested offshore, in tax havens where it is forever lost to US consumers who might have used it to invest in better housing or in goods that are still manufactured in the US. Even if the consumer should decide to 'save' his windfall, the chances are good that his domestic 'bank' will sell his 'paper' to a larger institution and eventually offshore. Briefly, tax cuts benefiting only the nation's increasingly tiny elite are forever lost to domestic investment or domestic spending. These are dollars that are effectively removed from the economy. This is, in fact, a mechanism by which the supply of money contracts. Another word for it is 'depression'. All the official records, charts and data analyses prove that following every GOP tax cut is a recession/depression. Now you know why!

More than 83 corporations have offshore subsidiaries where their funds are protected in tax havens in the Caymen islands such as: The Bank of America, Citigroup, Morgan Stanley, AIG, JP Morgan Chase, Wells Fargo, and even Pepsi and General Motors who received 13.4 billion have hundreds of millions of dollars in tax havens offshore. All these corporations receive protection from paying the US government their taxes and the loss to the US is into the 100 billion dollars of lost tax revenue.

Senator Carl Levin a democrat from Michigan and Byron Dorgan, Democrat of North Dakota requested the report to be released and are pushing for new laws prohibiting these bailout scam corporations from being tax dodgers while asking for bailouts from the taxpayer.

The Government Accounting Office includes 63 of the 100 largest contractors who receive government contracts also have accounts in tax haven countries.

--Bailout Corporation Tax Havens in Caymen Islands

I see a Pottersville whenever I see Wal-Mart put the locals out of business. It required an intervening angel to save Bedford Falls from its fate at the hands of a greedy banker. Like John Maynard Keynes, we wonder: who will save "capitalism from itself”? Where is our guardian angel?

Her aim was to convince China to keep investing its foreign exchange reserves in US treasury securities in order to help finance the bailout of failing US banks and pay for the $787 billion US stimulus package. The US treasury has indicated it must raise nearly $500 billion in the first quarter of this year alone.

In an interview on China's Dragon TV just before concluding her trip and returning to Washington Sunday, Clinton warned that if the US economy collapsed China would pay a steep price as well. "It would not be in China's interest if we were unable to get our economy moving," she told her interviewer.

"Our economies are so intertwined," she said on the talk show. "The Chinese know that in order to start exporting again to its biggest market ... the United States has to take some drastic measures with the stimulus package. We have to incur more debt."

Clinton added, "We are truly going to rise or fall together. By continuing to support American treasury instruments, the Chinese are recognizing our interconnection."

--Hillary Clinton presses China to keep buying US debt

It would appear then that America's only hope in the short term is that it continue to export American jobs and industries as it has done since Richard Nixon and the Bushes sold us all out to China. If what Hilary says is true, then --once again --the American labor movement will have to suck up the many harms that were in fact perped by the crooks on Wall Street, K-Street and 1600 Pennsylvania Avenue. It would appear that once again the weight of the US economy must be borne by the class of productive Americans who have been screwed silly by the Republican party and their legions of paid liars. If Hilary is correct, then In the longer term, we will have been owned lock, stock and barrel by China, the FOX Broadcasting/Wal-Mart of countries, the country that willingly made a Faustian pact with the Axis of Nixon/Bush/Bush. I simply must ask you: how do you feel about slaving away your life for waqes that will ultimately come from the nation that annexed Tibet, a nation in which there is most certainly no pictograph for 'human rights'?

While there are many analogies to be made with the Great Depression of 1929, the lessons themselves have obviously been missed. The right wing, for example, will never admit that their policies were simply dead wrong and incompetent. The Democrats will never admit that they might have effectively opposed the GOPs Four Horsemen of Economic Apocalypse. While even Nixon famously said 'We are all Keynesians now', the lessons of Keynes may never have been heeded and less so since the US entered into its faustian bargain with our new landlords --China.

It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much over expansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the mammon of unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy. We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again.

I do not take this view. I find the explanation of the current business losses, of the reduction in output, and of the unemployment which necessarily ensues on this not in the high level of investment which was proceeding up to the spring of 1929, but in the subsequent cessation of this investment. I see no hope of a recovery except in a revival of the high level of investment. And I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity... [p. 349].

While some part of the investment which was going on in the world at large was doubtless ill judged and unfruitful, there can, I think, be no doubt that the world was enormously enriched by the constructions of the quinquennium from 1925 to 1929; its wealth increased in these five years by as much as in any other ten or twenty years of its history... [p. 347].

Doubtless, as was inevitable in a period of such rapid changes, the rate of growth of some individual commodities [over 1924-1929] could not always be in just the appropriate relation to that of others. But, on the whole, I see few signs of any serious want of balance such as is alleged by some authorities. The rates of growth [of different sectors] seem to me, looking back, to have been in as good a balance as one could have expected them to be. A few more quinquennia of equal activity might, indeed, have brought us near to the economic Eldorado where all our reasonable economic needs would be satisfied... [pp. 347-48].>

--John Maynard Keynes, The General Theory and After: Part I, Preparation; Collected Writings of John Maynard Keynes, vol. 13, pt. 1, Donald Moggridge, ed., (Cambridge, U.K.: Cambridge University Press).

There is in America, then, a ruling class that willingly and knowingly lies to you not because they don't know the truth but because they do. This 'class' will never face up to the truth about tax cuts from which they alone benefited. This 'class' will forever blame others for a collapse that is well under way. This class denies the implications of the truth and in vain tries to avoid the consequences of their lies.

It's a Wonderful Life

A hat-tip to Crooks and Liars for the following vid and comment:

Rush Limbaugh Get his Sorry, Stupid, Arrogant Ass Kicked!!!

I found this clip this morning and thought I'd share it here at C&L. The clip is from 1990 when a much younger Rush Limbaugh got owned by the studio audience during his very brief career in television. The crowd eventually becomes so incensed by his nasty attacks on women that he can't get a word in edgewise and they are forced to clear the studio in order for Rush to actually finish the segment.

Rush has challenged President Obama to a debate, but only because he knows there isn't a hope in hell it will ever happen. He knows he wouldn't stand a chance, but that's not going to stop him from rallying his ignorant minions. He cares nothing for his party, this nation or its people, he's out for power,money and fame -- much like the party he now leads.

--Flashback: Limbaugh Gets Pwned By Studio Audience

---

Media Conglomerates, Mergers, Concentration of Ownership, Global Issues, Updated: January 02, 2009

Subscribe

Add to Google

Add Cowboy Videos to Google

The GOP: Architects of Another 'Great Depression'

by Len Hart, The Existentialist Cowboy

The GOP has dominated American economic policy since 1980 and with the exception of a brief period in Clinton's second term, the rich have gotten exceedingly richer and the poor, much, much poorer.

This gaping, growing inequality married to Bush's 'bailout', a failed example of corporate welfare and outright theft, has proven Karl Marx to have been absolutely correct. The nation now faces another Great Depression because it had not learned the lessons of Coolidge, Hoover, Reagan and Bush.

Any US history of events leading up to the stock market crash of 1929 and the 'great depression' following reads like a modern US history from 1980. The causes of the 'Great Depression' include a vastly unequal distribution of wealth and, of course, the stock market crash and financial panic of 1929.

This speculation and the resulting stock market crashes acted as a trigger to the already unstable US economy. Due to the maldistribution of wealth, the economy of the 1920's was one very much dependent upon confidence. The market crashes undermined this confidence.

The rich stopped spending on luxury items, and slowed investments. The middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest. As a result industrial production fell by more than 9% between the market crashes in October and December 1929. As a result jobs were lost, and soon people starting defaulting on their interest payment.

Radios and cars bought with installment credit had to be returned. All of the sudden warehouses were piling up with inventory. The thriving industries that had been connected with the automobile and radio industries started falling apart. Without a car people did not need fuel or tires; without a radio people had less need for electricity.
On the international scene, the rich had practically stopped lending money to foreign countries. With such tremendous profits to be made in the stock market nobody wanted to make low interest loans. To protect the nation's businesses the US imposed higher trade barriers (Hawley-Smoot Tariff of 1930). Foreigners stopped buying American products. More jobs were lost, more stores were closed, more banks went under, and more factories closed. Unemployment grew to five million in 1930, and up to thirteen million in 193249. The country spiraled quickly into catastrophe. The Great Depression had begun.

--Main Causes of the Great Depression, Main Causes of the Great Depression

The era leading up to the crash is remembered for the celebration and practice of unbridled 'laissez faire' or worse --what is now called 'supply side economics'. Laissez-faire is simplistically defined as 'economic freedom' but in practice it amounts to 'license' for the upper classes. It is another set of rules for the rich.

Supply-side economics is not a 'hands off' policy at all. It is, in fact, an active, deliberate distribution of wealth upward to an increasingly tiny elite. It is pseudo-economics touted to justify big tax breaks for the upper ten percent of the nation's income recipients and wealth-holders. Reagan's own budget director, David Stockman, called 'supply-side economics', a trojan horse. It is claimed that the wealth will 'trickle down' by stimulating investment. It never has and never will.

• Among the causes of the great depression, the great 'Stock Market Crash of 1929' tops the list.
  
  Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.
• Bank Failures
Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This exacerbated the situation leading to less and less expenditures.

• Reduction in Purchasing Across the Board
With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation.
• American Economic Policy with Europe
As businesses began failing, the government created the Hawley-Smoot Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation.
• Drought Conditions.
While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath--Top Five Causes of the Great Depression

The US experienced an overproduction in industry and agriculture just prior to the crash of 1929. Today, American production is 'out-sourced' to other nations and Americans are left with lower paying jobs or no jobs at all. I will not be surprised if the crash of '29 pales when compared to the impending crash for that very reason. Outsourcing, most which may be traced to deals struck by Bush Sr and Richard Nixon with what was then called 'communist' China will certainly leave the US reduced to third world status at the end of another 'great depression'.

The Great Depression is remembered for widespread hunger, poverty, and unemployment, the tragic result of agricultural overproduction and the inevitable decline in prices. We have seen these trends sporadically since 1980 though often papered over and ignored as an increasingly tiny elite continued to benefit from GOP 'supply side' tax cuts.

o the sorrow of small farmers, the Great Depression witnessed a drastic decline in prices for agricultural products. Between 1925 to 1928 there were good harvests all over the world but it didn't seem to matter. Millions were hungry and the food lines were long --starvation amid plenty. Amid this plenty, farmers refused to harvest. But few could blame them. They could not have earned enough to have justified the expenditure to harvest. Indeed, many farmers were foreclosed upon. Others, starving from lack of work, were reduced to soup lines and emergency 'kitchens'. It could not have come at a worse time for small farmers who had assumed great debts in order to expand production.

By 1933, unemployment had reached 26.6%.

As jobs declined, workers were either fired, laid off, or forced to work for declining wages. The effects were not confined to unskilled workers who had no properties. Landowners and farmers could not earn enough to keep up payments. Foreclosures rose exponentially. A form of economic slavery ensued. Workers had no choice but to work much longer hours for much, much less. Today --their jobs are exported to China.

As the US faces the consequences of yet another right wing experiment gone horribly wrong, certain facts must not be lost amid the din. Several factors have made the US extremely vulnerable to another 'Great Depression' and the symptoms were created by the policies of three men: Ronald Reagan, George H.W. Bush, and George W. Bush.

It was Ronald Reagan who inherited from Jimmy Carter a healthy economy and wrecked it. Though he is unfairly reviled and lied about, Jimmy Carter is number two among post World War II presidents in 'job creation'. perhaps the single most important economic index. He also beats out every other GOP president in every other category including GDP. In summary, every Democratic president has beat every GOP president in every economic category since World War II. Ronald Reagan must be singled out. It was his tax cut of 1982 which benefited only the upper quintile, the very, very wealthy, which triggered the long, slow decline that has taken this nation to the brink of yet another Great Depression.

The 'L-curve' helps one imagine the degree to which wealth in the United States is inequitably distributed by policy and by design. The US population is represented 'stretched across a football field in order of income, from poorest, on the left, to richest. Imagine a stack of $100 bills 'representing each person's income.' For example: a stack one inch high represents a stack of one hundred dollars bills, i.e, $25,000. The red line on the graph represents the height of that stack compared to an American football field.

"The red line in the first picture is the beginning of the US income distribution. On the scale of the football field the line slopes gradually from zero on the left to less than 2-inches high at the 50-yard line ($39,000), to about 4-inches high at the 95-yard line ($132,000). On this scale the entire graph is less than one pixel high, up to this point. It is not until you are well past the 99-yard line that you hit the $1 million mark: a stack of $100 bills 40-inches high. There were over 144,000 people who turned in IRS returns in 1997 with adjusted gross incomes of $1 million or more." [See: Houston Independent Media Center, Wealth Distribution in the US

http://houston.indymedia.org/news/2003/07/14100.php ]

One is tempted to posit a general rule: periods of wide and increasing income and wealth inequalities always precede long and deep recessions/depressions. The other rule is that GOP tax cuts have always preceded periods of sustained and increasing transfers of wealth to the upper classes.

In America, the theft has been overt. Bush called his beneficiaries his 'base'. Indeed, they were his sponsors.

Reagan's tax cut of 1980 benefited only the upper quintile. When all the data is in, Bush's tax cuts will prove to have benefited only about one percent of the nation, a fraction of those who benefited from Reagan. In both cases, only those who were already very, very, very wealthy benefited. Everyone else got poorer both in real terms and comparatively.

The effect of this on the economy is not only that the wealthy will get to live in better houses, get adequate health care, 'better neighborhoods', better educations, or drive more reliable cars. It means that many amenities that you might have previously enjoyed on your present income will become off limits to you even if you retain your job and your current income. That's because the very, very wealthy will have 'bid up' the prices on homes, educations, health care, cars, and other items.

There are yet other results that follow from GOP 'economics'.

The GOP has supported and effected outright transfers of wealth from all Americans to an increasingly tiny percentage of the US population. There is but one word for this: THEFT! [See: 'Greed is Good': The Death of an Economic Religion]

Although the US economy produces tremendous wealth, it is always accompanied in GOP regimes by tremendous poverty. The US, for example, was most egalitarian in the years immediately following World War II. During GOP regimes, income inequality increased and is, in fact, measured with the GINI index. Higher Ginis indicate greater levels of income inequality. These indices have been significantly greater in every GOP regime since World War II.

Certainly --there is enough wealth to go around. Instead, wealth flows upward ---not down, as the propagandists of 'supply side' i.e. 'trickle down theory' would have you believe. The problem is systemic --the result of identifiable, right wing policies.

The primary culprits are GOP tax cuts by Mssrs Ronald Reagan and Bush; the effect of those cuts have been the deliberate transfer of wealth first to the upper quintile and, most recently, to an increasingly tiny elite of about one percent of the total population [See: Dr. Daniel Weinberger, US Census Bureau Briefings; Also see: The Quarterly Journal of Economics: Income Inequality in the United States at the following. It's a PDF and cites academic and official, original sources of data.

The financial collapse of the US is tragic enough but complicated by the fact that Bush lied to you and stole your money in order to commit capital crimes in Iraq --crimes for which he could be executed when found guilty as charged. [see: US Codes, Title 18, Section 2441] There is a place in the dock for Bush.

The GOP hopes to deflect attention from its traditional marching orders. The GOP raison d'etre is simply this: pass tax cuts and other measures designed to enrich only the ruling elites. IF you are NOT among the top one percent of the nation, the GOP has robbed you under the rubric of "cutting taxes". It's an easy issue to demagogue. If it were difficult, the GOP would never pull it off.

Thanks to GOP policies which concentrate wealth at the top, there are increasingly FEWER 'small business' people. Small business can no longer compete with HUGE corporations favored by the GOP. The GOP has a vested interest in keeping an important truth from the American people. The truth is: wealth does not originate with rich people.

Every economist --even right wing economists like Milton Friedman --subscribe to an established principle --the labor theory of value. The labor theory of value has been the basis for almost every major economic theory since Aristotle.

The GOP believes the opposite. The GOP would have you believe that capital creates wealth. Think about it --if wealth had been created by the rich and, indeed, trickled down, the GOP would never feel 'compelled' to pursue its unfair tax policies. The government's own statistics prove beyond any reasonable doubt that GOP tax policies have enriched an increasingly tiny percentage of the total US population. It only makes sense to support 'trickle down' economics if, in fact, wealth does not trickle down. If wealth really trickled down, elites would not be motivated to support it. They are motivated to support only policies which they know will enrich them further. 'Trickle down' is the lie they use to sell it. They don't believe it themselves. Why should you? The nation's elites support 'trickle down' policies because they know wealth DOES NOT trickle down.

Wealth is created by the act of doing work. Wealth or 'utility' is the product of acts of labor itself. Government has put an unfair 'tax' upon this 'labor' and has transferred the wealth that it represents to an elite who has done nothing to create it and does not deserve it.

The lower and working classes pay more than their fair share of taxes. The government has it backward. The government taxes labor and gives capital a free ride with numerous dodges. This is the recipe for the impending economic collapse, a collapse that appears to be well underway and beyond anyone's power or ability to stop. But that has not stopped the government from playing it's well-rehearsed role as the shakedown arm of the nation's tiny and shrinking elite.

If because of GOP transfers of unearned wealth to this increasingly tiny elite of about one percent of the population, labor becomes unproductive or impoverished and the productivity of the nation declines. It will ultimately collapse like the house of cards that it is. That is what we see happening as I write this. If the poor can no longer afford decent housing or food because elites have bid up prices on commodities, the house of cards will not stand. If you can no longer afford decent housing, health care or food, you have then, perhaps recently under Bush, fallen off the ladder. It's the GOP way.

Bush's bailout proves Marx correct but, like everything else the GOP tries, they've mucked it up. It's not even 'good' Marxism. Not surprisingly, it benefits only the GOP base of elites and, because of that fact, it will have absolutely no effect whatsoever except that of hastening the impending collapse. Marx said that Capitalism would collapse of its own inconsistencies, 'internal tensions which will lead to its destruction.' The GOP has hastened that result. Bush drove a wedge between capital and labor. Karl Marx must be indulging schadenfreude from the grave.

Some history may illustrate the point: the Wall Street crash of 1929 was followed by a severe world wide depression acutely felt in the US, Germany, France, and to a lesser degree --Great Britain and Sweden. Nevertheless, unemployment was high in Sweden when that nation returned a Labor government committed to a program of public investment to address the high unemployment problem. It worked. By 1935 real output in Sweden was 7 percent above its 1929 level. Unemployment was reduced and the finance minister was said to have been happy to suffer another budget deficit to stimulate the economy.

Ronald Reagan's budget deficit did not have as happy a result. His tax cut of 1982 was quickly followed by the nation's worst recession since the Great Depression, a recession of some 18 months characterized by record levels of unemployment, home losses, the newly poor sleeping under bridges and overpasses.

Reagan's best critics were found in his regime. Primarily, budget director David Stockman who blamed a "noisy faction of Republicans" for Reagan's infamous tax cut. Reagan might have achieved the prosperity that Keynes had predicted had his policies not been designed to reward only the filthy rich --his base!

One wonders why Reagan didn't just cut out the middle man. A more equitable tax policy might have put more spendable income directly into the hands of consumers. Business would have benefited from additional sales to richer consumers. Spent money circulates and drives an economy. That consumers spend money seems to be a fact lost on the likes of Reagan, Bush, and the nation's rich and callous elites. Tax cut monies never stimulate growth and most certainly squirreled away --perhaps offshore--in ways that never create new jobs. It is jobs and the work done by way of jobs that is the wealth of a nation.

Surely, there were knowledgeable advisers in Reagan's regime who knew better. The tax cut, therefore, was entirely political, a pay off to the rich for their support. Nothing has changed in the GOP. The Bush administration has made several such "payoffs" during his catastrophic and criminal regime.

When the dollar collapses, you must know that its origins are found in the Nixon and Bush trips to China and Reagan's give away to his elite and greedy base. The policies have eaten away at our economic health like wood worms.
Additional resources:

• Obama: Beware the Lessons of '93

The "L-Curve"

---