Saturday, September 11, 2010

Fiddling in the Wasteland

Walking in Reagan's Shoes

The Fed's Beige Book, which was released on Wednesday, provides a sobering look at an economy that is sputtering-along on empty. Nearly all the districts reported slower activity amid "widespread signs of deceleration". The stimulus-fueled rebound which powered GDP above 5% two quarters earlier, has progressively dissipated slashing growth to an anemic 1.6%. As underemployment has soared to 16.5% and deflation has continued to tighten its grip, all talk of a "recovery" has ceased and policymakers have grown more tentative, unwilling to do anything that might cost them votes in the upcoming midterm elections.

Housing prices--which had been holding steady for nearly a year--have started to lose ground following the expiration of the homebuyer tax credit at the end of June. According to economist Joseph Stiglitz, "The foreclosure rate is increasing. Two million Americans lost their homes in 2008, and 2.8 million more in 2009, but the numbers are expected to be even higher in 2010." Residential construction activity has slowed to a crawl across the country as housing appears set for another leg down.

Not one sector of the economy is thriving. Everywhere demand is weak; from retail to real estate, from car sales to electronics, from manufacturing to exports. It's a wasteland.

The Obama administration has given up on stimulus and settled on an aggressive new campaign strategy. They've jettisoned "Recovery Summer" and shifted into full attack-mode. On Wednesday in Ohio, Obama delivered a blistering speech that rallied the Party faithful and left the GOP reeling in surprise. Here's an excerpt:
"I ran for President because for much of the last decade, a very specific governing philosophy had reigned about how America should work: Cut taxes, especially for millionaires and billionaires. Cut regulations for special interests. Cut trade deals even if they didn’t benefit our workers. Cut back on investments in our people and our future – in education and clean energy; in research and technology. The idea was that if we had blind faith in the market; if we let corporations play by their own rules; if we left everyone else to fend for themselves, America would grow and prosper.
For a time, this idea gave us the illusion of prosperity. We saw financial firms and CEOs take in record profits and record bonuses. We saw a housing boom that led to new homeowners and new jobs in construction. Consumers bought more condos and bigger cars and better televisions.
But while all this was happening, the broader economy was becoming weaker. Job growth between 2000 and 2008 was slower than it had been in any economic expansion since World War II – even slower than it’s been over the past year. The wages and incomes of middle-class families kept falling while the cost of everything from tuition to health care kept rising. Folks were forced to put more debt on their credit cards and borrow against homes that many couldn’t afford in the first place. Meanwhile, a failure to pay for two wars and two tax cuts for the wealthy helped turn a record surplus into a record deficit."
Notice how skillfully Obama absolves himself and his party of any blame in the crushing of the middle class and wrecking the economy. Many believe that both parties are equally culpable. And why the sudden transformation from president milquetoast to Jake LaMotta? Is Obama genuinely upset or is it just more political theater? Maybe Obama thinks he can avoid a GOP landslide by castigating the Republicans in public rather than pushing another stimulus bill through congress or closing down Guantanamo? In any event, a spirited bout of political mud-wrestling is bound to be more entertaining than two months of grandiose oratory and visions of the Elysian Fields.

Obama's speech sent up howls from the usual quarters. The Wall Street Journal took issue with Obama's "combative" style and dismissed the speech as "red meat" for disillusioned Democrats. The WSJ's editorial page, which serves as the stomping-grounds for the nation's far right ideologues, denounced the speech as "low rent rhetoric". And, while the president did provide some details of a $50 billion infrastructure upgrade and $200 billion in new tax breaks for small business, there's no mistake that the speech was meant to kick off the 2010 campaign season in grand style with a broadside aimed at the GOP leadership.

Obama must know by now that his abysmal performance has left downcast Dems with no reason to drag themselves to the voting booths in November. In the last few weeks the administration has been frantically trying to link together mini-events to create the impression that Obama is still serious about "change". The appearance of Mahmoud Abbas and Benjamin Netanyahu at the White House was a particularly cynical attempt to show that Obama is involved in an issue that is of vital importance to many of his supporters. The so called "summit" was nothing more than a photo op intended to establish Obama's bone fides as a peacemaker. But Obama was unable to get any concessions from Israel, so the public relations scheme fizzled without any real sign of improvement.

Perhaps developments in the Middle East don't matter--except of course to the small group of "professional leftists" that Obama has publicly repudiated already. What matters to most voters is the economy, and clearly, the outcome of the midterms will be decided on the condition of the economy and, more specifically, on jobs. On that front, there's both good and bad news. The nonpartisan Congressional Budget Office (CBO) recently released a report confirming that the American Recovery Act (aka--Obama's fiscal stimulus) did exactly what it was designed to do. It lowered unemployment by about 1.5%, provided jobs for roughly 2.5 to 3 million people, and increased GDP between 1.7 percent and 4.2 percent. Also, former Fed governor Alan Blinder and economist Mark Zandi released a report which showed that--without the emergency actions of the Fed and Obama administration--GDP would have plunged 12% rather than 4%, and unemployment would have skyrocketed to 16.5%. (rather than 9.6%) The two conservative economists concluded that, absent the monetary and fiscal stimulus, the budget deficits would have exceeded $2,600 billion in fiscal year 2011, nearly twice present projections. Bottom line: The stimulus and bank recapitalization programs worked. (although the TARP clearly rewarded crooked bankers who triggered the financial crisis)

Obama can also boast that (according to economist Robert Shapiro) of the 8.5 million jobs that were lost in the downturn, 7,800,000 of those jobs or 92 percent were lost either on Bush's watch or the first 6 months of the Obama administration. (before his policies were enacted) In other words, Obama can only be held accountable for about 41,000 lost jobs, while the Republicans are responsible for roughly 8 million jobs.

Even so, there's no indication that the job's situation is turning around anytime soon. Last Friday, the Labor Department reported that 67,000 new private sector jobs were created in August, a notable improvement. Unfortunately, at least 125,000 are needed to keep up with the growth of the potential work force. That means the economy will have to grow at a 2 to 2.5% GDP before we see a real decline in the jobless figures. And, now that the Fed and the administration are focused on "belt tightening", it is unlikely that the government will provide the necessary resources to dig out of the hole the country finds itself in. Gluskin Scheff's David Rosenberg summed it up like this:
"We are currently experiencing the recession with the slowest job creation in history. And based on our prior estimates, the recession will last around 85 months before we regain the unemployment rate seen at the onset in December 2007."
Meanwhile, the social safety net continues to get more and more frayed as the slump persists. Homeless shelters and food banks are stretched to the max while the Department of Agriculture’s Supplemental Nutrition Assistance Program (aka--the food stamps program) reports that 41 million people--more than one in eight people--now need government assistance to feed themselves and their families. That's up 10% from last year.

Ordinary working people are hurting bigtime, still waiting for the prophet Obama to lead them to the promised land. But Obama has abandoned "Big Government" as the answer, whether it be a second round of stimulus, government jobs programs, or expanded welfare assistance. He'll have none of it. Sure, he'll playfully joust with his GOP rivals, but he'll never seriously diverge from the path cleared by his ideological twin, Ronald Reagan.

Poverty Rising

We Once Had 55% of the World's Manufacturing Capacity

I’ve visited the San Francisco Bay Area, California’s Central Valley, Los Angeles, New York City, Washington DC, Miami and other areas over the last year. In each one, I witnessed a notable increase in poverty.

Unemployment has increased while health and education budgets have received the blow of the ax – along with fire and police departments. Welfare? Forget it! I note the growing number of homeless people, and those waiting at freeway off-ramps holding “I’m hungry” signs.

As the military budget rises with no visible results in security, home ownership also drops. In July, alone, 300,000 owners lost their residences because they didn’t make their mortgage payments. Maybe the term “owner” needs redefining?

The taxes governments at all levels collect do not correspond to basic needs. Politicians orate about the need for job creation, but Obama bailed out the pollution-producing auto industry that had shipped much of its labor-involved work abroad, so that Michigan remains in recession despite the publicized “Volt” given to its economy by GM. The old Middle West (Rust Belt) jobs have vanished.

The United States emerged from World War II possessing 55% of the world’s manufacturing. 65 years later finance capital rules the economy. Expensively dressed thieves in posh offices play poker with other people’s money. In 2008, the “players” lost big hands, shut down their game and went home with a substantial stake. The public “got what was coming to us” for gambling – as if we’d had a choice!

We have thousands of nuclear weapons, but the only market for them consists of terrorists or rogue states. We sell other weapons, food and some software, but the nation’s wealth and its once unshakable credit have diminished. The mysterious trade deficit reported by news stations without explanation like the equally enigmatic Dow-Jones averages continue to flash pessimistic signals.

As the empire flails in unsuccessful efforts to control “strategic areas” abroad, its internal politics have devolved into “The Unreality Game.” Electoral rivals try to raise their opponents’ “negatives.” Instead of presenting their respective positions on issues, they engage in searches for scandals, anticipating the appetites of the tabloids’ headline writers and cable news.

Republican leaders receive large sums from monster size corporations and banks. In turn, these GOP puppets try to block all legislation that might hinder corporate profits or increase taxes -- in the name of fighting “big government.” They did not embrace this cause when George W. Bush pissed away the surplus to launch two disastrous wars and drive the economy into deficit. But who remembers ancient history?

Democrats, for example, don’t trace the Timothy Geithner’s trajectory to Kissinger Associates (three years) before graduating to the International Affairs division of the Treasury Department in 1988. Tim also served Robert Rubin and Lawrence Summers, his two mentors, as Treasury Under Secretary for International Affairs. In 2003-7, as president of the Federal Reserve Bank of New York and earning a good six-figure salary, he arranged the rescue of Bear Stearns and helped former Goldman Sachs CEO and then Treasury Secretary Henry Paulson to bail out AIG – rather than Lehman Brothers. That decision arguably helped drive the steep descent of global finance.

The Democratic Party sees no contradiction in representing Wall Street alongside Main Street. After all Democrats represent landlords and tenants, polluters and environmentalists, defense plants and peace activists, HMOs and patients. So, why not have a certified Wall Street rep as a top economic decision maker?

Such facts tend to obscure the good legislation passed during Obama’s almost two years in office. The media gleefully fills space with Sarah Palin’s attacks on liberals and the English language; nattering that upstages events that affect millions of people’s livelihoods. Pretty plus vapid slogans! Hey, she got almost 60 million votes. That fact denotes both a desperate and/or very foolish public furthered in its anxiety by a media driven by commercial urgencies that no Founding Father could have conceived.

The climate changes, heat scorches as never before, droughts spread, floods inundate, earthquakes, hurricanes and tsunamis threaten – but these events have had little impact on Congress, stuck in the constipated twists and turns that constitute the bowels of legislative politics: a one-sided war between stupid special interests and public need.

After much compromise, the liberal Democrats managed to squeeze out some form of health care or health insurance reform, helping millions of people as well as the HMOs. Congress also passed some good job-creation bills, especially in education, but a far cry from meeting needs in health or education. But the obstructionist Republicans and their right wing Democratic allies prevent progress. They mouth slogans like “No Big Government” while pouring trillions into the “defense” budget.

The voting public is angry and confused as the nation seems heading for Hell amidst triumphant cries from tone-deaf Republican pundits about how Bush’s surge led to victory in Iraq. November (election time) may become the cruelest month!

The End of the American Century?

Suffering the New Normal

The American Century emerged out of the ashes of the Japanese bombing of Pearl Harbor on December 7, 1941, and reached its nadir in the wake of the al-Qaeda attacks of September 11, 2001. Looking back, the attacks of 9/11 seems to signal an end to a “century” of America’s ever-increasing domestic renewal and ever-expanding global hegemony. As we approach the ninth anniversary of 9/11, the unasked question that haunts the national political debate is whether the so-called “American Century” is over?

In a now famous editorial in “Life” magazine of February 17, 1941, Henry Luce, founder of Time Inc., called upon America to abandon its deep-seated fear of international entanglements and support Britain through lend-lease during the early days of World War II. The son of Christian missionaries spreading the gospel in China, Luce was infused by an abiding belief in the “white man’s burden.” The American Century sought to fulfill this promise internationally as well as domestically.

Luce saw the defeat of fascism as essential not only for the preservation of American Christian democracy, but also for the future of Euro-American notions of freedom. While not anticipating Pearl Harbor, Luce’s vision of a muscular America offered a worldview that sustained a long and bloody world war and an even longer Cold War recovery that pitted Christian capitalists against atheistic state-socialists.

Luce offered a grand concept of a new America:
… our vision of America as a world power includes a passionate devotion to great American ideals … a love of freedom, a feeling for the equality of opportunity, a tradition of self-reliance and independence and also of cooperation … we are the inheritors of great traditions of Western civilization – above all Justice, the love of Truth, the ideal of charity. … It now becomes our time to be the powerhouse from which the ideals spread throughout the world and do their mysterious work of lifting the life of mankind from the level of the beasts to what the Psalmist call a little lower than the angels. [American Century, pp. 38-39]
This vision links the rise of America’s international hegemony to the engine of domestic economic prosperity that would both fuel the nation’s global military reach and assure popular allegiance.

The current “great recession” is not the Great Depression, but may signal a far deeper social crisis than occurred during the 1930s. The formation of the American Century created the economic opportunity for the U.S. to absorb more and more Americans into the “middle class,” integrate the labor movement (until it was systematically destroyed) and accommodate the aspirations of racial minorities and women. The American Century made America America.

The price required to sustain this expanded middle class was increased corporate consolidation, a permanent military-industrial complex and ever-greater wealth inequality. For most Americans, this was a price they didn’t know they were paying (deception is the corporate media’s principal function) and, if they did know, they felt it was a price worth paying.

Now, as we come to the ninth anniversary of 9/11, a growing unspoken awareness is spreading throughout the country. It silently asked whether the post-WWII “miracle” has sputtered out and, most disturbing, will likely never recur again. The Tea Party phenomenon is a symptom of the growing perception that the era of middle-class economic opportunity has come to an end; it voices a desperate sense that the white-skin privilege that helped sustain the middle-class for more than a half-century is no longer a guarantor of opportunity.

As the popular sense of opportunity shrivels, a call for a “new normal” has begun to spread through conservative talking-heads on Wall Street, academia and the media. They are calling upon Americans to tighten their belts: accept wage cuts, a declining standard of living and higher levels of unemployment. Sadly, the Obama administration has offered only feeble efforts to band-aid over the symptoms of crisis and has failed to address the structural issues that bespeak the end of the American Century.

* * *

Luce’s ideological concept of the American Century sustained the nation for the last 70 years. The U.S. was stymied by the long drawn-out Depression and only due to the enormous amount of public debt-financed spending following the Pearl Harbor attack was the nation able to regain its economic footing. This set the stage for the post-war consumer revolution that became the American Century. As Paul Krugman recently pointed out:
From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today. [NY Times, September 6, 2010]
For Krugman and other liberal economists, only a pump-priming effort comparable to the federal financing of WWII will be sufficient to not simply pull the U.S. out of its current recession but provide the impetus needed to renew a 21st century middle-class revolution. As he and others are well aware, such a federal stimulus program is unlikely.

Over the last seven decades, the American economy flourished, flattened and now sputters. According to the U.S. Bureau of Economic Analysis, Real GDP (in 2005/$) has steadily increased since 1940 with only a few years of stalled growth. Such periods occurred in 1950, 1958, 1982, 1991 and in 2008 (the last year covered) either as a part of or shortly following a recession.

The Economic Policy Institute’s recent report, “State of Working America,” details America’s post-war ephemeral growth. It soberly details how, in the face of significant productivity gains, median household income remained stagnant. Most disturbing, it shows that wealth has increasingly gone to the top 5 percent (and especially the top 1%) of Americans; as of 2004, the top 20 percent controlled 85 percent of the nation’s wealth.

Ordinary Americans are suffering. EPI warns, “Today’s economic crisis finds America’s working families in an ever harder place. … [R]ecent developments are compounding a broader economic failure that has been not months or years, but decades in the making.”

* * *

The most disturbing graph in the EPI report is one that shows that in 2006, the top 1 percent controlled 23 percent of all income. What makes this so disturbing is that the super-rich have regained the position they held just prior to the 1929 stock market crash when they controlled 24 percent of all income. In the light of the current great recession, one can anticipate that the share controlled by the top 1 percent will have only increased. America has come full circle to a point when the American Century was not even a notion in Luce’s dreams. Have the forces of reaction set the stage for another Depression, a "new normal"?

For many, the great turning point in the erosion of the American Century came with the Reagan revolution. In the wake of the 1982 recession, which featured the worst unemployment rate since the Great Depression, Reagan championed a recovery characterized by de-industrialization, union busting and trickle-down economics. While some 12 million new jobs were added during Reagan’s presidency, the bulk of them were in the service sectors of FIRE (finance, insurance and real estate), health care and retail as well as the construction sectors. High-paying, unionized manufacturing jobs were a thing of the past.

More telling, achieving the American Century was predicated on a progressive or equitable income tax system. Between 1963 and 2003, the top bracket saw their tax rate decline to 35 percent from 91 percent. Reagan championed a further reduction in the income tax rate for the rich and super-rich; in 1988 and 1989 the rate for the rich fell to 28 percent.

Today, the U.S. economy is in free fall. Republicans and conservatives are calling upon Americans to tighten their belts and accept wage cuts, higher levels of unemployment and a declining standard of living. They have labeled this the “new normal.” It is a “normal” we should resist.

Calls for such an insidious “new normal” come at a time when America’s rich and super-rich, like pigs at the trough, simply can’t get enough. It is a time when all Americans but the wealthy are worse off than a decade ago. As all-too-many know all-too-well, the wages of 90 percent of American families have been essentially flat since the 1970s.

Yet, as wages shrink, the military budget increase. The increase is a testament to the power of lobbyist over public policy, a blindman’s effort to impose an incoherent foreign policy on the world. Its purpose is to protect the extraction industries and facilitate fictitious nation-building efforts. Nevertheless, de-industrialization and out-sourcing continued without even a blush of shame on the part of corporate opportunists.

Sadly, America is returning to the worst of Gilded Age obscenities. Glamour and greed define not only the over-indulgences of the wealthy but also the mass-market fictions hyped by the corporate media. Politics is a pay-to-play sport in which all involved are happily on the take; deals are cut to benefit those with the most at the expense of those with the least. Sign on or lose the next gladiator’s tournament.

America is stumbling to a day of reckoning when the vengeance of the masses of poor, working class and middle class people, who have been royally screwed, will wreak havoc on the rich and their political and media stooges. In the mean time, we are left to suffer with a smile to the mantra of Obama and Democratic apologists.

The Growing Boycott of Israel

A Force for Good

On September 5, 2010 the Israel newspaper Ha'aretz published an article the headline of which read "Anti-Israel Economic Boycotts are Gaining Speed." The subtitle went on to state that "the sums involved are not large, but their international significance is huge."

Actually, what seems to have triggered the piece was not international. Rather, it was the decision of a "few dozen theater people" to boycott "a new cultural center in Ariel," an illegally settled town in the Occupied Territories. This action drew public support from 150 academics in Israel. The response from the Israeli right, which presently controls the government and much of Israel’s information environment, was loud and hateful.

Though this affair was domestic, it provided a jumping off point for Haaretz to go on and examine the larger international boycott of Israel which is indeed "gaining speed." It noted that Chile had recently pledged to boycott products from the Israeli settlements and Norway’s state pension plan had divested itself of companies involved in construction in the Occupied Territories. The Haaretz article pointed out that these incidents (and there are others that can be named in such countries as Ireland and Venezuela) are signs that the boycott movement –so long the province civil society– is now finding resonance at the level of national governments. The Israeli paper declared that "the world is changing before our eyes. Five years ago the anti-Israel movement may have been marginal. Now it is growing into an economic problem."

The article puts forth two explanations for this turn of events one of which is problematic, and the other incomplete. Let’s take a look at them.
1. "Until now boycott organizers had been on the far left. [Now] they have a new ally: Islamic organizations....The red side has a name for championing human rights, while the green side [the Islamic side] has money." I have some personal knowledge of the boycott movement and I find some of these particulars to be, at best, exaggerations. The term "far left" must be based on some arbitrary Zionist definition of the political spectrum. Worldwide community support for the growing boycott movement has gone beyond political alignments. Today, it is a reflection of real united front seeking the promotion of Palestinian human rights (in this Haaretz is on the mark). As for the "green side" there is certainly an understandable affinity here. Muslims too are concerned about the human rights of Palestinians (including the Christians ones). However, the claim of any significant flow of cash is, as far as I know, another exaggeration. The Haaretz piece cites the example of the aid flotilla to Gaza, with its link to Turkey. But this is just one case in a worldwide movement. And, there was nothing illegitimate (despite Israeli propaganda) about the involvement of Turkish charities. It might come as a surprise to the Israelis, but you can run a boycott movement without heavy outside funding–as was the case of the boycott against South Africa.
2. Haaretz continues, "but then came the occupation, which turned us into the evil Goliath, the cruel oppressor, a darkness on the nations." The article suggests that this is such a contrast with the righteous stand that helped convince the West to support the original formation of Israel that many have turned away from Israel in disappointment. "And now we are paying the price of presenting ourselves as righteous and causing disappointment: boycott." No doubt there is much disappointment. The horrors of Israeli expansionism and occupation are such that they draw worldwide attention. And rightly so. But, they are symptoms of some deeper cause. What might it be? The state of Israel was founded on an ideological program called Zionism. That program called for the establishment of a state designed to serve the exclusive interests of one religiously identified group. While the Zionists felt this aim was justified by the centuries of persecution suffered by European Jews, it actually carried within it the seeds of its own corruption. The simple truth is that you cannot successfully design a state for one group only unless you found it on some desert island. If you put it down in a place that is occupied by others who are not of your group, what is the most likely next step? You turn into racists, ethnic cleansers, or worse. The Zionist adherence to their ideology and its program is the cause of their turning into "cruel oppressors." The means dictated by their end made it so.

The Haaretz article does not go beyond these points, but there is plenty more to say. Those who wonder whether they should support the boycott should certainly consider the horrors of the Israeli occupation and its ghettoizing of the people of Gaza. They might also consider the following:

1. The non-Jewish population of Israel proper, that is Israel within the 1967 borders (the "Green Line") are subject to segregation and economic and social discrimination that is both de jure and de facto. Their overall standards of living are lower than the Israeli Jews, their educational facilities inferior and their economic prospects poorer. This is to be expected. If you are running your state based on a racist principle, by definition discrimination must infuse the home front. This fact does not appear to fit with the often heard claim that the Israelis are "just like us" Americans. However, in a rather anachronistic way they are "like us" – that is like the United States prior to our civil rights legislation. In other words, Israel is like, say, Georgia or Alabama circa the 1920s.
2. The second factor worthy of consideration is the negative international impact of Zionist ideology, for the harm Zionism is not confined to either Israel or its Occupied Territories. The fact is that Zionist influence spreads far beyond Israel’s area of dominion and now influences many of the policy making institutions of Western governments, and particularly those of the United States. This influence is corruptive if only because it distorts both official and popular notions of national interests in the Middle East. When you have a powerful and single-minded lobby that is able to manipulate your government in such a fashion that it pours its national treasure into a racist state, arms it and protects it to the point of becoming an accomplice to its crimes, and by doing so willfully alienates 22% of the world’s population, you know that your notion of national interest has been seriously mangled. This harmful influence makes it imperative that Israel’s oppressive behavior be singled out as a high priority case from among the many other oppressive regimes that may be candidates for boycott. 

So no one in Israel, the U.S. or anywhere else should be surprised that the boycott against Israel, in its many manifestations, is "gaining speed." If you are not yet a supporter you should become one. To join the boycott is good the world’s future in general. It is certainly good for the Palestinians, and yes, it is good for the Jews too.

The Fading Light of American Democracy

The First 9/11

"America was targeted for attack,” President George W. Bush declared on September 11, 2001 “because we're the brightest beacon for freedom and opportunity in the world.” That may have been true once but unfortunately ever since September 11, 1973 the shining light of our democracy has been dimmed by our actions at home and abroad.

In order to understand why begin by recalling that in a true democracy every individual has an equal say in determining the rules that govern all. Democracy, in the words of President Lincoln, is government “of the people, for the people, and by the people.” Democracy, furthermore, embodies the ideal that no individual has an intrinsic worth greater than another. Hence, in a democracy everyone has the right to hold and express unpopular views, receive a fair share of goods and services produced, and be free of the fear of being unjustly imprisoned, tortured or punished.

Two reasons, therefore, explain how in the years from 1930 to 1970 the U.S. became a beacon of democracy. First during that time the U.S. put into place laws such as the 1935 Social Security Act (providing public assistance to the aged, blind, disabled and dependent children) the 1938 Fair Labor Standards Act (establishing a minimum wage), the 1964 Civil Rights Act (that aimed to end racial and sexual discrimination), and the Miranda ruling (that helped protect prisoners from violent interrogations) that protected workers, individuals accused of crimes, and people who held unpopular views. Second, in World War II the U.S. played a key role in defeating fascism on two continents and then helped its former enemies establish healthy democracies.

Unfortunately, however, on September 11, 1973, twenty-eight years to the day before the Attack on America, our image as a defender of democracy was shattered when Augusto Pinochet overthrew the elected government of Salvador Allende in a bloody military coup d’état. Allende in the eyes of President Richard Nixon and his National Security Advisor, Henry Kissinger, was a communist hostile to the interests of U.S. based multinationals with investments in Chile. Consequently, Nixon and Kissinger helped to engineer the coup. Afterward, furthermore, they supported Pinochet as he abolished the Chilean congress, outlawed political parties, censored the press and imprisoned and tortured thousands. The implicit message behind this sequence of events was the United States supports the interest of the wealthy even at the expense of democracy.

Since September 11, 1973, furthermore, our democratic image has been further tarnished by our support for repressive forces and undemocratic regimes in El Salvador, Nicaragua, Pakistan, Egypt, Saudi Arabia and elsewhere and by the manner in which wealth and income has become increasingly skewed and liberties curtailed at home.

The Gini coefficient for the U.S. in 2008, for example, was 44 according to the U.S. Census Bureau while the Gini coefficient for the European Union was 31. The Gini coefficient is a single number that characterizes income distribution in a country. It varies from 0 (perfect equality) to 100 (perfect inequality). Furthermore in 2007, according to U.S. Census Bureau, the top 5% of income earners in our country received 21.2% of all the income generated in the economy, while the bottom 20% received only 3.4%. And according a to a study by Levy Economic Institute scholar, Edward Wolff, the top 1% of wealth holders in our country held 35% of the wealth in 2007 or more than twice as much as the bottom 80%. Clearly such wide discrepancies in income and wealth translate into wide discrepancies in the ability to support policymakers and promote policies that favor one’s own interests and are a primary reason we may now be seen as having a government of the people, by the rich, and for the rich.

Finally, the “war on terrorism” led to the PATRIOT ACT which according to the American Civil Liberties Union, “vastly … expanded the government’s authority to pry into people’s private lives” and the Military Commissions Act which led to people defined as unlawful enemy combatants being tortured at the U.S. base in Guantanamo, Cuba.

Hence the light of American Democracy began to dim after the first 9/11 and darkened further after the second. Consequently, we have a long long way to go if it is ever to brighten the world again.

Selective Memory and History in Limbo

The Twin Towers

If Michelangelo is considered a computer virus, then it dismantles the notion of posterity. Why is it that young people who were children on September 11, 2001 will remember that date but not substantial chunks of other pasts? For a generation that believes reality shows have always existed, how will they view the burning of the Quran?


Time is not factored in here. The Michelangelo reference comes from a study conducted by two academics at a US university. Students who had recently enrolled did not know who the artist was. There were other results – Beethoven is a dog, John McEnroe appears in ads and has no connection with tennis, reality shows have always been there, Germany was never divided and Czechoslovakia did not exist.

The Mindset List is compiled by Beloit College professors, Tom McBride and Ron Nief. The questions are updated to include social, political and cultural events that shape a generation. However, these become dated and annually there are new inputs, timed from the year of the student’s birth. “Then we present the ideas to every 18-year-old whose attention we can get and we wait for the ‘mindset moment’—the blank stare that comes back at you that makes you realize they have no idea what you’re talking about.”

Since there are references to pop culture as well, one would imagine the longevity simply due to its accessible nature. It is frightening not because it reveals ignorance, but it wipes out the generators of data while continuing to use the data. In a wired world the genesis is rooted in several decades and even centuries of scientific discoveries upon which it has been built. Music, art, literature, sports and even nationalism exist and are in fact prominently displayed on billboards, but the inventors and pioneers have been blanked out.

We are forced to think about the immensity of forgetfulness and how memory is reduced to memorabilia. History is no more about origin but action replay. The oral tradition of information has been replaced with media murmurs and the numbing of senses through constant repetition of peripheral issues. Chances are that those born in 2001 will remember 9/11, but not Iraq and Afghanistan, that is if the American establishment lets them forget.


While societies that have been colonised will retain memories, they will also have internalised aspects of such colonial concepts. Contemporary colonialism does not possess the ability to last or even feels the need to. The aggressiveness is tinged with the cartoon-strip quality of Robin Hood.

Political leaders are, therefore, not much different from the students. Their memories are selective and they ride on the wave of any movement that conforms to their political ends.

Rev.Terry Jones is not an isolated opportunist. He is but a small cog in the wheel that is keeping American xenophobia in motion. Does anyone have a count of the number of Qurans that are burned or destroyed in drone attacks in civilian areas? How many are destroyed when Muslims bomb their own mosques in terrorist attacks?

The ‘International Burn-a-Quran Day’ movement gathered momentum not due to the First Amendment that protects the rights of American citizens to freedom of speech, but because it is a handy tool to express concern while firing the gun from the pastor’s shoulders.

The President of the United States of America, Barack Obama, says, “This is a bonanza for Al Qaeda and could increase recruitment of individuals willing to blow themselves up in American or European cities.”

To begin with, it is disingenuous to tie up the Al Qaeda with the anti-US sentiments in many parts of the Muslim world. Has the US arrested the supposed brain behind 9/11? Do we hear much about the search for Osama bin Laden? If Saudi Arabia is reportedly sponsoring the movements in Afghanistan, the Northern areas of Pakistan and even Iraq, why has America always gone soft on it? Obama and his administration know that the real deal lies in the Af-Pak policy; they let it go and they have to face the pressing issues back home.

When this is clearly an intitiative against a particular group of believers, and the actual act of burning has less significance than the buildup, the predators are calling themselves victims. Gen. David Petraeus is more concerned about the impact of video images, much as a great screen director would be about the box office results of a magnum opus. He is worried about anti-US extremists: “We’re concerned that the images from the burning of a Quran would be used in the same way that extremists used images from Abu Ghraib — that they would in a sense be indelible. They would be used by those who wish us ill, to incite violence and to enflame public opinion against us and against our mission here in Afghanistan, as well as our missions undoubtedly around the world.”

I am not quite sure who the pastor is here – the general or Terry Jones. The images of Abu Ghraib were real and vicious, just as US occupation in other territories is. If he could count, then he would know from figures as to how many have been killed in those nations by militants as well as troops of the US and its allies. If it would sway public opinion, then it has worked the other way round too. Why would an unknown pastor become an important figure who can declaim, “How much do we back down? How many times do we back down? Maybe it’s time to send a message to radical Islam that we will not tolerate their behaviour”?

What is this radical Islam? The immediate provocation is the proposed building of an Islamic Centre near the Ground Zero site. Rev. Jones has been happily playing a truth or dare game, getting into discussions with imams and exchanging promises, real or imagined. He says he will withdraw if they decide not to build the Cordoba Centre. Then he retracts. Does any sensible person for a moment believe that someone from Florida who will not be physically affected and who was nowhere in sight when the issue was raked up earlier is of any consequence?

It would be dangerous to term his actions innocent, though. He is speaking the language of the establishment and is ideologically important. It is quite likely that the mainstream media has helped along simply because the anniversary of 9/11 cannot go unsung without a controversy. An inert, unconstructed building would not quite do the trick. This is about the president performing a canny balancing act to regain lost ground when he initially gave the feudal nod for the Islamic Centre; he now has to go along with a church. He needs to show that his history is not really his history.

Here he is in complete sync with the real self:
“He (Jones) says he’s someone who is motivated by his faith, I hope he listens to those better angels and understands that this is a destructive act that he’s engaging in.”
Better angels? Better than whom or whose?


Obama modestly wonders, “If he's listening, I just hope he understands that what he's proposing to do is completely contrary to our values and this country has been built on the notions of religious freedom and religious tolerance.”

Apparently, what happens in America stays in America, for he also states, “As a very practical matter, as commander in chief of the armed forces of the United States, I just want him to understand that this stunt that he is pulling could greatly endanger our young men and women in uniform who are in Iraq, who are in Afghanistan.”

Is this about religious freedom or about freedom to protect American interests? When troops are sent out they are not provided a won’t-be-killed warranty. Why will this endanger the troops more than when they shell those countries and face retaliatory or provocative fire?

The US colonial idea works at the level of both Islamophobia and tolerance. Hillary Clinton has been showering praises to those who have been voicing their discomfort over this burning issue. These are the visible peaceniks. Most Americans may not come out in the streets but are unlikely to support this behaviour. The reason for visible signs is to somehow connect the incident to patriotism.

Nations that have nothing to do with 9/11 join in or are forced to. The Vatican has found the proposed act outrageous and the Iranian ayatollah wants the pastor arrested. Most interestingly, German Chancellor Angela Merkel, in an unrelated but well-timed moment, honoured the Danish cartoonist who caricatured Prophet Muhammad at an award ceremony to honour his achievements for freedom of speech. She described Kurt Westergaard’s bravery despite “fear for his life since the publication of the cartoons in 2005”. It is a long time for Germany to risk the lives of such brave soldiers of speech.

In India, Cardinals and maulanas are huddling over their common aversion to this event. While the Catholic says, “I can’t imagine a man who claims to follow Christianity ever thinking of burning a holy book”, the Muslim cleric says, “The Quran never asked the 9/11 plotters to plough loaded planes into the Twin Towers. They were the misguided merchants of death and their heinous crime should not be blamed on a book which Allah revealed as a guide not just to Muslims but to humanity”.

This is known to believers and there appears to be no reason to preach to the congregation. It is obvious they are being swept along with the flow to meet the dead-end of the US-manufactured dam.

There are some with overarching facile liberalism who will say that Muslims are in denial about the culprits of 9/11. Muslims across the globe would not have given it much thought had the unfortunate attacks not been forced down every available electronic medium and newsprint. Do not forget that like most people in economically poor countries, they too look to America as some sort of financial haven. They did their jobs as do the Americans and Europeans in several Muslim countries. The difference is that the latter are treated as superior beings even if they are serving coffee at the Starbucks franchise and the former are suspect. This after 9/11.

So, whose history will be recorded and who will remember that Beethoven is not a dog and Barack Obama does not have Hussein as a middle name? Perhaps, Michelangelo the computer virus can help spread selective lies.

Christian Advocacy in the Holy Land

The Kairos Document

Much is said about Palestine-Israel. There is no shortage of reporting, analysis, and opinion. And there is no shortage of expressions of personal commitments to ‘peace’. One need only glance at recent headlines to discover this, especially with another push to reinvigorate the ‘peace process’.

But there is also much that is not said. For example, in many reports of Israel’s attack on an aid flotilla headed to Gaza earlier this year there was a glaring absence of a back story. Why are basic relief supplies needed in Gaza?

No reference to Israel’s occupation of Gaza. No reference to the fact that the 1.5 million Palestinians in Gaza—the majority of whom are refugees—live in what is essentially the world’s largest open-air prison. No reference to the denial of access to needed services and economic opportunity with over 70 percent living in poverty, dependent on food aid.

Or take those headlines you may have read even this morning. While we read about the United States’ and Israel’s counsel to Palestinians not to miss the opportunity to re-engage in direct peace talks, recent house demolitions within the Occupied Territories and in Israel continue unabated and unaddressed. [1]

As the Israeli Committee Against House Demolitions asserted in a recent news release, “Both the White House and the State Department will hold Iftar meals. But the bulldozers and other expressions of apartheid and warehousing tell a much different story.” [2]

It can be argued that our efforts at advocacy should be aimed at identifying what the British journalist Robert Fisk calls those “too many mendacious statements of optimism” and the “reluctance to confront unpleasant truths” that too-often inform our personal commitments to ‘peace’. [3]

Advocacy as such was discussed in the Kairos Palestine Document, “A moment of truth: A word of faith, hope and love from the heart of Palestinian suffering.” [4] More than a dozen Palestinian church leaders co-authored this document last year as a “cry of hope in the absence of all hope,” addressed to Palestinians, Israelis and “Christian brothers and sisters in the Churches around the world.”

In addition to challenging theologies that legitimize violence and dispossession, it points out the mission of the Church “to speak the Word of God courageously, honestly and lovingly,” and to “stand alongside the oppressed.”

The military occupation of Palestinian land is called a “sin against God and humanity.” It describes Palestinian livelihoods that continue to be devastated as more land is being expropriated for the expansion of settlements and the construction of a 430-mile barrier built not on the ‘Green Line’ but instead on Palestinian land. And as it cuts deeply into the West Bank, the Wall forms the borders of what some call ‘reservations’ or ‘bantustans’—evoking images of South Africa under apartheid—isolated islands of land on roughly 40 to 50 percent of the West Bank where Palestinians are confined, and out of which Palestinians are expected to negotiate a ‘Palestinian state’.

The Kairos Palestine Document urges Christians to “take a position of truth with regard to Israel’s occupation of Palestinian land.” It favorably notes that some Palestinian civil organizations, as well as international organizations and churches, support boycotts and divestment as a form of nonviolent resistance to the occupation.

However one chooses to confront these unpleasant truths, recognizing that it is not some notion of ‘statehood’ that should consume us as Christian advocates but the well-being of all who inhabit ‘Mandate Palestine’—that is, present-day Israel, the West Bank, East Jerusalem, and the Gaza Strip—begins with the confession that from a Christian perspective, we are called first and foremost to practice and witness for a politics of jubilee, one which brings liberty to the oppressed and a secure existence in the land (Luke 4; Leviticus 25) and to work for the day when each will sit under vine and fig tree without fear (Micah 4:4)—a vision that cannot be confined to our notions of ‘one state’ or ‘two states’.

Palestinian Christian leaders echo this by describing a message of “love and living together” to the Muslims and Jews of the ‘Holy Land’, condemning “all forms of racism.” The Palestine Kairos call is for a “common vision, built on equality and sharing, not on superiority, negation of the other or aggression, using the pretext of fear and security.” It is only in this manner that “justice and security will be attained for all.”

The Kairos call is one that understands ‘peacebuilding’ as a shared work for justice. And it is a call that challenges us to work for justice here at home in the United States, a work that requires our attention to the historical—and often-times unpleasant—truths about what our roles have been in this conflict. A work that requires hope, courage, and risk.

May the witness of our Palestinian and Israeli sisters and brothers move us to deeper engagement beyond good intentions and personal commitments and challenge us to vigilantly confront unpleasant truths.

[1] Badil Resource Center, “Peace Talks in the Shadow of Demolitions,”, 19 August 2010; available online at

[2] Jeff Halper, “Ramadan Kareem from the Netanyahu and Obama Administrations,”, 11 August 2010; available online at

[3] Robert Fisk, “The Age of Terror – a landmark report,” The Independent, 8 October 2006; available online at

[4] The Kairos Palestine Document, “A Moment of Truth: A Word of Faith, Hope and Love from the Heart of Palestinian Suffering,” 15 December 2009; available online at

A Viable Alternative to Right-Wing Republicans and Corporate Democrats

Time for Progressives to Fight Back

At this bleak political moment, gaining congressional power for progressives might seem like pie in the sky. More and more desperate efforts are underway to stave off a Republican takeover of Congress. But the necessity of trying to prevent right-wing rule on Capitol Hill should not obscure the need to win more seats for genuine progressives.

Ever since early last year, the Obama administration has chipped away at the Democratic Party’s base -- undermining its capacity to mobilize for the midterm election -- while sometimes courting Republican leaders to the point of absurdity. Consider this news account from the New York Times a few days ago:
“Though liberal and labor groups have been agitating for public works spending, Mr. Obama and his advisers are emphasizing business tax cuts in hopes of drawing Republican support -- or, failing that, to show that Republicans are so determined to thwart Mr. Obama that they will oppose even ideas that they and most business groups, like the U.S. Chamber of Commerce, advocate.”

Or consider the Washington Post report Thursday on “Obama’s proposal for $180 billion in fresh infrastructure spending and business tax breaks.” The newspaper explained that “his plan would make permanent a corporate tax credit for research and allow companies to deduct from their taxes this year and next the entire cost of whatever they spend in new investments -- ideas pulled directly from GOP playbooks.”

Progressives need to fight back -- today, tomorrow and every day. The electoral struggle is just one part of what’s needed to build effective social movements, but it’s an important part. And that effort should include primary battles to elect real progressives to Congress.

One such election is coming up Tuesday in Rhode Island, where progressive populist David Segal is running against corporate Democratic insiders to fill the seat of retiring Congressman Patrick Kennedy. For many years, Segal has been organizing to challenge banks and other corporate behemoths on behalf of working people and the poor. Although he’s been in the state legislature for four years and on the Providence City Council before that, Segal isn’t a politician nearly so much as a committed activist whose work has won him wide support from labor unions and many other progressive organizations in the current campaign. [ ]

“It’s a slap in the face to American workers that our current trade agreements give corporations incentives to lay off U.S. workers and move jobs abroad where they can pay their workers sub-poverty wages and wreak havoc on the environment,” David Segal said on Labor Day. “These job losses aren’t an accident or the result of a force of nature: they are the direct result of the obscene power that corporations wield over our government. Corporations and the extremely wealthy spend tens of millions of dollars each year to ensure that our trade agreements guarantee their profits, even if it’s at the expense of millions of our working families.”

Of course Segal is being heavily outspent by the corporate opposition. He’s a distinct underdog, but -- whatever the Sept. 14 election results -- the work behind his campaign is an inspiring model for grassroots, volunteer-driven approaches to fighting for electoral power.

More broadly, progressive populism is essential in the quest for economic and social justice -- a vast worldview away from the “populism” flaunted by Tea Bag boosters and the like.

“It’s necessary to restate the solid principles of populism and reassert its true spirit, because both are now being severely perverted by corporate manipulators and a careless media establishment,” Jim Hightower wrote early this summer. “To these debasers of the language, any politicos or pundits who tap into any level of popular anger (toward Barack Obama, liberals, the IRS, poor people, unions, gays, immigrants, Hollywood, community organizers, environmentalists et al.) get a peel-off ‘populist’ label slapped onto their lapels -- even when their populist pose is funded by and operates as a front for one or another corporate interest. That’s not populism, it’s rank hucksterism -- disguising plutocrats as champions of the people.”

Hightower’s assessment is true today, and it will be true the morning after Election Day:
“Now is the time for progressives to reassert their populist beliefs and bona fides, for we’re living in a teachable moment in which it’s possible to reach most Americans with an aggressive and positive approach to achieving a higher level of economic and political democracy.”
There’s a viable -- and essential -- alternative to right-wing Republicans and corporate Democrats. Real progressive populism is grounded in humane values, solidarity, caring and organizing. We can put up a fight. And we can win.

The Corruption Conundrum

Washington Rules

Corruption is more and more being built up as our greatest problem in Afghanistan. It’s all over the newspapers and the TV. At the epi-center of this corruption, the Kabul Bank we helped create and maintain has run aground and there’s talk in the air of a financial bail-out.

Meanwhile, the $250 million commission created to buy off Taliban fighters is “almost dead,” according to a top Afghan official at the commission. We have no trouble giving US tax dollars to the government and banking system in Afghanistan, but we can’t seem to get the Taliban to take our money.

“In Kabul, politics is all about money,” a prominent Afghan businessman recently told New York Times reporters in a story on the political connections between President Hamid Karzai and the Kabul Bank. It seems the bank gave $14 million for Karzai’s re-election after he agreed to name a bank shareholder’s brother – the fearsome Tajik General Muhammad Fahim -- as his vice presidential candidate.

Afghan and US leaders are concerned the Kabul Bank mess could unravel the government of Afghanistan. It’s a sticky matter for the US, since it helped create both the Afghan government and the Kabul Bank when it invaded in 2001. Our government has a major capital investment in the whole shebang. Our CIA, military and other US agencies have been hosing in US funds for years.

The who’s who of corruption

At this juncture, it’s worth reminding ourselves what’s really going on here. About a year ago, former National Security Adviser Zbigniew Brzezinski was on MSNBC’s Rachel Maddow Show. She apparently knows Brzezinski’s daughter, so it was a loose, friendly conversation. Maddow earnestly asked Brzezinski to comment on the corruption in Afghanistan. Brzezinski paused, then chuckled.
“But Rachel. What about the corruption in Washington?”
It was one of those unplanned remarks that suddenly flung open locked doors and shuttered windows. Yeh, what about the corruption in Washington, the town the infamous Philly Congressman Ozzie Myers summed up this way:
“In this town, money talks and bullshit walks.”
So why should we be aghast, after invading and occupying Afghanistan, to find out “politics is all about money” in Afghanistan?

The greasing of the wheels of politics in Washington is certainly more sophisticated and smoother than it is in Kabul. But let’s not kid ourselves, it’s all part of the same cesspool. Utilizing their best natural instincts, our loyal allies in Kabul have used our guidance and US tax dollar generosity to create an incredible infrastructure of mutual back-scratching and power-sharing. They also lined up some really cool villas in Dubai.

The real problem in Afghanistan for the US government in its determined world domination posture is not, as so many now like to complain, one of corruption. Corruption -- as we’ve seen historically in Central America, Vietnam and a host of other places – is not something the United States is concerned about as long as the corrupt element is in synch with the interests of US policy makers.

All we have to do is recall Franklin Roosevelt’s comment on the English-speaking gangster-President of Nicaragua, Anastasio Somoza. “He may be a bastard, but he’s our bastard.”

No. The problem in Afghanistan is that the corruption that up until now has been fine with the US – even funded and encouraged -- is now so pervasive and so evident and alienating for the ordinary Afghan citizen that it is making the Taliban and other insurgent elements look good.

Once again, the United States has used its great wealth and power to nurture a monster that, in the end, has become its own worst enemy. As Pogo put it, “I’ve met the enemy and the enemy is us.” It would be comical if it were not so gravely serious.

Allowing wisdom to happen

Andrew Bacevich opens his new, magnificent book Washington Rules: America’s Path to Permanent War with a tale of himself as an Army colonel on a research mission into the former East Germany, part of the Cold War enemy that loomed over his entire career. He describes how the scales fell from his eyes.

“How could I have so profoundly misjudged the reality of what lay on the far side of the Iron Curtain?” he asked himself. But then that was only the half of it. “Far worse than misperceiving ‘them’ was the fact that I misperceived ‘us’ ”

He refers to himself as a “slow learner,” the truth hitting him in his forties. “Worldly ambition inhibits true learning,” he writes. “A young man in a hurry is nearly uneducable. …All that counts is that he is going somewhere. Only as ambition wanes does education become a possibility.”

That same personal epiphany applies, he says, to the nation as it pursues a state of permanent war on what amounts to the global front lines of what was begun as westward Manifest Destiny centuries ago. This drive to control is our “worldy ambition,” the thing that “inhibits true learning” and precludes the humility it takes to see what is being done in our names as Americans, often dishonestly and in secret.

“If change is to come, it must come from the people,” Bacevich writes. “Yet unless Americans finally awaken to the fact that they’ve been had, Washington will continue to have its way.”

Without this soul-searching change, there will be no meaningful national jobs programs; there will be no needed infrastructure maintenance; there will be no domestic Marshal Plan pursuing alternative energy application; and we will continue to fall behind in educating our youth for the future.

We are now on the verge of bailing out crooks in an Afghan banking system that crashed, just like the economic crisis here, due to irresponsible loans and real estate boondoggles. Just like we did here, we will be bailing out the fat-cat crooks who caused the crisis. And just like here, the poor and working people will suffer.

We will bail the government out in Afghanistan, as Bacevich and Brzezinski make clear, because of our own blinding ambition, drive and corruption – and because we know, if we don’t bail them out in a crisis like this, we will be disempowering them and empowering the Afghan insurgency.

It could be different.

Instead of endorsing permanent militarism, President Obama could take a tack in line with Bacevich’s well-developed thinking. He could use his bully pulpit to educate, “summoning Americans to take on the responsibilities of an active and engaged citizenship … confronting illusions (and) dissecting contradictions.”

If the American people don’t have the courage for such soul searching, Bacevich and others predict disaster ahead. The current Afghan corruption conundrum should be a warning.

As is unfortunately our government’s inclination, choosing to get tough on only the corruption that’s inconvenient for our imperial interests won’t cut it in the end.

The Heart of Corporate Darkness

The Gulf of Mexico, It Dead
‘Mistah Kurtz, he dead’ 
Joseph Conrad, Heart of Darkness.

It really is so very difficult to attempt to understand what is going on in the World today, though perhaps the point as made by Karl Marx; that the priority is not to understand the World but to change it is valid - and we certainly live in time of change - sense of ‘Sic Transit Gloria Mundi’?

This small article seeks to examine what amounts to Political horror; that horror which is Corporatism become synonymous with ‘Ecocide’, and describable as ‘Heart of Darkness’.

These small quarters write as a ‘Prole’, sense of George Orwell’s abbreviation of ‘Proletariat’; and it is certainly the case that Orwell had a sublime consciousness. His concept of ‘Inner Party, Outer Party and Prole’ holds approximate sense of Gini Co-efficient today in most parts of the Western World - as does his vision of ‘Geopolitical Power Block’ as ‘supra National’; sense of ‘Eastasia, Eurasia and Oceania’, express prescience?

The Proletariat, and indeed the ‘Lumpenproletariat’ or ‘Proletariat in rags’, are growing in number daily in the Western World given the shrinkage of the middle classes under the onslaught of Economic Depression - and are increasingly liable to be viewed as ‘superfluous’ accordant the growth of power of ‘Inner Party’ as ‘Masters of the Universe’ or ‘?bermenschen’?

‘Population Control’ is a euphemism as can be employed by ‘Philanthropists’ who see themselves as ‘?bermenschen’, and to whom ‘Genocide’ concerning the elimination of ‘Prole’ as ‘?ntermenschen’ is but only a further step along the Corporate line in an Orthodoxy demanding seeing others as less worthy of Life - and as to be so ‘constrained’?

So it goes.

It is a questionable proposition that the engineering of an Economic Depression constitutes Population Control?

The horror!

These small quarters write expressive of a psychophysical consciousness which is reflective of a neurophysiological integration, involving an ‘anamnesis’ as put by Socrates, and within context of a ‘Paradigm’ as would be determined by Empiricism. It is ultimately through Empiricism that Corporatism as an Orthodoxy has been spawned, much along the lines of ‘Dialectic’ as enumerated by Marx concerning relationship to means of Production determined by Science as a fruit of Empiricism - as it is also through same Empiricism as paradigm Corporate that a mere Prole is not ‘meant’ to use words such as ‘psychophysical’ or ‘neurophysiological’ - as Orwell in his concept of ‘Newspeak’ acknowledged?

The point being made is that the ‘Heart of Darkness’ is not only ‘out there’ in Cartesian sense of particular best laid scheme being played with ‘matter’, but is also ‘in here’ sense of best laid scheme being played with ‘mind’?

The point is also that the ‘Inner Party’ as Stateless Bastards imposing Orthodoxy for gain ‘Utilitarian’ have a variety of ways of ‘grinding’ Man down through the imposition of illusion directed at destroying Hope; or at the very least rendering it capable of being described as ‘audacious’?

Asking the ‘right questions’ in a Panopticon comes with the risk of being ‘unintelligible’ or labelled ‘derogatory’ - such the control as they who would have wrong questions asked have attained – never mind the truth that ‘hope springs eternal in the human breast’ as Pope stated?

The pragmatism of the Corporatist Age in which we currently ‘live’ will surely be viewed in the future as being ‘Dark’ as Lichtenberg proposed; and in such illumination the Horror of the Age as illusion imposed will necessarily be faced and recognised for the denial it was?

‘Grundrisse’ as outlines critique of Political Economy is Marx’s prescience concerning the inevitable effects of concentration of wealth as a polarisation of power- and the degeneration of Capitalist Democracy to Corporatism?

That ‘History is written by the ‘Victorious’ was illustrated through alternative interpretation expressing a transcendence of such ‘paradigm’ by Howard Zinn - as an iconoclast concerning Orthodox American History?

For as there are certain Men as cannot be ‘ground down’ sense of Illegitimum non carborundum, and who retainthe right to have own opinions, idiosyncratic or offensive as they may be, but whose consciousness constitutes the attempt at ‘CounterPunch’ against Corporatist illusion in the denial of denial; so there is orthodox propaganda founded in a cynical pragmatic of the materialism which Corporatism has come to represent at the level of hegemony?

Squeezed out to the margins through technologically enhanced Hegemony of Orthodoxy; the narrative of those as are able to refuse reduction to the cynicism of pragmatism and deny imprisonment within the paradigm of illusion yet remains a vital sign of ‘Political Life on the Planet’ -though there exists an ongoing effort to render such not only ‘illegitimate’ but ‘unintelligible’? Corporatism ‘works’ by means of invisible restraint as of ‘unwritten rule’ concerning what is palatable, what is acceptable, what will be ‘rewarded’ - and in the final analysis what is comprehensible?

As Orwell put sublimely in 1984:
“Don't you see that the whole aim of Newspeak is to narrow the range of thought?… Has it ever occurred to your, Winston, that by the year 2050, at the very latest, not a single human being will be alive who could understand such a conversation as we are having now?…The whole climate of thought will be different. In fact, there will be no thought, as we understand it now. Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness."
For we all exist in a ‘cage’ do we not, such as ‘Yellow Submarine’ as song sung of represents ‘imprisonment’ of sensibilities, and for some such a ‘tubular cage’ is more constraining, and not just in the singularity of ‘One Dimensional Man’, as Marcuse put, but also by way of multiplicity; as in the context of ‘Realpolitik’ the imperative exists of division, as of by way of the Roman maxim which has rationale of ‘conquering’, by way of illusion become as between ‘Republican’ or ‘Democrat’ concerning the power of ‘Inner Party’ - and as there can be ‘cages within a cage’?

The Corporatist Orthodoxy demands a uniformity which has the inevitable developmental line of marginalising Humanity through abrogation of Life as denial of Truth in the propagation of Death - as the acceptance of Lie as an unconsciousness; as in ‘no need to think’?

The tragedy of such Darkness’ as would be even at ‘Noon’ sense of Koestler, is that such cage will become ever more confining but yet would be ‘unseen’ under the illusion which is expressive of ‘power of mind over mind’.

The tragedy of America contemporaneous is of the Darkness of a Panopticon, such as the Heart of Corporatism would ‘pump up the volume’ to point of incapacitating level; as in where Man cannot hear himself or herself think – and so gives up the ghost’ concerning the imperative of consciousness?

Concerning Politics as ‘moral economics’, there is a Manichean aspect; given the acknowledgement of ‘morality’?

These small quarters seeing the trend contemporaneous in Western World as being primarily evil, as evident in the infliction of sufferance epitomised by Corporatism.

At present these small quarters can only speak as a ‘mushroom’ kept in a particular darkness the intent of power of mind over mind. In such darkness there exists as ‘foodstuff’ a certain kind of ‘shit’ which defines the demanded illusion of ‘geopolitical power block’. The unity of such power block is expressed in the currency, or money which is believed in, and controlled as of the exercise of a hidden taxation - to the ‘wetting of the beak’ in Mafia parlance by the ‘Inner Party’ as International Financier?

That ‘The Heart of Corporate Darkness’ is to be found within a ‘Continuity of Memoranda’ relating to identifiable horrors is the proposition of this small article.

In mind here is the ‘Ford Pinto Memo’ as real and demonstrable - and a Memorandum as must exist somewhere concerning the ‘Gulf of Mexico’, which summates the mechanics of deliberation concerning disaster as a series of pragmatic calculations within an obscene and warped Orthodoxy, realised in the denial of Life?

Increasingly mere ‘Proles’ such as these small quarters are being ‘asked’ to ‘suspend disbelief’ in the face of a crafted illusion which is wreaking ‘havoc!’, given ‘unleashing’ of the Corporatist ‘Dogs of War’; where ‘War’, as in the multiplicity concerning context of restraint apropos ‘cage’ above, is a polymorphous horror: ranging from a wrought Economic Depression with its ‘collateral damage’ of millions impoverished, to the abuse of military force against Nation with its ‘collateral damage’ of millions killed, to the destruction of Ecosystem with its ‘collateral damage’ of millions of lives lost - as considered across a wondrous diversity of species.

America, Iraq and the Gulf of Mexico exemplify respectively.

The horror!, the horror!, the horror!

Yet the manifold forms of Warfare as ‘Racket’ are not just for Mind, they are ultimately for Soul, such the ‘what it is all about’ concerning the pump of the Heart of Darkness - as every beat of dark bastard heart leads to further sufferance reflecting breakdown of ‘Life’; which in the case of America means making a mockery, to point of tragedy, of the best Political Constitution which the World has yet seen, through the destruction of ‘Life, Liberty and the Pursuit of Happiness’ evident through impoverishment of the Citizenry - and the diversion, under Orthodoxy, of precious resources to a Military Industrial Complex which projects ‘Empire’ fearful to point of ‘shock and awe’ under such pitifully perverse illusion as the imposition of Democracy by force in an Irony far from sublime as the grubby racket it represents by way of expropriation?

The horror!

Americans need not look far to see what such horror as irony means; for every American Citizen reliant on Food Stamp to survive, every American Citizen under threat of foreclosure and homelessness, every American Citizen living in fear of losing livelihood, is a testimony to the Obscenity of the Orthodoxy of Corporatism which would continue to propagate cruel illusion denying the horror of such actuality?

Welcome to the ‘Land of the Free and the Home of the Brave’ - such the ‘Doublethink’?

It is not without meaning that the last two published articles by these small quarters this exemplary Journal of Democracy have ended with one particular extract from the Political Constitution of the United States of America as an understanding of what Corporatism represents way of what it can deny - and what is held to be self evident.

For what is held as self evident these small quarters is the destruction of America by an enemy within as would be unseen; the takeover of power to issue money as a ‘permit’ being as a fatal blow to Democracy, as cannot be hidden despite the truly expensive efforts of Corporatist illusion to deny what is become so clear as it is so tragic, - and given awareness of the concept of ‘opportunity cost’?

It is become inevitable, such the Dialectic as reflecting the mechanics of deliberation as can be epitomised in a Memorandum; and as continuity demands consideration of Memoranda, that in America today there is a tragedy of homelessness, a tragedy of businesses closing, a tragedy of immiseration through impoverishment as unemployment and dependency upon food stamp represents; a tragedy which is of the ‘cages within cage’ of Corporatism - given the prevalence of fear, almost Universal such context as the beat of a ‘Heart of Darkness’ inevitably pumps out sufferance form of the destruction of Constitution by way of a Panopticon condemned to destroy Truth?

The horror!

It is a tragedy as would be unseen, unmentionable to the pathological state of ‘mind’ become dominant which is as Corporatism representing the ‘ascendancy’ of an Orthodoxy through which an Oligarchic Collective ‘survives’, as within such ‘Gutenbergian Galaxy’ become digitised, as per McLuhan, such medium contains a message indeed, and it is fearful as it arises from ‘Darkness’ - as of ‘enough never being enough’, such the greed as driven maniacal as abrogative of Humanity - or as Satanic as would destroy the Joy which the ‘Gift of Life’ represents?

Less than Zero’ such the ‘Luciferian Burn’ as the avoidable death of People in a Ford Pinto become magnified in the avoidable death of Life in the Gulf of Mexico as vehicle of the ‘buy in’ to illusion - form of trust extended or as permit granted? It is a tragedy of continuity as in a denouement expressive of the degeneration of ‘Citizenry’ and ‘Democracy’ by a ‘Coterie’ as constitutes Oligarchic Collective; it is a tragedy of the slow but sure strangulation of the breath of Life to the point beyond whimper whence last gasp of despair concerning materialism exists; at the end of the ‘day’ sense of the termination of the period of sunlight direct, such tragedy is of ‘cide’ can be summative; as in the ascending scale of obscenity represented by, ‘sui, ethno, geno, eco’ to such suffix.

Rather than ‘side’ as within humane context of debate as prefix of ‘for’ or ‘against’, the ubiquity of ‘cide’ as a suffix context of inhumane Warfare is a tragedy of expropriation, arrogation and abrogation, such the sadness that mere Corporatism can eliminate Democracy in the marginalisation of Humanity to point of ‘hollow man’ become dominant - such the ‘patter of rat’s feet over broken glass’. -T.S. Eliot was in his own way above and beyond the mechanics of deliberation?

Corporatism is a tragedy because it is unnecessary; because it is an avoidable abrogation of potentiality, because as simply put in colloquial vernacular: ‘it don’t have to be this way’?

The challenge for Corporatism is to sustain and perpetuate a life denying illusion which calls into ever greater question the ability of Man to refuse to believe the evidence of his or her own eyes. The dynamic or dialectic is of the suspension of disbelief given a growing disparity between the illusion as would be imposed, and the day to day reality for the ever growing Majority as truly suffer ‘impoverishment Utilitarian’. Orwell saw within such challenge a form of illusion he described as ‘Doublethink’, encapsulated within the slogans:

‘War is Peace, Freedom is Slavery, andIgnorance is Strength.’

The motivation for adoption of life denying illusion is as simple as the biological ‘rationale’ for the diversity of parasitical life; it is material gain and the occupation of a comfortable niche with minimal expenditure of effort and provision of return. It is ‘survival’ as an imperative experienced as ‘superseding’ the need to speak up, sense of as Neimöller wrote - for all those who give up the right to ‘speak up’ experience an inevitable execution through joining the ‘chorus’ of a Moritaten, or ‘Ballad of Death’ concerning ‘consciousness’?

If humble parasites such as leeches could speak and dream, such would tell of Corporatism as a ‘rise’ above mere hematophagy and the feed upon lifeblood of an individual host; such would tell of money and power and corruption, and control and manipulation towards the end of ever greater expropriation from a greater diversity - as of all other life become as ‘host’?

Such a horror of the Necrotrophy as has destroyed the American Dream?

The Ford Pinto Memorandum is a testimony to the mechanics of deliberation which epitomises Corporatism as Orthodoxy. ‘ It is ‘Life’, Jim, and just as we have come to know it’’ more the horror, such as a ‘Trek amongst the Stars’ it is not; but closer to the scatological ravings of perverse degenerates such as coprophagiacs become as Hegemony; such the ‘existence’ for Man when lunatics take over an asylum. Because the reduction of any life to mere dollars and cents in concept of ‘worth’ is obscene, and reflects a level of perversity to which the sadness of Coprophagia as a state of perverse degeneracy could represent ‘improvement’?

The irony being that Corporatists exist on the premise of People ‘eating’ the shit of Propaganda; sense of illusion being swallowed as Orthodoxy accepted - and evidence of Man as has own eyes denied?

The Ford Pinto Memorandum concerned Corporate product as designed, built, marketed and branded which had a design flaw which meant an increased risk of the product bursting in to flames in a collision. Given recognition of this flaw, some sad bastard of Corporatist Orthodoxy sat down and ran calculations of contingency within margins of levels of confidence, ultimately expressed in levels of ‘bottom line’ of dollars and cents reaching a conclusion in terms of ‘EMV’ or ‘Expected Monetary Value’ concerning ‘recall and replace’ or ‘recompense for fatality/injury’ as part of a ‘decision tree’. The answer being as History demonstrates, such the discovery of what ‘life’ can mean in a paradigm of Obscene Orthodoxy.

Every person burned to death - or lucky enough to escape with ‘degree of burn’ - in such a product of Corporatism contributed to a profit as would be maximised under costs minimised - so the Orthodoxy goes.

The hypothetical ‘Gulf of Mexico Memorandum’ posits a development of the above horrific obscenity, written by an even sadder bastard than the author of the Ford Pinto Memorandum.

Why sadder?

Because the calculations concerning the ongoing tragedy of ‘Deepwater Horizon’ would have to reflect an even greater ‘incorporation’ of diversity of life denied, evidenced in bigger figures concerning dollars and cents, such the scale of obscenity as ‘Homicide’ can be represented as ‘mere’ when it comes to ‘Ecocide’; such the failure, such the Denial. We are not just talking of children as passengers or drivers as parents burned alive as the Ford Pinto Memorandum ‘incorporated’; we are talking of the diversity of species encompassed by an ecosystem ‘incorporated’ as a cost, sense of dollars and cents, and as can determine the choice between a number of courses of action -where ‘denial’ is the inevitable outcome of obscene Orthodoxy.

The hypothetical Gulf of Mexico Memorandum represents the ‘Big League’ of Corporatist Orthodoxy; commensurate with resonance of the illusion as to ‘Where has all the money gone?’ realising Genocide in an Economic Depression as disastrous illusion become ‘Where has all the Oil gone? in an Environmental Catastrophe of Ecocide as illusion would seek to deny – such the ‘Too big to fail’ premise as the illusion of Corporatism demands the inevitable imposition of sufferance and denial, variant only the prefix of the ‘cide’, such the obscenity.

But yet the failure of Corporatist Orthodoxy is all too evident, sense of the loss of life, sense of the magnification of expenditure of resources gone in to the support of illusion, sense of the Depression being as denial of Life - and of the Joy which it is as a wondrous gift.

The horror!

To reiterate a point made in a recent article by these small quarters, the drill of Corporatism as an Orthodoxy died in the Gulf of Mexico, and that is not tragic, but long overdue. What is truly tragic is the horror of the sacrifice it has taken to bring about the death of such Orthodoxy as an assassin of consciousness; for it is a sacrifice which many lives, and not just of Man, have yet to ‘enumerate’ - sense of acknowledgement of Truth as the absence of denial?

Citizens as People of America, particularly in the Gulf of Mexico, are beginning to open their eyes to what this current ‘evolutionary trajectory’ represents - as they are beginning to see the illusion of Corporatism for what it represents as the denial of Life?

At a pragmatic level given sense of horror reflected in ability to hypothesize, concerning the continuity as of ‘Memoranda’, what this means for Orthodoxy is that People have to be eliminated – and for People read Citizenry; read Majority; read ‘Prole’?

To parallel of a journey to the Heart of Darkness, way of the river of the Mississippi rather than the Congo as in Conrad’s Novella, and as in a Memorandum as somewhere exists as parallels ‘Ford Pinto Memorandum’:

‘The Gulf of Mexico. It Dead’

-How such horror expressive of an Obscene Orthodoxy such as Corporatism has come to prevail in a Nation which has a Constitution enshrining:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights that among these are Life, Liberty and the pursuit of Happiness.
is a right question, as ‘they’, sense of Inner Party, would have not asked – as they indeed would not have the consequences of such truths as above find meaning in ‘Right to Life, Liberty and the pursuit of Happiness’?

As a fact becoming increasingly self evident, such the horror of the pump of the Heart of Corporate Darkness.

The horror! The horror!

How to Reverse a Deflation

It's Time for Helicopter Ben to Drop Some Money on Main Street By ELLEN BROWN

In 2002, in a speech that earned him the nickname “Helicopter Ben,” then-Fed Governor Bernanke famously said that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” You could cure a deflation, said Professor Friedman, simply by dropping money from helicopters.

It seems logical enough. If there is insufficient money in the money supply (deflation), the solution is to put more money into it. But if deflation is so easy to fix, then why has the Fed’s massive attempts to date failed to do the job? At the Federal Reserve’s Jackson Hole summit on August 27, Chairman Bernanke said he would fight deflation with his whole arsenal, including “quantitative easing” (QE) – purchasing longterm securities with money created on a computer. Yet since 2008, the Fed has added more than $1.2 trillion to “base money” doing just that, and the economy is still in a serious deflationary spiral. In the first quarter of this year, the money supply actually shrank at a record annual rate of 9.6%.

Cullen Roche at The Pragmatic Capitalist has an answer to that puzzle. He says that as currently practiced, quantitative easing (QE) is not really a money drop. It is just an asset swap:

“[T]he Fed doesn’t actually ‘print’ anything when it initiates its QE policy. The Fed simply electronically swaps an asset with the private sector. In most cases it swaps deposits with an interest bearing asset.”

The Fed just swaps Federal Reserve Notes (dollar bills) for other assets (promissory notes or debt) that can quickly be turned into money. The Fed is merely trading one form of liquidity for another, without raising the overall water level in the pool.

The mechanics of how QE works were revealed in a remarkable segment on National Public Radio on August 26, describing how a team of Fed employees bought $1.25 trillion in mortgage bonds beginning in late 2008.

According to NPR:

“The Fed was able to spend so much money so quickly because it has a unique power: It can create money out of thin air, whenever it decides to do so. So . . . the mortgage team would decide to buy a bond, they’d push a button on the computer – ‘and voila, money is created.’
“The thing about bonds, of course, is that people pay them back. So that $1.25 trillion in mortgage bonds will shrink over time, as they get repaid. Earlier this month, the Fed announced that it will use the proceeds from the mortgage bonds to buy Treasury bonds – essentially keeping all that newly created money in circulation. The decision was a sign that the Fed thinks the economy still needs to be propped up with extraordinary measures.”

“Extraordinary measures” was a reference to Section 13(3) of the Federal Reserve Act, which allows the Fed in “unusual and exigent circumstances” to buy “notes, drafts and bills of exchange” (debt instruments) from “any individual, partnership or corporation” satisfying its requirements. The Fed was supposedly engaging in these extraordinary measures to “reflate” the money supply and get credit flowing again. Yet the money supply continued to shrink. The problem, as Roche explains, is that the dollars were merely being swapped for other highly liquid assets on bank balance sheets. That this sort of asset swap will not pump up a collapsed money supply has been shown not only by the Fed’s failed experiments over the last two years but by two decades of failed QE policy in Japan, an economy which remains in the deflationary doldrums. To reverse deflation, it seems, QE needs to be directed somewhere else besides the balance sheets of private banks. What we need is the sort of helicopter drop described by Bernanke in 2002 – one over the towns and cities of the real economy.

There is another interesting lesson suggested by two decades of failed QE: it might actually be possible for the government to “print” its way out of debt, without triggering the dreaded hyperinflation long warned of by pundits. Swapping dollars for debt hasn’t inflated the circulating money supply to date because federal debt securities already serve as forms of “money” in the economy.

The Textbook Money Multiplier Model . . .

Beginning with some definitions,“quantitative easing” is explained in Wikipedia like this:
“A central bank . . . first credit[s] its own account with money it has created ex nihilo (‘out of nothing’). It then purchases financial assets, including government bonds, mortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus a hopeful stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system.”
“Deposit multiplication” is the textbook explanation for how credit expands as it circulates through the economy. In the textbook model, banks must retain “reserves” equal to 10% of outstanding deposits (including deposits created as loans). With a 10% reserve requirement, a $100 deposit can support a $90 loan, which gets deposited in another bank, where it becomes an $81 loan, and so forth, until a $100 deposit becomes $1,000 in credit-money.

The theory is that increasing the banks’ reserves will stimulate this process, but both the Federal Reserve and the Bank for International Settlements (BIS) now concede that the process has not been working in the textbook way. (The BIS is “the central bankers’ central bank” in Basel, Switzerland.) The futile effort to push more money into bloated bank reserve accounts has been compared to adding more apples to shelves that are already overstocked with apples. Adding more reserves to a banking system that already has more reserves than it can use has no net effect on the money supply.

The failure of QE either to increase bank lending or to inflate the money supply was confirmed in a March 24 paper by Federal Reserve Vice Chairman Donald L. Kohn, who wrote:
“The huge quantity of bank reserves that were created [by quantitative easing] has been seen largely as a byproduct of the purchases [of debt instruments] that would be unlikely to have a significant independent effect on financial markets and the economy. This view is not consistent with the simple models in many textbooks or the monetarist tradition in monetary policy, which emphasizes a line of causation from reserves to the money supply to economic activity and inflation.”
The textbook model is obsolete because banks don’t make lending decisions based on how many reserves they have. They can always get the reserves they need. If customers don’t walk in the door with new deposits, the bank can borrow deposits from other banks, something they can now do at the very low Fed funds rate of .2% (1/5th of 1%). And if those deposits are not available, the Federal Reserve itself will supply the reserves. This was confirmed in a BIS working paper called “Unconventional Monetary Policies: An Appraisal”, which observed:
“[T]he level of reserves hardly figures in banks’ lending decisions. The amount of credit outstanding is determined by banks’ willingness to supply loans, based on perceived risk-return trade-offs, and by the demand for those loans. . . .
“The aggregate availability of bank reserves does not constrain the expansion [of credit] directly. The reason is simple: . . . in order to avoid extreme volatility in the interest rate, central banks supply reserves as demanded by the system. From this perspective, a reserve requirement, depending on its remuneration, affects the cost . . . of loans, but does not constrain credit expansion quantitatively. . . . [A]n expansion of reserves in excess of any requirement does not give banks more resources to expand lending. It only changes the composition of liquid assets of the banking system. Given the very high substitutability between bank reserves and other government assets held for liquidity purposes, the impact can be marginal at best.”
Again, one form of liquidity is just substituted for another, without changing the overall level in the pool.

If bank reserves do not constrain bank lending, what does? According to the BIS paper, “the main . . . constraint on the expansion of credit is minimum capital requirements.” These capital requirements, known as “Basel I” and “Basel II,” were imposed by the BIS itself. It is interesting that the BIS knows that the main constraints on bank lending are its own capital requirements, yet it is talking about raising them, in an economic climate in which lending is already seriously impaired. Either the BIS is talking out of both sides of its mouth, or its writers don’t read each other.

A Solution to the Federal Debt Crisis?

Another interesting aside arising from all this is the suggestion that the government could actually print its way out of debt – it could print dollars and buy back its bonds -- without creating inflation. As Roche observes:
“[Quantitative easing] in time of a balance sheet recession is not actually inflationary at all. With the government merely swapping assets they are not actually ‘printing’ any new money. In fact, the government is now essentially stealing interest bearing assets from the private sector and replacing them with deposits. . . . [T]his policy response would in fact be deflationary – not inflationary.”
Roche concludes, “the inflationistas have been wrong and the USA defaultistas have been horribly wrong.” The “inflationistas” are the pundits screaming that QE will end in hyperinflation, and the “defaultistas” are those insisting that the U.S. must eventually default on its debt. Representing both camps, for example, is Richard Russell, who writes:
“In my opinion, the US MUST default on its debt. There are two ways to default. One is simply to renege on the debt. . . . The other way to default on the debt is to inflate it away. I’m absolutely convinced that this is the path that the US will take. If the US inflates enough, then over time (many years) the devalued dollar will tend to reduce the power of the debts.”
The failed QE experiments in Japan and the U.S. suggest, however, that there is a third alternative. Printing dollars to pay the debt (referred to by Russell as “inflating the debt away”) might actually eliminate the debt without creating inflation. This is because federal bonds and Federal Reserve Notes are interchangeable forms of liquidity. Government securities trade around the world just as if they were money. A $100 bond represents a claim on $100 worth of goods and services, just as a $100 bill does. The difference, as Thomas Edison said nearly a century ago, is merely that “the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. . . . Both are promises to pay, but one promise fattens the usurers and the other helps the people.”

The Fed’s earlier attempts at QE involved swapping $1.25 trillion in mortgaged-backed securities (MBS) for dollars created on a computer screen. As noted in the NPR segment, many of those securities have come due and have gotten paid off, putting cash in the Fed’s till. The Fed now proposes to use this money to buy long-term Treasury debt rather than MBS. That means the Fed will, in effect, be buying the government’s debt with dollars created on a computer screen. The privately-owned Federal Reserve is not actually an arm of the federal government, but if it were, the government would thus be printing its way out of debt – just as Helicopter Ben proposed in 2002. Recall that he said, “the U.S. government has a technology, called a printing press” – the U.S. government, not the central bank that has done all the QE to date.

Running the government’s printing presses to pay its bills has not seriously been tried since the Civil War, when President Lincoln saved the North from a crippling war debt at usurious interest rates by printing Greenbacks (U.S. Notes). Other countries, however, have tested and proven this model more recently. They include Germany, which pulled itself out of a massive financial collapse in the early 1930s by printing a form of currency called “MEFO bills”; and Australia, New Zealand and Canada, all of which successfully funded public works in the first half of the twentieth century simply by advancing the credit of the nation. China, Malaysia, Guernsey, Jersey, India, Argentina and other countries have also revived their economies at critical times by this means. The U.S. government could do this too. It could print dollars (or type them into electronic bank accounts) and spend the money on the sorts of local public projects that would put people back to work and get the economy rolling again.

How to Reverse a Deflation

The government could pay its bills by issuing Greenbacks as Lincoln did, but it probably won’t, given the current deadlock in Congress. Today only the Federal Reserve Chairman seems to be in a position to act unilaterally, without asking anyone’s permission. Chairman Bernanke could execute his own plan and generate the credit needed to get the economy churning again, by aiming his “quantitative easing” tool at the states. After all, if Wall Street (which got us into this mess) can borrow at .2%, underwritten by the Fed as “lender of last resort,” then state and local governments should be able to as well. Chairman Bernanke could credit the Fed’s account with money created ex nihilo (out of nothing) and swap it for state and municipal bonds at the Fed funds rate.

A “state” might not qualify as an “individual, partnership or corporation” under Section 13(3) of the Federal Reserve Act, but a state-owned bank would. Bruce Cahan, an attorney and social entrepreneur in Silicon Valley, California, proposes that the Fed could diversify its role by buying long-term bonds in existing or newly-chartered state-owned banks. These banks, which would have a mandate to serve state and local communities, would more quickly and accountably lend for in-state purposes than private banks do now. They could be required to use accepted transparency accounting standards to trace how the proceeds of their loans flowed into the economy. Local needs would thus determine how best to jumpstart and keep alive businesses and households that the “too big to fail” megabanks no longer want to fund on fair credit terms. Adding a state-owned bank would also bring competition to regional banking markets such as that of the San Francisco Bay area, which are now dominated by out-of-state megabanks. By funding state-owned banks, the Fed could inject “liquidity” where it is most needed, in local markets where workers are hired and real goods and services are sold.