By expanding the credit, there is more money to loan and collect
types--over $55 trillion, 5/09
debt--over $60 trillion, 5/09
3. Flooding of labor market with elderly, illegals, and documented workers
Falling wages measured by purchasing power
causing contraction of manufacturing and service sectors
Trade deficit $60 billion per month
country is being bought based on trade deficit and globalization laws
Interest payments on the debt load goes to parasitic banking sector
9. All the developed nations have similar
debt load ratios and banking
17% of GDP consumed by over-priced medical
system, even more by banking
11. Flow of funds out of this country trade deficit, and foreign investments
Vanishing value of
assets as markets implode
13. Major drop in new construction, reduced
inventories, no plant expansion
of credit requirements
and reduced consumer spending
in retail, manufacturing, finance, and consumer sectors
17. Snowball effect: each element exacerbates the others
The Core is Rotten--jk 10/3/8, 11/30/8, 4/23/9
Pumping money into the banking system will not avert a second great depression,
for the principle cause is the Federal Reserve Banking System and their policy 10% fractional reserve requirement of member
banks. This policy has permitted the supply of money to multiply. The more credit
ran through the Federal Reserve and member banks the more profits they make through loans.
A dozen other factors pushed forward the clock: especially falling buying power of workers and debt overload (federal, consumer, housing, and commercial). Other major causes include the loss of manufacturing, trade deficits, the outsourcing
of jobs, housing bubble, drop in value of stocks and pension plans, rising unemployment, supporting a gigantic financial sector,
a military budget greater than all the other nations of this world’s combined, and the worlds most costly medical system.
Propping up housing prices and the financial sector is only delays the collapse. Ideologs
dismantled the strong dollar policy of Clinton and the Democrats. In 01, with
the fed debt at $5 trillion, and the Republicans drastically cut taxes on businesses and the top 1%, while waging a war.
At $11 trillion dollars in 08, the fed debt is unsustainable; so too are unsustainable commercial and manufacturing
at over $20 trillion, and consumers’ at over $13 trillion. The trade deficit in 07 was over $60 billion per month.
Total debt in the U.S. totals $53 trillion (Sept. 08). And there is on top
of this the shadow banking sector, which has in 08 was over $60 trillion. Our government has responded by further expanding the currency through new
debt owed to the banks, which they then return to the banks like a form of welfare.
Debt is the problem more debt is not the long-term fix.
The proven path is not being taken (nor mentioned in our
corporate media) is that of building up the purchasing power of the masses. Roosevelt,
who took office in March of 1933, used debt to create jobs (for a thorough balanced review of the New Deal, and id27.html). He empowered the unions so as to raise wages, kept in place
existing high tariffs, cut drastically immigration, established federal works programs, unemployment insurance, social security,
etc. The New Deal Democrats were
increasing the in purchasing power of the masses, while at the same time promoting domestic tranquility. Although the leading bankers and industrialists didn’t like this Keynesian cure, many of them though it necessary for to save their system. They feared
what happened abroad might happen at home: Germany and Italy elected nationalist-socialist
parties which instituted very successfully state ran economies; while England and France elected moderate socialist governments, and Russia had 12 years before had a radical socialist
revolution. Given our domestic unrest, the New Deal programs appeared as a prudent
course to big business and banking.
3) These programs worked and by 1937 the GDP was above the pre-depression
level. Out of depression, the Democrats and FDR ended the federal work programs
and the increased taxes upon the masses in 1937. The economy crashed again. With the reinstitution of the work programs, the economy bounced back (see the graph
at http://skeptically.org/crash/index.html) and by 1939—two years before the war—GDP was again above the 1929 level.
4) But today few support radical changes, so our government
continues to work closely with banking interests, whom hereafter I will call the globalizers.. In Hoover’s day corporations
were national not international, and so protective tariffs had wide appeal. Manufacturing
played a far greater role in the economy and thereby had a greater affect upon government policies. In a world with protective tariffs, building up purchasing power of workers made sense. This shift to financialization and our loss of manufacturing entails that our government (now wearing the
liberal Obama face) will do far more for banking and less for manufacturing and workers.
This dole for the banks has far less impact upon the economy than the New Deal type fixes; made even less because of
our outsourcing of services and importation of manufactured goods.
5) Since Hoover’s day we have gone from monopoly capitalism to global capitalism. The players are better organized with their WTO, IMF, and the World Bank and their
trade treaties with nearly all nations. What hasn’t changed is that those
who fund the political parties (and they also control our economy through manipulation of the money supply through interest
rates); they are the power behind the political scene. They want more debt for
to collect interest thereon, and they want to be bailed out. They were the dominate
force in the 20th century, and they still are. Our government is responding
to the wishes of the globalizers, and this will continue until the masses are ready to revolt.
6) The amount of currency was once limited by the requirement
that paper money be back by gold, which ended in 1971. This change permitted
the Federal Reserve Banks to require of member banks a10% fractional reserve for loans. As the loans were being repaid they could again borrow again at the
ratio of 10 for 1. This greatly expands amount of loans, and thus money in
circulation—see graph above. Banks
are a loan making business; give them lots of money and they make lots of loans, and lots of profits on those loans. This
flood of money permitted the financial profits to grow as a percentage of all profits from 14% in 1969 to 38% in 2006.
7) This currency expansion,
and deregulation of financing are parts of the neoliberal economics (http://en.wikipedia.org/wiki/Neoliberal_economics). With
the 10% reserve requirement (see graph below) shows the credit expanding gradually as payments are made on debts. Debt obligation in the form of T-bills meets this reserve requirement, and our government makes interest
payment to the holders of the T-bills. The Federal Reserve Bank then extend lines
of credit to member banks. The competative review system of performance requires
the CEO’s to maximize profits, and for banking this consists mainly of making loans.
Shaky loans were repackage and sold to the Shadow-banking sector secured by under 3% assets. The financial sector of our economy is the largerand more profitable than manufacturing.
8) The interest payments
along with the overpriced medical establishment, energy prices, Iraq War costs, 500 billion defense budget, real unemployemnt
over 20%, falling wages, and the trade deficit, all these have so burdern our economy as to cause the depression. The
problems were hidden by expanding the debts. Our economic expansion since 1973 was not based on manufacturing and a
favorable trade balance, but rather on the printing of money which is loaned to the banks and then reloaned. Our real
GDP has not expanded as fast as population
because our manufacturing has shrunk. Printing more money only hides this fact.
9) The stock market crash 08 (down 40% from the high in 07) is a reaction to the economic conditions; so too that in the
housing market—down over 50% from its high in 06. Now the consumer credit-card debt bubble is slowly bursting,
and so too is the business community defaulting on their loans as their income collapses. This will result in massive
bank failures; failures which the FDIC will not be able to cover. To forestall this our government is printing money
which it gives to the financial sector, and uses what’s left for programs to increase consumer demand. The more
money there is the cheaper it become. Run-away inflation will likely result. Debts can then be paid off with cheap
dollars—or simply defaulted on. This is what happened in Argentina in the 90s.
10) Every downward element feeds the others. Rising
unemployment and falling wages has caused the major fall off of business activity, which entails further declines in employment.
The unemployed don’t spend much. Evaporating stock market and falling housing prices entails further reduction
in spending. Falling asset values reduces credit worthiness. Stratospheric debt level is being corrected by defaults.
Moreover the U.S. is not alone, every industrialized nation has applied adopted
the same policy of monetary expansion (in 1913 our Federal Reserve System was model on the European systems). The expansion
of credit brought the good times of the 20s which hid the falling wages that brought on the depression of the 30s. The
decline started with a fall in the GDP at a 20% annual rate the 2 months prior to the run on the stock
market in 1929. The run on the banks occurred in January of 1933. History is repeating itself.
11) The European
Union is all part of an overall neoliberal plan for to establish a flat world for the globalizing financial, commercial, and manufacturing interests. They
want to dominate the economies of every nation. The heads of all the industrialized nations go along with the WTO-IMF’s
economic plans. The governments of all the industrialized nations and nearly all the under developed nations have signed
trade agreements (which go far beyond tariffs) with acronyms such as NAFTA, GAFTA, and MEFTA. These treaties were sold
on the theory of creation of skilled jobs for the developed nations, and manufacturing jobs for the underdeveloped nations.
This ruse became law with treaties that allow the globalizers to greatly expand in both developed and under developed nations.
And with the flood of funds they are able to purchase their smaller competitors. With
the lack of regulations we are reliving the era of the robber barons on a global scale.
12) Will Obama become another Roosevelt? Will the
Democrats victory be seen as a mandate for basic changes? Will they undo the links between their party and the commercial
interests through campaign reform, and will they close down the conservative media propaganda machine? The Secretary of the Treasury is the former head
of the New York Federal Reserve Bank. Several Bush appointees are still there and many of Clinton’s top people
have been appointed. Judging from Obama’s financial advisers, the relationship
of the Democrats to the neoliberals has not changed. The economic collapse brought on by the globalizers has not undone
their relationship with governments here, in Europe, and in the underdeveloped world. With global corporations
in bed with politicians and all drinking from the neoliberal bottle of ideas, their treatments will be more welfare for banking.
13) Yes, welfare because there is not interest
payments required by those who have been bailed out. Nor does as some nations
have done, and ours will, the acquiring a position in the financial institution change it from welfare. To own its stocks or take over its operation is not a basic change.
It would be like your wife buying your once separate property home and then living with you in it. Now there is just another signature on the title paper, but things go on essentially the same.
14) Basic changes will not occur until the
people take to the streets. That is what got us out of Vietnam and what motivated
Roosevelt and the Democrats to formulate the New Deal. Moreover, there is no
significant labor-populist voice in the media for to raise popular support for a New Deal Keynesian fix. We need a populist
movement pressuring our government to protect wages through pro-union laws, protective tariffs, and to minimize immigration. We need a government to stand up to the parasitic financial community: what do they bring us that we ourselves haven’t already made or could make? History is not repeating itself because labor is much weaker and the populace confused. The harm
done by today’s robber baron (globalizing neoliberals) to the public weal is mind boggling.