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Threecrow: Welcome to the Inferno

June 30, 2010 Leave a comment

Threecrow explains that we have now passed the point of no return:

King Minos, for whom an entire extended period of time and culture, The Minoan Civilization was named, lived a very long time ago.

His Kingdom was based on the island of Crete and his power was derived from the sea, his people were Sea People.  Greece, the Aegean, the Eastern coast of the Mediterranean, even Egypt came under the influence of this Civilization.  He lived so long ago that he had passed into history and myth long before anyone mentioned in The Bible had drawn their first breath.  His home or Palace on the island was named Knossos and beneath the palace existed an elaborate and deadly labyrinth that once entered, the way out was impossible to find.  I mention this only because it seems to me that elusive quality called wealth, whether it be the wealth of nations or the wealth of the individual, this thing we have named, The Golden Grimace has found itself prisoner and wanderer within the labyrinth.  I do not see them exiting any time soon.  The only exit lay at the beginning.

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USS Truman now off Iran…Israel poised to attack

June 27, 2010 1 comment

From Zero Hedge:

As we first reported last week, in an article that was met with much original skepticism, the Pentagon has now confirmed that a fleet of 12 warships has passed the Suez Canal, and is now likely awaiting orders to support the escalation in the Persian Gulf. The attached image from Stratfor shows the latest positioning of US aircraft carrier groups as of June 23: the USS Harry Truman (CVN-75) is now right next to USS Eisenhower (CVN 69), both of which are waiting patiently just off Iran.

As for the catalyst the two carriers may be anticipating, we provide the following update from the Gulf Daily News where we read that Israel may be on the verge of an attack of Iran, with an incursion originating from military bases in Azerbaijan and Georgia.

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The value of Billy’s humanity…

June 23, 2010 Leave a comment

A fascinating post at Billy Blog – a proponent of Modern Monetary Theory – on the issue of the drive toward austerity in Europe and the United States.

We quote a particularly interesting section: an imagined conversation between an economist and her poet husband.

“But the government cuts will cause more workers to lose their jobs”, he said, trying to relate the issue back to his value of humanity, “and then they are calling to cut the protections that we give the unemployed”.

“It is necessary to realign the budget parameters”, she said.

“Will the bond traders lose their jobs and lose their protection”, he said, and added “I read that the bankers are now making record profits”.

“No-one likes anyone losing their jobs”, she replied, “but what do you mean by “their protection?”

“Well didn’t you say the bonds that the government issues give the bond traders a risk-free asset?”, he said, “that is protection”.

And, continuing, he said, “And the government provided plenty of spending to save the jobs of the bankers”.

She replied, showing signs of being a bit disoriented by the lateral thinking that wasn’t in the textbooks, “The government has to issue debt”.

“No they don’t, they issue the currency”, he said (having just read a MMT blog), “So the bond traders will continue making record profits, using the funds that the workers saved, but want the workers who saved the funds in the first place to be unemployed and their unemployment benefits cut”.

“The governments have run out of money”, she retorted, now thoroughly disoriented.

“No they haven’t, they control the money”, he said.

“They would just cause inflation”, she said.

“But the financial news said that we have problem[s] of deflation. Isn’t that the opposite of inflation”, he said.

“The bond markets are just the canaries”, she said.

“Then they should be kept in cages”, he said, trying to be empathetic to the values his wife was displaying. Never for one moment would the poet want a free bird caged. He cared.

Conclusion

The agenda ahead is clear. The conservatives are pushing austerity for all they are worth because they see it as an effective vehicle to finish of[f] their “program”.

For three decades, the neo-liberals have been trying to undermine the welfare state and reduce the size of the public sector. They have had considerable success in this “program”. But they were not fully successful and important social protections still remain.

Now they have the opportunity to exploit this major economic crisis which their market-oriented policies created in the first place to complete their demolition [ … ] agenda.

Having proven beyond all counter-argument that the debased dollar is only fictitious money, and, moreover, only a weapon wielded by Wall Street to bludgeon the worker into submission – to threaten her with starvation should she not reduce her consumption beyond already intolerable limits – our simpleton proponents of MMT, whose stupidity apparently knows no bounds, and who treat the entire world of money as if it were as simple and stupid as they are – who, apparently, cannot conceive what lies plainly in their sight: that money is and has always been a weapon of class domination –  propose to use this weapon, which has only ever been used against the worker, on the worker’s behalf!

USS Harry S. Truman crosses Suez Canal enroute to Iran…

June 20, 2010 1 comment

USS Harry S. Truman

From Zero Hedge:

Arabic newspaper Al-Quds al-Arabi reports that 12 American warships, among which one aircraft carrier, as well as one Israeli corvette, and possibly a submarine, have crossed the Suez Canal on their way to the Red Sea. Concurrently, thousands of Egyptian soldiers were deployed along the canal to protect the ships. The passage disrupted traffic into the manmade canal for the “longest time in years.” The immediate destination of the fleet is unknown. According to Global Security, two other carriers are already deployed in the region, with the CVN-73 Washington in the western Pacific as of May 26, and the CVN-69 Eisenhower supporting operation Enduring Freedom as of May 22. It is unclear at first read what the third carrier group may be, but if this news, which was also confirmed by the Jerusalem Post and Haaretz, is correct, then the Debka report about a surge in aircraft activity in the Persian Gulf is well on its way to being confirmed. There has been no update on the three Israeli nuclear-armed subs that are believed to be operating off the coast of Iran currently.

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The Golden Grimace (Part Twelve: Inflation, or the Illusion of Scarcity)

June 18, 2010 Leave a comment

Off and alone
Got me thinking bout these prices that work me to the bone
Trying to invent my self a clone
Park in the wrong place and get towed

Despite the fact that there is little or no need for work in our society, each of us actually knows that were we to stop working for any considerable length of time we would starve, bills would go unpaid, and our homes and cars would be repossessed.

Although today it takes only a tiny fraction of the effort needed to produce a house originally built in 1951, we still devote 15, 20 or even thirty years of our life to repay the debt incurred in its purchase. A home built by Threecrow’s parents in California in 1951 cost $9,500, yet that same home, now 60 years old, sells today for $432,000 – 45 times its 1950s price. For the most part we take no notice of this discrepancy; we write it off to inflation or even choose to ignore it altogether – in fact, in the case of homes, the very idea that the same home should increase in price each year, although it has actually decayed by some increment in useful life, has actually been a selling point!

The home, as a useful thing required some definite amount of labor by a group of people – carpenters, electricians, plumbers, etc. We cannot measure the value created by this actual labor directly however, but only through the market price of the home. If, despite the decay of the home as a useful thing over a sixty year period, its market price should constantly increase, it is only because market prices for homes in general are increasing.

If the actual sale prices of all the homes around you tend to rise by ten percent a year, it is likely the notional price of your home will also be rising in market price by ten percent a year. Your city or town will register this rise by dutifully raising the tax on your property even though you have no intention of selling. They estimate the potential market price of your property by examining the actual sale prices of homes in your area generally.

Homes, as things of value are responsible for each other as things of value, which is to say, the price of a sixty year old home cannot be considered in isolation from the market prices of all the other homes with which it can be compared. If, therefore, the same home costs $9,500 in 1951, and $432,000 sixty years later the only explanation for this discrepancy must be found not in the home itself, but in the thing in which the price of the home is denominated, dollars.

We can do a simple thought experiment to demonstrate this: We can suppose that the original $9,500 sale price represents the monetary expression of the useful life of the home – the amount of time it can be used as a house until it must be replaced by another house. If we assume that the useful life of this home is 120 years, we also assume that each year the home declines in value by $79.17, or 120th of its purchased price. Sixty years later, the total value of the house has dropped to half the original, or $4,750. If the useful life of the home had declined by half over that sixty year period, but the price had remained the same – $9,500 – the purchasing power of its original price would have fallen by half. Before this $9,500 reflected a useful life of 120 years, now the same price only reflects the useful life of the 60 remaining years.

In the case of Threecrow’s childhood home, the price of the home has increased by 45 times over a sixty year period. If, therefore, the useful life of the house was 120 years initially, the purchasing power of the original dollar price has declined to such a point that only a price 45 times higher than the original price suffices to pay for its remaining sixty years. The only other conclusion possible is that we now expect the home to be useful for another 3500 years! We are clearly forced to conclude that a change has occurred in the purchasing power of the dollar which is driving up the prices of homes generally. The purchasing power of money has eroded over the same sixty year period but at a remarkably – even staggeringly – faster rate than the decay in the usefulness of a home built in 1951.

Economists have tracked the change in home prices for decades now, but have yet to offer any reasonable explanation for why dollar prices have escalated this way. The reason they offer no explanation is, of course, because they already know why this happens, but they, Washington, and the sociopath Children of Crassus wish to leave you in the dark about its cause.

You did it!

You drove the prices of homes to this mind-boggling level. The monetary system is designed in such a way that every time you or another working family purchases a home, you drive the prices of homes still higher. As we saw in the case of our rebellious redneck, the debt system results in the automatic escalation of the prices of everything.

Remember, when our redneck went into debt to purchase his Ford F250, he precipitated the immediate creation of new fiat money in the bank account of the dealer. This money entered the economy and existed side by side with his promise to repay recorded on the bank’s books. His debt existed in two places at the same time: as a promise, and as actual newly created money.

The case is exactly the same for our deadbeat African-American sub-prime borrower in Akron, Ohio. By signing the mortgage agreement with her bank, she triggered the immediate creation of the dollar price of the home in the account of the seller. The money did not exist before the bank created it in the seller’s account. The actual supply of money in the economy was, therefore, increased by both the creation of new money in the account of the Ford dealer, and also by the creation of new money in the account of the home seller.

This is how fiat dollars differ entirely from dollars backed by gold: had these transactions taken place before 1933, the bank would have been required to transfer a definite amount of gold from its account into the accounts of the Ford dealer and the seller of the home. The bank’s holding of gold would have declined exactly by the same amount of gold money as the dealer’s and the home seller’s holdings of gold increased. The promises to repay, made by our redneck and our deadbeat, would have appeared on the bank’s books only as a notional placeholder, it would have remained only a promise until it was repaid. In the meantime, the bank was out the gold it gave to the Ford dealer and the home seller.

The purely notional quality of the bank’s asset would have been enforced by the same rules which we mentioned above: just as the prices of homes cannot be considered in isolation from each other, so the purchasing power of an ounce of gold cannot be considered in isolation from that of all gold.

This is exactly the case for gold money. Since it only circulates to facilitate transactions, the price of the good is represented by so many ounces of gold. It does not matter whether this gold was plundered from Mesoamerica or mined in today’s democratic South Africa, each ounce of gold represents exactly the same value and exactly the same purchasing power as every other ounce of gold.

And, gold can’t be created in the accounts of the Ford dealer or the home seller by entering keystrokes on a computer. To actually deliver the purchasing power of an ounce of gold to the Ford dealer, it must be deducted from where it currently resides: in the account of the bank. If the bank should try to do what the slave-owners of the South did during the Civil War, and issue paper symbols of the gold far in excess of the real gold it owns, this would only result in the more or less rapid depreciation of this token.

Absent the actual production of more gold, the amount of gold available to circulate in the economy cannot increase. At the same time, the amount of gold in circulation cannot exceed the amount that is needed to facilitate the purchase and sale of goods taking place in the economy. When gold was the standard for the dollar, the dollar prices for all goods had to generally reflect the actual value contained in them. Gold held prices of goods in check, and the prices of goods held the amount of gold in circulation in check.

But, as we stated in another segment, the price of a good measured nothing more than the amount of time it took to produce the good in the form of gold. Gold was the physical material used by society to express the socially necessary labor time required for the production of goods. We had no way of knowing what this labor time is, and so relied on their constantly fluctuating money prices to approximate that value for us. We could then compare this money price to our own money wages.

By debasing dollars from gold, however, Washington and the children of Crassus were able to perform what Threecrow calls an ingenious sleight of hand – a cheap charlatan’s trick, a massive scam against working people – namely, by inflating the amount of worthless dollars every time you borrowed money, they could surreptitiously increase the prices of goods.

Since prices were no longer being held in check by gold, they could freely creep upward; driven only by the common business practices of offering goods for whatever price the market could bear. Since these new prices now demand an even greater supply of dollars in circulation to realize them, a ready supply of new dollars could now be made available through the credit system. And, as prices crept upward faster than your wages, your need for credit increased.

The expression of the value of a good in the physical material of so many ounces of gold only measured the labor time socially necessary for its production. The total amount of gold money spent on homes in any given year measured the amount of human effort annually required by society to satisfy their total need for new shelter, and, thus, for social labor performed in the specific fashion required to produce housing during that year. If too much labor was expended in the form of housing construction, therefore, the prices of houses sold that year would fall. If too little labor was expended in the year, the prices of housing would rise. Gold thus indirectly regulated labor after the fact, through the fluctuating movement of prices in the market for housing.

Once gold was severed from the dollar, this useful function of money was silenced. Money prices no longer approximated the value of goods, and no longer gave an indication of whether the mass of social labor time was greater than what was required by society or smaller than what was required by society. It only recorded what it was: so many dollars spent by society to purchase the goods.

To give an example of how this works: Although, as a result of an improvement in the productivity of the construction industry, our $9,500 California house required in 1952 only 98 percent of the labor time that was socially necessary in 1951, still the developer could claim with a straight face that land had now grown scarcer in the area, making all the remaining lots in his development that much dearer. He could, on this pretext, increase the price of new homes by 3 percent – from $9,500 to $9,785 – and thus pocket the entire five percent difference between the actual value of the new houses and their sale prices.

Immediately upon concluding the mortgage agreement, the bank would dutifully create this $9,785 in the account of the developer. The real estate agent, having concluded this sale between the buyer and the developer would immediately upwardly revise all the existing homes in the area by a proportion of the new home’s price minus the depreciation the older homes had experienced. Threecrow’s parents’ house would now have a notional market value of $9,785 minus $79.17 in depreciation, or a new market price of $9,705.83. (While the particulars of this example will inevitably vary from reality, the principle nevertheless applies.)

On the other hand, should Threecrow’s parents have decided that same year to sell their home, the real estate agent will dutifully put it on the market at its new market price of $9705.83, or $205.83 more than they paid for it, citing the appreciation in the market prices for homes in the area. Of course, the real estate agent has a hidden agenda in all of this – the dearer the price of the home, the greater her commission. And, since this new price is supported by the empirical evidence of homes sale prices in the area, the new buyers – who have looked diligently for an alternative – come to the conclusion that this price is justified by the housing market.

The bank, with whom they sign a mortgage agreement has also appraised the home and compared it to the selling prices of homes in the area. They have also established that the buyers indeed have a contract to deliver their labor power to an employer at a price which makes the service on the debt reasonable. The bank, like the real estate agent, is also not concerned that the buyers have purchased less house for more dollars. They are only concerned that they have increased the flow of debt service from the existing home with little or no efforts on their part. So they agree to finance the new mortgage at the asking price of $9,705.83, despite the fact that the house is a year older, and has that much less of a useful life. In addition to the original $9,500 they injected into the economy for the first purchase of the home, they now create $9,705.83 in the Threecrow’s parents’ account minus the outstanding debt on the original mortgage.

While the home has actually declined in value by $79.17 over the year, it actually sells for $205.83 more than originally paid for it. In value it has depreciated, but value does not determine its selling price. Dollars, which have no value at all, is the material in which the price of the home is denominated, as it is the denomination of the buyers’ wages.

And what of the buyers? They have no way of telling whether they have paid too much or too little for the home since they do not, and cannot know, the value of the home. They only know that when they enter the market for a home in 1952 for some unexplained reason a home costs more than it did in 1951. Each year then, for some unexplained reason, or so many reasons as to constitute an obstacle to any reasoning, home prices march upward irresistibly. Each new buyer of the home assumes greater debt for less house than the mortgagee before him, and must, therefore, earn more to service that debt than the previous.

Socially necessary labor time now takes the form of the labor time required to earn the requisite quantities of dollars to purchase the home. And, since this labor time is always tied to the dollar wages each worker receives in exchange for his labor power, either the quantity of those wage dollars must increase for a given amount of labor power, or the amount of labor powers offered must increase: two jobs replace one – either in the form of a single worker employed in two jobs, or by the addition of the earnings of a spouse.

The illusion of scarcity – the maintenance of a constant threat of starvation for working people amidst actual great material wealth – is the only basis on which actual superfluity of labor power could exist. The actual material wealth of society must appear in a form that is comprehensible to our containers of labor power: hunger, want, and deprivation – in a phrase, as the constant battle for mere physical survival, as a battle of the loaf.

Our rebel redneck or his comrade, the African-American deadbeat sub-prime mortgagee, must be brought to experience scarcity in the only form consistent with real material abundance: as a constant lack of sufficient fiat necessary to purchase this abundant means of life. Even as the actual value of homes shrink and the ease by which they can be built grows, the actual dollar prices of homes (and everything else) must constantly increase to create a phony scarcity – a purely monetary condition of insufficiency – and so goad the worker to remain on the job, constantly expand the amount of labor power he is prepared to sell, and to seek out the highest price for this labor power.

The Golden Grimace (Six questions on fiat money and superfluous work)

June 18, 2010 Leave a comment

We received these questions from one person on the ideas presented in the series, The Golden Grimace…

This is like a theory of the general strike.  If all workers strike, it will cause capitalism to collapse and to be replaced by a socialist or anarchist economy. “

It is not a theory of general strike. I am not talking of a struggle between classes, but the abolition of classes entirely. What I speak of is simply recognizing what has already been accomplished by society. The need for work has already been abolished – we have, so far, failed to accept this fact and so insist on creating work where none exists. All that really remains is work in its purely superfluous form.

“But then my question about policy becomes: what sort of economy will be set up to replace capitalism after it collapses.”

None. Absolutely none. What is there to economize? Economies are based on material scarcity, but there is no scarcity here. We have an overabundance of labor power (unemployment) and over-abundance of means of production (chronic under-utilization of industrial capacity). What remains is poverty or chronic under-consumption of a massive portion of mankind and this is effected solely by a constraint imposed by means of exchange (money). All that remains to end this chronic under-consumption is to sweep aside fiat money. (The possibility for this sweeping away has already been realized, since money was made worthless by debasing it from gold in 1971 and 1933) The constraint imposed by fiat money is the massive waste of resources that arises from tying consumption to work despite the absolute over-abundance of labor power.

The economy must be entirely replaced by voluntary effort. Since, the amount of work required to be done is so little, this alone should suffice. Voluntary labor association(s) of every sort will spontaneously arise based on the common interests. (this common interest is no longer the INTEREST of present society – i.e., some particular interest imposed as a general interest – but actual things that interest some group of people.) Individuals will choose to do whatever few tasks are necessary. If necessary, this could be supplemented by an entirely volunteer labor reserve for emergencies. This would be similar to the National Guard except it exists solely for productive purposes, and involves no hierarchy.

“Though productivity has increased dramatically, we still need some labor to produce goods.  That means we need some way of deciding which goods are produced and consumed, and to decide who works for how many hours to produce those goods.”

The point here is not whether there will be work to be done. It is how society voluntarily organizes itself to get it done. The present state IS work – it is this state which must be abolished by the abolition of money. “WE” no longer decide what is to be produced. Each of us decides what he or she will produce, and how many hours he or she will work to produce it.

“I think Americans could get along very comfortably with half the work and consumption we have now (a 20-hour work week), and we could get along austerely with one-tenth of the work and consumption we have now (a 4-hour work week).  But despite high productivity, we do need some human labor to produce and distribute food, produce and maintain housing, and so on.”

With work abolished voluntary effort alone is sufficient. This has to be understood: work is dead. There will be far more than 4 hours per week of voluntary effort, once consumption is no longer tied to work. On the other hand, not one minute of this work will be coerced in any shape or form. On the one hand more will be produced than has been produced previously; on the other hand, less will be wasted than at present.

“How do we decide whether the right level of consumption is one-half or one tenth of what it is now?  How do we decide what food we should produce (hamburgers or soyburgers or chicken, bagels or pita bread or tuscan pane)?  How do we decide how much square footage of housing each family needs and whether they should live in houses or apartments? How do we decide who does the work of producing these things?”

Again: No one decides what is the right level of consumption for you. No one decides what you will eat. No one decides how big your dwelling will be. One the other hand, the actual existing means of production already exist in such a form that even minimal effort produces quantities of material wealth far in excess of individual needs. What each of us individually decide to produce yields quantities of this thing far in excess of what we can consume.

“I think you can see that I am skeptical, but nevertheless I am interested in learning what your thinking is.”

I am not entirely sure what my thinking on these things are. I can only follow the lines of reasoning so far as the assumptions embedded in them direct. Once money is revealed to be worthless, this implies the work no longer is bound by the law of value. This further assumes that necessary work had been so reduced by the progress of technology that a society based on work must be a society based on superfluous work – that material scarcity has been abolished, and, therefore, that all the human conflict bound up with the struggle against scarcity must end.

Website supports whistle blower Bradley Manning

June 17, 2010 3 comments

There is now a website supporting Bradley Manning, the American hero who exposed war atrocities in Iraq. It provides a postal address where direct messages of support can be sent to the soldier.

Bradley Manning broke no laws, since it is the lawful obligation of every soldier to report evidence of war crimes.