(Shown in the above chart is the historical correlation between the change in debt and the rate of unemployment. Courtesy of economist Steve Keen and chrismartenson.com)
Libertarians, anarchists and communists who sincerely favor a stateless society must realize that the present crisis is not merely, nor even primarily, an economic crisis — it is a crisis of the State itself. There is no exit for the State from this crisis, and it must result in the collapse of the State.
How we approach this crisis can spell the difference between a long drawn out process of collapse, or a much shorter one.
The two great issues facing Washington in this crisis are the rising public debt and the rising population of persons who cannot find work. Since World War II, Washington has been able to enjoy a trade off between these two symptoms of capitalist breakdown by encouraging the accumulation of private and public debt to offset the tendency toward a fall in productive employment of labor power.
The growth in public and private debt has allowed Washington to perform its essential role in a period of capitalist relative breakdown: to maintain generally stable conditions for the purchase and sale of labor power. This role corresponds to the needs of both the working and capitalist classes insofar as we only consider them as poles within capitalist relations of production.
In the face of falling demand for the productive employment of labor power, Washington has encouraged and facilitated the expansion of unproductive employment based on various forms of consumer debt in particular — mortgage, credit cards, auto loans, etc. — but also public debt, including ever increasing levels of federal debt. This debt, since it can never be repaid and sits on the books of financial institutions as fictitious assets, must be succeeded by increasing levels of new debt. It is a classic Ponzi scheme that had to unravel eventually and finally did in the Great Financial Crisis of 2008.
Since 2008, Washington has attempted to stabilize the economy by accumulating massive amounts of debt in its own right, hoping for its stimulative interventions in the economy to trigger a new round of debt accumulation by consumers. Consumers, who have been hit hard by the loss of millions of jobs in 2008 and 2009 have not responded to Washington’s stimulative interventions, and appear to be having an increasingly hard time even servicing existing debt.
The central problem facing Washington is that massive amounts of new debt must be created each year to absorb those who lost their jobs in 2008-2009. Moreover, this new debt must be sufficient not only to absorb those who lost their jobs, but also more than a million new workers who enter the labor force each year looking for work, and those who continue to be displaced from productive employment because of improving productivity. If consumers (who are, overwhelmingly, those workers who still are employed) are not able to carry a sufficient new debt burden to absorb this huge mass of new and existing unemployed, plus offset the falling demand for employment of labor power resulting from improvements in productivity, Washington will face an ever increasing mass of unemployed persons who are living on the edge of starvation.
At the same time, since Washington has been trying to compensate for inadequate consumer debt accumulation by running massive deficits in 2009, 2010, and 2011, a broad section of the population has been growing uneasy with the seemingly endless river of red ink in the federal budget. It doesn’t take a degree in economics to figure out that the massive accumulation of new federal debt must in time be offset by equally massive increases in the tax burden on the population and severe austerity of the type already evident in many European countries.
The result must be the steady conversion of public taxes into debt service to line the pockets of the big holders of federal debt, even as Washington tries to maintain its completely superfluous expenditures on military adventures, while the social safety net is ruthlessly eviscerated; leaving large segments of the population to starve. In its extremity, the fascist State consists solely of an ever increasing mass of new debt undertaken to maintain itself as an aggressive military machine.
Washington is thus trapped in an intractable crisis of rising public debt coupled with rising unemployment and an increasingly naked militaristic posture, even as it fails to address its most basic function: maximizing the purchase and sale of labor power. To an extent not seen in the post-World War II period, we are seeing the formation of permanent unemployable mass on the scale previously experienced only during the Great Depression. Despite two massive stimulus injections of nearly $1 trillion each, unprecedented zero interest rates for more than two years, and Federal Reserve money printing on a scale never seen before in history, unemployment has not fallen to anything approaching pre-crisis levels.
Washington is vulnerable to attack by those who favor a stateless society on both fronts. I would suggest libertarians, anarchists and communists pursue these points of agitation in their work:
- Debt and deficit spending: Oppose any attempt by Congress to increase the debt ceiling. It is clear that the Obama administration is working with both the GOP controlled House and the Democratic controlled Senate to slip through another increase in the debt ceiling this Spring. Libertarians, anarchists and communists should not stand aloof from this fight. They must combine efforts to ensure a NO vote on raising the debt ceiling, and to identify those Republican and Democratic Party representatives and senators who are conspiring with the Obama administration to saddle the nation with more debt.
- Unemployment and hours of labor: To the charge by apologists for Washington that deficit spending is necessary to combat rising unemployment, we should answer that it is not necessary. The unemployment crisis is solely the result of the refusal by Washington to reduce hours of labor. Those who stand for a stateless society should point out that increasing productivity of labor has made the reduction of hours of labor the pressing issue of our time. Any attempt to substitute State intervention in the economy for this reduction can only lead to further accumulation of debt without solving the problem of unemployment.
Washington is caught in a cul-de-sac from which there is no exit. Now is the time to strike a deathblow to it, and pave the way for a stateless society. If we fail to take advantage of this opportunity, we will have only ourselves to blame.
One of the first battles of 2011 will come in the spring as the Washington establishment seeks to gain approval to raise the debt ceiling. Anarchists, libertarians and Marxists will be tested on whether they are satisfied to be appendages and compliant tools of the two parties, or are prepared to strike out on their own in preparation for the 2012 election season.
No one should be confused about this issue: It is a life or death moment for the bloated Washington machinery of repression and imperial expansion and the increasingly heavy debt servitude of the public treasury to global banking interests. Here is how one writer put it:
The tax-cut war is over for now. “Don’t Ask, Don’t Tell” repeal has been signed into law. The New START treaty has been ratified. But another big battle between Democrats and Republican is looming. The subject is something most Americans have likely never heard of—the debt ceiling. And, unlike the lame-duck battles that somehow found their way to happy conclusions, this one could very easily end in disaster.
The debt ceiling does exactly what it sounds like it does: It caps the total amount of money the government is allowed to owe. Because the government keeps running deficits, it keeps bumping up against it, and Congress then has to increase the limit to keep the government going. Right now, the national debt stands only $400 billion short of the $14.3 trillion ceiling, which means that some time in the next few months Congress will need to vote to raise it.
It’s a safe bet that most politicians would be extremely reluctant to cast such a vote. Deficit reduction was a major component of the Republicans’ battle cry this past electoral season, and Democrats are no more likely to embrace a measure that explicitly allows for more debt. But it’s a necessary evil: Failure to raise the ceiling could lead to full-fledged U.S. default—that is, the inability to make scheduled interest payments on existing Treasury bonds and other government debts.
It gets better: according to Zero Hedge, Washington may need not one but two debt ceiling increases in 2011, and as many as 8 by 2015:
As Zero Hedge has long been predicting, we anticipate roughly $2 trillion in incremental debt per year. Surprisingly we are not far too off from where the “debt clock” sees US leverage in 5 years. At an estimated $24.5 trillion in federal debt, our $2 trillion per year run rate is spot on. Another thing that is spot on: our prediction that the US will need not one but two debt ceiling increases in 2011. And probably 6-8 over the next 5 years.
Already wild stories of impending disaster are being ginned up in an attempt to shape public opinion on the issue through fear:
Recent history provides a sense of just how scary this would be. “The reason the markets calmed down [during the financial crisis] is that we took [the banks’] toxic assets and handed the financial institutions Treasurys,” says Kevin Hassett, a scholar at the American Enterprise Institute. “If we’re in a default situation, the Treasurys themselves are the toxic assets, and it’s not clear what we can hand anybody to calm them down.” Banks and countries like China would view American debt as a severe liability, and markets would be thrown into chaos. Admittedly, this scenario is unlikely, since the Treasury Department can ward off default for months by taking extreme steps, such as raiding Social Security or civil-service pensions. But even if we don’t default, a protracted failure to raise the debt ceiling risks other dire economic consequences by making it look like the United States is ungovernable and a bad place to invest.
Folks, Washington NEEDS this vote, and they are going to win it by playing every wedge issue, and divisive card in the deck. The debate over the debt ceiling is going to be staged as a fight between “austerity” and “fiscal sanity”; with Democrats playing the “Republicans hate the poor” card, while Republicans scream about “Obama’s socialist agenda”.
Those on the Left can expect to be hit with image after image of “the suffering masses”, as the Democrats accuse the Republicans of being willing to sacrifice working families, the poor and “the middle class” with an outrageous austerity the likes of which, they will swear, has never been seen in modern history — they will go on in this vein until Obama announces he has secretly cut a deal with the GOP leadership in the House behind closed doors.
Those on the Right can expect Republicans to spend a lot of time on Fox NEWS complaining vociferously about the rising deficits and imminent collapse of the national economy and even morality itself under the dead weight of Washington’s profligacy, even as they meet secretly with their Democrat counterparts to work out a “deal” to trade more debt now for another worthless promise of a balanced budget tomorrow.
Without raising the debt ceiling, Washington will have great difficulty funding its ongoing occupations of Iraq and Afghanistan, the bailout of the too big to fail banks, and its massive machinery of domestic repression. No matter the contours of this partisan bickering, it will be a fight staged for public consumption that ends in a conclusion on which both wings of the Washington establishment have already agreed.
Anarchists, libertarians and Marxists need to help folks both on the left and the right to understand that the debt ceiling itself is the issue — and, if Zero Hedge is correct, we will have 6-8 opportunities to ram this lesson home over the next five years. If, however, anti-statists get caught up in the public circus that the debate over the debt ceiling promises to become, we will forfeit a good chance to put a nail in the coffin of the State.
So, this is the takeaway from the Messiah’s tax deal with the Party of Wall Street: there wasn’t any tax deal. The agreement between the Messiah and the Party of Wall Street is an admission that the economy is officially brain dead and on complete life support. There is no recovery, there is only the false appearance of recovery produce by the expansion of federal debt.
Unemployment shows no signs of improving, job creation is negligible, the bankster mafia cartel’s quantitative easing money printing scheme has already failed and will fail again to generate inflation in the world market.
Of course, there was no recovery during the period 2003 to 2007, when the economy appeared to expand because of the increasing debt slavery of working families. The collapse of your income put an end to that Ponzi scheme, and the only thing keeping the entire global economic system from imploding is the judicious application of Washington debt manufactures to sustain the illusion of economic growth.
As the O’stimulus version 1.0 petered out, so did the recovery. And, it will likely be the same for version 2.0.
While the Party of Washington mobilized its useful idiots among the progressives to engage in a blatant class war against “the rich”, and as the Party of Wall Street deployed fear of US bankruptcy to drive its base to meet them, the Washington-Wall Street Axis negotiated a separate peace: to continue propping up an essentially brain dead economy with a feeding tube of unlimited public debt.
Progressives should have been warned in advanced: the Party of Washington does not engage in the language of class warfare unless they are trying to cover up their shameless and blatant treason against working families. The more insidious the betrayal, the louder the call to arms against the “rich”. “billionaires”, and “wealthy fat-cats”. Each new enslavement of the working stiff to Wall Street is always accompanied by a party announcement of a new era of freedom from bondage.
As for the Party of Wall Street: who are we kidding here? Look at the history of American public debt. The continuous stream of steady debt service oozing from the orifices of every government body — local, state and federal — is the mother’s milk of Ponzi economics. Public revenue and the power of money creation converted into an endless stream of safe Wall Street “investments” is the entire foundation of the fictitious economic activity and the ever lengthening social work week.
Once again, you have been played. But, you will never learn, will you? Even now you are angry at some imagined betrayal by the Party of Wall Street, or the Party of Washington — depending entirely on your personal ideological delusion.
Unfortunately, the joke is on you — you’re a pawn and the chessmasters move you where they see fit because you have not acquired the capacity to decide where your interest lie, and, hence, what must be your next move.
Today, Europe is deciding their next move: a bank run. Will they be any more successful than you. Perhaps not, but at least they are trying.
You can’t be in the game until you realize there is one.
(Click to enlarge)
This is a helpful graph, which crystallizes what is actually taking place amidst all the numbers being thrown around today. We have yet to see anything like it elsewhere.
One under-reported aspect of the GDP numbers released last week is the impact US war preparations spending is having on inflating that measure of economic activity.
Under-reported is a kind way of putting it; the actual term should be “A fucking cone of silence.”
Since this crisis began to blossom in 2007, much of the collapse has been hidden by a marked ramp up in war prep expenditures – first, by the Moron, and now by the Messiah.
This, in addition to corporate subsidies – in the form of Cash for Clunkers, and tax breaks for new home-buyers – accounts for most, if not all, of the bounce in GDP witnessed in the doctored numbers.
If, as CNBC‘s Jim Cramer informed us, and Klaus Kleinfeld, President & CEO of Alcoa confirmed, the first leg of an attempt to find a way out of this crisis is to accelerate a shift of industrial operations from the U.S. to faster growing markets like Brazil, Russia, and China, the second leg is clearly an attempt to improve profitability in the United States by increasing expenditures on those kinds of goods which have no productive use – things anyone who is not insane would consider wasteful.
War preparation, thus, serve a two-fold purpose: First, they allow Washington to fulfill its role as buyer of last resort, and second, they allow profits to be expanded in a way that it does not further increase productive capacity.
What the second point means, in plain English, is that wasteful spending like war preparations makes the US appear less productive than it really is.
Of course, the question posed by that last statement is: Why the fuck would Washington want the US economy to appear less productive than it really is?
The answer is that this has nothing to do with Washington. This is a blindly thrashing attempt to slow unemployment and over-production (the accumulation of superfluous workers, inventories of unsold goods and excess money that cannot be invested profitably.)
If work can be expanded in an area which is not productive – building machines designed to kill people – people, goods and money can be redirected from productive purposes – which only add to unemployment and over-production – into an economic dead end for the time being.
There is, of course, a connection between the Cramer observation, and the rise in war spending:
Since military spending adds nothing to the real living standard of Americans, the net result is that even as Brazil and China become more productive due to investment by Alcoa and other American companies, real wages in the United States become more like those in Brazil and China.
In the words of Tom Friedman, the world gets flatter.
But, of course, we have seen all of this before, haven’t we? It was called the Rust Belt – when manufacturing left the industrial states to move to the Sunbelt, Mexico, and other venues to lower labor costs resulting in the longest period of stagnant wages in US history.
One of the implications of the current economic crisis is the role China dollar recycling plays in allowing the United States to pursue its empire. This role is under some greater amount of strain as Washington valiantly runs up its debt in order to save its Wall Street toadies.
Brad Setser, in an eye opening paper discussing the potential for a squeeze on the U.S. by its main creditors, wrote the U.S. is faced with a number of options, none of which would be bode well for business as usual here at home, should its creditors balk at extending a new round of funding:
Should foreign creditors’ appetite for low-yielding, dollar-denominated assets wane or Americans lose confidence in dollar assets, one of the following would need to happen:
– The dollar would need to fall to a point where the United States imported less and exported more, reducing the United States’ need for external financing;
– Yields on long-term U.S. bonds (and other financial assets) would have to rise to the point where investors once again found U.S. assets attractive;
– The Federal Reserve would have to raise U.S. short-term policy rates to “defend” the dollar;
– The Treasury could face pressure to curb its deficits to facilitate the reduction in the U.S. external borrowing need. This would include pressure to limit the budget the United States devotes to maintaining its global presence. The Treasury might also face pressure to raise financing by selling debts denominated in the currencies of America’s creditors.
It should be mentioned that the section in bold implies the dismantling of the US empire and the relegation of the dollar to just another currency among many – it would lose its status as world reserve currency.
Which caused this item to catch our eye this morning:
BEIJING (AFP) — A decision by China to reduce its US Treasury holdings suggests concern about the US attitude towards its economic woes, Chinese economists were quoted as saying in state media Wednesday.
The remarks, coming after US data showed a modest decline in Chinese investments in US government bonds, were in contrast to an earlier statement in Beijing which had said the recent sell-off was a routine transaction.
“China is implying to the US, more or less, that it should adopt a more pragmatic and responsible attitude to maintain the stability of the dollar,” He Maochun, a political scientist at Tsinghua University, told the Global Times.
According to US Treasury data issued Monday, Beijing owned 763.5 billion dollars in US securities in April, down from 767.9 billion dollars in March.
It was the first month since June 2008 that Beijing failed to purchase more US T-bills.
All of this, we are told, is merely prudent due diligence by the People’s Republic of China:
BEIJING (AFP) — China may buy more US Treasury bonds but Washington must take action to ensure the safety of foreign countries’ assets, a former Chinese central bank governor said.
“In the short term, if our foreign exchange reserves rise and the US dollar remains stable, China will probably increase investment in the US Treasury bonds at appropriate times,” said Dai Xianglong in an essay.
“However, the US government should adopt practical measures to live up to its commitment to ensuring the safety of foreign assets,” the essay, published by the China Finance magazine Wednesday, said.
Of course, those practical measures seem to require that the U.S. take steps to reduce it trade and fiscal deficits.
However, as we see it, both of these deficits result from what economist call substitution effects: In order to expend more money on its imperial forces than the rest of the world combined, the United States is required to divert 1.5 million young men and women in the prime of their productive years from productive economic activity. These men and women have to be fed, clothed, provided medical and housing needs, their families supported in their absence, and, of course, provided the latest in high-tech, state-of-the-art, killware.
This costs money, but more important it is a burden for even an advanced industrial base like the one we have here at home. And, if the advanced industrial base if being used to build high-tech, state-of-the-art killware, someone else has to make our 42 inch high definition, wide-screen plasma televisions in return for worthless pieces of paper called dollar bills.
China has been volunteering for the task for about a decade now, and they are concerned that the worthless dollars may, in fact, turn out to to be – well – worth less than the paper on which they are printed.
Plus, they ain’t all that enthusiastic about having aircraft carriers plying the Taiwan Straits as American sailors thumbs their noses in the general direction of Beijing.
It is a simple step to go from concern about the security of the dollars they lent Washington to being insistent that the aircraft carriers go away as well – and, both can be assured if the US simply reduces its trade and fiscal deficits.
We will see how this story unfolds.
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Barack’s economic team has published a paper purporting to show his $775 billion plan will create about 4 million jobs.
That is $194,000 per job – which, given the average income of American working families, may seem a bit rich.
$775B/4 million jobs = $193,750.00
For the record, we point out it would not cost a penny for Washington to reduce the work week by one measly day – and the $775B saved could be returned to American working families as reduced tax rates to offset the incomes impact of the reduction.
$775B/ Labor force of 153M = $5100.00, or about $100.00 per week in additional after-tax income per worker.
No need for a stimulus, and a better standard of living, with more time for our familes too.
The fiscal cost of our approach could be offset by the elimination of the Department of Defense and all subordinate organizations. Which means, none of it need be borrowed from the People’s Republic of China.
Barack would get his greener economy – with less oil used for commutes and other energy costs in the economy, fewer pollutants tossed into the environment.
Barack would also get his increase in resources for education, as parents had more time to spend supervising their children, helping with homework, and attending conferences with their child’s teacher.
We have been thinking about some of the reasoning which goes into the Party of Washington’s approach to this crisis and what their approach says about you.
From what we can tell by our admittedly superficial reading of the most recent economic literature – we are not fans of economists and rate them on the food chain somewhere just above fungi and lawyers, and considerably below plankton – surprisingly, Barack and his economic team think their approach will work because you are most probably destitute, impoverished, lacking any significant means of subsistence – such as food and shelter – and all resources which might be used to acquire or produce those means – insolvent.
Of course, you don’t think of yourself this way: You likely hang that meaningless label on your social status, middle class, but, were you to lose your job today, in a matter of months you would be a resident of some homeless shelter, and subsisting entirely on charity.
Were you to receive a tax cut from Washington, you would likely blow it in a month or two.
Whatever increase in your income you receive from your paltry wages quickly gets spent on basic necessities of life, or, servicing the mountain of debt gathered as unpaid bills on your kitchen table.
While your more successful peers have worked diligently and honestly – adding to the wealth bequeathed to them by their millionaire grandparents (who acquired those means from their millionaire slave-owning grandparents – its wonderful what centuries of unpaid labor can do for a portfolio) – you can’t touch a dollar without immediately trying to spend it on the latest gadget – like food, cell phones or 42 inch, high-definition, wide screen, plasma televisions, which, interestingly enough, began rolling out just as Washington mandated digital television to replace the old analog system, and which new technology promises amazing video images of the best reruns cable has to offer.
You are, in a phrase, dirt poor, by any useful definition of that term. If you looked up the term, penniless uneducated fucking hillbilly, in a dictionary, the definition would not only include your picture, but also your social security number, address, and phone number.
In economic theory, the term, penniless uneducated fucking hillbilly, goes by the more obfuscating term, rule of thumb consumer – a concept introduced into economic literature in a paper N. Gregory Mankiw prepared for the American Economic Association, in January 2000.
Greg, citing earlier research, concluded:
If we exclude home equity on the grounds that it is not always liquid, the mean [net worth] for this group falls to a negative $10,600, indicating that debts such as credit cards balances exceed financial assets. Net worth is zero or negative for 18.5 percent of households; excluding home equity, the number of households in the red rises to 28.7 percent.
Stated in ordinary American, Greg concludes a good 28 percent of American families don’t have a pot to piss in, nor a window to throw it out. They, like you, probably, are devoid of any resources to survive the loss of their jobs, or the slightest reduction in their wages. And. like you, they stand on the edge of financial disaster, hoping the wind doesn’t blow the wrong way.
And, boy did the wind blow the wrong way in 2008: 2.6 million jobs lost and counting, manufacturing employment falling for 23 months in a row, even service jobs getting swallowed up in the financial implosion on Wall Street.
(We might note: Greg’s insight, significant as it is, did not so much add to the body of human knowledge , as it did simply concede to Karl Marx what he had asserted some 150 years ago, when he wrote that capitalism would produce a, “mass of propertyless workers – the utterly precarious position of labour – power on a mass scale cut off from capital or from even a limited satisfaction and, therefore, no longer merely temporarily deprived of work itself as a secure source of life…,” however, we might simply be accused of nitpicking.)
The upshot of Greg’s insight into you as an economic category, is that you are completely reliant on selling yourself into slavery in order to eat, and feed your family.
If your wages fell, you would likely respond by working harder, longer – even taking on a second or third job – and, it is pretty unlikely you would ever see a wage increase which would allow you to work less – you are tied to your job by the constant threat of starvation.
And, from what we can see, there is nothing which says you have to be completely penniless: just that you should be so relatively hard up that you might, for example, be inclined to work longer hours whenever the opportunity presented itself, or, when you hit that credit card to repair your transmission, or, are suddenly faced with balloon payments on your alt-A mortgage.
Washington knows this about you, and, they know they can pretty much manipulate economic events which compel you to work longer hours, for less pay, as you drown in debt.
Hence, when Barack declares,
And above all, I will ask you join in the work of remaking this nation the only way its been done in America for two-hundred and twenty-one years – block by block, brick by brick, calloused hand by calloused hand.
He knows he really doesn’t have to ask: it is not exactly like you have a choice in the matter.