The Economic Crises Has Been Engineered

[darkbeaver]

So, given what Klein has laid out, how planners deliberately induce serious crises and collapses to pave the way for a neoliberal revolution and given that the United States is entering into such a severe crisis, what could be the motivation? What is left of public services to steal? Klein provides a clue from Canada in the early nineties.

In February 1993, Canada was in the midst of financial catastrophe, or so one would have concluded by reading the newspapers and watching TV. "Debt Crisis Looms," screamed a banner front-page headline in the national newspaper, the Globe and Mail. A major national television special reported that "economists are predicting that sometime in the next year, maybe two years, the deputy minister of finance is going to walk into cabinet and announce that Canada's credit has run out.... Our lives will change dramatically."
The phrase "debt wall" suddenly entered the vocabulary. What it meant was that, although life seemed comfortable and peaceful now, Canada was spending so far beyond its means that, very soon, powerful Wall Street firms like Moody's and Standard and Poor's would downgrade our national credit from its perfect Triple A status to something much lower. When that happened, hypermobile investors, liberated by the new rules of globalization and free trade, would simply pull their money from Canada and take it somewhere safer. The only solution, we were told, was to radically cut spending on such programs as unemployment insurance and health care. Sure enough, the Liberal Party did just that...
Two years after the deficit hysteria peaked, the investigative journalist Linda McQuaig definitively exposed that a sense of crisis had been carefully stoked and manipulated by a handful of think tanks funded by the largest banks and corporations in Canada... (p. 257)
​

With the baby-boom generation entering retirement and high health care spending years, clearly the neoliberals want to eliminate Social Security, Medicare and Medicaid in the U.S. and throw everyone at the mercy of the cruel marketplace. It may be that the way clear to the neoliberal paradise in their minds lies in a complete collapse of the dollar and the introduction of the Amero and a North American Union, where all the workers have the same right and benefits of Mexican workers.
Last week we wrote:

To the extent that a social theory or movement has an incorrect view of human nature, to that extent is it susceptible to ponerization. For Marxism or revolutionary socialism, the erroneous view of human nature would be that human nature is a blank slate created by human practice. Its downfall was that it didn't recognize the two types of humans: psychopaths and those with the potential to develop conscience. It shares that downfall with many other ideologies and religions.
​

Where does neoliberalism fit in? One the one hand it clearly has an impoverished view of human nature: nothing but self-interested legal actors freely buying and selling things. But neoliberalism seems more like the vehicle for the ponerization of society at large than an idealistic movement that got corrupted. Or that it's idealism and corruption are one and the same. It is as if it is a purely idealistic when seen from the point of view of psychopaths. Andrew Lobaczewski in Political Ponerologyexplains this strange idealism, the paradise for psychopaths:
In any society in this world, psychopathic individuals and some of the other deviant types create a ponerogenically active network of common collusions [they cooperate with each other, in other words], partially estranged from the community of normal people. An inspirational role of essential psychopathy in this network appears to be a common phenomenon. They are aware of being different as they obtain their life-experiences and become familiar with different ways of fighting for their goals. Their world is forever divided into "us and them"; their little world with its own laws and customs and that other foreign world of normal people that they see as full of presumptuous ideas and customs by which they are condemned morally. Their sense of honor bids them to cheat and revile that other human world and its values at every opportunity. In contradiction to the customs of normal people, they feel that breaking their promises is appropriate behavior... (p. 138)
In the psychopath, a dream emerges like some Utopia of a "happ

http://www.sott.net/articles/show/147923-Signs-Economic-Commentary-for-28-January-2008

 

[darkbeaver]

Stagflation is Here

By Prof. Rodrigue Tremblay

Global Research, January 31, 2008

War—after all, what is it that the people get? Why—widows, taxes, wooden legs and debt.
Samuel B. Pettengill
"Armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.
James Madison, 4th U.S. President (April 20, 1795)
"Let me issue and control a nation's currency and I care not who makes its laws".
Nathan Rothschild, 1791
​

Last summer, I observed that there was a "solvency crisis" underneath the ongoing subprime mortgage liquidity squeeze. Central banks can alleviate a "liquidity crisis", but they cannot solve a solvency crisis.

Last year also, before the events, I warned that the U.S. was heading toward stagflation.

This was due to three fundamental factors.

First, the structural fiscal imbalances of the federal budget in a period of prosperity, as a result of the Bush-Cheney administration's continuous deficit spending linked to the Iraq and Afghanistan wars and to its large tax cuts;

Second, the over-indebtedness of the overall U.S. economy coupled with an overall saving rate close to zero (in 1981, it was 12 percent), and, as a consequence, the rapidly increasing foreign debt of the U.S.; and,

Third, the required decline in the U.S. dollar to reverse and correct the deteriorating American balance of payments. The second factor was a harbinger of less consumer spending in the coming months while the third factor would stoke the fire of overall inflation. And with already high budget deficits, there would be less leeway for an aggressive fiscal policy to sustain economic activity. The table was thus set for a bout of stagflation, i.e. slow growth and rising inflation.
Now, stagflation is here. —Economic growth is slowing down, M3 money supply numbers, as a measure of overall liquidity in the economy, are in the double digits range, the yield curve has inverted and become negative (short term rates higher than longer term rates) and the U.S. dollar has become one the weakest currencies in the world. All this as American twin deficits (balance of trade and federal government budget deficits) are at record levels. —As I pointed out last year, " A lower currency translates into more imported inflation and makes it difficult to maintain low interest rates," even if, in due time, it will improve the trade balance. This means that, for all practical purposes, monetary policy is also severely constrained in what it can now accomplish. For all of 2007, inflation hit 4.1 percent, which is two-thirds more than in 2006 when inflation registered at 2.5 percent. Moreover, the surge in wholesale prices announces even higher inflation in the months ahead.
With inflation being on the rise and real interest rates already in negative territory, aggressive monetary stimulus would likely be counterproductive, because too low interest rates would encourage capital outflows, pushing the dollar further down, and translating into more imported inflation. On top of that, one has to remember that monetary policy shifts take at least nine to twelve months before impacting the real economy. One has also to keep in mind that the U.S. operates, more and more, in an international environment, and is less and less capable of influencing the domestic economy by manipulating one variable only, such as the interest rate.
Of course, the Fed could have played a better preventive regulatory role if it had intervened in 2003-04 to reign in the unsound banking lending practices that have led to the subprime debacle. But the milk is out of the bottle now, and nothing can erase the damage done to the housing construction sector and other parts of the economy because of this lack of oversight.
After seven years of continuous indulging, of borrowing and debt building, the U.S. federal government is also in a fiscal bind and will find it difficult to effectively counteract the slowdown in the economy. Indeed, over the last seven years, the Bush-Cheney administration has run fiscal deficits on the average of $461.29 billion each year, for a grand total of $3,229 billion of cumulative of on-budget deficits.
This makes it harder to embark upon a new round of deficit spending to stimulate the economy. For one, fiscal policy shifts have even a longer time horizon before impacting the real economy. Secondly, the coming slowdown and recession will worsen an already high federal government deficit, as government receipts decline with the rise in unemployment and the drop in income growth. On the spending side, the Iraq war, in particular, is a black hole that siphons off more than $100 billion each year, with no end in sight. Oil prices are also very high, partly because of high world demand, partly because of geopolitical instability and partly because of the lowered dollar.
After seven years of foreign policy madness and of empire building on a mountain of debt, and of public indulging and private gouging, the financial crisis and credit crunch, the plummeting dollar, the high price for oil will all contribute to the 2008 economic slowdown, which is likely to turn into a recession, during the first half of the year, if it is not already into one since last December. The downturn in the world stock markets during this month is another clear indication that something is wrong, not only with the U.S. economy, but also with the world economy.
All that would seem to be very bad news for George W. Bush's Republicans, just as it was bad news for the Democratic Carter administration in the late '70s. Indeed, over the last century, the U.S. economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research. In each of those years — 1920, 1932, 1960 and 1980 — the party of the incumbent president lost the election.
Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com
He is the author of the book 'The New American Empire'

Visit his blog site at: www.thenewamericanempire.com/blog.
Author's Website: www.thenewamericanempire.com/
Check Dr. Tremblay's coming book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/