Fear of the Unknown

All the moats and fortifications that a rich man builds and all the terrorising of populations cannot take away from such a person the fear of an invisible enemy.

One of the ideological undercurrents here for the Republicans is the shock of having a black man as President. Some of them would rather lose the country then face four more years of this humiliation. The world view of white supremacy, which reigned supreme in the south for decades is hard to adjust to despite the civil war. In fact the Civil war never ended. The red necks are joined in this by the Jewish lobby who is still reeling from the fact that Obama can concede to Palestinians having some rights.

No President has faced these issues combined with perhaps leading America down the mountain instead of up the mountain. There seems to be no other way to explain all the raw emotion on the hill.

When the main option being looked at by an overleveraged country is to borrow more then they are running out of options. The brinkmanship in Congress is so intense that the nation is mesmerised by waiting for, who blinks first.


The system is broken, The checks and balances do not work, there is a big disconnect between ruler and ruled, it has become all about how the interests of a minority can be best served, money is the only value that is recognised, all other values have become secondary. This may sound more like a third world country than the USA but tragically it is true.

Lately there has been a formal recognition of this by S&P downgrading the US to AA. Barring the noise against S&P, there is a creeping recognition that the government is not working and unlikely to work going forward. This defers the solution to 2012, when Obama may or may not get thrown out. Billion will be spent between now and 2012 trying to sell the public a pack of meaningless propoganda. No where is Democracy made a bigger mockery of than in the US. Decisions are being made in the interest of the party and not the Country. In the next one year enough bad decisions will have been made to make it meaningless as to who gets elected.
There is no one on the scene who can save the country except a lone black man who is more professor than leader. Perhaps he can see that once you get elected you no longer represent the party but that you represent the country. Perhaps he needs another four years to come of his shell. This will be the issue before the electorate in 2012. So far there is no one else on the scene with the slightest ounce of decency or integrity. In fact decency and integrity have not been in demand, if they were then Ralph Nader would be every ones candidate for the Presidency.

It is now becoming clearer that the huge increase in the Budget Deficit during the Bush years was direcly as a result of actions Bush took after 9/11. It is not being recognised how Osama bin Laden has helped not only to Bankrupt the US but also to set in motion its decline. That is one other reason that the media does not talk about these costs.

Is the world headed for the mother of all disasters?

"The Invisible Hand of Power
Support for democracy is the province of ideologists and propagandists. In the real world, elite dislike of democracy is the norm. The evidence is overwhelming that democracy is supported insofar as it contributes to social and economic objectives, a conclusion reluctantly conceded by the more serious scholarship.
Elite contempt for democracy was revealed dramatically in the reaction to the WikiLeaks exposures. Those that received most attention, with euphoric commentary, were cables reporting that Arabs support the U.S. stand on Iran. The reference was to the ruling dictators. The attitudes of the public were unmentioned. The guiding principle was articulated clearly by Carnegie Endowment Middle East specialist Marwan Muasher, formerly a high official of the Jordanian government: "There is nothing wrong, everything is under control." In short, if the dictators support us, what else could matter?" Naom Chomsky 2011

A long article, typical of Chomsky but as usual penetrating and matter of fact about the ways of the powerful. The elite of the world have become a problem specially for the environment. It is no longer East verses West, world wide power is being excercised by the few over the many. The concentration of power in fewer and fewer hands is as anti democratic as the system can become. The powerful are unbelievably greedy. unbelievably selfish and ruthlessly committed to staying in power. The really powerful are not the Presidents, Secretary Generals and other high officials but the people who put them there and the people who put them there were not the general populace. This is a system screaming to be changed anf if it cannot be changed then the world is headed for its biggest disaster ever.
Khusro

A nation in decline

The truth is that the world looked upon the US, particularly Obama with a lot of hope and admiration. Two years of Obama have brought about a reality check. Do the neocons represent the views of most Americans? No. Were the neocons, the American Right and AIPAC able to wreak havoc on Ameircan politics including Foreign policy? Yes.
Is there an awareness that these minority groups have access to untold money and power and will continue to have outsize influence on all American policies including ones that lead them into wars? No.
Several areas of major weakness are appearing for the US.
1. An irresponsible media, far too intent on making money to worry about their duty to inform the public rather than to entertain them. This is more true of TV than print.
2. Two political parties far too intent on winning elections than doing the right thing. There is an absence of any long term thinking and short term sound bites rule the day.
3. The role of money in politics has meant every thing is purchaseable, the checks and balances of Democracy have been trampled by every one particularly the Corporate Sector and more particularly Wall Street.
4. A leadership gap is emerging showing that after Obama, the new leaders will be even weaker than him and some of them will make Bush look like an angel. The Democrats and Obama are betting heavily that History will repeat itself, the Republicans will shoot themselves in the foot and Obama will shift far enough to the right and bounce back for another term. Weak as he is Obama still represents some sanity before the lunatic fringe takes over.

All this sounds very pessimistic, but it is not uncommon for a nation in decline. Time will tell whether the actions that they take will slow their decline or accelerate it but key to this will be the leadership that they chose. For the next two years the die is cast
Khusro

Capitalism and Democracy

"Four years on, however, WikiLeaks' release of contemporary troop logs raises serious questions about who, exactly, was doing the lying.
One of the few absolute revelations from the Wikileaks documents is the extent to which Rumsfeld, then-U.S. commander Gen. George Casey, and others had access to ample information from unimpeachable sources -- their own troops on the ground in Iraq -- regarding how badly events had turned in Iraq by 2006, but nonetheless denied a surge in killing to reporters and the U.S. public. "

To this day, the only justification for removing Saddam that is given is that he was an evil man and removing him was worth destroying Iraq for. The fact is that the result of removing Saddam has been, apart from destroying Iraq's infrastructure and making its people refugees, handing Iraq over to Iran sympathetic Shias. I am not saying that this is good or bad, just that this was the last thing on the minds of Rumsfeld, Cheyne, Wolfowitz and the Saudis. In fact if they could think of the worst possible outcome of the Iraq war, this would have been it.
Wikileaks proves something we already know that these people were cheats and liars and together with the the collusion of an inept media misled the American Public for years and years. In fact so geat was the deception that Bush won a second term as President. We also know something else that no one talks about, that the American public or its leaders or the media have learnt nothing from this fiasco. Everyone is locked into a makebelieve world of American superiority and invulnerabilty. As we prepare for mid term elections, no one is focussed on the lying, cheating thugs that we have been electing as our representatives, In fact all indications are that the new breed will be much worse than the previous one. This is not so much a failure of Democracy as the failure of the lethal combination of a Capitalist dominated Democracy.
For better or worse, the Chinese have chosen Capitalism over Democracy while the Indians are following the US model. The Europeans have long shied away from selling their souls to Capitalism. At no time has the world needed more ideas than now as to what is the better form of governance and what is the better form of economic management.
Khusro

Is the present economic crisis being underestimated?

The question is not that the facts are unknown or are being underestimated by the Government; the question is whether the Government knows what the solution is and whether they have the courage to administer the bitter pill or pills that are needed to redress the problem.

Part of the solutions can be,

• Cut entitlements ( Social Security etc)
• Raise Taxes
• Withdraw troops from foreign adventures and cut the Defense budget
• Cut the size of the Government
• Raise Productivity and live with high unemployment for some time.
• Encourage increased savings instead of encouraging spending.
• Stop printing money, that is not backed by productivity
• Stop the waste within the Economy specially relating to energy.
• Increase the Exports of the country and reduce reliance on imports

Out of these, the Government is doing the following,

• Phasing out troops from Iraq and Afghanistan, and avoiding attacking Iran.
• Considering increasing taxes on the rich by allowing Bush tax cuts to expire on the segment.
• Savings is going up.
• Encouraging China to revalue the Yuan.

One of the areas where costs will go up is the Health Care reform which is still a captive of the Insurance Industry and Premiums will go up.
The biggest failures of America are, not owning up to its mistakes. This is typical of declining powers and in fact this is why they decline, because it is not until you own up to your mistakes that you can correct them.

The two biggest mistakes to recognize are,

1. US Foreign policy relating to oil hegemony has been deeply flawed. The Middle East policy relating to Israel/Palestine, Iraq, Iran, Egypt and now Afghanistan/Pakistan has cost trillions and has backfired miserably.

2. The excesses of Capitalism are at the core of the most recent Economic collapse and not only are the guilty going unpunished but they are being given a second chance to try again.

Colonizers and Empires work on the reverse Robin Hood Principle and that is to rob the poor and the weak in order to make the rich, richer. The US has been both an Empire and a colonizer and the absence of revenues or privileges from withdrawing from this role, will add to the Economic burden of trying to make an honest living.
The political gridlock between those who believe that if dishonesty succeeded in the past there is no reason to change course now and those who can see that world dynamics have changed for good will prevent any meaningful solution to come forward. America has no stomach for a national government, even if there is an emergency.
Khusro

Does it matter which party wins the elction in the US?

The fact is that in Obama, America has a leader, better than any alternate but a man who is obsessed with wining ( the elections) more than doing what America needs. The foreign policy and economic tsunami of the Bush era needed a man capable of reversing almost all his policies and asking for at least 8 years to revive America from its near fatal illness. Instead he has taken an almost apologetic route to reluctantly doing away with Bushes mistakes. First he decided to continue with the Afghan war after being paralyzed for six months, and now he is in a daze about raising taxes from the rich, while the States are going bankrupt. Even his great medical reforms were compromised so badly that they will go down in history as a non event.
Obama is criticized for being white from inside, a black man, intimidated by all the whites around him but I now wonder if he is not yellow inside. His hopeful admirers who for 8 years watched in horror as Bush delivered punishing body blows to the might and prestige of America , are now having to watch another four years of insipid leadrship before the Republicans return to finish the job which George started.
Perhaps only one thing can be said in defense of Obama, There is only a cosmetic difference between the Democrats and the Republicans. Over these superficialities they are willing to slaughter one another. Does it really matter who is in charge?

The reason for the failure of Copenhagen

Stilwell says that rich countries are trying to exchange "beads and blankets for Manhattan." He adds: "This is a colonial moment. That's why no stone has been left unturned in getting heads of state here to sign off on this kind of deal.... Then there's no going back. You've carved up the last remaining unowned resource and allocated it to the wealthy."


Under the leadership of America, nothing can be expected except an un equal distribution of everything. America has come to stand for inequality and the virtues of self interest only even if it comes at the cost of depriving millions of minimal existence.
In many ways the negotiations on the environment represents the pits in offering leadership to a problem that affects the preservation of our planet. The Chinese appear to understand the magnitude of the problem more than America and yet an American, Al Gore, was given a prize, for talking glibly about global warming.
The tragedy is that a large part of America would want to do the right thing and yet our political system does not give them a voice. The eight years of Bush were spent in denial for dealing with the most serious problem faced by our planet and now that Obama is willing to at least accept that this is a problem, we have a weak President unable to break free of interests of the Corporations.

Khusro

A new world order?

http://www.ted.com/talks/hans_rosling_asia_s_rise_how_and_when.html




Several interesting points from viewing the video. Please see the video first.

1. The world as a whole is a better place today in terms of wealth and health than it was in 1858.
2. Imperialism helped the West and hurt Asia ( except Japan). Victory in two world wars put the West in control of making rules on how the game is to be played. The rules were slanted giving the West a huge edge.
3. Sovereignty is critical for the growth of a nation. A freer world ( free of Imperial domination, whether military or Economic) will lead to greater prosperity for every one as the rules will be more even.
4. The possibility of war to maintain the status quo of the West has already been tried. Fear of the emergence of China partly influenced the attack on Iraq. The idea was to occupy the Middle East ( including Iran) so that Energy supplies could be controlled to the disadvantage of China and India. This attempt has failed bar the shouting.

A new world order is emerging not just because nations like China and India are gaining a bigger say in making the rules but also because the West in their panic are making colossal mistakes hurting their credibility and calling into question the robustness of their institutions.

Khusro














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Is the US political system capable of bringing about change that does not perpetuate the interests of the elite?

Excerpt"

he stood with his predecessor – serial bubble-blowing Alan Greenspan – who argued that monetary authorities are best positioned to clean up the mess after the bursting of asset bubbles rather than to pre-empt the damage. "

Editorial Comment

The biggest criticism of US Policy is that they their planners are not adjusting to the new realities represented by globalisation, the failures of US Foreign policy, the loss of faith in the dollar and the apparent lack of any ethics in the general economic environment. I believe it is less a case of the planners not being aware of the need to make fundamental changes as the fact that these changes will hurt some major players and their interests and therefore will not be allowed to happen.
A consumer economy based on the good credit standing of the US will have to undergo change when the US is no longer AAA but this is a tough sell to the powerful retail Industry. A foreign policy that hurts the interests of AIPAC and the defense Industry is a non starter.
Is the US political system capable of bringing about change that does not perpetuate the interests of the elite? This is the biggest hurdle when the answer is " unlikely". While the non elite forces are greater in number, they still lack the organisation to have an impact. There is a growing sense of frustration that the Democratic Party is too much in the grip of the elite. It is only less elitist to the extent that the Republican party is far more racist and for the time being the Democratic President is black.
The forlorn hope that a grass roots movement will revolt and bring about change rises perpetually in the American heart. What will this grass roots movement be based on? Anti race, resistance to war or a concern for the environment. I believe neither of these. People will revolt, when they do, because of economic injustice. The lack of jobs, housing,reasonable heath care and adequate educational opportunities will bring out people on the streets faster. Not until people come out on to the streets to express their point of view will any one sit up and take notice. I believe that we need to build up the platform for Economic Justice within Wespac and build awareness not just for a better life but specially for meeting the basics of life. Until such time that we can show the way of achieving this both through mobilising and education, we cannot give the hope to the distressed that is needed. Hope will come with success and success will come through more vigorous and effective action. The message is quite clear, we cannot wait for Obama to deliver. It should be enough that he is there, we need for ourselves to mobilise and deliver.

Khusro


The case against Bernanke
By Stephen Roach
Published: August 25 2009 16:02 | Last updated: August 25 2009 16:02
Barack Obama has rendered one of his most important post-crisis verdicts: Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. This is a very shortsighted decision. While America’s head central banker deserves credit for being creative and courageous in orchestrating an unusually aggressive monetary easing programme, it is important to remember that his pre-crisis actions played an equally critical role in setting the stage for the most wrenching recession since the 1930s. It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor.
Mr Bernanke made three critical mistakes in his pre-Lehman incarnation: First, and foremost, he was deeply wedded to the philosophical conviction that central banks should be agnostic when it comes to asset bubbles. On this count, he stood with his predecessor – serial bubble-blowing Alan Greenspan – who argued that monetary authorities are best positioned to clean up the mess after the bursting of asset bubbles rather than to pre-empt the damage. As a corollary to this approach, both Mr Bernanke and Mr Greenspan drew the wrong conclusions from post-bubble strategies earlier in this decade put in place after the bursting of the equity bubble in 2000. In retrospect, the Fed’s injection of excess liquidity in 2001-2003, which Mr Bernanke endorsed with fervour, played a key role in setting the stage for the lethal mix of property and credit bubbles.

Second, Mr Bernanke was the intellectual champion of the “global saving glut” defence that exonerated the US from its bubble-prone tendencies and pinned the blame on surplus savers in Asia. While there is no denying the demand for dollar assets by foreign creditors, it is absurd to blame overseas lenders for reckless behaviour by Americans that a US central bank should have contained. Asia’s surplus savers had nothing to do with America’s irresponsible penchant for leveraging a housing bubble and using the proceeds to fund consumption. Mr Bernanke’s saving glut argument was at the core of a deep-seated US denial that failed to look in the mirror and pinned blame on others.

Third, Mr Bernanke is cut from the same market libertarian cloth that got the Fed into this mess. Steeped in the Greenspan credo that markets know better than regulators, Mr Bernanke was aligned with the prevailing Fed mindset that abrogated its regulatory authority in the era of excess. The derivatives’ explosion, extreme leverage of regulated and shadow banks and excesses of mortgage lending were all flagrant abuses that both Mr Bernanke and Mr Greenspan could have said no to. But they did not. As a result, a complex and unstable system veered dangerously out of control.
Notwithstanding these mistakes, Mr Obama may be premature in giving Mr Bernanke credit for the great cure. No one knows for certain as to whether the Fed’s strategy will ultimately be successful. The worst of the US recession appears to have been arrested for now – a fairly typical, but temporary, outgrowth of the time-honored inventory cycle. But the sustainability of any post-bubble recovery is always dubious. Just ask Japan 20 years after the bursting of its bubbles.
While financial markets are giddy with hopes of economic revival – in part inspired by Mr Bernanke’s cheerleading at the Fed’s annual Jackson Hole gathering – there is still good reason to believe that the US recovery will be anaemic and fragile. US consumers are in the early stages of a multi-year retrenchment as they cut debt and rebuild retirement saving. The unusual breadth and synchronicity of the global recession will restrain US export demand from becoming a new growth engine.
It would be the height of folly to reward Mr Bernanke for the recovery that never stuck. Yet Mr Bernanke’s apparent reward is, unfortunately, typical of the snap judgments that guide Washington decision-making. In this same vein, it is hard to forget Mr Greenspan’s mission-accomplished speech in 2004 that claimed “our strategy of addressing the bubble’s consequences rather than the bubble itself has been successful”. Eager to declare the crisis over, the Obama verdict may be equally premature.
The Bernanke reappointment is a welcome chance for a broader debate over the conduct and role of US monetary policy. Mr Obama has made sweeping proposals that give the Fed broad new powers in managing systemic risks. I argued in the Financial Times 10 months ago that the Fed should not be granted these powers without greater accountability as required by a “financial stability mandate” – in effect, forcing the Fed to shape monetary policy with an aim towards avoiding asset bubbles and imbalances. Without a revamped policy mandate, it is conceivable that we could face another destabilising crisis.
Ultimately, these decisions boil down to the person – in this case, Mr Bernanke – who is being charged with the awesome responsibility as America’s chief economic policymaker. As a student of the Great Depression, he should have known better. Yes, he reacted strongly after the fact in taking actions to avoid the pitfalls highlighted by his own research. But he lacked the foresight and courage to resist the most reckless tendencies of the era of excess. The world needs central bankers who avoid problems, not those who specialise in post-crisis damage control. For that reason, alone, he should not be reappointed. Let the debate begin.

The writer is chairman of Morgan Stanley Asia and author of The Next Asia to be published next month

Who rules America?

Excerpt

"Fighting the special interests doesn't pay and doesn't succeed."

Editorial Comment

Paul Craig Roberts has been railing against this system for a long time but as we are seeing in the case of Health care the corporations own Congress. I do not expect anything to change soon even under Obama. What may gain traction though is the second part of the article which questions why we are in Afghanistan. As the cost of conducting this war exceeds the cost of the Iraq war, sheer Economics will make people ask the obvious questions, what are we doing pouring valuable resources like men and money into the worlds biggest hell hole?

Obama has a very short window to make up his mind about how he will justify the Afghan war but if it is still there by the time of the next elections he will have run out of sell able ideas. His commitment to AfPak has stopped his party from pointing out the obvious connection between the Iraq/Afghanistan adventure and his failure to finance the Health Care plan. The Health Care plan incidentally is dying before our very eyes.

The other point in the article which gets no sympathy from any one because no one really cares about them ( never mind the car sticker s which say, I support the toops) is the psychological destruction of the men and women who serve in the US army. In spite of the various programs that the army puts them through on their return, a fairly large number become killers, rapists, wife/girl friend beaters, misfits and outcasts of society.

There is even less sympathy for what we have done to Iraq in destroying their country. No one questions how Iraq is now a much worse place for it's citizen then it was under Saddam. All we care about is to declare victory and to get out. If there are huge red flags relating to an ailing nation then we are not recognising them because we are not admitting that any thing serious ails us.

We are a nation in denial about our sickness and continue to harp on the great virtues of our Democracy and our Financial systems.
Khusro

Excerpt

"We have shifted from a culture of production to a culture of consumption. "

"The skillfully manufactured images and slogans that flood the airwaves and infect our political discourse mask reality. And we do not protest. "
=0 A

Consider the following written by Chris Hedges in his new Book:

I reported in my new book, Empire of Illusion: The End of Literacy and the Triumph of Spectacle from the ringside of professional wrestling bouts at Madison Square Garden, from Las Vegas where I wrote about the pornographic film industry, from academic conferences held by positive psychologists -- who claim to be able to engineer happiness – and from the campuses of universities to chronicle our terrifying flight as a culture into a state of illusion. I looked at the array of mechanisms used to divert us from confronting the economic, political and moral collapse around us. I examined the fantasy that if we draw on our inner resources and strengths, if we realize that we are truly exceptional, we can have everything we desire.
The childish idea that we can always prevail, that reality is never an impediment to what we want, is the central motif of illusion peddled on popular talk shows, by the Christian Right, by Hollywood, in corporate retreats, by the news industry and by self-help gurus. Reality can always be overcome. The future will always be glorious. And held out to keep us amused and entertained are spectacles and celebrities who have become idealized versions of ourselves and who, we are assured,20we can all one day become.
The cultural embrace of illusion, and the celebrity culture that has risen up around it, have accompanied the awful hollowing out of the state. We have shifted from a culture of production to a culture of consumption. We have been sold a system of casino capitalism, with its complicated and unregulated deals of turning debt into magical assets, to create fictional wealth for us and vast wealth for our elite. We have internalized the awful ethic of corporatism -- one built around the cult of the self and consumption as an inner compulsion -- to believe that living is about our own advancement and our own happiness at the expense of others. Corporations, behind the smoke screen, have ruthlessly dismantled and destroyed our manufacturing base and impoverished our working class. The free market became our god and government was taken hostage by corporations, the same corporations that entice us daily with illusions though the mass media, the entertainment industry and popular culture.
The more we sever ourselves from a literate, print-based world, a world of complexity and nuance, a world of ideas, for one informed by comforting, reassuring images, fantasies, slogans and a celebration of violence the more we implode. We ask, like the wrestling fans or those who confuse love with pornography, to be fed lies. We demand lies. The skillfully manufactured images and slogans that flood the airwaves and infect our political discourse mask reali ty. And we do not protest. The lonely Cassandras who speak the truth about our misguided imperial wars, the global economic meltdown and the imminent danger of multiple pollutions that are destroying the eco-system that sustains the human species, are drowned out by arenas full of fans chanting "Slut! Slut! Slut!" or television audiences chanting "Jer-ry! Jer-ry! Jer-ry!" The worse reality becomes, the less a beleaguered population wants to hear about it and the more it distracts itself with squalid pseudo-events of celebrity breakdowns, gossip and trivia.
A culture that cannot distinguish between reality and illusion dies. And we are dying now. We will wake from our state of induced childishness, one where trivia and gossip pass for news and information, one where our goal is not justice by an elusive and unattainable happiness, to confront the stark limitations before us or we will continue our headlong retreat into fantasy. Those who do not grow up in times of despair and turmoil inevitably turn to demagogues and charlatans to entertain and reassure them. And these demagogues, as they have throughout history, lead the crowd, blinded and amused, towards despotism.





















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Who Rules America?
By Paul Craig Roberts
5-18-9

What do you suppose it is like to be elected president of the United States only to find that your power is restricted to the service of powerful interest groups?


A president who does a good job for the ruling interest groups is paid off with remunerative corporate directorships, outrageous speaking fees, and a lucrative book contract. If he is young when he assumes office, like Bill Clinton and Obama, it means a long life of luxurious leisure.


Fighting the special interests doesn't pay and doesn't succeed. On April 30 the primacy of special over public interests was demonstrated yet again. The Democrats' bill to prevent 1.7 million mortgage foreclosures and, thus, preserve $300 billion in home equity by permitting homeowners to renegotiate their mortgages, was defeated in the Senate, despite the 60-vote majority of the Democrats. The banksters were able to defeat the bill 51 to 45.


These are the same financial gangsters whose unbridled greed and utter irresponsibility have=2 0wiped out half of Americans' retirement savings, sent the economy into a deep hole, and threatened the US dollar's reserve currency role. It is difficult to imagine an interest group with a more damaged reputation. Yet, a majority of "the people's representatives" voted as the discredited banksters instructed.


Hundreds of billions of public dollars have gone to bail out the banksters, but when some Democrats tried to get the Senate to do a mite for homeowners, the US Senate stuck with the banks.The Senate's motto is: "Hundreds of billions for the banksters, not a dime for homeowners."


If Obama was naive about well-intentioned change before the vote, he no longer has this political handicap.


Democratic Majority Whip Dick Durbin acknowledged the voters' defeat by the discredited banksters. The banks, Durbin said, "frankly own the place."


It is not difficult to understand why. Among those who defeated the homeowners bill are senators Jon Tester (Mont), Max Baucus (Mont), Blanche Lincoln (Ark), Ben Nelson (Neb), ManyLandrieu (La), Tim Johnson (SD), and Arlan Specter (Pa). According to reports, the banksters have poured a half million dollars into Tester's campaign funds. Baucus has received $3.5 million; Lincoln $1.3 million; Nelson $1.4 million; Landrieu $2 million; Johnson $2.5 million; Spec ter $4.5 million.


The same Congress that can't find a dime for homeowners or health care appropriates hundreds of billions of dollars for the military/security complex. The week after the Senate foreclosed on American homeowners, the Obama "change" administration asked Congress for an additional $61 billion dollars for the neoconservatives' war in Iraq and $65 billion more for the neoconservatives' war in Afghanistan. Congress greeted this request with a rousing "Yes we can!"


The additional $126 billion comes on top of the $533.7 billion "defense" budget for this year. The $660 billion--probably a low-ball number--is ten times the military spending of China, the second most powerful country in the world.


How is it possible that "the world's only superpower" is threatened by the likes of Iraq and Afghanistan? How can the US be a superpower if it is threatened by countries that have no military capability other than a guerilla capability to resist invaders?


These "wars" are a hoax designed to enrich the US armaments industry and to infuse the "security forces" with police powers over American citizenry.


Not a dime to prevent millions of Americans from losing their homes, but hundreds of billions of dollars to murder Muslim20women and children and to create millions of refugees, many of whom will either sign up with insurgents or end up as the next wave of immigrants into America.


This is the way the American government works. And it thinks it is a "city on the hill, a light unto the world."


Americans elected Obama because he said he would end the gratuitous criminal wars of the Bush brownshirts, wars that have destroyed America's reputation and financial solvency and serve no public interest. But once in office Obama found that he was ruled by the military/security complex. War is not being ended, merely transferred from the unpopular war in Iraq to the more popular war in Afghanistan. Meanwhile, Obama, in violation of Pakistan's sovereignty, continues to attack "targets" in Pakistan. In place of a war in Iraq, the military/security complex now has two wars going in much more difficult circumstances.


Viewing the promotion gravy train that results from decades of warfare, the US officer corps has responded to the "challenge to American security" from the Taliban. "We have to kill them over there before they come over here." No member of the US government or its numerous well-paid agents has ever explained how the Taliban, which is focused on Afghanistan, could ever get to America. Yet this hyped fear is sufficient for the public to support the continuing enrichment of the military/security complex, while American homes are foreclosed by the banksters who have destroyed the retirement prospects of the US population..


According to Pentagon budget documents, by next year the cost of the war against Afghanistan will exceed the cost of the war against Iraq. According to a Nobel prize-winning economist and a budget expert at Harvard University, the war against Iraq has cost the American taxpayers $3 trillion, that is, $3,000 billion in out-of-pocket and already incurred future costs, such as caring for veterans.


If the Pentagon is correct, then by next year the US government will have squandered $6 trillion dollars on two wars, the only purpose of which is to enrich the munitions manufacturers and the "security" bureaucracy.


The human and social costs are dramatic as well and not only for the Iraqi, Afghan, and Pakistani populations ravaged by American bombs. Dahr Jamail reports that US Army psychiatrists have concluded that by their third deployment, 30 percent of American troops are mental wrecks. Among the costs that reverberate across generations of Americans are elevated rates of suicide, unemployment, divorce, child and spousal abuse, drug and alcohol addiction, homelessness and incarceration. http://www.truthout .org/051209J? n


In the Afghan "desert of death" the Obama administration is constructing a giant military base. Why? What does the internal politics of Afghanistan have to do with the US?


What is this enormous waste of resources that America does not have accomplishing besides enriching the American munitions industry?


China and to some extent India are the rising powers in the world. Russia, the largest country on earth, is armed with a nuclear arsenal as terrifying as the American one. The US dollar's role as reserve currency, the most important source of American power, is undermined by the budget deficits that result from the munition corporations' wars and the bankster bailouts.


Why is the US making itself impotent fighting wars that have nothing whatsoever to do with its security, wars that are, in fact, threatening its security?


The answer is that the military/security lobby, the financial gangsters, and AIPAC rule. The American people be damned.

Beloscuni in Tehran- A book Review Comments on the state of Democracy

Excerpt

" What we call the ‘crisis of democracy’ isn’t something that happens when people stop believing in their own power but, on the contrary, when they stop trusting the elites, when they perceive that the throne is empty, that the decision is now theirs. ‘Free elections’ involve a minimal show of politeness when those in power pretend that they do not really hold the power, and ask us to decide freely if we want to grant it to them.
We act as though we were free, not only accepting but even demanding that an invisible injunction tell us what to do and think."

"..nobody takes democracy or justice seriously, we are all aware that they are corrupt, but we practise them anyway because we assume they work even if we don’t believe in them. "

Editorial Comment

A brilliant essay on the state of Democracy as well as the role that capitalism is playing by a person who seems to have thought more about Democracy than Capitalism.
I have questioned consistently whether Democracy as practiced today particularly in the US is serving a useful purpose. So wedded are people to this concept here that they are not only proud of the way they practice it but wish to export it to the rest of the world. They know no other way to govern themselves and are therefore willing to live with all the warts, boils, stink and much more serious side effects that comes with the way they practice it.

A democratic process that does not simultaneously have as it's goal the bringing of Economic Justice is no more than treason against the people that it purports to serve. When a nation puts Capitalism on a higher pedestal than Democracy than it serves the interests of Capitalism and not Democracy. Capitalism is a wild animal that will usurp Democracy and bend it to it's will if it is given the slightest leeway and nothing serves Capitalism more than Materialism and nothing serves materialism more than self interest and nothing serves self interest more than the absence of spiritualism in life.

Russia and Italy have been given as examples where the elite ( representatives of Capitalism) have created the drama that deludes their people into thinking that what is happening is in their name. The question is whether even if something happens in the name of the people is it in their best interest and who decides what is in the best interest of people.

One of the greatest skills of America is Marketing itself. In this way it does a great job in Marketing to its citizen that the highest goal to aspire to for a nation is unending affluence powered by ruthless materialism. This is treated as a given and not questioned even in the face of unequal economic opportunity. In order to do this Democracy must have the strength to curb raw Capitailsm or end up in the dustbin of History as a Capitalist tool more than a Democratic process. Just as Iran is ruled by the clergy, America is ruled by it's Corporations and the rich and both call themselves Democracies and both accuse the other with some justification of confusing Democracy with Elitism.
Khusro




LRB
23 July 2009
Slavoj Žižek
Berlusconi in Tehran
Slavoj Žižek
When an authoritarian regime approaches its final crisis, but before its actual collapse, a mysterious rupture often takes place. All of a sudden, people know the game is up: they simply cease to be afraid. It isn’t just that the regime loses its legitimacy: its exercise of power is now perceived as a panic reaction, a gesture of impotence. Ryszard Kapuściński, in Shah of Shahs, his account of the Khomeini revolution, located the precise moment of this rupture: at a Tehran crossroad, a single demonstrator refused to budge when a policeman shouted at him to move, and the embarrassed policeman withdrew. Within a couple of hours, all Tehran had heard about the incident, and although the streetfighting carried on for weeks, everyone somehow knew it was all over. Is something similar happening now?
There are many versions of last month’s events in Tehran. Some see in the protests the culmination of the pro-Western ‘reform movement’, something along the lines of the colour-coded revolutions in Ukraine and Georgia. They support the protests as a secular reaction to the Khomeini revolution, as the first step towards a new liberal-democratic Iran freed from Muslim fundamentalism. They are countered by sceptics who think that Ahmadinejad actually won, that he is the voice of the majority, while Mousavi’s support comes from the middle classes and their gilded youth. Let’s face facts, they say: in Ahmadinejad, Iran has the president it deserves. Then there are those who dismiss Mousavi as a member of the clerical establishment whose differences from Ahmadinejad are merely cosmetic. He too wants to continue with the atomic energy programme, is against recognising Israel, and when he was prime minister in the repressive years of the war with Iraq enjoyed the full support of Khomeini.
Finally, and saddest of all, are the leftist supporters of Ahmadinejad. What is at stake for them is Iranian freedom from imperialism. Ahmadinejad won because he stood up for the country’s independence, exposed corruption among the elite and used Iran’s oil wealth to boost the incomes of the poor majority. This, we are told, is the true Ahmadinejad: the Holocaust-denying fanatic is a creation of the Western media. In this view, what’s been happening in Iran is a repetition of the 1953 overthrow of Mossadegh – a coup, financed by the West, against the legitimate premier. This not only ignores the facts (the high electoral turnout, up from the usual 55 to 85 per cent, can be explained only as a protest vote), it also assumes, patronisingly, that Ahmadinejad is good enough for the backward Iranians: they aren’t yet sufficiently mature to be ruled by a secular left.
Opposed to one another though they are, all these versions read the Iranian protests as a conflict between Islamic hardliners and pro-Western liberal reformists. That is why they find it so difficult to locate Mousavi: is he a Western-backed reformer who wants to increase people’s freedom and introduce a market economy, or a member of the clerical establishment whose victory wouldn’t significantly change the nature of the regime? Either way, the true nature of the protests is being missed.
The green colours adopted by the Mousavi supporters and the cries of ‘Allahu akbar!’ that resonated from the roofs of Tehran in the evening darkness suggested that the protesters saw themselves as returning to the roots of the 1979 Khomeini revolution, and cancelling out the corruption that followed it. This was evident in the way the crowds behaved: the emphatic unity of the people, their creative self-organisation and improvised forms of protest, the unique mixture of spontaneity and discipline. Picture the march: thousands of men and women demonstrating in complete silence. This was a genuine popular uprising on the part of the deceived partisans of the Khomeini revolution. We should contrast the events in Iran with the US intervention in Iraq: an assertion of popular will on the one hand, a foreign imposition of democracy on the other. The events in Iran can also be read as a comment on the platitudes of Obama’s Cairo speech, which focused on the dialogue between religions: no, we don’t need a dialogue between religions (or civilisations), we need a bond of political solidarity between those who struggle for justice in Muslim countries and those who participate in the same struggle elsewhere.
Two crucial observations follow. First, Ahmadinejad is not the hero of the Islamist poor, but a corrupt Islamofascist populist, a kind of Iranian Berlusconi whose mixture of clownish posturing and ruthless power politics is causing unease even among the ayatollahs. His demagogic distribution of crumbs to the poor shouldn’t deceive us: he has the backing not only of the organs of police repression and a very Westernised PR apparatus. He is also supported by a powerful new class of Iranians who have become rich thanks to the regime’s corruption – the Revolutionary Guard is not a working-class militia, but a mega-corporation, the most powerful centre of wealth in the country.
Second, we have to draw a clear distinction between the two main candidates opposed to Ahmadinejad, Mehdi Karroubi and Mousavi. Karroubi is, effectively, a reformist, a proponent of an Iranian version of identity politics, promising favours to particular groups of every kind. Mousavi is something entirely different: he stands for the resuscitation of the popular dream that sustained the Khomeini revolution. It was a utopian dream, but one can’t deny the genuinely utopian aspect of what was so much more than a hardline Islamist takeover. Now is the time to remember the effervescence that followed the revolution, the explosion of political and social creativity, organisational experiments and debates among students and ordinary people. That this explosion had to be stifled demonstrates that the revolution was an authentic political event, an opening that unleashed altogether new forces of social transformation: a moment in which ‘everything seemed possible.’ What followed was a gradual closing-down of possibilities as the Islamic establishment took political control. To put it in Freudian terms, today’s protest movement is the ‘return of the repressed’ of the Khomeini revolution.
What all this means is that there is a genuinely liberatory potential in Islam: we don’t have to go back to the tenth century to find a ‘good’ Islam, we have it right here, in front of us. The future is uncertain – the popular explosion has been contained, and the regime will regain ground. However, it will no longer be seen the same way: it will be just one more corrupt authoritarian government. Ayatollah Khamenei will lose whatever remained of his status as a principled spiritual leader elevated above the fray and appear as what he is – one opportunistic politician among many. But whatever the outcome, it is vital to keep in mind that we have witnessed a great emancipatory event which doesn’t fit within the frame of a struggle between pro-Western liberals and anti-Western fundamentalists. If we don’t see this, if as a consequence of our cynical pragmatism, we have lost the capacity to recognise the promise of emancipation, we in the West will have entered a post-democratic era, ready for our own Ahmadinejads. Italians already know his name: Berlusconi. Others are waiting in line.
Is there a link between Ahmadinejad and Berlusconi? Isn’t it preposterous even to compare Ahmadinejad with a democratically elected Western leader? Unfortunately, it isn’t: the two are part of the same global process. If there is one person to whom monuments will be built a hundred years from now, Peter Sloterdijk once remarked, it is Lee Kuan Yew, the Singaporean leader who thought up and put into practice a ‘capitalism with Asian values’. The virus of authoritarian capitalism is slowly but surely spreading around the globe. Deng Xiaoping praised Singapore as the model that all of China should follow. Until now, capitalism has always seemed to be inextricably linked with democracy; it’s true there were, from time to time, episodes of direct dictatorship, but, after a decade or two, democracy again imposed itself (in South Korea, for example, or Chile). Now, however, the link between democracy and capitalism has been broken.
This doesn’t mean, needless to say, that we should renounce democracy in favour of capitalist progress, but that we should confront the limitations of parliamentary representative democracy. The American journalist Walter Lippmann coined the term ‘manufacturing consent’, later made famous by Chomsky, but Lippmann intended it in a positive way. Like Plato, he saw the public as a great beast or a bewildered herd, floundering in the ‘chaos of local opinions’. The herd, he wrote in Public Opinion (1922), must be governed by ‘a specialised class whose personal interests reach beyond the locality’: an elite class acting to circumvent the primary defect of democracy, which is its inability to bring about the ideal of the ‘omni-competent citizen’. There is no mystery in what Lippmann was saying, it is manifestly true; the mystery is that, knowing it, we continue to play the game. We act as though we were free, not only accepting but even demanding that an invisible injunction tell us what to do and think.
In this sense, in a democracy, the ordinary citizen is effectively a king, but a king in a constitutional democracy, a king whose decisions are merely formal, whose function is to sign measures proposed by the executive. The problem of democratic legitimacy is homologous to the problem of constitutional democracy: how to protect the dignity of the king? How to make it seem that the king effectively decides, when we all know this is not true? What we call the ‘crisis of democracy’ isn’t something that happens when people stop believing in their own power but, on the contrary, when they stop trusting the elites, when they perceive that the throne is empty, that the decision is now theirs. ‘Free elections’ involve a minimal show of politeness when those in power pretend that they do not really hold the power, and ask us to decide freely if we want to grant it to them.
Alain Badiou has proposed a distinction between two types (or rather levels) of corruption in democracy: the first, empirical corruption, is what we usually understand by the term, but the second pertains to the form of democracy per se, and the way it reduces politics to the negotiation of private interests. This distinction becomes visible in the (rare) case of an honest ‘democratic’ politician who, while fighting empirical corruption, nonetheless sustains the formal space of the other sort. (There is, of course, also the opposite case of the empirically corrupted politician who acts on behalf of the dictatorship of Virtue.)
‘If democracy means representation,’ Badiou writes in De quoi Sarkozy est-il le nom?, ‘it is first of all the representation of the general system that bears its forms. In other words: electoral democracy is only representative in so far as it is first of all the consensual representation of capitalism, or of what today has been renamed the “market economy”. This is its underlying corruption.’[*] At the empirical level multi-party liberal democracy ‘represents’ – mirrors, registers, measures – the quantitative dispersal of people’s opinions, what they think about the parties’ proposed programmes and about their candidates etc. However, in a more radical, ‘transcendental’ sense, multi-party liberal democracy ‘represents’ – instantiates – a certain vision of society, politics and the role of the individuals in it. Multi-party liberal democracy ‘represents’ a precise vision of social life in which politics is organised so that parties compete in elections to exert control over the state legislative and executive apparatus. This transcendental frame is never neutral – it privileges certain values and practices – and this becomes palpable in moments of crisis or indifference, when we experience the inability of the democratic system to register what people want or think. In the UK elections of 2005, for example, despite Tony Blair’s growing unpopularity, there was no way for this disaffection to find political expression. Something was obviously very wrong here: it wasn’t that people didn’t know what they wanted, but rather that cynicism, or resignation, prevented them from acting.
This is not to say that democratic elections should be despised; the point is only to insist that they are not in themselves an indication of the true state of affairs; as a rule, they tend to reflect the predominant doxa. Take an unproblematic example: France in 1940. Even Jacques Duclos, the number two in the French Communist Party, admitted that if, at that point in time, free elections had been held in France, Marshal Pétain would have won with 90 per cent of the vote. When De Gaulle refused to acknowledge France’s capitulation and continued to resist, he claimed that only he, and not the Vichy regime, spoke on behalf of the true France (not, note, on behalf of the ‘majority of the French’). He was claiming to be speaking the truth even if it had no democratic legitimacy and was clearly opposed to the opinion of the majority of the French people. There can be democratic elections which enact a moment of truth: elections in which, against its sceptical-cynical inertia, the majority momentarily ‘awakens’ and votes against the hegemonic opinion; however, that such elections are so exceptional shows that they are not as such a medium of truth.
It is democracy’s authentic potential that is losing ground with the rise of authoritarian capitalism, whose tentacles are coming closer and closer to the West. The change always takes place in accordance with a country’s values: Putin’s capitalism with ‘Russian values’ (the brutal display of power), Berlusconi’s capitalism with ‘Italian values’ (comical posturing). Both Putin and Berlusconi rule in democracies which are gradually being reduced to an empty shell, and, in spite of the rapidly worsening economic situation, they both enjoy popular support (more than two-thirds of the electorate). No wonder they are personal friends: each of them has a habit of ‘spontaneous’ outbursts (which, in Putin’s case, are prepared in advance in conformity with the Russian ‘national character’). From time to time, Putin likes to use a dirty word or utter an obscene threat. When, a couple of years ago, a Western journalist asked him an awkward question about Chechnya, Putin snapped back that, if the man wasn’t yet circumcised, he was cordially invited to Moscow, where they have excellent surgeons who would cut a little more radically than usual.
Berlusconi is a significant figure, and Italy an experimental laboratory where our future is being worked out. If our political choice is between permissive-liberal technocratism and fundamentalist populism, Berlusconi’s great achievement has been to reconcile the two, to embody both at the same time. It is arguably this combination which makes him unbeatable, at least in the near future: the remains of the Italian ‘left’ are now resigned to him as their fate. This is perhaps the saddest aspect of his reign: his democracy is a democracy of those who win by default, who rule through cynical demoralisation.
Berlusconi acts more and more shamelessly: not only ignoring or neutralising legal investigations into his private business interests, but behaving in such a way as to undermine his dignity as head of state. The dignity of classical politics stems from its elevation above the play of particular interests in civil society: politics is ‘alienated’ from civil society, it presents itself as the ideal sphere of the citoyen in contrast to the conflict of selfish interests that characterise the bourgeois. Berlusconi has effectively abolished this alienation: in today’s Italy, state power is directly exerted by the bourgeois, who openly exploits it as a means to protect his own economic interest, and who parades his personal life as if he were taking part in a reality TV show.
The last tragic US president was Richard Nixon: he was a crook, but a crook who fell victim to the gap between his ideals and ambitions on the one hand, and political realities on the other. With Ronald Reagan (and Carlos Menem in Argentina), a different figure entered the stage, a ‘Teflon’ president no longer expected to stick to his electoral programme, and therefore impervious to factual criticism (remember how Reagan’s popularity went up after every public appearance, as journalists enumerated his mistakes). This new presidential type mixes ‘spontaneous’ outbursts with ruthless manipulation.
The wager behind Berlusconi’s vulgarities is that the people will identify with him as embodying the mythic image of the average Italian: I am one of you, a little bit corrupt, in trouble with the law, in trouble with my wife because I’m attracted to other women. Even his grandiose enactment of the role of the noble politician, il cavaliere, is more like an operatic poor man’s dream of greatness. Yet we shouldn’t be fooled: behind the clownish mask there is a state power that functions with ruthless efficiency. Perhaps by laughing at Berlusconi we are already playing his game. A technocratic economic administration combined with a clownish façade does not suffice, however: something more is needed. That something is fear, and here Berlusconi’s two-headed dragon enters: immigrants and ‘communists’ (Berlusconi’s generic name for anyone who attacks him, including the Economist).
Kung Fu Panda, the 2008 cartoon hit, provides the basic co-ordinates for understanding the ideological situation I have been describing. The fat panda dreams of becoming a kung fu warrior. He is chosen by blind chance (beneath which lurks the hand of destiny, of course), to be the hero to save his city, and succeeds. But the film’s pseudo-Oriental spiritualism is constantly undermined by a cynical humour. The surprise is that this continuous making-fun-of-itself makes it no less spiritual: the film ultimately takes the butt of its endless jokes seriously. A well-known anecdote about Niels Bohr illustrates the same idea. Surprised at seeing a horseshoe above the door of Bohr’s country house, a visiting scientist said he didn’t believe that horseshoes kept evil spirits out of the house, to which Bohr answered: ‘Neither do I; I have it there because I was told that it works just as well if one doesn’t believe in it!’ This is how ideology functions today: nobody takes democracy or justice seriously, we are all aware that they are corrupt, but we practise them anyway because we assume they work even if we don’t believe in them. Berlusconi is our own Kung Fu Panda. As the Marx Brothers might have put it, ‘this man may look like a corrupt idiot and act like a corrupt idiot, but don’t let that deceive you – he is a corrupt idiot.’
To get a glimpse of the reality beneath this deception, call to mind the events of July 2008, when the Italian government proclaimed a state of emergency in the whole of Italy as a response to the illegal entry of immigrants from North Africa and Eastern Europe. At the beginning of August, it made a show of deploying 4000 armed soldiers to control sensitive points in big cities (train stations, commercial centres and so on.) A state of emergency was introduced without any great fuss: life was to go on as normal. Is this not the state we are approaching in developed countries all around the world, where this or that form of emergency (against the terrorist threat, against immigrants) is simply accepted as a measure necessary to guarantee the normal run of things?
What is the reality of this state of emergency? On 7 August 2007, a crew of seven Tunisian fishermen dropped anchor 30 miles south of the island of Lampedusa off Sicily. Awakened by screams, they saw a rubber boat crammed with starving people – 44 African migrants, as it turned out – on the point of sinking. The captain decided to bring them to the nearest port, at Lampedusa, where his entire crew was arrested. On 20 September, the fishermen went on trial in Sicily for the crime of ‘aiding and abetting illegal immigration’. If convicted, they would get between one and 15 years in jail. Everyone agreed that the real point of this absurd trial was to dissuade other boats from doing the same: no action was taken against other fishermen who, when they found themselves in similar situations, apparently beat the migrants away with sticks, leaving them to drown. What the incident demonstrates is that Agamben’s notion of homo sacer – the figure excluded from the civil order, who can be killed with impunity – is being realised not only in the US war on terror, but also in Europe, the supposed bastion of human rights and humanitarianism.
The formula of ‘reasonable anti-semitism’ was best formulated in 1938 by Robert Brasillach, who saw himself as a ‘moderate’ anti-semite:
We grant ourselves permission to applaud Charlie Chaplin, a half Jew, at the movies; to admire Proust, a half Jew; to applaud Yehudi Menuhin, a Jew; and the voice of Hitler is carried over radio waves named after the Jew Hertz . . . We don’t want to kill anyone, we don’t want to organise any pogroms. But we also think that the best way to hinder the always unpredictable actions of instinctual anti-semitism is to organise a reasonable anti-semitism.
Our governments righteously reject populist racism as ‘unreasonable’ by our democratic standards, and instead endorse ‘reasonably’ racist protective measures. ‘We grant ourselves permission to applaud African and Eastern European sportsmen, Asian doctors, Indian software programmers,’ today’s Brasillachs, some of them social democrats, are telling us. ‘We don’t want to kill anyone, we don’t want to organise any pogroms. But we also think that the best way to hinder the always unpredictable, violent actions of the instinctual anti-immigrant is to organise reasonable anti-immigrant protection.’ A clear passage from direct barbarism to Berlusconian barbarism with a human face.
* The Meanings of Sarkozy by Alain Badiou, translated by David Fernbach (Verso, 117 pp., £12.99, February, 978 1 84467 309 4).
Slavoj Žižek, dialectical-materialist philosopher and Lacanian psychoanalyst, is codirector of the International Centre for Humanities, Birkbeck College, London

THE WORLD FROM WASHINGTON

Excerpt

"Most major insurance companies use outside firms to reinsure, but the vast majority of AIG's reinsurance contracts are negotiated internally among its affiliates, Gober says, and these internal balance sheets don't add up."

Editorial comment

Capitalism's excesses just keep piling up. It was well known the the American Economy was a pack of cards but one which some how kept standing based on it's size, its assumed productivity and it's record of growth. Once the music stopped, Capitalism is the one left standing without a chair. If Madoff was the biggest individual scandal, AIG is beginning to looks like the biggest corporate swindle.

Previously Bush had already indulged in the biggest Government swindle, taking the country into a trillion dollar war based on lies about WMDs and based on private instructions from God. Yet no one, no one, is being held accountable, not even Madoff. He will probably get off in time with a light sentence for good behavior.

Still to break, the big media swindle. Presenting America with two points of view and silencing the third point of view. These are the people kept away from TV interviews, their views not given space in the oped pages, letters to the Editor, they are even denied a place in Presidential debates even while they are standing for President. These are people denied tenure in colleges, they are fired from their jobs for having a third point of view, their identities revealed at the cost of their security and at the expense of national security and the list goes on and on.

Fortunately the Internet has provided the public an access to various points of view. People can make up their own mind about what they want to believe but they should know how unscrupulously they have been lied to, cheated and made fools of. Unless a concerted effort is made to change this culture of materialism, nothing can save us from falling off the cliff.

Khusro


THE WORLD FROM WASHINGTON
The Next AIG Scandal?
The firm's problems may extend to its 'healthy' insurance side. By Michael Hirsh | Newsweek Web ExclusiveMar 18, 2009

Outrageous. It's the preferred adjective used by Barack Obama and Ben Bernanke to describe AIG, the crippled giant that has turned into a national money pit. AIG has swallowed at least $170 billion in taxpayer money so far while funneling $165 million of it onward in bonuses to its incompetent executives, along with tens of billions more to equally privileged "counterparties" like Goldman Sachs.But I suspect that—with apologies to a famous American patriot—we have not yet begun to get outraged. At least if some of the insurance experts I've been talking to are correct.Thomas Gober, a former Mississippi state insurance examiner who has tracked fraud in the industry for 23 years and served previously as a consultant to the FBI and the Department of Justice, says he believes AIG's supposedly solvent insurance business may be at least as troubled as its reckless financial-products unit. Far from being "healthy," as state insurance regulators, ratings agencies and other experts have repeatedly described the insurance side, Gober calls it "a house of cards." Citing numerous documents he has obtained from state insurance regulators and obscure data buried in AIG's own 300-page annual reports, Gober argues that AIG's 71 interlocking domestic U.S. insurance subsidiaries are in hock to each other to an astonishing degree.Most of this as-yet-undiscovered problem, Gober says, lies in the area of reinsurance, whereby one insurance company insures the liabilities of another so that the latter doesn't have to carry all the risk on its books. Most major insurance companies use outside firms to reinsure, but the vast majority of AIG's reinsurance contracts are negotiated internally among its affiliates, Gober says, and these internal balance sheets don't add up. The annual report of one major AIG subsidiary, American Home Assurance, shows that it owes $25 billion to another AIG affiliate, National Union Fire, Gober maintains. But American has only $22 billion of total invested assets on its balance sheet, he says, and it has issued another $22 billion in guarantees to the other companies. "The American Home assets and liquidity raise serious questions about their ability to make good on their promise to National Union Fire," says Gober, who has a consulting business devoted to protecting policyholders. Gober says there are numerous other examples of "cooked books" between AIG subsidiaries. Based on the state insurance regulators' own reports detailing unanswered questions, the tally in losses could be hundreds of billions of dollars more than AIG is now acknowledging.One early sign of trouble came when Christian Milton, AIG's vice president of reinsurance from 1982 to 2005, was convicted last year in federal district court of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission. (Milton was sentenced in January; his lawyers have indicated plans to appeal.)AIG spokesman Mark Herr took strong exception: "We strongly disagree with Mr. Gober's analysis, which lacks a fundamental understanding of our commercial insurance operations' inter-company risk sharing agreements or even the basics of statutory accounting. Our primary regulators, including New York and Pennsylvania, regularly review our statutory filings as well as our intra-company risk sharing pool, and have raised no objections to this structure. They have repeatedly stated that we have sufficient financial strength to meet our obligations. In fact, in today's hearing on AIG, Joel Ario, Pennsylvania State Insurance Commissioner, commented that the insurance companies of AIG remain strong and well capitalized. " But if Gober is right, the implications are almost too awful to contemplate. Despite its troubles on Wall Street, AIG is still the largest insurance company in the United States, controlling both the largest life and health insurer and the second-largest property and casualty insurer. It has 30 million U.S. customers. AIG is also a major provider of guaranteed investment contracts and products that protect people in 401(k) plans, as well as being the leading commercial insurer in the U.S. It is one of the largest insurance companies in the world, with insurance and financial operations in more than 130 countries. These insurance businesses were once thought to be so solid that AIG was able to use the triple-A rating it was routinely awarded to start up its vast credit-default- swap business.Public outrage has been building, along with the outcry about bonuses, over all the taxpayer money that has gone to keep AIG afloat by paying off the credit-default- swap counterparties. While some worries have surfaced about the various insurance companies' risky securities-lending practices, most have escaped scrutiny. But if millions of AIG policyholders are at risk too and no one's saying it yet, the populist backlash could get really ugly.Gober has brought his allegations to the attention of the House Financial Services Committee, chaired by Rep. Barney Frank. A committee spokesman did not immediately return a call asking for comment. But over at the Senate banking committee, ranking member Sen. Richard Shelby during hearings last week raised questions about whether AIG's insurance side was as sound as the company maintained it to be. In response, Eric Dinallo, New York state's superintendent of insurance, said he thought "the operating companies of AIG, particularly the property companies, are in excellent condition." But Dinallo admitted he had examined only 25 of the domestic AIG companies and added: "There are problems with state insurance regulation. I've been a proponent of us revisiting it."And therein lies the real problem. More than any other Wall Street rogue, AIG has been able to indulge in "regulatory arbitrage" on a global scale, creating totally unsupervised businesses that act beyond the purview of any government (AIG has repeatedly said that its problems were confined to the London-based financial-products unit). The company's ability to escape an umbrella regulator was one reason the financial-products group was able to sell, indiscriminately and without hedges, credit-default swaps around the world in the belief that they could never all come due at once. They did. Fed chairman Bernanke told lawmakers in early March that AIG "exploited a huge gap in the regulatory system" and was essentially a hedge fund attached to a "large and stable insurance company." But is that really an accurate description? Huge regulatory gaps also exist in insurance. "There is no federal insurance regulator," according to a senior government banking official, only individual state agencies. Are we missing something really big here? If so, there might be another terrible reckoning to come.© 2009

The Crisis Is Not an Abnormality of Capitalism

Excerpt

"I believe the crisis can reach very serious dimensions, but I do not think that, on its own, it represents the end of the capitalist system or its definitive destruction. One of the things that Marx argued with great lucidity was that capitalism does not collapse through an economic crisis. Capitalism has to be brought down, through political actions."

Editorial Comment

An interview worth reading. A serious re examination is taking place of the pros and cons of Capitalism. The excessive focus on profits and its disregard for a social purpose have come to to haunt a system that got carried away by its own hubris.

The question not asked was whether Capitalism breeds its own culture of materialism which then helps to perpetuate the system like a disease. Materialsim become a cancer which could become difficult to eradicate even with surgery. This is where I differ with Marx. Political action will not bring down Capitalism in America or reform it. America is likely to implode under the weight of its top heavy political system.

There is a race going on between the grass roots and the entrenched establishment. The grass roots have been dealt a blow by the apparent defection of Obama to the other side. They are in denial about it and want to give him the benefit of the doubt. Will they get there before the implosion happens? This is the Trillion dollar question.

Khusro


http://mrzine. monthlyreview. org/martinez2303 09p.htmlOsvaldo Martínez: "The Crisis Is Not an Abnormality of Capitalism"

Interview by Luisa Maria Gonzalez Garcia 2009 started off badly. The international economic crisis is the top priority of governments, companies, international organizations, and individuals preoccupied with having a roof to sleep under and food on the table.The situation has surprised almost everybody, albeit Cuba to a lesser degree. Almost a decade ago, Comandante Fidel Castro warned that the conditions were being created for the outbreak of a crisis of enormous dimensions. Osvaldo Martínez, director of the Research Centre for World Economy and chair of the Cuban National Assembly's Economic Affairs Commission, had also alluded to the subject on several occasions. Looking back, the Economics PhD says: "They criticized us heavily, they called us catastrophists, but finally the crisis is here.

"Mass lay-offs all around the world, rising unemployment and poverty, closures of companies and insolvency of banks are some of the most obvious effects of the crisis. What stage of the crisis are we in?
The crisis is just beginning, and no one can predict with certainty its duration or intensity. We are facing something more than a mere financial crisis: it is a global economic crisis that affects not only international finances but also the real economy. Because of the high degree of development of speculation and financial capital in recent years, the extent of the breakdown in the financial sector, and the high degree of globalization of the world economy, we can confidently conclude that the present crisis will be the worst since the Great Depression that occurred in the 30s.What has been happening since August 2008 is the burst of the speculative financial bubble caused essentially by neoliberal policies. At this point the crisis is beginning to affect the real economy, that is, the economy that produces real goods and services, development of technology, and use values that can be used to satisfy needs.

How much more will it affect the real economy?

It is hard to say. There are many opinions on this subject. Some suggest that the crisis may last between two and five years. If we use historical references, we see that the crisis of the 30s started in October 1929, developed at full speed until 1933, and the economies had not fully recovered their previous levels of activity when the Second World War started in 1939.What finally solved that crisis -- and I put "solve" between quotation marks because I'm referring to how capitalism solves a crisis -- was precisely the Second World War; it was the destruction of productive forces as a result of the war that allowed post-1945 capitalism to initiate a new growth stage based on the reconstruction of everything that had been destroyed by the war. Every crisis, whether or not linked to a war, is above all a process of destruction of the productive forces.Turning to the current situation, I would not presume to make a precise forecast on the duration of the crisis, but I will say that it is far from having hit bottom.

Which are the sectors that have been most affected?

The burst of the financial bubble has caused the collapse of stock markets and the bankruptcy of large corporate speculators (the so-called investment banks, which in fact are not productive investors but speculative investors). Large banks have become bankrupt and credit at a global level has become scarce and expensive. The prices of raw materials and oil have plunged. Sectors of the real economy, such as the automobile industry in the USA, are beginning to be affected by the crisis: the three largest companies, General Motors, Ford, and Chrysler, are receiving support from the government to avoid bankruptcy. Several airlines have closed down, and flights have been reduced. Unemployment is on the rise, tourism is also affected. It is a cascading process, which can lead to a much deeper crisis in 2009.

To some specialists, this is one more cyclical crisis of the capitalist system, one of those described by Marx in the 19th century. But it has also been said that it is not just "one more" but, given the huge dimensions it has reached, it is the expression of the internal destruction of late capitalism. What is your opinion?

I think that the current crisis is, without doubt, another cyclical crisis of capitalism. It is one more in the sense that the system that has been in place since 1825, the date of the first crisis identified by Marx, has suffered hundreds of similar crises. A crisis is not an abnormality of capitalism; rather, it is a regular feature and is even necessary to the system. Capitalism follows a particular logic, since it needs to destroy productive forces in order to pave the way for another stage of economic growth. However, the current crisis is undoubtedly the mark of a very profound deterioration within the capitalist system. I believe the crisis can reach very serious dimensions, but I do not think that, on its own, it represents the end of the capitalist system or its definitive destruction. One of the things that Marx argued with great lucidity was that capitalism does not collapse through an economic crisis. Capitalism has to be brought down, through political actions.

So do you agree with what Marx said, and Vladimir Lenin and Rosa Luxemburg later demonstrated, that, despite the self-destructive nature of capitalism, there has to be a revolution to bring it down?

Of course I do. To think that capitalism will collapse on its own, due to a spontaneous force like an economic crisis, is to believe in utopia. The crisis may create conditions that promote large anti-capitalist political movements. A capable leadership of the masses that is adept at the art of politics can take advantage of the favorable conditions created by the greater poverty, unemployment, large-scale bankruptcy, and desperation of the masses generated by the crisis. Throughout history, major economic crises have been linked to revolutionary movements. For example, during the First World War there was a profound capitalist crisis, and the success of the first socialist revolution in Russia was linked to this. The crisis of the 1930s, however, was linked to the rise of fascism because in Germany and Italy the right successfully capitalized on the desperation of the masses as a result of the crisis and led them toward far-right, fascist, chauvinist, and ultranationalist positions.What I want to stress is that nothing is set in stone in history. It all depends on the skill and expertise of the contending political forces. In the present situation, I think that it is possible to think about change: we are in a situation that in my view is quite likely to result in a radicalization of anti-capitalist movements.

It is yet another cyclical crisis, but it is different; what makes it unique?
I think the differences lie especially in the context. The present crisis is particularly complicated because the global economy is much more complicated than it was in 1929. In the first place, the level of economic globalization is vastly greater. The degree of interconnectedness of national economies back in 1929 was still incipient, corresponding to the technologies available at the time, especially in transportation and communications. In 1929 there was no internet, no email, no jet planes; they depended on telegraph communications, telephones were still quite underdeveloped, and planes were just starting to take to the skies. Today the situation is very different. Globalization ensures that whatever happens in a powerful economy has an impact, within minutes, on the rest of the world. Markets are greatly interconnected, especially global financial markets, and that means that the world economy is like a spider web in which we are all trapped. A movement in any part of the spider web is felt everywhere else. Therefore, the crisis's capacity to spread is infinitely greater today than in 1929. That is the first difference.Secondly, the level of financialization of the global economy is also vastly greater. Speculative capital and its operations play a much greater role than in 1929. Back then there were stock markets, but their functioning was much more simple. Today, financial speculation has achieved immense sophistication, and this sophistication is at the same time one of its weak points. That is, the speculative operations are so sophisticated, risky, unreal, and fraudulent that they have been at the basis of the global financial explosion.

Up until now no steps have been taken that are sufficiently radical to curb the crisis. However, little by little, we are seeing how states, above all the United States, have been intervening to avoid the bankruptcy of companies . . . with a "protagonist" approach reminiscent of the Keynesian methods used by Franklin D. Roosevelt to overcome the 1930s crisis.

Today many claim that "neo-Keynesianism" will be the alternative.
In essence that is what they are trying to do: to apply neo-Keynesian methods in a very diffused manner. We can see this in what Barack Obama has announced in connection with a major public works program including the reconstruction of the highway system (roads, bridges, etc). That is a typical Keynesian method of generating employment and income and stimulating demand. But at the same time, measures like this are being combined with others that are contradictory, such as rescuing bankrupt speculators and allocating huge amounts of money to reconstitute the speculative structure which has failed and collapsed.This is in contradiction to classic Keynesianism, and a clear expression that the neoliberals continue to hold some key positions of power; in fact, they have not been removed. We are witnessing a battle between a neo-liberalism that is unwilling to die and a neo-Keynesianism that is supposedly being established.I very much doubt that neo-Keynesianism, even if it is strictly applied, can be the solution to this crisis, because the current crisis has new components. The crisis combines elements of over- and under-production simultaneously; it is also a crisis that coincides with an attack on the environment so massive that it is not only an economic but also environmental crisis, jeopardizing the survival of human beings and the conditions for human life on this planet.

Do you mean that, in the form it has taken, Keynesianism will only be a temporary solution that will paper over the problems without getting at the roots?

Of course. It is inconceivable that Keynesianism and neo-Keynesianism can be an infallible recipe to resolve the economic problems of capitalism. Capitalism has suffered major crises with both neoliberal and Keynesian policies. Between 1973 and 1975 there was a severe capitalist crisis that occurred under Keynesian policies, and that was precisely a factor that brought about the substitution of neoliberal policy for Keynesian policy.We should put no credence in the false dichotomy according to which neoliberalism provokes the crisis and Keynesianism resolves it. Simply put, the system is contradictory and has a tendency to develop periodic economic crises. Whether they are neoliberal or Keynesian, economic policies can facilitate, postpone, or stimulate, but are not able to eliminate, capitalist crises.

Then there is one solution left: socialism. . . .

Without a doubt. I am more convinced of this than ever before and I believe that we are very clearly faced today with the dilemma posed by Rosa Luxemburg: "Socialism or barbarism." I do not believe that humanity will regress to barbarism, if only because our survival instinct is the strongest of all.I believe the rational position will prevail, and the rational position implies a sense of social justice. I think we will overcome capitalism, and we will come to implement a creative socialism, socialism as a permanent search, which is not to deny that the system has certain common general basic principles that apply to all socialisms. However, based on these principles, there are immense possibilities for experimentation, controversy, and creativity.

And that would be the socialism of the 21st century?

I think so.

President Rafael Correa, in a lecture he gave in the main assembly hall at the University of Havana in January this year, explained that one of the problems of socialism is that it has adhered to a development model similar to that of capitalism: that is, a different and fairer way to achieve the same thing -- GDP, industrialization, and accumulation. What do you think?

Correa raised a good point. The socialism practiced by the countries of the Socialist Camp replicated the development model of capitalism, in the sense that socialism was conceived as a quantitative result of growth in productive forces. It thus established a purely quantitative competition with capitalism, and development consisted in achieving this without taking into account that the capitalist model of development means the structuring of a consumer society that is inconceivable for humanity as a whole.The planet would not survive. It is impossible to replicate the model of one car for each family -- the model of the idyllic North American society, Hollywood, etc. -- that's absolutely impossible. It is also impossible for this to continue to be the reality for the 250 million inhabitants of the United States, with a huge rearguard of poverty in the rest of the world. It is therefore necessary to come up with another model of development that is compatible with the environment and has a much more collective way of functioning.Although I heard Correa say many correct things, there was one that seems incorrect to me. In his TV interview, when he was talking about this socialism of the 21st century, with which I am in full agreement, he referred to things that would be obsolete and would have to be done away with. Amongst them, he mentioned the class struggle, but I think that what he was explaining in his lecture in the main assembly hall about the political struggles that confront him in Ecuador, what he was describing, is nothing more than an episode of the class struggle in which the project he represents is immersed.Who opposes this agenda? It is undoubtedly the oligarchy, the bourgeoisie. Who can he rely on to support him against those enemies? The workers, the peasants, the indigenous peoples. What I have in mind is not a narrow classic definition of "class," but the unquestionable existence of social classes, broadly speaking, and the struggle of those classes is undeniable and evident. If we renounce the class struggle, what would we be left with? Class collaboration? I do not think Ecuador can proceed to 21st century socialism with the cooperation of people like Gustavo Novoa or that sector of the Catholic church and all those who are now trying to overthrow Correa.

Many expectations have developed worldwide in relation to the presidency of Barack Obama. What role can his government play with regard to solving the crisis?
I do not have high hopes of change. I believe that Obama's government may represent a certain change in US politics that is more cosmetic than substantive. In my opinion, he represents the position of a certain political sector in the United States which understood that it was impossible to continue with a regime that was as unpopular, worn out, and disagreeable as that of George Bush. However, there is a factor we must take into account, giving him at least the benefit of the doubt: Obama's ideas are one thing, and where the deepening economic crisis may take him is another thing. And once again I have to use the thirties as an example.In 1932, when the crisis was full-blown, Franklin D. Roosevelt was elected president. His ideas were nothing extraordinary, there was nothing in his election platform that would suggest what would happen next: his policy of active state intervention in the economy, of basing himself on the trade unions, or regulating the private US economy along the lines of a national economy.All those measures were taken more as the result of what the crisis forced him to do than as a result of a pre-existing political philosophy. Something similar could happen with Obama; we must give him the benefit of the doubt to see where the crisis might take him.

In the past few weeks there has been a lot of talk about the role of Latin American integration in confronting the crisis. Although this process is only in its initial stages, there have been changes at the structural level that point towards integration. How can integration help us face the crisis as a region and as a country?
I think that the integration of Latin America and the Caribbean will be a key strategic factor in the future of the region, of course, and I do not mean integration as an appendage of the United States. For decades, the priority of Latin American integration has been all rhetoric and no practice. But now we are seeing the beginning of a new period, characterized in particular by the Summit of Salvador de Bahía, held last December, when Cuba joined the Rio Group. We also have the ALBA (Bolivarian Alternative for the Americas), a new model of integration based on solidarity and cooperation, not on the market.This situation coincides with the big crisis that is forcing Latin America to rethink her position in the global economy. This also coincides with the profound crisis in the neoliberal policy that dominated the region during the last 30 years. It is a great moment, and I think that there is a real possibility that true Latin American and Caribbean integration is beginning to take firm steps.Some commentators are arguing that in the wake of the current crisis the world economy will be structured in large regional blocs: one in Asia, another that will continue to exist in North America, and a new one taking shape in Latin America. This is a very interesting possibility.


1 Former president of Ecuador (2000-2003), now living in exile in the Dominican Republic. -- RF.
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Luisa Maria Gonzalez García, the interviewer, is a journalism student at the University of Havana. This is a revised version of Richard Fidler's English translation for Socialist Voice, which was in turn based on an earlier translation by Damaris Garzón of CubaDebate, where this interview was first published in English. The original interview "Osvaldo Martínez: 'La crisis no es una anormalidad en el capitalismo' " was published by CubaDebate on 10 March 2009.
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The Global Collapse- A non orthodox view

The problem with Capitalism is when it takes over Democracy and then bends it to it's will.Built into Capitalism is the ability to rule the Capitalist. It is an addictive process from which there is no escape. Money becomes the alter on which the Capitalist worships.Value means monetary value, the ultimate measure of success and human values become degraded and considered valueless
Editoria1 Comment

1. The problem with ......redistributing income to the rich, you were gutting the incomes of the poor and middle classes, thus restricting demand,
2. By the end of the 1990s, with excess capacity in almost every industry, the gap between productive capacity and sales was the largest since the Great Depression.
3. The radical rise of prices of an asset far beyond real values is what is called the formation of a bubble.

The above is a summary of a fine article below. It misses out on an aspect which almost every single analyses misses out on as if they would commit blasphemy by mentioning it. This is the role of the US Financial Institutions and the role of Capitalism as practised in the US in bringing about the present economic catastrophe.
The first time that a surplus was created in the world in recent times was through the rise in oil prices.All the surplus came into the US Economy and US Banks. Subsequently South America and Asia were flooded with this money in the form of loans. This was predatory lending at it's worst and it only created bad loans, wrecked economies and huge commissions for US bankers. The next time the surplus came in the form of increased reserves of emerging markets such as China and Brazil. This also landed in the US and was lent out to finance US Mortgages again resulting in the collapse of the housing market, massive foreclosures, securitizes bad debts exported world wide and huge commissions for US Bankers.
In both cases the commissions and false profits were shared with, Rating Agencies and Legislators. Regulators looked the other way because they did not have a clue as to what was going on and deemed it their patriotic duty not to interfere in the business of wealth creation.No Analyst, Economist, Politician wants to tackle this hit and run which has happened twice in recent History and will likely happen again if people still trust America with their money.
There is a culture of greed, fraud and graft built into the American system which thank God has been exposed so that other countries ( except Europe and America) will learn from it. Here are the people who will continue to spread illusion and fantasy, The Wall Street Journal, Barrons Magazine, Fortune Magazine, Time, MSNBC, The Economist. John Stewart of the daily show recently exposed MSNBC in 10 minutes in an act of brilliant journalism. He showed how people on MSNBC were recommending the purchase of Bear Stern shares two weeks before Bear collapsed. This was not an act of deliberate deceit. It was the blind, leading the blind.
If you think, I am getting carried away, think of the people world wide who have lost 30 trillion dollars of wealth in the last 12 months and think of the people primarily in the US who were paid huge ( unimaginable) bonuses for creating these losses. The Fundamental law of Economics that has been broken is the creation of phantom value. This was and is the privilege of watch makers, who sell a watch for millions of dollars, whose intrinsic value might be a few thousand dollars. It is deemed OK if it relieves the rich of their ill gotten gains but when everything is deemed to have a value way beyond it's worth then there will be hell to pay.
It is when people forget that the best things in life are free that there is opportunity for creating value in valueless objects. Then it is happy hunting for the Madoffs of this world. Madoff should not be put in Jail, he should be teaching at Harvard. He was amongst the few who recognised how easily people could be made fools of. Not ordinary people, but captains of Industry and Society. Smart, educated, successful people. People who are the pillars of our decadent culture.

Khusro







The Global Collapse: a Non-orthodox View

February 22, 2009 By Walden Bello Source: MR Zine

This is the longer version of an essay by the author released by the
British Broadcasting Corporation (BBC) on 6 February 2009.

Week after week, we see the global economy contracting at a pace worse
than predicted by the gloomiest analysts. We are now, it is clear, in
no ordinary recession but are headed for a global depression that could
last for many years.

The Fundamental Crisis: Overaccumulation

Orthodox economics has long ceased to be of any help in understanding
the crisis. Non-orthodox economics, on the other hand, provides
extraordinarily powerful insights into the causes and dynamics of the
current crisis. From the progressive perspective, what we are seeing is
the intensification of one of the central crises or "contradictions" of
global capitalism: the crisis of overproduction, also known as
overaccumulation or overcapacity. This is the tendency for capitalism
to build up, in the context of heightened inter-capitalist competition,
tremendous productive capacity that outruns the population's capacity to
consume owing to income inequalities that limit popular purchasing
power. The result is an erosion of profitability, leading to an
economic downspin.

To understand the current collapse, we must go back in time to the
so-called Golden Age of Contemporary Capitalism, the period from 1945 to
1975. This was a period of rapid growth both in the center economies
and in the underdeveloped economies -- one that was partly triggered by
the massive reconstruction of Europe and East Asia after the devastation
of the Second World War, and partly by the new socioeconomic
arrangements and instruments based on a historic class compromise
between Capital and Labor that were institutionalized under the new
Keynesian state.

But this period of high growth came to an end in the mid-1970s, when the
center economies were seized by stagflation, meaning the coexistence of
low growth with high inflation, which was not supposed to happen under
neoclassical economics.

Stagflation, however, was but a symptom of a deeper cause: the
reconstruction of Germany and Japan and the rapid growth of
industrializing economies like Brazil, Taiwan, and South Korea added
tremendous new productive capacity and increased global competition,
while income inequality within countries and between countries limited
the growth of purchasing power and demand, thus eroding profitability.
This was aggravated by the massive oil price rises of the seventies.

The most painful expression of the crisis of overproduction was global
recession of the early 1980s, which was the most serious to overtake the
international economy since the Great Depression, that is, before the
current crisis.

Capitalism tried three escape routes from the conundrum of
overproduction: neoliberal restructuring, globalization, and
financialization

Escape Route # 1: Neoliberal Restructuring

Neoliberal restructuring took the form of Reaganism and Thatcherism in
the North and Structural Adjustment in the South. The aim was to
invigorate capital accumulation, and this was to be done by 1) removing
state constraints on the growth, use, and flow of capital and wealth;
and 2) redistributing income from the poor and middle classes to the
rich on the theory that the rich would then be motivated to invest and
reignite economic growth.

The problem with this formula was that in redistributing income to the
rich, you were gutting the incomes of the poor and middle classes, thus
restricting demand, while not necessarily inducing the rich to invest
more in production. In fact, it could be more profitable to invest in
speculation.

In fact, neoliberal restructuring, which was generalized in the North
and south during the eighties and nineties, had a poor record in terms
of growth: Global growth averaged 1.1 percent in the 1990s and 1.4
percent in the '80s, compared with 3.5 percent in the 1960s and 2.4
percent in the '70s, when state interventionist policies were dominant.
Neoliberal restructuring could not shake off stagnation.

Escape Route # 2: Globalization

The second escape route global capital took to counter stagnation was
"extensive accumulation" or globalization, or the rapid integration of
semi-capitalist, non-capitalist, or pre-capitalist areas into the global
market economy. Rosa Luxemburg, the famous German radical economist,
saw this long ago in her classic "The Accumulation of Capital" as
necessary to shore up the rate of profit in the metropolitan economies.

How? By gaining access to cheap labor, by gaining new, albeit limited,
markets, by gaining new sources of cheap agricultural and raw material
products, and by bringing into being new areas for investment in
infrastructure. Integration is accomplished via trade liberalization,
removing barriers to the mobility of global capital, and abolishing
barriers to foreign investment.

China is, of course, the most prominent case of a non-capitalist area to
be integrated into the global capitalist economy over the last 25 years.

By the middle of the first decade of the 21st century, roughly 40-50
percent of the profits of US corporations came from their operations and
sales abroad, especially in China.

The problem with this escape route from stagnation is that it
exacerbates the problem of overproduction because it adds to productive
capacity. A tremendous amount of manufacturing capacity has been added
in China over the last 25 years, and this has had a depressing effect on
prices and profits. Not surprisingly, by around 1997, the profits of US
corporations stopped growing. According to one calculation, the profit
rate of the Fortune 500 went from 7.15 in 1960-69 to 5.30 in 1980-90 to
2.29 in 1990-99 to 1.32 in 2000-2002. By the end of the 1990s, with
excess capacity in almost every industry, the gap between productive
capacity and sales was the largest since the Great Depression.

Escape Route # 3: Financialization

Given the limited gains in countering the depressive impact of
overproduction via neoliberal restructuring and globalization, the third
escape route -- financialization -- became very critical for maintaining
and raising profitability.

With investment in industry and agriculture yielding low profits owing
to overcapacity, large amounts of surplus funds have been circulating in
or invested and reinvested in the financial sector -- that is, the
financial sector is turning on itself.

The result is an increased bifurcation between a hyperactive financial
economy and a stagnant real economy. As one financial executive noted
in the pages of the Financial Times, "there has been an increasing
disconnection between the real and financial economies in the last few
years. The real economy has grown . . . but nothing like that of the
financial economy -- until it imploded." What this observer does not
tell us is that the disconnect between the real and the financial
economy is not accidental -- that the financial economy exploded
precisely to make up for the stagnation owing to overproduction of the
real economy.

One indicator of the super-profitability of the financial sector is that
while profits in the US manufacturing sector came to one percent of US
gross domestic product (GDP), profits in the financial sector came to
two percent. Another is the fact that 40 percent of the total profits
of US financial and non-financial corporations is accounted for by the
financial sector although it is responsible for only five percent of US
gross domestic product (and even that is likely to be an overestimate) .

The problem with investing in financial sector operations is that it is
tantamount to squeezing value out of already created value. It may
create profit, yes, but it does not create new value -- only industry,
agricultural, trade, and services create new value. Because profit is
not based on value that is created, investment operations become very
volatile and prices of stocks, bonds, and other forms of investment can
depart very radically from their real value -- for instance, the stock
of Internet startups may keep rising to heights unknown, driven mainly
by upwardly spiraling financial valuations.

Profits then depend on taking advantage of upward price departures from
the value of commodities, then selling before reality enforces a
"correction, " that is a crash back to real values. The radical rise of
prices of an asset far beyond real values is what is called the
formation of a bubble.

Profitability being dependent on speculative coups, it is not surprising
that the finance sector lurches from one bubble to another, or from one
speculative mania to another. Because it is driven by speculative
mania, finance-driven capitalism has experienced about 100 financial
crises since capital markets were deregulated and liberalized in the
1980s, the most serious before the current crisis being the Asian
Financial Crisis of 1997.

Dynamics of the Subprime Implosion

The current Wall Street collapse has its roots in the Technology Bubble
of the late 1990s, when the price of the stocks of Internet startups
skyrocketed, then collapsed, resulting in the loss of $7 trillion worth
of assets and the recession of 2001-2002.

The loose money policies of the Fed under Alan Greenspan had encouraged
the Technology Bubble, and when it collapsed into a recession,
Greenspan, trying to counter a long recession, cut the prime rate to a
45-year low of 1.0 percent in June 2003 and kept it there for over a
year. This had the effect of encouraging another bubble -- the real
estate bubble.

As early as 2002, progressive economists were warning about the real
estate bubble. However, as late as 2005, then Council of Economic
Advisers Chairman and now Federal Reserve Board Chairman Ben Bernanke
attributed the rise in US housing prices to "strong economic
fundamentals" instead of speculative activity. Is it any wonder that he
was caught completely off guard when the Subprime Crisis broke in the
summer of 2007?

The subprime mortgage crisis was not a case of supply outrunning real
demand. The "demand" was largely fabricated by speculative mania on the
part of developers and financiers that wanted to make great profits from
their access to foreign money -- most of it Asian and Chinese in origin
-- that flooded the US in the last decade. Big ticket mortgages were
aggressively sold to millions who could not normally afford them by
offering low "teaser" interest rates that would later be readjusted to
jack up payments from the new homeowners.