"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Austerity Measures’

The “Looming Fiscal Cliff” Is a Hoax: Tax Reform As Wealth Privatization Scam & The Phony Crisis Industry

In Uncategorized on November 19, 2012 at 4:23 pm

Oldspeak:”Nothing’s “looming.” Nothing. There’s just some language in a law Congress passed last year. If they don’t want it to happen they can un-pass that law. It’s a simple as that. And do you want to know something? They don’t want it to happen. It’s a part of a long-range plan to scam the public into transferring even more of its wealth to the wealthiest among us: first by giving them lower tax rates, and then by cutting a program the public has already paid into. That way there’ll be less pressure to increases taxes on the wealthy later on. (They may also want to raid Social Security’s trust fund to pay for the deficits caused) –Richard Eskow. While the President meets with senior banking corprocrats to discuss how to avoid the latest manufactured crisis, corprocrat controlled media outlets avoid discussing the obvious and easy means to avoid austerity cuts. Probably because both parties have agreed that austerity is necessary.  Especially on public programs that are not contributing to deficit like Social Security. How long will Demopublicans engage in their latest  farcical dance masquerading as “negotiations” before they decide to sell their country to the highest bidders?  “Ignorance Is Strength”

By Richard Eskow @ The Campaign For America’s Future:

They’re dashing through the corridors of power in Washington with appropriately grim expressions this week. Congressional leaders are talking about the upcoming ‘fiscal cliff,’ which journalists are dutifully describing as a “looming crisis.”

In fact, if you do a Google News search for articles containing the words “fiscal cliff” and “looming” you’ll get 72,000 hits (as of Wednesday evening). We know because we tried it.

72,000 hits.

But nothing’s “looming.” Nothing. There’s just some language in a law Congress passed last year. If they don’t want it to happen they can un-pass that law. It’s a simple as that.

And do you want to know something? They don’t want it to happen.

Nobody Move

This phony crisis is a lot like this scene in Mel Brooks’ Blazing Saddles, where Cleavon Little as The Sheriff pretends to take himself hostage to escape an angry crowd. You may remember the gag line, which included a word we won’t use: “Nobody move or the $^((*&^(* gets it.”

Brooks crafts his throwaway lines pretty carefully, too. Look for the earnest man who says “I think he means it,” or the woman in the crowd who says “Won’t somebody help that poor man?”

Here’s how the “fiscal cliff” scam’s being played: Congressional Republicans are holding the guns to their own heads. Democrats are the town leaders, dutifully laying their weapons down.

And the American media are the gullible townfolk, carefully writing in their notebooks about the “looming” threat to their sheriff.

Johnny Law

Viewers of MSNBC know that progressives like Chris Hayes and Lawrence O’Donnell are dutifully trying to remove the word “cliff” from the nomenclature, since the effects of this law would be gradual — more like a “slope,” as they said the other night. They’re right about the “slope” part.

But it’s a tactical mistake to even engage in this kind of discussion, because there’s really no “slope” either. There’s just a law.

John Boehner’s law.

Sure, the President agreed to that law as part of a deal to settle deficit talks last year. At the time the Republicans were about to shut down the entire government. The GOP forced this law into existence.

That means the “fiscal cliff” is theirs. They own it.

Anyone who opposes disastrous, European-style austerity measures needs to stop talking about this in urgent terms. And nobody should characterize it as anything but what it really is: A deed performed by Republicans in Congress, which the same Congress can easily reverse.

That’s not just more accurate. It also places the responsibility for this pseudo-crisis exactly where it belongs.

A Gun to the Head

The motives for the hoax are easy to understand. As a Campaign for America’s Future/Democracy Corps poll reaffirmed after the election, the public overwhelmingly opposes any of the fiscal measures being negotiated as the result of this fictitious “crisis.”  A majority of voters, cutting across party lines, opposes virtually all of the ideas being discussed – including cuts to Social Security and Medicare benefits, and reductions in anti-poverty programs.

Voters strongly support some steps that aren’t being debated because of this phony “crisis,” like increased investment in jobs and economic growth. These negotiations are likely have the opposite effect instead, leading to more cuts in these programs. In fact, of the many “debt deal” provisions being debated today, only tax increases for the wealthiest Americans have the majority’s approval.

No wonder Congressional Republicans are holding a gun to their own heads.

Unfortunately it’s pointed at our heads too. If Republicans get their way the entire country will be hit with austerity cuts that increase the poverty rates, hurt most people’s standard of living, and create even more unemployment.

This phony crisis is the GOP’s way of saying “Nobody move or the country gets it.” And if the public doesn’t make its voice heard, it will.

Manhattan Transfer

Here’s more proof that both the “fiscal cliff” and the “emergency” deficit talks surrounding it are a fraud: They include two issues that don’t belong in a deficit discussion at all.  One’s Social Security, which is forbidden by law from contributing to the national deficit.

The other is the scam known as tax “reform” and “tax code simplification” – which, in plain English, means a lowering of top tax rates for millionaires and billionaires – supposedly in return for reduced “tax expenditures” and increased “tax revenues” to be named at a later date.

Why would deficit talks include two ideas that won’t reduce the national debt, especially when “tax simplification” will undoubtedly increase that debt substantially? That’s an easy one: Because this phony “crisis” has nothing to do with deficits.

It’s a;; part of a long-range plan to scam the public into transferring even more of its wealth to the wealthiest among us: first by giving them lower tax rates, and then by cutting a program the public has already paid into. That way there’ll be less pressure to increases taxes on the wealthy later on. (They may also want to raid Social Security’s trust fund to pay for the deficits caused by their tax breaks.)

These “deficit” moves would transfer even more of our national treasure to the extremely rich – including those on Wall Street who created our economic crisis in the first place. That, and not a “fiscal cliff,” is what’s “looming.”

The Phony-Crisis Industry

In the past the President has sometimes seemed willing, even eager, to press for a larger “Grand Bargain.” He’s taking a tougher line today, especially about taxes on the wealthy, and should be applauded for that. He should also be urged to take an equally strong position on Medicare and Social Security, which he hasn’t done yet.

Everyone involved needs to understand that, thanks to some new fiscal and electoral math, the anti-austerity team is holding the winning hand now.

It’s true that a tougher Presidential stand would disappoint some people, especially the highly-paid professional “deficit hawks” from both parties. That includes people like former Clinton White House functionary Erskine Bowles, who ghoulishly described this artificial crisis as a “magic moment” to impose austerity measures on the American people.

Bowles is a Director of bailed-out investment bank Morgan Stanley. That means that, unlike most Americans, he would do very well under the lower tax rates proposed in these “deficit” discussions.

A repudiation of this pseudo-crisis would also embarrass professional scaremongers like Douglas Holtz-Eakin, who warned of “big financial market repercussions” if the nation goes over the “cliff.” But we haven’t seen any repercussions before.

The word for talk like that is “nonsense.” (Well, that’s one word for it.) Nobody’s going over any “cliff,” least of all the Republicans.

Dare Ya

Let’s be clear: It would be a bad thing if the provisions in this bill took effect for any length of time. But it’s time to call Boehner’s bluff. Good Democrats can’t let themselves be railroaded into austerity by this phony crisis, while the other kind – the Erskine Bowles Democrats – shouldn’t be allowed to use it as cover.

Boehner knows he’s in a weak position, which is why Republicans have quietly been looking for ways to delay the “cliff.”  Democrats should take note of that and recognize the motives behind it.

The President should go on television and say to Congress: If you won’t accept the will of the people, undo your reckless law. Democrats on the Hill should insist on up-or-down votes for provisions that the public wants. This charade won’t stop until the GOP’s bluff is called.

Boehner insists that Congressional Republicans, along with everybody else, are standing on a “cliff.” It’s time somebody dared them to jump.

While 40% Of Food Is Uneaten, Millions Go Hungry In The U.S., Congress Considers Food Stamp Cuts As Drought Threatens Food Supply

In Uncategorized on August 24, 2012 at 4:59 pm

DroughtOldspeak: “Austerity Measures are still coming home to roost, with much more to come.  “With millions of Americans struggling to stave off hunger, anti-poverty groups are asking that Congress abandon proposals to cut off support for the Supplemental Nutrition Assistance Program (SNAP), which supplies assistance commonly called food stamps. “The numbers underscore the point that people still continue to struggle, and that cuts some in Congress are proposing to our nation’s nutrition safety net will only worsen a bad situation,” –Jim Weill  coincidentally, conditions are perfect, for Monsanto and the rest of the Biotech Bigs to introduce their genetically modified drought-resistant corn and wheat to ‘help fuel the worlds fight against poverty and hunger” 

By Mike Ludwig @ Truthout:

Nearly one in five Americans could not afford the food they or their families needed at some point in the past year, and now anti-poverty advocates are pressing Congress to abandon proposed food stamp cuts as a historic drought threatens to drive up food prices across the country.

A Gallup poll released this week shows that 18.2 percent of Americans did not have enough money to buy the food they or their families needed at least once during the past year. In 15 states, at least 1 in 5 Americans polled in the first half of 2012 reported struggling to pay for food during the past 12 months.

Little has changed since 2011, when 18.6 percent of Americans reported struggling to afford food, but proposed food stamp cuts in Congress and the worst drought in half a century could soon make matters worse.

The drought has impacted 80 percent of the country’s agricultural lands, and the US Department of Agriculture predicts that consumers will see meat and dairy prices increase within two months. Increases in the cost of packaged products, such as cereal, containing corn and flour are expected in about 10 to 12 months.

The rate of Americans facing food hardship peaked in late 2008 as the economy fell into a deep recession. The rate spiked from 16.3 percent in the first quarter of 2008 to 19.5 percent in the last quarter.

Congress Considers Cutting Food Stamps

With millions of Americans struggling to stave off hunger, anti-poverty groups are asking that Congress abandon proposals to cut off support for the Supplemental Nutrition Assistance Program (SNAP), which supplies assistance commonly called food stamps.

“The numbers underscore the point that people still continue to struggle, and that cuts some in Congress are proposing to our nation’s nutrition safety net will only worsen a bad situation,” said Jim Weill, president of the Food Research and Action Center.

 

SNAP funding is included in the 2013 omnibus agriculture appropriations bill. The Senate version would cut $4.4 billion over ten years and would cause about 500,000 households to lose an average of $90 in nutritional assistance each month.

SNAP cuts in the House version, which seeks about $16 billion in SNAP reductions, would make the same cuts and change eligibility requirements to push at least 1.8 million people out of the food stamp program.

“These cuts to SNAP will particularly harm seniors, children and working families, taking food away from the poorest and most vulnerable among us,” Weill said, echoing concerns shared by the White House and Democrats in Congress.

The White House opposes the deep SNAP cuts proposed in the House, which are largely supported by Republicans eager to cut domestic spending.

The number of participants in SNAP programs has been at a historic high since the recession began, and SNAP spending increased from $30 billion in 2007 to $73 billion in 2011, according to the Congressional Budget Office.

Regional Food Disparity

In general, more people living in Southern states report struggling to pay for food. Mississippi tops the national Gallup list, with 24.9 percent of those polled in the state reporting struggling to pay for groceries during the past year. Alabama, Delaware, Georgia and Nevada join Mississippi as the top five states where people face food hardships.

People living in Southern states will also be hardest hit by increases in food prices due to drought, according to Gallup. People living in the Mountain Plains and Midwest states that make up America’s breadbasket are least likely to face food hardship. North and South Dakota top the list of states where residents are least likely to go hungry.

Despite the troubling data on food hardship, vast amounts of America’s food supply goes to waste. The National Resources Defense Council reported this week that 40 percent of food produced in the United States goes uneaten. That’s about 20 pounds of food per person every month.

 

Top Economists Agree: The U.S. Is In A Depression

In Uncategorized on May 8, 2012 at 2:07 pm

Oldspeak:”You know it’s grim when the prevailing debate among economists and historians is whether the world economy faces the “Great” depression of the 1930s or the “Long” depression of the 1870s.” I like to call it a “Stealth Great Depression” The bread lines have been replaced with EBT cards, and the banks are too bigger to fail, but many of the other conditions that existed in the 1930’s and 1870’s exist today. Tent cities, high unemployment, high poverty, high homelessness, wage stagnation, high debt, mass bankruptcy etc, etc, etc… A profound difference between today’s depression and those of the past is the propaganda. It’s so exquisitely and insidiously crafted that people actually believe it over what it happening all around them in the real world. Meanwhile “Institutions (banks) that know how and why to prevent things from falling apart and which nonetheless sit back and do nothing. A global collapse is being engineered. We need a radically new way forward to avert catastrophe but all we’re being offered by our political classes is tried and false ways of the past that are clearly leading to catastrophe. A ‘sustainable future’ is being monetized. More and more people awakening to the reality that those old ways are no longer acceptable. Our civilization needs a new operating system. Or a crash is not a matter of if, but when. Greed will be our downfall.

By Washington’s Blog:

Paul Krugman released a new book yesterday called “End This Depression Now“. In the introduction, Krugman writes:

The best way to think about this continued slump, I’d argue, is to accept that we’re in a depression …. It’s nonetheless essentially the same kind of situation that John Maynard Keynes described in the 1930s: “a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse.”

Robert Shiller said yesterday that the world is in a state of “late Great Depression”.

Many other top economists also say that were in a Depression.

We are stuck in a depression because the government has done all of the wrong things, and has failed to address the core problems.

For example:

  • The government is doing everything else wrong. See this and this

This isn’t an issue of left versus right … it’s corruption and bad policies which help the top .1% but are causing a depression for the vast majority of the American people.

AT&T Chief Says DOJ Blocked Merger With T-Mobile Will Cost Its Consumers More

In Uncategorized on May 5, 2012 at 4:22 pm

Oldspeak: “Since that deal got killed, our data prices have gone up 30%,” he said. He also blamed the blocked T-Mobile USA deal, in part, for AT&T’s decision earlier this year to impose a limit on the amount of data available to a given customer. However, he said such a move probably would have been necessary regardless of the decision, and that he regretted not imposing the cap sooner.” Austerity measures, affect you in more ways than you think. How bout that. The merger doesn’t happen, so they jack up prices to increase their perceived lost potential profits. And the argument for corporate consolidation and less choice perfectly crystallizes some of the fundamental flaws with oligarchical capitalism.  In the minds of terminal ill Capitalists, More for me, less for you = More for me, more for you. Your basic 2+2-=5 logic. This insatiable lust for more, and the idea that it is good, unbridled greed;  it is unsustainable and certainly catastrophic for our planet, and our ‘civilization’. Every thing in nature grows, and then stops growing. We’ve created a civilization in which that basic physical rule does not apply and we are reaping the consequences: ever rapid resource depletion and contamination, mass extinctions, environmental destruction and contamination, drought, starvation, overcrowding, homelessness, poverty… All because a few hundred Oligarchs want ever ‘more’.  And have conditioned us to believe that we want ever ‘more’ even though the vast majority of us never will attain Oligarchical levels of it. That simple and insidious idea; ‘more’ has led us to the brink of collapse on multiple levels, yet we’re still being told that everything is ok. Why? We need Barefoot Economics. NOW.”

Related Story:

AT&T To Buy T-Mobile: Great For Them, Bad For You

What Does Proposed AT&T And T-Mobile Merger Mean?

By Ethan Smith @ The Wall Street Journal:

The government’s decision to block AT&T Inc.’s T -0.76% takeover of Deutsche Telekom AG’s DTEGY -0.18% T-Mobile USA unit will result in higher prices to consumers, AT&T Chairman and Chief Executive Randall Stephenson contended during a public interview Wednesday.

Speaking at the Milken Institute’s annual global conference, Mr. Stephenson said that the U.S. wireless-telecommunications market can’t sustain the current number of competitors because there isn’t enough wireless spectrum for all of them.

Based on current patterns, wireless data usage will increase 75% a year for at least five years, Mr. Stephenson said.

“We’re running out of the airwaves that this traffic rides on,” he added. “There is a shortage of this spectrum.”

With or without a deal like the one his company unsuccessfully pursued, he said, competitors will be forced to drop out if they can’t find enough wireless capacity to offer more modern data services to growing numbers of customers.

“The more competitors you have, the less efficient the allocation of spectrum will be,” he said. “It’s got to change. I don’t think the market’s going to accommodate the number of competitors there are in the landscape.”

Many countries in Asia, Europe and Latin America have many fewer companies offering wireless voice and data services, letting them allocate bandwidth more efficiently, Mr. Stephenson contended.

“Since that deal got killed, our data prices have gone up 30%,” he said. He also blamed the blocked T-Mobile USA deal, in part, for AT&T’s decision earlier this year to impose a limit on the amount of data available to a given customer. However, he said such a move probably would have been necessary regardless of the decision, and that he regretted not imposing the cap sooner.

“I wish we had moved quicker to change the pricing model to make sure the people who were using the bandwidth were paying for the bandwidth,” Mr. Stephenson said.

Toward A Creditor State: 1 in 7 Americans Pursued By Debt Collectors

In Uncategorized on March 5, 2012 at 12:42 pm

Oldspeak:“Money As Debt” “One of the characteristics of the new social contract ushered in by both George W. Bush and Barack Obama is the increasing power of creditors to govern outright, from tax farming by banks to the use of credit checks to access employment opportunities. There are now thousands of people legally jailed because they aren’t paying their bills, ie. debtor’s prisons have returned.  Occasionally elites let it slip that this is not an accident, but is their goal – former Comptroller General David Walker has wistfully pined for debtor’s prisons” –Matt Stoller. “A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom. This is the greatest question of all, and to this statesmen must address themselves with an earnest determination to serve the long future and the true liberties of menU.S. President Woodrow Wilson

Related Video:

Money As Debt

By Matt Stoller @ Naked Capitalism:

I went through the Federal Reserve’s Quarterly Release on Household Debt and Credit released today, and there were two notable trends.  One is that the amount of consumer debt is declining, but that delinquency rates are stabilizing above what they were before the crisis.  And the second is in this graph below, which is that the number of people subject to third party collections has doubled since 2000, from a little less than 7% to a little over 14% of consumers.  Ten years ago, one in fourteen American consumers were pursued by debt collectors.  Today it’s one in seven.

The experience of debt collection can be chilling, as this 2007 ABC News report suggests.

Consumers around the country have taped threatening phone calls from collectors who have called in the middle of the night, used abusive language and have threatened to have people fired from work or thrown in jail.  All of these tactics are illegal under federal law.

One of the characteristics of the new social contract ushered in by both George W. Bush and Barack Obama is the increasing power of creditors to govern outright, from tax farming by banks to the use of credit checks to access employment opportunities.

There are now thousands of people legally jailed because they aren’t paying their bills, ie. debtor’s prisons have returned.  Occasionally elites let it slip that this is not an accident, but is their goal – former Comptroller General David Walker has wistfully pined for debtor’s prisons overtly (on CNBC, no less).

This may be somewhat mediated by government action, as the CFPB is beginning to make noise around debt collection and credit ratings, and Illinois Attorney General Lisa Madigan is working to stop debt-related arrest warrants.  But only somewhat, only where the government can protect you and only when there is the political will to do so.  Increasingly, creditors are coming to set up the institutional structures for financial surveillance, state-sponsored enforcement of their claims through tightened bankruptcy laws and the selective use of jail, and the denial of economic opportunity based on one’s interaction with the financial system.

This is part of the new social contract.  The sheer percentage of consumers with third party collections in pursuit is striking.  Additionally, the uptrend through both Bush boom and Obama bust years of the percentage of people being tracked down by third party collection agencies suggests we live in a different country than we did just ten years ago.

Again, ten years ago, one in fourteen Americans were pursued by debt collectors.  Today it’s one in seven.  I suspect this number will keep going up.  And though debt collection is a highly competitive field, it’s also a growth industry.

Matt Stoller is the former senior policy adviser to Rep. Alan Grayson and a fellow at the Roosevelt Institute. He blogs frequently for Naked Capitalism. Follow him on Twitter at @matthewstoller.

 

 

Report: Poverty In America Likely To Get Worse; 46 Million ‘Living’ Below Poverty Line

In Uncategorized on January 16, 2012 at 12:26 pm

Oldspeak:” ‘Poverty in America is remarkably widespread, the number of people living in poverty is increasing and is expected to increase further, despite the recoveryMillions of Americans will be forced into poverty in the coming years even as the US hauls itself out of the longest and deepest recession since the second world war’ Dr King would be appalled.

By Chris McGreal @ U.K. Guardian:

Millions of Americans will be forced into poverty in the coming years even as the US hauls itself out of the longest and deepest recession since the second world war.

A study from Indiana University, released on Wednesday, says the number of Americans living below the poverty line surged by 27% since the beginning of what it calls the “Great Recession” in 2006, driving 10 million more people into poverty.

The report warns that the numbers will continue to rise, because although the recession is technically over, its continued impact on cuts to welfare budgets and the quality of new, often poorly paid, jobs can be expected to force many more people in to poverty. It is also difficult for those already under water to get back up again.

“Poverty in America is remarkably widespread,” concludes the study, At Risk: America’s Poor During and After the Great Recession. “The number of people living in poverty is increasing and is expected to increase further, despite the recovery.”

The white paper, drafted by the university’s school of public and environmental affairs, which is among the best ranked schools of its kind in the US, says that six years ago, 36.5 million Americans fell below the poverty line. By 2010, the number of people living in poverty rose to 46.2 million and continued to grow over the past year.

“The Great Recession has left behind the largest number of long-term unemployed people since records were first kept in 1948. More than 4 million Americans report that they have been unemployed for more than 12 months,” said the report.

John Graham, dean of the school and one of the authors of the report, said that the numbers of “new poor” will continue to rise.

“One of the big surprises is that poverty in the United States is likely to continue to increase even as the economic recovery unfolds,” said Graham. “The unique feature of the great recession is not just the high rate of unemployment, but the long duration of unemployment that millions of Americans have experienced. [For] a lot of these long-term unemployed, the job that they had won’t exist when they go back in to the labour market.”

Graham said that many of those who once held well-paid jobs will be forced to settle for lower paying work, trapping some in a permanent cycle of poverty.

“As a consequence they will be poor or near poor for a substantial period of time,” he said.

The latest census data shows that nearly one in two of the US’s 300 million citizens are now officially classified as having a low income or living in poverty. One in five families earns less than $15,000 (£9,600) a year.

The Indiana University study says that the numbers of people falling into poverty is also likely to grow because of severe cuts to state and federal welfare budgets.

“The states by their constitutions all have to have a balanced budget each year. A lot of states are already in the process of cutting back their safety net programmes at the same time that poverty is increasing,” said Graham. “Their needs are going up but the programmes are receiving less support. It’s going to continue because the revenues of state governments are not increasing as rapidly as is needed and the federal government will be under a lot of pressure because of its large deficit to decrease funding given to the states.”

The report warns that the situation is likely to become even worse if the long-term unemployed lose their jobless benefits. Congress extended them for two months at the end of the year, but it is unlikely they will be continued indefinitely.

Among the most severely affected states are Florida, Nevada and Arizona, which have been particularly badly hit by the housing foreclosure crisis, and Michigan and Ohio, which have seen the collapse of traditional manufacturing.

Minorities are among the hardest hit. More than one in four African Americans and Hispanics is officially recorded as living in poverty. About one in 10 white Americans fall below the poverty line.

“We can expect to find that the most vulnerable parts of our society are the ones who will recover most slowly from a deep recession like this. More have gone in to poverty and they’ll be slower coming out of it,” said Graham. “If you look at the educational levels and skill levels of African Americans and Hispanics, they are more vulnerable as the job market tightens. They don’t have either the extra edge in education or skills that white Americans do.”

The report says that the situation would have been much worse had it not been for the Obama administration’s 2009 federal stimulus package, which increased child health insurance for poorer families, and cut taxes for low income workers.

Still, the study says that although unemployment is officially falling, that may not be the whole story. Some workers give up looking for jobs and are no longer counted in the unemployment rate.

“Although the official rate of unemployment is declining, much of this apparent progress is attributable to the fact that many adults are giving up on the search for a job,” it said.

The report argues that a better measure of how well an economy is creating employment is the “jobs-to-people ratio”. It says that in a healthy economy the range is between 0.60 and 0.70. The US fell within that range until it fell to 0.582 at the end of 2009. It had risen only to 0.585 in November 2011.

“These data suggest that the reported progress in reducing the rate of unemployment may not be as encouraging as we think since increasing numbers of the unemployed may simply be giving up on the search for a job,” the report said.

Using Debt To Crush Democracy: How Financiers Are Waging Economic Warfare Against Nations

In Uncategorized on December 16, 2011 at 10:23 am

Oldspeak:”Everything is version of something else”. The eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history. Financial oligarchy has happened before. Many times throughout history. This recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies and crushing national self-determination” As they have in the past.  It will be interesting to see if an aristocracy is coming in our future. Highly recommend reading John Perkins’ “Confessions Of An Economic Hit Man” to understand what is going on.

By Michael Hudson @ Michael Hudson’s Blog:

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by canceling the debts and redistributing property or taking its usufruct for the state.

Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts [1]. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.

By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.

This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.

Near Eastern rulers proclaimed Clean Slates to preserve economic balance
Charging interest on advances of goods or money was not originally intended to polarize economies. First administered early in the third millennium BC as a contractual arrangement by Sumer’s temples and palaces with merchants and entrepreneurs who typically worked in the royal bureaucracy, interest at 20% (doubling the principal in five years) was supposed to approximate a fair share of the returns from long-distance trade or leasing land and other public assets such as workshops, boats and ale houses.

As the practice was privatized by royal collectors of user fees and rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws (c. 1750 BC) cancelled their debts in times of flood or drought. All the rulers of his Babylonian dynasty began their first full year on the throne by cancelling agrarian debts so as to clear out payment arrears by proclaiming a clean slate. Bondservants, land or crop rights and other pledges were returned to the debtors to “restore order” in an idealized “original” condition of balance. This practice survived in the Jubilee Year of Mosaic Law in Leviticus 25.

The logic was clear enough. Ancient societies needed to field armies to defend their land, and this required liberating indebted citizens from bondage. Hammurabi’s laws protected charioteers and other fighters from being reduced to debt bondage, and blocked creditors from taking the crops of tenants on royal and other public lands and on communal land that owed manpower and military service to the palace.

In Egypt, the pharaoh Bakenranef (c. 720-715 BC, “Bocchoris” in Greek) proclaimed a debt amnesty and abolished debt-servitude when faced with a military threat from Ethiopia. According to Diodorus of Sicily (I, 79, writing in 40-30 BC), he ruled that if a debtor contested the claim, the debt was nullified if the creditor could not back up his claim by producing a written contract. (It seems that creditors always have been prone to exaggerate the balances due.) The pharaoh reasoned that “the bodies of citizens should belong to the state, to the end that it might avail itself of the services which its citizens owed it, in times of both war and peace. For he felt that it would be absurd for a soldier … to be haled to prison by his creditor for an unpaid loan, and that the greed of private citizens should in this way endanger the safety of all.”

The fact that the main Near Eastern creditors were the palace, temples and their collectors made it politically easy to cancel the debts. It always is easy to annul debts owed to oneself. Even Roman emperors burned the tax records to prevent a crisis. But it was much harder to cancel debts owed to private creditors as the practice of charging interest spread westward to Mediterranean chiefdoms after about 750 BC. Instead of enabling families to bridge gaps between income and outgo, debt became the major lever of land expropriation, polarizing communities between creditor oligarchies and indebted clients. In Judah, the prophet Isaiah (5:8-9) decried foreclosing creditors who “add house to house and join field to field till no space is left and you live alone in the land.”

Creditor power and stable growth rarely have gone together. Most personal debts in this classical period were the product of small amounts of money lent to individuals living on the edge of subsistence and who could not make ends meet. Forfeiture of land and assets – and personal liberty – forced debtors into bondage that became irreversible. By the 7th century BC, “tyrants” (popular leaders) emerged to overthrow the aristocracies in Corinth and other wealthy Greek cities, gaining support by canceling the debts. In a less tyrannical manner, Solon founded the Athenian democracy in 594 BC by banning debt bondage.

But oligarchies re-emerged and called in Rome when Sparta’s kings Agis, Cleomenes and their successor Nabis sought to cancel debts late in the third century BC. They were killed and their supporters driven out. It has been a political constant of history since antiquity that creditor interests opposed both popular democracy and royal power able to limit the financial conquest of society – a conquest aimed at attaching interest-bearing debt claims for payment on as much of the economic surplus as possible.

When the Gracchi brothers and their followers tried to reform the credit laws in 133 BC, the dominant Senatorial class acted with violence, killing them and inaugurating a century of Social War, resolved by the ascension of Augustus as emperor in 29 BC.

Rome’s creditor oligarchy wins the Social War, enserfs the population and brings on a Dark Age
Matters were more bloody abroad. Aristotle did not mention empire building as part of his political schema, but foreign conquest always has been a major factor in imposing debts, and war debts have been the major cause of public debt in modern times. Antiquity’s harshest debt levy was by Rome, whose creditors spread out to plague Asia Minor, its most prosperous province. The rule of law all but disappeared when the publican creditor “knights” arrived. Mithridates of Pontus led three popular revolts, and local populations in Ephesus and other cities rose up and killed a reported 80,000 Romans in 88 BC. The Roman army retaliated, and Sulla imposed war tribute of 20,000 talents in 84 BC. Charges for back interest multiplied this sum six-fold by 70 BC.

Among Rome’s leading historians, Livy, Plutarch and Diodorus blamed the fall of the Republic on creditor intransigence in waging the century-long Social War marked by political murder from 133 to 29 BC. Populist leaders sought to gain a following by advocating debt cancellations (e.g., the Catiline conspiracy in 63-62 BC). They were killed. By the second century AD about a quarter of the population was reduced to bondage. By the fifth century Rome’s economy collapsed, stripped of money. Subsistence life reverted to the countryside as a Dark Age descended.

Creditors find a legalistic reason to support parliamentary democracy
When banking recovered after the Crusades looted Byzantium and infused silver and gold to review Western European commerce, Christian opposition to charging interest was overcome by the combination of prestigious lenders (the Knights Templars and Hospitallers providing credit during the Crusades) and their major clients – kings, at first to pay the Church and increasingly to wage war. But royal debts went bad when kings died. The Bardi and Peruzzi went bankrupt in 1345 when Edward III repudiated his war debts. Banking families lost more on loans to the Habsburg and Bourbon despots on the thrones of Spain, Austria and France.
  
Matters changed with the Dutch democracy, seeking to win and secure its liberty from Habsburg Spain. The fact that their parliament was to contract permanent public debts on behalf of the state enabled the Low Countries to raise loans to employ mercenaries in an epoch when money and credit were the sinews of war. Access to credit “was accordingly their most powerful weapon in the struggle for their freedom,” notes Ehrenberg: “Anyone who gave credit to a prince knew that the repayment of the debt depended only on his debtor’s capacity and will to pay. The case was very different for the cities, which had power as overlords, but were also corporations, associations of individuals held in common bond. According to the generally accepted law each individual burgher was liable for the debts of the city both with his person and his property.”[2]

The financial achievement of parliamentary government was thus to establish debts that were not merely the personal obligations of princes, but were truly public and binding regardless of who occupied the throne. This is why the first two democratic nations, the Netherlands and Britain after its 1688 revolution, developed the most active capital markets and proceeded to become leading military powers. What is ironic is that it was the need for war financing that promoted democracy, forming a symbiotic trinity between war making, credit and parliamentary democracy in an epoch when money was still the sinews of war.

At this time “the legal position of the King qua borrower was obscure, and it was still doubtful whether his creditors had any remedy against him in case of default.”[3] The more despotic Spain, Austria and France became, the greater the difficulty they found in financing their military adventures. By the end of the eighteenth century Austria was left “without credit, and consequently without much debt” the least credit-worthy and worst armed country in Europe (as Steuart 1767:373 noted), fully dependent on British subsidies and loan guarantees by the time of the Napoleonic Wars.

Finance accommodates itself to democracy, but then pushes for oligarchy
While the nineteenth century’s democratic reforms reduced the power of landed aristocracies to control parliaments, bankers moved flexibly to achieve a symbiotic relationship with nearly every form of government. In France, followers of Saint-Simon promoted the idea of banks acting like mutual funds, extending credit against equity shares in profit. The German state made an alliance with large banking and heavy industry. Marx wrote optimistically about how socialism would make finance productive rather than parasitic. In the United States, regulation of public utilities went hand in hand with guaranteed returns. In China, Sun-Yat-Sen wrote in 1922: “I intend to make all the national industries of China into a Great Trust owned by the Chinese people, and financed with international capital for mutual benefit.”[4]

World War I saw the United States replace Britain as the major creditor nation, and by the end of World War II it had cornered some 80 percent of the world’s monetary gold. Its diplomats shaped the IMF and World Bank along creditor-oriented lines that financed trade dependency, mainly on the United States. Loans to finance trade and payments deficits were subject to “conditionalities” that shifted economic planning to client oligarchies and military dictatorships. The democratic response to resulting austerity plans squeezing out debt service was unable to go much beyond “IMF riots,” until Argentina rejected its foreign debt.

A similar creditor-oriented austerity is now being imposed on Europe by the European Central Bank (ECB) and EU bureaucracy. Ostensibly social democratic governments have been directed to save the banks rather than reviving economic growth and employment. Losses on bad bank loans and speculations are taken onto the public balance sheet while scaling back public spending and even selling off infrastructure. The response of taxpayers stuck with the resulting debt has been to mount popular protests starting in Iceland and Latvia in January 2009, and more widespread demonstrations in Greece and Spain this autumn to protest their governments’ refusal to hold referendums on these fateful bailouts of foreign bondholders.

Shifting planning away from elected public representatives to bankers
Every economy is planned. This traditionally has been the function of government. Relinquishing this role under the slogan of “free markets” leaves it in the hands of banks. Yet the planning privilege of credit creation and allocation turns out to be even more centralized than that of elected public officials. And to make matters worse, the financial time frame is short-term hit-and-run, ending up as asset stripping. By seeking their own gains, the banks tend to destroy the economy. The surplus ends up being consumed by interest and other financial charges, leaving no revenue for new capital investment or basic social spending.

This is why relinquishing policy control to a creditor class rarely has gone together with economic growth and rising living standards. The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage. To restore economic balance, antiquity’s cry for debt cancellation sought what the Bronze Age Near East achieved by royal fiat: to cancel the overgrowth of debts.

In more modern times, democracies have urged a strong state to tax rentier income and wealth, and when called for, to write down debts. This is done most readily when the state itself creates money and credit. It is done least easily when banks translate their gains into political power. When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade. The fall of the Roman Empire demonstrates what happens when creditor demands are unchecked. Under these conditions the alternative to government planning and regulation of the financial sector becomes a road to debt peonage.

Finance vs. government; oligarchy vs. democracy
Democracy involves subordinating financial dynamics to serve economic balance and growth – and taxing rentier income or keeping basic monopolies in the public domain. Untaxing or privatizing property income “frees” it to be pledged to the banks, to be capitalized into larger loans. Financed by debt leveraging, asset-price inflation increases rentier wealth while indebting the economy at large. The economy shrinks, falling into negative equity.

The financial sector has gained sufficient influence to use such emergencies as an opportunity to convince governments that that the economy will collapse they it do not “save the banks.” In practice this means consolidating their control over policy, which they use in ways that further polarize economies. The basic model is what occurred in ancient Rome, moving from democracy to oligarchy. In fact, giving priority to bankers and leaving economic planning to be dictated by the EU, ECB and IMF threatens to strip the nation-state of the power to coin or print money and levy taxes.

The resulting conflict is pitting financial interests against national self-determination. The idea of an independent central bank being “the hallmark of democracy” is a euphemism for relinquishing the most important policy decision – the ability to create money and credit – to the financial sector. Rather than leaving the policy choice to popular referendums, the rescue of banks organized by the EU and ECB now represents the largest category of rising national debt. The private bank debts taken onto government balance sheets in Ireland and Greece have been turned into taxpayer obligations. The same is true for America’s $13 trillion added since September 2008 (including $5.3 trillion in Fannie Mae and Freddie Mac bad mortgages taken onto the government’s balance sheet, and $2 trillion of Federal Reserve “cash-for-trash” swaps).

This is being dictated by financial proxies euphemized as technocrats. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even more unpayable.

Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy. Through their media and think tanks, they have convinced populations that the way to get rich most rapidly is to borrow money to buy real estate, stocks and bonds rising in price – being inflated by bank credit – and to reverse the past century’s progressive taxation of wealth.

To put matters bluntly, the result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation. Government planning and taxation is accused of being “the road to serfdom,” as if “free markets” controlled by bankers given leeway to act recklessly is not planned by special interests in ways that are oligarchic, not democratic. Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.

The failure to take the wishes of voters into consideration leaves the resulting national debts on shaky ground politically and even legally. Debts imposed by fiat, by governments or foreign financial agencies in the face of strong popular opposition may be as tenuous as those of the Habsburgs and other despots in past epochs. Lacking popular validation, they may die with the regime that contracted them. New governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.

At the very least, they may seek to pay by re-introducing progressive taxation of wealth and income, shifting the fiscal burden onto rentier wealth and property. Re-regulation of banking and providing a public option for credit and banking services would renew the social democratic program that seemed well underway a century ago.

Iceland and Argentina are most recent examples, but one may look back to the moratorium on Inter-Ally arms debts and German reparations in 1931.A basic mathematical as well as political principle is at work: Debts that can’t be paid, won’t be.

Footnotes:

[1] James Steuart, Principles of Political Oeconomy (1767), p. 353.

[2] Richard Ehrenberg, Capital and Finance in the Age of the Renaissance (1928):44f., 33.

[3] Charles Wilson, England’s Apprenticeship: 1603-1763 (London: 1965):89.

[4] Sun Yat-Sen, The International Development of China (1922):231ff.

 

Michael Hudson, a former Wall Street Journal reporter, is a staff writer at the Center for Public Integrity (http://www.publicintegrity.org), a nonprofit journalist organization. He is the author of “THE MONSTER: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America – And Spawned a Global Crisis” (2010, Times Books)

© 2011 Michael Hudson’s blog All rights reserved.
View this story online at: http://www.alternet.org/story/153338/

 

New Census Data Shows 1 in 2 People In America Are Now Poor Or Low Income

In Uncategorized on December 15, 2011 at 9:35 am

 

Oldspeak:” It’s midnight in America. ‘Austerity Measures’ and ‘Structural Adjustment Programs‘  imposed across much of the 2nd and 3rd world have come home to roost in the 1st world. They’re beginning to bear bitter fruit. ”The reality is that prospects for the poor and the near poor are dismal.  Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too `rich’ to qualify’. If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years”-Sheldon Danziger This is going to much get worse. Look at Greece, and you’ll see the future of the U.S. People won’t be able to ignore reality for much longer. The banksters who’ve hi-jacked our republic won’t stop until there’s no one left to reduce to debt peonage. The question is how long are Americans gonna sit idly by and let it happen? “Freedom Is Slavery”

By The Associated Press:

Squeezed by rising living costs, a record number of Americans – nearly 1 in 2 – have fallen into poverty or are scraping by on earnings that classify them as low income.

The latest census data depict a middle class that’s shrinking as unemployment stays high and the government’s safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.

“Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too `rich’ to qualify,” said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.

“The reality is that prospects for the poor and the near poor are dismal,” he said. “If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years.”

Congressional Republicans and Democrats are sparring over legislation that would renew a Social Security payroll tax cut, part of a year-end political showdown over economic priorities that could also trim unemployment benefits, freeze federal pay and reduce entitlement spending.

Robert Rector, a senior research fellow at the conservative Heritage Foundation, questioned whether some people classified as poor or low-income actually suffer material hardship. He said that while safety-net programs have helped many Americans, they have gone too far, citing poor people who live in decent-size homes, drive cars and own wide-screen TVs.

“There’s no doubt the recession has thrown a lot of people out of work and incomes have fallen,” Rector said. “As we come out of recession, it will be important that these programs promote self-sufficiency rather than dependence and encourage people to look for work.”

Mayors in 29 cities say more than 1 in 4 people needing emergency food assistance did not receive it. Many middle-class Americans are dropping below the low-income threshold – roughly $45,000 for a family of four – because of pay cuts, a forced reduction of work hours or a spouse losing a job. Housing and child-care costs are consuming up to half of a family’s income.

States in the South and West had the highest shares of low-income families, including Arizona, New Mexico and South Carolina, which have scaled back or eliminated aid programs for the needy. By raw numbers, such families were most numerous in California and Texas, each with more than 1 million.

The struggling Americans include Zenobia Bechtol, 18, in Austin, Texas, who earns minimum wage as a part-time pizza delivery driver. Bechtol and her 7-month-old baby were recently evicted from their bedbug-infested apartment after her boyfriend, an electrician, lost his job in the sluggish economy.

After an 18-month job search, Bechtol’s boyfriend now works as a waiter and the family of three is temporarily living with her mother.

“We’re paying my mom $200 a month for rent, and after diapers and formula and gas for work, we barely have enough money to spend,” said Bechtol, a high school graduate who wants to go to college. “If it weren’t for food stamps and other government money for families who need help, we wouldn’t have been able to survive.”

About 97.3 million Americans fall into a low-income category, commonly defined as those earning between 100 and 199 percent of the poverty level, based on a new supplemental measure by the Census Bureau that is designed to provide a fuller picture of poverty. Together with the 49.1 million who fall below the poverty line and are counted as poor, they number 146.4 million, or 48 percent of the U.S. population. That’s up by 4 million from 2009, the earliest numbers for the newly developed poverty measure.

The new measure of poverty takes into account medical, commuting and other living costs. Doing that helped push the number of people below 200 percent of the poverty level up from 104 million, or 1 in 3 Americans, that was officially reported in September.

Broken down by age, children were most likely to be poor or low-income – about 57 percent – followed by seniors over 65. By race and ethnicity, Hispanics topped the list at 73 percent, followed by blacks, Asians and non-Hispanic whites.

Even by traditional measures, many working families are hurting.

Following the recession that began in late 2007, the share of working families who are low income has risen for three straight years to 31.2 percent, or 10.2 million. That proportion is the highest in at least a decade, up from 27 percent in 2002, according to a new analysis by the Working Poor Families Project and the Population Reference Bureau, a nonprofit research group based in Washington.

Among low-income families, about one-third were considered poor while the remainder – 6.9 million – earned income just above the poverty line. Many states phase out eligibility for food stamps, Medicaid, tax credit and other government aid programs for low-income Americans as they approach 200 percent of the poverty level.

The majority of low-income families – 62 percent – spent more than one-third of their earnings on housing, surpassing a common guideline for what is considered affordable. By some census surveys, child-care costs consume close to another one-fifth.

Paychecks for low-income families are shrinking. The inflation-adjusted average earnings for the bottom 20 percent of families have fallen from $16,788 in 1979 to just under $15,000, and earnings for the next 20 percent have remained flat at $37,000. In contrast, higher-income brackets had significant wage growth since 1979, with earnings for the top 5 percent of families climbing 64 percent to more than $313,000.

A survey of 29 cities conducted by the U.S. Conference of Mayors being released Thursday points to a gloomy outlook for those on the lower end of the income scale.

Many mayors cited the challenges of meeting increased demands for food assistance, expressing particular concern about possible cuts to federal programs such as food stamps and WIC, which assists low-income pregnant women and mothers. Unemployment led the list of causes of hunger in cities, followed by poverty, low wages and high housing costs.

Across the 29 cities, about 27 percent of people needing emergency food aid did not receive it. Kansas City, Mo., Nashville, Tenn., Sacramento, Calif., and Trenton, N.J., were among the cities that pointed to increases in the cost of food and declining food donations, while Mayor Michael McGinn in Seattle cited an unexpected spike in food requests from immigrants and refugees, particularly from Somalia, Burma and Bhutan.

Among those requesting emergency food assistance, 51 percent were in families, 26 percent were employed, 19 percent were elderly and 11 percent were homeless.

“People who never thought they would need food are in need of help,” said Mayor Sly James of Kansas City, Mo., who co-chairs a mayors’ task force on hunger and homelessness

Shock Doctrine In Practice: The Connection Between Nighttime Robbery In The Streets And Daytime Robbery By Elites

In Uncategorized on August 22, 2011 at 11:15 am

Oldspeak:When your most elite, most powerful members of the society adopt a strategy of plundering, then they will develop a morality that doesn’t simply permit plundering, but valorizes it. And when that happens, the moral structures of the society will inevitably deteriorate. In the upper classes that leads to polite looting. In the under classes that leads to street looting. –William K. Black 

 

 

 

Related Video:

Keiser Report: Banking Looters

By Naomi Klein @ The Nation:

I keep hearing comparisons between the London riots and riots in other European cities—window smashing in Athens or car bonfires in Paris. And there are parallels, to be sure: a spark set by police violence, a generation that feels forgotten.

But those events were marked by mass destruction; the looting was minor. There have, however, been other mass lootings in recent years, and perhaps we should talk about them too. There was Baghdad in the aftermath of the US invasion—a frenzy of arson and looting that emptied libraries and museums. The factories got hit too. In 2004 I visited one that used to make refrigerators. Its workers had stripped it of everything valuable, then torched it so thoroughly that the warehouse was a sculpture of buckled sheet metal.

Back then the people on cable news thought looting was highly political. They said this is what happens when a regime has no legitimacy in the eyes of the people. After watching for so long as Saddam and his sons helped themselves to whatever and whomever they wanted, many regular Iraqis felt they had earned the right to take a few things for themselves. But London isn’t Baghdad, and British Prime Minister David Cameron is hardly Saddam, so surely there is nothing to learn there.

How about a democratic example then? Argentina, circa 2001. The economy was in freefall and thousands of people living in rough neighborhoods (which had been thriving manufacturing zones before the neoliberal era) stormed foreign-owned superstores. They came out pushing shopping carts overflowing with the goods they could no longer afford—clothes, electronics, meat. The government called a “state of siege” to restore order; the people didn’t like that and overthrew the government.

Argentina’s mass looting was called El Saqueo—the sacking. That was politically significant because it was the very same word used to describe what that country’s elites had done by selling off the country’s national assets in flagrantly corrupt privatization deals, hiding their money offshore, then passing on the bill to the people with a brutal austerity package. Argentines understood that the saqueo of the shopping centers would not have happened without the bigger saqueo of the country, and that the real gangsters were the ones in charge.

But England is not Latin America, and its riots are not political, or so we keep hearing. They are just about lawless kids taking advantage of a situation to take what isn’t theirs. And British society, Cameron tells us, abhors that kind of behavior.

This is said in all seriousness. As if the massive bank bailouts never happened, followed by the defiant record bonuses. Followed by the emergency G-8 and G-20 meetings, when the leaders decided, collectively, not to do anything to punish the bankers for any of this, nor to do anything serious to prevent a similar crisis from happening again. Instead they would all go home to their respective countries and force sacrifices on the most vulnerable. They would do this by firing public sector workers, scapegoating teachers, closing libraries, upping tuitions, rolling back union contracts, creating rush privatizations of public assets and decreasing pensions—mix the cocktail for where you live. And who is on television lecturing about the need to give up these “entitlements”? The bankers and hedge-fund managers, of course.

This is the global Saqueo, a time of great taking. Fueled by a pathological sense of entitlement, this looting has all been done with the lights left on, as if there was nothing at all to hide. There are some nagging fears, however. In early July, theWall Street Journal, citing a new poll, reported that 94 percent of millionaires were afraid of “violence in the streets.” This, it turns out, was a reasonable fear.

Of course London’s riots weren’t a political protest. But the people committing nighttime robbery sure as hell know that their elites have been committing daytime robbery. Saqueos are contagious.

The Tories are right when they say the rioting is not about the cuts. But it has a great deal to do with what those cuts represent: being cut off. Locked away in a ballooning underclass with the few escape routes previously offered—a union job, a good affordable education—being rapidly sealed off. The cuts are a message. They are saying to whole sectors of society: you are stuck where you are, much like the migrants and refugees we turn away at our increasingly fortressed borders.

David Cameron’s response to the riots is to make this locking-out literal: evictions from public housing, threats to cut off communication tools and outrageous jail terms (five months to a woman for receiving a stolen pair of shorts). The message is once again being sent: disappear, and do it quietly.

At last year’s G-20 “austerity summit” in Toronto, the protests turned into riots and multiple cop cars burned. It was nothing by London 2011 standards, but it was still shocking to us Canadians. The big controversy then was that the government had spent $675 million on summit “security” (yet they still couldn’t seem to put out those fires). At the time, many of us pointed out that the pricey new arsenal that the police had acquired—water cannons, sound cannons, tear gas and rubber bullets—wasn’t just meant for the protesters in the streets. Its long-term use would be to discipline the poor, who in the new era of austerity would have dangerously little to lose.

This is what David Cameron got wrong: you can’t cut police budgets at the same time as you cut everything else. Because when you rob people of what little they have, in order to protect the interests of those who have more than anyone deserves, you should expect resistance—whether organized protests or spontaneous looting.

And that’s not politics. It’s physics.

Naomi Klein is an award-winning journalist and syndicated columnist and the author of the international and New York Times bestseller The Shock Doctrine: The Rise of Disaster Capitalism (September 2007); an earlier international best-seller, No Logo: Taking Aim at the Brand Bullies; and the collection Fences and Windows: Dispatches from the Front Lines of the Globalization Debate (2002). Read more at Naomiklein.org. You can follow her on Twitter @naomiaklein.

 

The U.S. & The Five Stages Of Collapse

In Uncategorized on August 6, 2011 at 1:59 pm

Oldspeak: When I first read this 3 years ago, I could shrug it off. Today, in the wake of the first downgrading of U.S. debt EVER; it’s glaringly obvious that in the U.S. Stage 1. Financial collapse is very far along. Stages 2 and 3, Commercial and political collapse are in progress. Stages 4 and 5 social and cultural collapse are in progress in many parts of the U.S. At some point all the communitainment in the world won’t prevent us from acknowledging the actual reality happening around us.  We’ve seen this movie before in the 1920s-30s. Extreme inequality, oligarchy, rampant joblessness, austerity, deflationary policy, Acute consolidation of power and influence in the hands of a monied few. It’s unfortunate that the U.S. has not learned the lessons of its history. At some point we will have no choice but to heed the lessons from The U.S.S.R., Rome, The Maya, Mesopotamia, and other great empires the have risen and fallen in much the same way. U.S. Default is not a matter of if, but when. Printing money and raising the debt ceiling can only put off the inevitable for so long. We have to have serious discussion about what happens after. ”

By Dmitri Orlov @ Energy Bulletin:

Hello, everyone! The talk you are about to hear is the result of a lengthy process on my part. My specialty is in thinking about and, unfortunately, predicting collapse. My method is based on comparison: I watched the Soviet Union collapse, and, since I am also familiar with the details of the situation in the United States, I can make comparisons between these two failed superpowers.

I was born and grew up in Russia, and I traveled back to Russia repeatedly between the late 80s and mid-90s. This allowed me to gain a solid understanding of the dynamics of the collapse process as it unfolded there. By the mid-90s it was quite clear to me that the US was headed in the same general direction. But I couldn’t yet tell how long the process would take, so I sat back and watched.

I am an engineer, and so I naturally tended to look for physical explanations for this process, as opposed to economic, political, or cultural ones. It turns out that one could come up with a very good explanation for the Soviet collapse by following energy flows. What happened in the late 80s is that Russian oil production hit an all-time peak. This coincided with new oil provinces coming on stream in the West – the North Sea in the UK and Norway, and Prudhoe Bay in Alaska – and this suddenly made oil very cheap on the world markets. Soviet revenues plummeted, but their appetite for imported goods remained unchanged, and so they sank deeper and deeper into debt. What doomed them in the end was not even so much the level of debt, but their inability to take on further debt even faster. Once international lenders balked at making further loans, it was game over.

What is happening to the United States now is broadly similar, with certain polarities reversed. The US is an oil importer, burning up 25% of the world’s production, and importing over two-thirds of that. Back in mid-90s, when I first started trying to guess the timing of the US collapse, the arrival of the global peak in oil production was scheduled for around the turn of the century. It turned out that the estimate was off by almost a decade, but that is actually fairly accurate as far as such big predictions go. So here it is the high price of oil that is putting the brakes on further debt expansion. As higher oil prices trigger a recession, the economy starts shrinking, and a shrinking economy cannot sustain an ever-expanding level of debt. At some point the ability to finance oil imports will be lost, and that will be the tipping point, after which nothing will ever be the same.

This is not to say that I am a believer in some sort of energy determinism. If the US were to cut its energy consumption by an order of magnitude, it would still be consuming a staggeringly huge amount, but an energy crisis would be averted. But then this country, as we are used to thinking of it, would no longer exist. Oil is what powers this economy. In turn, it is this oil-based economy that makes it possible to maintain and expand an extravagant level of debt. So, a drastic cut in oil consumption would cause a financial collapse (as opposed to the other way around). A few more stages of collapse would follow, which we will discuss next. So, you could see this outlandish appetite for imported oil as a cultural failing, but it is not one that can be undone without causing a great deal of damage. If you like, you can call it “ontological determinism”: it has to be what it is, until it is no more.

I don’t mean to imply that every part of the country will suddenly undergo a spontaneous existence failure, reverting to an uninhabited wilderness. I agree with John-Michael Greer that the myth of the Apocalypse is not the least bit helpful in coming to terms with the situation. The Soviet experience is very helpful here, because it shows us not only that life goes on, but exactly how it goes on. But I am quite certain that no amount of cultural transformation will help us save various key aspects of this culture: car society, suburban living, big box stores, corporate-run government, global empire, or runaway finance.

On the other hand, I am quite convinced that nothing short of a profound cultural transformation will allow any significant number of us to keep roofs over our heads, and food on our tables. I also believe that the sooner we start letting go of our maladaptive cultural baggage, the more of a chance we will stand. A few years ago, my attitude was to just keep watching events unfold, and keep this collapse thing as some sort of macabre hobby. But the course of events is certainly speeding up, and now my feeling is that the worst we can do is pretend that everything will be fine and simply run out the clock on our current living arrangement, with nothing to replace it once it all starts shutting down.

Now, getting back to my own personal progress in working through these questions, in 2005 I wrote an article called “Post-Soviet Lessons for a Post-American Century”. Initially, I wanted to publish it on a web site run by Dale Alan Pfeiffer, but, to my surprise, it ended up on From The Wilderness, a much more popular site run by Michael Ruppert, and, to my further astonishment, Mike even paid me for it.

And ever since then, I’ve been asked the same question, repeatedly: “When? When is the collapse going to occur?” Being a little bit clever, I always decline to give a specific answer, because, you see, as soon as you get one specific prediction wrong, there goes your entire reputation. One reasonable way of thinking about the timing is to say that collapse can occur at different times for different people. You may never quite know that collapse has happened, but you will know that it has happened to you personally, or to your family, or to your town. The big picture may not come together until much later, thanks to the efforts of historians. Individually, we may never know what hit us, and, as a group, we may never agree on any one answer. Look at the collapse of the USSR: some people are still arguing over why exactly it happened.

But sometimes the picture is clearer than we would like. In January of 2008, I published an article on “The Five Stages of Collapse,” in which I defined the five stages, and then bravely stated that we are in the midst of a financial collapse. And ten months later it doesn’t seem that I went too far out on a limb this time. If the US government has to lend banks over 200 billion dollars a day just to keep the whole system from imploding, then the term “crisis” probably doesn’t do justice to the situation. To keep this game going, the US government has to be able to sell the debt it is taking on, and what do you think the chances are that the world at large will be snapping up trillions of dollars of new debt, knowing that it is being used to prop up a shrinking economy? And if the debt can’t be sold, then it has to be monetized, by printing money. And that will trigger hyperinflation. So, let’s not quibble, and let us call what’s happening what it looks like: “financial collapse”.

2.
So here are the five stages as I defined them almost a year ago. The little check-mark next to “financial collapse” is there to remind us that we are not here to quibble or equivocate, because Stage 1 is pretty far along. Stages 2 and 3 – commercial and political collapse, are driven by financial collapse, and will overlap each other. Right now, it is unclear which one is farther along. On the one hand, there are signs that global shipping is grinding to a halt, and that big box retailers are in for a very bad time, with many stores likely to close following a disastrous Christmas season. On the other hand, states are already experiencing massive budget shortfalls, laying off state workers, cutting back on programs, and are starting to beg the federal government for bail-out money.

Even though the various stages of collapse drive each other in a variety of ways, I think that it makes sense to keep them apart conceptually. This is because their effects on our daily life are quite different. Whatever constructive ways we may find of dodging these effects are also going to be different. Lastly, some stages of collapse seem unavoidable, while others may be avoided if we put up enough of a fight.

Financial collapse seems to be particularly painful if you happen to have a lot of money. On the other hand, I run across people all the time, who feel that “Nothing’s happened yet.” These are mostly younger, relatively successful people, who have little or no savings, and still have good paying jobs, or unemployment insurance that hasn’t run out yet. Their daily lives aren’t much affected by the turmoil on the financial markets, and they don’t believe that anything different is happening beyond the usual economic ups and downs.

Commercial collapse is much more obvious, and observing it doesn’t entail opening envelopes and examining columns of figures. It is painful to most people, and life-threatening to some. When store shelves are stripped bare of necessities and remain that way for weeks at a time, panic sets in. In most places, this requires some sort of emergency response, to make sure that people are not deprived of food, shelter, medicine, and that some measure of security and public order is maintained. People who know what’s coming can prepare to sit out the worst of it.

Political collapse is more painful yet, because it is directly life-threatening to many people. The breakdown of public order would be particularly dangerous in the US, because of the large number of social problems that have been swept under the carpet over the years. Americans, more than most other people, need to be defended from each other at all times. I think that I would prefer martial law over complete and utter mayhem and lawlessness, though I admit that both are very poor choices.

Social and cultural collapse seem to have already occurred in many parts of the country to a large extent. What social activity remains seems to be anchored to transitory activities like work, shopping, and sports. Religion is perhaps the largest exception, and many communities are organized around churches. But in places where society and culture remain intact, I believe that social and cultural collapse is avoidable, and that this is where we must really dig in our heels. Also, I think it is very important that we learn to see our surroundings for what they have become. In many places, it feels as if there just isn’t that much left that’s worth trying to save. If all the culture we see is commercial culture, and all the society we see is consumer society, then the best we can do is walk away from it, and look for other people who are ready to do the same.

3.
There is nothing particularly deep or magical about the five stages I chose, except that they seem convenient. They correspond to the commonly distinguished aspects of everyday reality. Each stage of collapse also corresponds to a certain set of beliefs in the status quo, that is about to go by the wayside.

It is always an impressive thing to observe when reality shifts. One moment, a certain idea is seen as preposterous, and the next moment it’s being treated as conventional wisdom. There seems to be a psychological mechanism involved, where nobody wants to be seen as the last fool to finally get the picture. Everybody starts pretending that they’ve thought that way all along, or at least for a little while, for fear of appearing foolish. It is always awkward to ask people what caused them to suddenly change their minds, because with the fear of looking foolish comes a certain loss of dignity.

The most compelling example of lots of minds suddenly going “snap” is, to my mind, the sudden demise of the USSR. It happened with Boris Yeltsin standing atop a tank, and being asked the question: “But what will become of the Soviet Union?” And his answer, pronounced with maximum gravitas was: “Henceforth I shall only refer to it as the FORMER Soviet Union.” And that was that. After that, whoever still believed in the Soviet Union appeared as not just foolish, but actually crazy. For a while, there were a lot of crazy old people parading around with portraits of Lenin and Stalin. Their minds were too old to go “snap”.

Here in the US, we are yet to experience any of the really major, earth-shattering realizations, the ones that look preposterous immediately before and completely obvious immediately after they occur. We have had minor tremors, mostly relating to financial assumptions. Is real estate a good investment. Will private retirement allow you to retire? Will the government bail us all out? All the major realizations are yet to come, or, as my die-hard Yuppie friends keep telling me, “Nothing’s happened yet.”

But by the time something does happen, it will have been too late for us to start planning for it happening. It doesn’t seem all that worthwhile for us to sit around waiting for the happy event of everybody else feeling foolish all at the same time. Arrogant though that may seem, we may be better off accepting their foolishness before they do, and keeping a safe distance ahead of the prevailing opinion.

Because if we do that, we may yet succeed in finding ways to cope. We may learn to dodge financial collapse by learning to live without needing much money. We may create alternative living arrangements and informal production and distribution networks for all the necessities before commercial collapse occurs. We may organize into self-governing communities that can provide for their own security during political collapse. And all of these steps put together may put us in a position to safeguard society and culture.

Or we can just wait until everyone starts agreeing with us, because we wouldn’t want them to look foolish.

4.
The important dynamic, when it comes to financial collapse, is obvious by now. It’s the collapse of credit pyramids, “the whole house of cards” as President Bush put it. The technical term is “deleveraging,” and the response is the bailout. The federal government will be bailing out the banks and the insurance companies, the auto companies, and state governments. Call it the bail-out treadmill: we are borrowing faster and faster just to keep from falling down. The treadmill is actually a good metaphor. Imagine what would happen if you went to a gym, got on a treadmill machine, and just kept punching up the speed, as high as it will go. What happens is you trip and fall, and find yourself flying backwards.

It is instructive to ask the question, Who are we borrowing this bail-out money from? People will tell you that we are borrowing it from “the taxpayer.” But it’s not as if federal tax receipts have automatically shot up by a few trillion over the past couple of months, and so this begs the question, Who is “the taxpayer” going to borrow this money from in the meantime? From other Americans? No, because our savings rate has been abysmally low for quite some time now, and what little we have saved is in housing equity, which is dwindling, and in stocks and bonds, through mutual funds and 401ks and such, which are down by a third or so. The value of these investments is crashing, and if we dumped these investments to raise the cash to fund this new debt, that would just make them crash even faster. In effect, we’d only be moving money from one pocket to another. So, really, the bailouts have to be financed by foreigners. And what if these foreigners decide not to trust us with any more of their savings? Then our only recourse is to “monetize” the debt: to print money.

And so the next question is, how much money would we have to print? The purpose of the bailouts is to provide liquidity to insolvent companies, to avoid deleveraging. To understand what that means, we have to understand that for every actual dollar within the economy, in the sense of it not being borrowed, there are over 13 dollars of borrowed money, which only exists while the debt can be rolled over. If our credit is maxed out while the economy is growing, that’s bad enough, but the US economy is shrinking because of the recent oil shock. A smaller economy cannot carry as much debt, and this is part of the reason why we have deleveraging. Once the process of debt going sour gets started, it is hard to stop, and if deleveraging were to run its course, we would be down over 1300%. To monetize that much debt would require over 1300% inflation. And once that gets started, it becomes very hard to stop.

And, that, believe it or not, is actually the good news. Because most of our debt is denominated in our own currency – the US dollar – the US will not have to declare sovereign default, like Russia was forced to do in the 1990s. Instead, we can inflate our way out of national bankruptcy, by printing a lot of dollars. We will repay our national debt, but we will do so in worthless paper money, bankrupting our international creditors in the process. There is sure to be plenty of pain for everyone, especially everyone who is used to having plenty of money, because their money will no longer make the world go around. Once the US has to start earning foreign currency in order to pay for imports, you can be sure that imports will become quite scarce.

5.
Here are before and after snapshots of the most salient characteristics of financial collapse, as they will affect the vast majority of the population. Here, I am assuming that commercial and political collapse are slower in arriving, and that government is still there to step in with emergency aid of various sorts, and that a market economy of some sort continues to function. It could come down to everyone walking around with their little food stamps debit cards, and the only place they can use them that’s within walking distance is McDonalds, but I am assuming some semi-stable period during which other adjustments can occur before other stages run their course.

The adjustments would have to do with major aspects of the living arrangement, from where we live to how we grow food to how we relate to each other. With money scarce and not particularly potent, other ways of winning the cooperation of others would need to be evolved in a hurry. The financial realm can be seen as a complex system of fences: your bank account is fenced off from my bank account. This arrangement allows you and me to not worry too much about each other, provided each of us has enough to live on. Though this is largely a fiction, we can fancy ourselves to be independent economic players on a level playing field. But once these conceptual fences become irrelevant, because there is nothing behind them, we become each others’ burden, in an immediate sort of way, that would come as a shock to most people. The indignity of such physical interdependence would be psychologically devastating to many people, raising the human toll from financial collapse beyond what you’d expect from a problem that really only exists on paper. This is going to be particularly hard for a nation brought up on the myth of rugged individualism.

6.
Commercial collapse, when it arrives, will again cause much more of a psychological crack-up than you’d expect from a purely organizational problem. The quantities of immediately available goods and services right before and right after the collapse would remain about the same, but because market psychology is so ingrained in the population, no other ways of coping would be considered. Hoarding would become widespread, with looting as the obvious antidote. There would be an instant, huge black market for all sorts of necessities, from shampoo to vials of insulin.

The market mechanism works well in some cases, but it doesn’t work at all when key commodities become scarce. It leads to profiteering, hoarding, looting, and other pernicious effects. There is usually a knee-jerk reaction to regulate the markets, by imposing price controls, or by introducing rationing. I found it quite funny that the recent clamoring for re-regulating the financial markets was greeted with cries of “Socialists!” Failing at capitalism doesn’t make you a socialist, any more than getting a divorce automatically make you gay.

If by the time commercial collapse is upon us, there is still enough of the political system left intact to implement rationing and price controls and emergency distribution schemes, then we should count these among our blessings. Such heavy-handed governance is certainly not a crowd-pleaser during times of plenty, when it’s also unnecessary, but it can be quite a life-saver during times of scarcity. The Soviet food distribution system, which was plagued with chronic underperformance during normal times, proved to be paradoxically resilient during collapse, allowing people to survive the transition.

7.
If prior to commercial collapse the challenge is finding enough money to afford the necessities, afterward the challenge is getting people to accept money as payment for these same necessities. Many of the would-be sellers will prefer to be paid in something more valuable than mere cash. Customer service comes to mean that customers must provide a service. Given that most people won’t have much to offer, other than their now worthless money, should they still have any, most purveyors of goods and services decide to take a holiday.

With the disappearance of the free and open market, even the items that still are available for sale come to be offered in a way that is neither free nor open, but only at certain times and to certain people. Whatever wealth still exists is hidden, because flaunting it or exposing it just increases the security risk, and the amount of effort required to guard it.

In an economy where the vast majority of manufactured items is imported, and designed with planned obsolescence in mind, it will be difficult to keep things running as imports dry up, especially imports of spare parts for foreign-made machinery. The pool of available equipment will shrink over time, as more and more pieces of equipment become used as “organ donors.” In an effort to keep things running, entire cottage industries devoted to refurbishing old stuff might suddenly come together.

8.
It is sometimes hard to discern political collapse, because politicians tend to be quite good at maintaining the pretense of power and authority even as it dwindles. But there are some telltale signs of political collapse. One is when politicians start moonlighting because their day job is no longer sufficiently gainful. Another is when regional politicians start to openly defy orders from the political center. Russia experienced plenty of each of these symptoms.

One thing that makes political collapse particularly hard to spot is that the worse things get, the more noise the politicians emit. The substance to noise ratio in political discourse is pretty low even in good times, making it hard to spot the transition when it actually drops to zero. The variable that’s easier to monitor is the level of political embarrassment. For instance, when Mr. Nazdratenko, the governor of the far-east Russian region of Primorye, stole large amounts of coal, made strides in the direction of establishing an independent foreign policy toward China, and yet Moscow could do nothing to reign him in, you could be sure that Russia’s political system was pretty much defunct.

Another telltale sign of political collapse is actual disintegration, where regions declare independence. In Russia, that was the case with Chechnya, and it led to a prolonged bloody conflict. Here, we might have a “Reconquista” where former Mexican territories become ever more Mexican, the South might rise again. New England, California, and the Pacific Northwest might decide to go their separate ways. Once the interstate highway system is no longer viable and the remaining domestic airlines are extinct, there is not much to keep the two coasts together. What once united the country was the construction of the continental railroad, but railroads have been too neglected to hold it together now. A country consisting of two halves tied together via Panama Canal is de facto at least two countries.

Yet another thing to watch for is foreign incursions into domestic politics. When foreign political consultants start stage-managing elections, as happened with Yeltsin’s reelection campaign, you can be sure that the country is no longer in charge of its own political system. In the US, there is a gradual surrender of sovereignty, as sovereign wealth funds buy up more and more US assets. That sort of thing used to be considered akin to an act of war, but these are desperate times, and they are allowed to do so without so much as a nasty comment. Eventually, they may start making political demands, to extract the most value out of their investments. For instance, they could start vetting candidates for public office, to make sure that we remain friendly to their interests.

Lastly, the power vacuum created by the collapse of legitimate authority tends to be more or less automatically filled by criminal syndicates. These often try to commandeer the political establishment by getting their heads elected or appointed to political offices. Examples include Russian oligarchs, such as Boris Berezovsky, who got himself elected to Duma, the Russian parliament, and Mikhail Khodorkovsky, who thought he could use his oil wealth to buy his way into the political establishment. Luckily for Russia, Berezovsky is in exile in England, and Khodorkovsky is in jail.

9.
A great many people in the US insist that they do not need government help, and that they would do just fine if only the government would leave them alone. But this is really just a pose; there is a great deal that that government does to make their lives possible. In the United States, the federal government keeps many people alive through programs such as Medicaid, Social Security, and food stamps. Local governments provide for trash removal and water and sewer line maintenance, road and bridge repair, and so on. Police departments try to defend people from each other.

When all of that starts to unravel, it is likely to do so from the bottom, not from the top. Local officials are more accessible than remote Washington bureaucrats, and so they will be the first to be overwhelmed by the anger and confusion of their constituents, while Washington remains unresponsive. One likely exception may have to do with the use of federal troops. It seems almost a given that troops repatriated from the more than 1000 foreign military bases will see action right here at home. They will be reassigned to domestic peacekeeping duties.

10.
Aside from the big government programs, there is little available in the US to help those in need. Again, Americans make a big show of their philanthropy, but, compared to other developed countries, they are in fact quite stingy when it comes to helping those in need. There is even a streak of political sadism, which, for example, shows up in people’s attitudes toward welfare recipients. This sadism can be seen in the so-called welfare reform, which has forced single mothers to work jobs that barely cover the cost of daycare, which is often substandard.

Aside from the government, there are charities, many of which are church-based, and so they have the ulterior motive of recruiting people to their cause. But even when a charity does not make any specific demands, its real purpose is to reinforce the superiority of those who are charitable, at the expense of those who are the recipients. There is a flow of forced gratitude from the beneficiary to the benefactor. The greater the need, the more humiliating is the transaction to the beneficiary, and the more satisfying it is to the benefactor. There is no motivation for the benefactor to provide more charity in response to greater need, except in special circumstances, such as immediately following a natural disaster. Where the need is large, constant, and growing, we should expect charities to matter very little when it comes to satisfying it.

Since neither government largesse nor charity is likely to provide for those who cannot provide for themselves, we should look for other options. One promising direction is a revival of mutual help societies, which take membership contributions and then use them to help those in need. At least in theory, such organizations are vastly better than either government aid or charities. Those who are helped by them do not have to surrender their dignity, and can survive difficult times without being stigmatized.

To make it intact through times of great need, the only reasonable approach, it seems to me, is to form communities that are strong and cohesive enough to provide for the well-being of all of their members, that are large enough to be resourceful, yet small enough so that people can relate to each other directly, and to take direct responsibility for each other’s well-being.

11.
If this effort fails, then the outlook becomes dire indeed. I would like to emphasize, once again, that we must do all we can to avoid this stage of collapse. We can allow the financial system, and the commercial sector, and most of the government institutions to collapse, but not this.

What makes this particularly challenging is that the existence of finance and credit, of consumer society, and of government-imposed law and order has allowed society, in the sense of direct, mutual help and of freely accepting responsibility for each others’ welfare, to atrophy. This process of social decay may be less advanced in groups that have survived recent adversity: immigrant and minority groups, or people who served together in the armed forces. The instincts that underlie this behavior are strong, and they are what helped us survive as a species, but they need to be reactivated in time to create groups that are cohesive enough to be viable.

12.
Culture can mean a great many things to people, but what I mean here is a specific very important element of culture: how people relate to each other face to face. Take honesty, for instance: do people demand it of themselves and others, or do they feel that it is acceptable to lie to get what you want? Do they take pride in how much they have or in how much they can give? I took this list of virtues from Colin Turnbull, who wrote a book about a tribe in which most of these virtues were almost entirely missing. Turnbull’s point was that these personal virtues are also all but destroyed in Western society, but that for the time being their absence is being masked by the impersonal institutions of finance, commerce, and government.

I believe that Turnbull has a point. Ours is a cold world, in which the citizens are theoretically expected to fend for themselves, but in reality can only survive thanks to the impersonal services of finance, commerce, and government. It only allows us to practice these warm virtues among family and friends. But that is a start, and from there we can expand this circle of warmth to encompass more and more of the people who matter to us and we to them.

13.
In his amazing book about the legacy of European colonialism, Exterminate all the Brutes, Sven Lindqvist makes the stunning observation that violence renders one unrecognizable. The aggressor, whether active or passive, becomes a stranger.

The violence does not have to be physical. One subtle type of mental violence that abounds in our world is the act of refusing to acknowledge someone’s existence. We may believe that it makes us safer to walk past people without making eye contact. That is certainly true if our look is blank and indifferent, and it is then better to avert one’s gaze than to look, and in effect to say: “I do not recognize you.” That definitely does not make you any safer. But if your look says “I see you, you are OK,” or even “I recognize you,” then the effect is quite the opposite. Dogs understand this principle perfectly well, and so should people.

14.
When I was doing a radio tour to promote my book, a lot of the AM radio motor-mouths who interviewed me would sum up the interview with something like “So this is all doom and gloom, isn’t it.” And then I would have maybe 15 seconds for a rebuttal. So here is my standard 15 second rebuttal: “No, my message is actually quite hopeful. I want to let people know that they can find ways to lead happy, fulfilling lives even as this doomed system crumbles all around them.” Here, I can give you a longer answer.

I believe that the financial pyramid scheme and globalized consumerism are done. But I think that having no government at all is not an option. Forget entitlements, forget military bases on foreign soil, forget the three-ring circus that passes for representative democracy here, but we will still need agencies to print passports, to control the nuclear stockpile, as well as many other mundane but essential services that only a central government can provide. For most other needs, local self-government may be the best we can do, but that may not be bad at all.

Commercial collapse need not be final. It is quite possible that a new economy will arise spontaneously, one without all the frills and the waste, but able to provide for most of the basic needs. In the places that are socially and culturally intact, this is almost inevitable, as people take charge and start doing what’s necessary without waiting for official sanction.

As far as social and cultural collapse, as I already mentioned, to some extent they have already happened, but this is being masked, for the time being, by the availability of finance, commerce, and government. But they can be undone, not everywhere, of course, but in quite a few places, because the instincts are there, and a dire common predicament can be the catalyst that changes society, bringing it closer to the human norm.

15.
Knowing what to expect can provide us with peace of mind, even in the midst of collapse. Wallowing in nostalgia over the good old days, or denying that sweeping changes are before us — these responses are definitely unhealthy.

If we know what’s coming, we can start ignoring the things that we will not be able to rely on. If we do enough of this, we may find ourselves in a different world, quite possibly a better one, rather quickly. Here is a personal example. Some years ago, I decided to give up the car, finding it quite impractical, and started bicycling instead. It wasn’t that easy at first, but once I got used to it, a strange thing happened to my perception: I started seeing cars quite differently. On the way to work in the morning, I would ride along a stretch of highway, which was always packed with cars. When you are driver, you see it as normal, because you are part of this herd of mechanized insects. But what I saw was sheet metal boxes with people imprisoned inside them, strapped down to a chair inside a tiny padded cell, and most of these poor crazies were just pictures of misery: an angry, desperate, lonely mob, condemned to move about in circles. And then I would happily pedal away, through a park and around a pond, and leave that horrible, dying world behind.

And so it is with a great many things. We can wait until the lifestyle that is killing the planet and is making us crazy and sick is no longer physically possible, or we can opt out of it ahead of time. And what we replace it with can be difficult at first, but quite a lot better for us in the end.

16.
So let us summarize our findings. Financial collapse is already quite far along, and is guaranteed to run its course. Bailouts can make insolvent institutions look solvent for a time by providing liquidity, but one thing they cannot provide is solvency. For instance, no matter how much we bail out the auto companies, making any more cars will still be a bad idea. Similarly, no matter how much money we give to banks, their loan portfolios, loaded down with houses built in places that are inaccessible except by car, will still end up being worthless. By continuously nationalizing bad debt, the country will make itself into a bad credit risk, and foreign lenders will walk away. Hyperinflation and loss of imports will follow.

17.
Commercial collapse is likewise guaranteed to happen. One key import is oil, and here the loss of imports will cause much of the economy to shut down, because in this country nothing moves without oil. But it should be possible to come up with new, far less energy-intensive ways to provide for the basic needs.

18.
Political collapse is guaranteed as well. As tax receipts dwindle, municipalities and states will no longer be able to meet the minimal maintenance requirements for existing infrastructure: roads, bridges, water and sewer mains, and so forth. Municipal services, including police, fire departments, snow removal and garbage collection, will also be curtailed or eliminated. The better-organized communities may be able to find ways to compensate, but many communities will become impassable and uninhabitable, generating a flood of internal refugees.

Currently, the political class couldn’t be farther from understanding what is about to happen. I listened in on one of the recent presidential debates (I don’t have a television set, but I caught a chunk of it on NPR). It struck me that the two candidates spent most of the time arguing over ways of spending money that they don’t have. For me, listening to them was a waste of time that I didn’t have. I suspect that my book, would sell better if McCain got elected; nevertheless, I choose to remain selflessly apolitical. National politics is a distraction and a waste of time.

Actually, I should be gratified. A while ago I proposed a whimsical Collapse Party. The Collapse Party platform featured planks such as the freeing of prisoners to whittle down the prison population before a general amnesty becomes necessary due to lack of funds, a jubilee – forgiveness of all debts – to wipe the slate clean of all these bad loans, and a few others. Elsewhere, I proposed that it is a good idea to stop making new cars – just run down the ones we already have, and we’ll run out of cars just as we run out of gas. I am happy to report that this has been banner year for the Collapse Party. Without fielding a single candidate, we managed to push through much of our agenda: many states are releasing prisoners due to the fiscal crisis, the federal government is now involved in avoiding foreclosures, a huge credit card debt write-off is in the works (not quite a jubilee, but still…) and now automakers are ready to consolidate or declare bankruptcy. Next year, perhaps we will repatriate troops and shut down overseas military bases, also in line with the Collapse Party platform.

19.
Continuing with our recap, I see social collapse as avoidable, but not in all places. In many places, the task is to reconstitute society before the first three stages run their course, and it may already be too late. But this is where we need to make a stand, if only to be remembered for something more than the sum total of our mistakes.

20.
Lastly, cultural collapse is something that’s almost too horrible to contemplate, except that in some places it seems to have already happened, and is being masked by the various institutions that still exist, for the time being. But I believe that a lot of people will come around and remember their humanity, the better parts of their natures, when dire circumstances force them to rise to the occasion.

Also, there are some intact pockets of culture here and there that can be used as a sort of cultural seed stock. These are communities and groups that have seen some adversity in recent times, and have some social cohesion left over from the experience. They may also be those who made certain conscious decisions, to simplify their living arrangements in order to lead saner, more fulfilling lives. We must do all we can to avert this final stage of collapse, because what is at stake is nothing less than our humanity.

21.
I hope that, if you have been following along, by this point this slide is self-explanatory. Collapse is not one monolithic thing. Each kind of collapse requires a response, be it jumping clear ahead of time, sitting it out, or opposing it with all you got. At this point, if anyone in this room got up and tried to tell us what to do to avoid financial collapse, we would probably find that quite funny. On the other hand, if we stand by and let social and cultural collapse unfold, then what’s the point of any of this?

That’s all. Thank you for listening.

Editorial Notes

This article is a talk that was originally given by Dmitry Orlov at the Community Solutions Conference in Michigan in November 2008.

Thanks to SO and KS for the formatting. This was an especially difficult job.

-BA