Charles Hugh Smith, author of Survival+ and An Unconventional Guide to Investing in Troubled Times discusses why the Great Recession is here to stay, the structural unemployment that will affect many people and the future of the US economy. Plus, investing your money and time in your own life and in your own community and not getting burned by a publicly traded company you’ve never personally visited. Charles Hugh Smith blogs daily at Of Two Minds.com.
I don’t always agree with Noam Chomsky. I think he’s too reflexively anti-American (to the detriment to his works being more widely read), that he’s been getting a lil’ cranky as he gets older (as we all do) and sometimes he veers a little too far into conspiracy theory territory for my tastes. Still, when he’s on it, Chomsky can zero in on a complex confluence of events and trends and elucidate them like few other observers of national and world politics can. He recently took on the topic of American decline on the pages of al-Akhbar:
The post-Golden Age economy is enacting a nightmare envisaged by the classical economists, Adam Smith and David Ricardo. Both recognized that if British merchants and manufacturers invested abroad and relied on imports, they would profit, but England would suffer. Both hoped that these consequences would be averted by home bias, a preference to do business in the home country and see it grow and develop. Ricardo hoped that thanks to home bias, most men of property would “be satisfied with the low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations.
In the past 30 years, the “masters of mankind,” as Smith called them, have abandoned any sentimental concern for the welfare of their own society, concentrating instead on short-term gain and huge bonuses, the country be damned—as long as the powerful nanny state remains intact to serve their interests.
A graphic illustration appeared on the front page of the New York Times on August 4. Two major stories appear side by side. One discusses how Republicans fervently oppose any deal “that involves increased revenues”—a euphemism for taxes on the rich. The other is headlined “Even Marked Up, Luxury Goods Fly Off Shelves.” The pretext for cutting taxes on the rich and corporations to ridiculous lows is that they will invest in creating jobs—which they cannot do now as their pockets are bulging with record profits.
The developing picture is aptly described in a brochure for investors produced by banking giant Citigroup. The bank’s analysts describe a global society that is dividing into two blocs: the plutonomy and the rest. In such a world, growth is powered by the wealthy few, and largely consumed by them. Then there are the ‘non-rich,’ the vast majority, now sometimes called the global precariat, the workforce living a precarious existence. In the US, they are subject to “growing worker insecurity,” the basis for a healthy economy, as Federal Reserve chair Alan Greenspan explained to Congress while lauding his performance in economic management. This is the real shift of power in global society.
The Citigroup analysts advise investors to focus on the very rich, where the action is. Their “Plutonomy Stock Basket,” as they call it, far outperformed the world index of developed markets since 1985, when the Reagan-Thatcher economic programs of enriching the very wealthy were really taking off.
Before the 2007 crash for which the new post-Golden Age financial institutions were largely responsible, these institutions had gained startling economic power, more than tripling their share of corporate profits. After the crash, a number of economists began to inquire into their function in purely economic terms. Nobel laureate in economics Robert Solow concludes that their general impact is probably negative: “the successes probably add little or nothing to the efficiency of the real economy, while the disasters transfer wealth from taxpayers to financiers.”
By shredding the remnants of political democracy, they lay the basis for carrying the lethal process forward—as long as their victims are willing to suffer in silence.
“Baby Marx” is an ongoing TV pilot project by Mexican artist Pedro Reyes currently on exhibit at the prestigious Walker Art Center in Minneapolis from August 11 to November 27.
Reporting on the advent of the Second French Empire in 1851, Marx famously repeated an insight he had read in a letter from Engels, itself a variation on Hegel: if all great world-historical facts and personages occur twice, the first time they do so as “grand tragedy,” the second as “rotten farce.” A century and a half ago, Marx and Engels regarded this repetition with despair, brandishing the category of farce as a denunciation of Louis-Napoléon Bonaparte’s dictatorship.
In the context of advanced capitalism, however, Pedro Reyes (Mexico City, 1972) asks us, with Baby Marx, to re-evaluate the political inheritance of both repetition and farce.
Taking up a recent trend in the production of Hollywood blockbusters, Reyes proposes to “reboot” the nineteenth century debate between socialism and capitalism. Media moguls such as Ronald D. Moore (Battlestar Galactica) and J.J. Abrams (Star Trek) have similarly resurrected dystopian, Cold War-era visions of the future to great commercial success. Repetition recommends itself in these latter contexts principally as a means of streamlining the production process itself: brand recognition has been subsidized in advance, capitalizing on consumers’ prior emotional investments in the franchise’s narrative.
Reyes and his team are actually shooting new scenes for “Baby Marx” at the Walker Art Center. The behind the scenes process is what the exhibit is all about. I think this is a funny idea, but I don’t think it’s funny enough. I’ve read that Reyes hired two writers from an Adult Swim show to help punch it up a bit in that department. “Baby Marx” has been pitched to HBO and Japanese TV execs, who both apparently turned it down. In the age of The Daily Show, South Park and Bill Maher, something like this would require an absolutely savage satirical wit to make it come alive and so far this project lacks that, in my never so humble opinion. It’s cool, but it could be a lot better.
The first installment of “Baby Marx,” produced for Japan’s Yokohama Triennial in 2008:
More “Baby Marx” (and Monty Python’s “Communist Quiz Show” sketch) after the jump…
“We thought the markets work. They’re not working.”—Dr. Nouriel Roubini
I have always maintained that the global future will ultimately be a socialist one, but it was not easy to “keep the faith” after the collapse of the Soviet bloc and the (seemingly) robust (dot)economy of the Clinton years. However, these days Marx’s predictions for voracious end-stage capitalism seem well-vindicated by what we’re seeing take place in Greece, Israel, Iceland and especially in England. The system hollowed itself out from the inside far faster than I ever would have thought possible in 1999.
So as someone whose politics have been more or less wildly out of step with American mainstream opinion for my entire life, I have watched with great bemusement at the surprisingly Marxist-tinged rhetoric that is now being espoused in places like TIME, the Wall Street Journal and Forbes. It doesn’t get much more “establishment” than these venerable publications, I think you’ll agree, which is why they’ve always been such credible markers of where the cultural conversation is headed.
The riots that hit London and other English cities last week have the potential to spread beyond the British Isles. Class rage isn’t unique to England; in fact, it represents part of a growing global class chasm that threatens to undermine capitalism itself.
The hardening of class divisions has been building for a generation, first in the West but increasingly in fast-developing countries such as China. The growing chasm between the classes has its roots in globalization, which has taken jobs from blue-collar and now even white-collar employees; technology, which has allowed the fleetest and richest companies and individuals to shift operations at rapid speed to any locale; and the secularization of society, which has undermined the traditional values about work and family that have underpinned grassroots capitalism from its very origins.
All these factors can be seen in the British riots. Race and police relations played a role, but the rioters included far more than minorities or gangsters. As British historian James Heartfield has suggested, the rioters reflected a broader breakdown in “the British social system,” particularly in “the system of work and reward.”
In the earlier decades of the 20th century working class youths could look forward to jobs in Britain’s vibrant industrial economy and, later, in the growing public sector largely financed by both the earnings of the City of London and credit. Today the industrial sector has shrunk beyond recognition. The global financial crisis has undermined credit and the government’s ability to pay for the welfare state.
With meaningful and worthwhile work harder to come by — particularly in the private sector — the prospects for success among Britain working classes have been reduced to largely fantastical careers in entertainment, sport or all too often crime. Meanwhile, Prime Minister David Cameron’s supporters in the City of London may have benefited from financial bailouts arranged by the Bank of England, but opportunities for even modest social uplift for most other people have faded.
Usually, when such thing is posed as a query, the answer in the text tends toward the affirmative. Roubini writes:
So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.
Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.
To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.
The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.
Over time, advanced economies will need to invest in human capital, skills and social safety nets to increase productivity and enable workers to compete, be flexible and thrive in a globalized economy. The alternative is – like in the 1930s - unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.
Below, Roubini interviewed by the Wall Street Journal:
By now you’ve probably heard about the plane that was flown over NYC today with a flowing banner behind it reading: “THANKS FOR THE DOWNGRADE. YOU SHOULD ALL BE FIRED.”
Fortune magazine’s Dan Primack learned who flew the plane: It was a Lucy Nobbe, a vice president with Wedbush Morgan Securities. Nobbe is a single mother from St. Louis who is angry with Wall Street and Washington and wanted to vent her frustration:
“I originally wanted to fly it over Washington, D.C., but learned that you can’t do that,” says the banker, who asked to remain anonymous for job security reasons [She revealed herself subsequently—RM]. “So I chose Wall Street instead, but didn’t specifically intend it to fly over S&P. I’m just a mother from St. Louis who feels the only reason we got downgraded was people in politics.”
A friend of the woman who flew the plane who requested anonymity spoke to the Observer by phone, confirming that her friend is in fact a single mother of two from St. Louis. We were told she is an investment banker (Fortune noted her as a “broker”) and as her friend explained to us, “she woke up pissed about everything in Washington, especially now with the downgrade.” She wanted to fly it over D.C. but she couldn’t because of the restricted airspace; her original intent wasn’t to fly the plane “at” Wall Street, per se.
“She’s not mad at S & P, she’s mad at Washington D.C. She called me up to have me talk her out of it, and of course, I didn’t,” her friend noted, “because I think it’s funnier than shit.” According to her friend, the woman “does not have a lot of discretionary cash as others are saying. She’s a single mother of two. She’s been working and paying taxes since she was 16 years old.”
Is she of any particular political persuasion? “Nope,” her friend notes. “Not really. It’s directed at Washington. The Republicans, Democrats, President. Not at S & P.” We noted—as we’ve heard from friends, colleagues, and sources that the banner is likely making quite a few people smile.
“I think she’d be happy to hear that. She can’t reveal herself because she doesn’t want to lose her job, obviously,” her friend noted, “but I think she’d be happy to hear that.”
Raymond Johnson, a 26-year-old man from Charleston, SC has breast cancer, something that rarely afflicts men. Mr. Johnson, who is employed laying tile was unable to afford health insurance BECAUSE IT COSTS TOO DAMNED MUCH.
Susan Appelbaum, an angel working in disguise as a patient advocate at the Charleston Cancer Center, tried to help Raymond get into a state program providing Medicaid for breast cancer patients. Mr. Johnson was denied the coverage because he’s a man and the program is only for women.
The SC Department of Health and Human Services has asked the federal government for help. But Raymond Johnson needs the treatment NOW. From WCIV ABC-TV news in South Carolina:
“Each treatment is probably roughly around 10 grand,” said Susan Appelbaum, the patient advocate for Raymond Johnson. She says, Raymond still needs several more chemotherapy treatments.
“Right now I’m stuck with these bills and I’m trying to find a way,” said Raymond, who just underwent his second round of chemotherapy at Roper Saint Francis Hospital.
Breast cancer in men may be rare, but it does happen. Statistics show one in 1000 men will get it, roughly 2,100 cases a year.
Susan Appelbaum hasn’t given up.
“He’s young. He’s working and he’s worried this could be financially devastating to him.”
She is now contacting lawmakers, trying to get the medicaid program changed. Raymond Johnson calls her his new best friend.
“I don’t know where I’d be without her,” he said.
Best wishes to Raymond Johnson. May he live long and thrive. The only thing he did wrong was not being born in Canada. Ms. Appelbaum is a fine human being for not letting him slip through the cracks of our horrible healthcare system in this country. I do hope this story has a happy ending.
A timely and handy chart for the understanding what’s going on with the deficit negotiations in Washington.
Remember that during the Clinton administration there was actually a SURPLUS coming in that went towards paying down the national debt. George Bush thought this was a bad thing—that the government shouldn’t be bagging surpluses—then promptly gave the average person the cost of a can of soda a day while giving billionaires major tax cuts and starting two costly wars. I think this chart makes it pretty obvious who fucked up this country. Who could deny otherwise? There’s no competition!
No wonder there’s nothing left for schools, roads, seniors, universal healthcare, the out of work and the sick… Isn’t this just infuriating?
British photographer Lee Jeffries’ portraits of the homeless are darkly beautiful and deeply sad.
Jeffries’ photographs remind me of the brilliant Walker Evans who chronicled the Great Depression in similarly compassionate and heartrending style.
Jeffries, an accountant by profession, describes the moment he became inspired to dedicate himself to photographing the homeless:
My involvement with the homeless started after an encounter with a young girl in London. She was huddled under a sleeping bag in a doorway in Leicester Square and took offense as I stole a photo from a distance. I was tempted to turn around and leave but something prompted me to go talk to her instead. Her story broke my heart, and changed the way I perceived the homeless. Most of my images are of people I have met on the street, whether in the UK, Europe or the US. The situations presented themselves, and I’ve made an effort to get to know each of the subjects before asking their permission to take their portrait.
In the few years I’ve been doing photography, it has taught me to really ‘see’ people in their everyday environment and to not take the familiar for granted. You have to be aware of what’s going on around you in order to be ready for those decisive moments, to pick up on the subtle and not just the obvious.”
Visit Alafoto.com to view the photographs in larger format. They are stunning.
“A system which consigned me to poverty at birth and Nelson Godawful Rockefeller to riches, is demonstrably insane.”—Robert Anton Wilson
A blog devoted to collecting vintage—and often very obscure—interviews with Robert Anton Wilson posted a long portion of what is apparently only one of three parts from a publican called New Libertarian Notes , issue 39,” from September 5, 1976.
Here’s a gem plucked from deep within it where Wilson discusses the illusion of wealth, one of his favorite topics:
RAW: Of course, my position is based on the denial that money does store wealth. I think it’s a semantic hallucination, the verbal equivalent of an optical illusion, to speak at all of money containing or storing wealth. Such thinking should have gone out with phlogiston theory. The symbol is not the referent; the map is not the territory. Money symbolizes wealth, as words symbolize things, and that’s all. The delusions that money contains wealth is the mechanism by which the credit monopoly has gained a stranglehold on the entire economy. As Colonel Greene pointed out in Mutual Banking, all the money could disappear tomorrow morning and the wealth of the planet would remain the same. However, if the wealth disappeared—if squinks from the Pink Dimension dragged it off to null-space or something—the money would be worth nothing. You don’t need to plow through the dialects of the debate between the Austrians and the free credit people like Tucker and Gesell to see this; any textbook of semantics will make it clear in a few hours of study. Wealth is nature’s abundance, freely given, plus the exponential advance of technology via human intelligence, and as Korzybski and Fuller demonstrate, this can only increase an an accelerating rate. Money is just the tickets or symbols to arrange for the distribution—either equitably, in a free money system, or inequitably, as under the tyranny of the present money-cartel. As you realize, a cashless society could exist merely by keeping bookkeeping entries or computer tapes. Money is a primitive form of such computer tapes, serving a feedback function. If we are not to replace the present banking oligopoly with a programmer’s oligopoly, in which the interest will be paid to computer technicians, we must realize that this is all a matter of abstract symbolism—that it exists by social agreement and nobody owns it, anymore than Webster owns the language. Why is it, incidentally, that the Austrians don’t follow their logic to its natural conclusion and demand that we pay interest to the dictionary publishers every time we speak or write?
You have to watch people playing Monopoly, and see them begin to “identify” the paper markers with real value, to understand how the mass hypnosis of Capitalism works. Fortunately, the Head Revolution is still proceeding and more and more people are waking up to the difference between our economic game-rules and the real existential situation of humanity.
Illuminating Discord: An interview with Robert Anton Wilson (Cleveland Okie)
Below, Lance Bauscher’s enjoyable documentary portrait of Robert Anton Wilson, Maybe Logic:
As frequent readers of this blog know, I consider Senator Bernie Sanders of Vermont to be a great American and a personal hero. He’s one of the only honest politicians in Washington and a blunt-talking national treasure:
On June 18, 2011 artists Ligorano/Reese presented a temporary monument in the garden of Jim Kempner Fine Art in NYC called “Morning In America.” The installation was witnessed by hundreds and lasted a total of 8 hours throughout the hot day.
...A THOUSAND CUTS is a timelapse video of the event. The soundtrack was inspired by an excerpt from Senator Bernie Sanders 8-hour filibuster on the U.S. Senate floor against the extension of the Bush tax cuts and the effects on the middle class. It is orchestrated to music by composer/violinist Michael Galasso.
Below, Bernie Sanders speaks about his career and the remarkable 8-hour speech he gave filibustering President Obama’s extension of the Bush tax cuts and the disappearance of America’s middle class.
