Elaine Meinel Supkis
The news from China is interesting today. They are changing direction. No question about this. The world banking system is still in crisis as bankers pretend they have infinite resources yet they must borrow from each other all over the place as they shift funds like mad trying to give the appearance of liquidity. The Federal Reserve has decided to inflict terrible inflationary losses on all savers as it tries to save the madcap 'consumer society' of reckless American spending.
China's top leader Hu Jintao has called for accelerating banking reform to push forward the sustainable and healthy development of the country's financial sector.Hu, state president and general secretary of the Communist Party of China (CPC) Central Committee, made the call on Wednesday when presiding over a brainstorm of the Political Bureau of the CPC Central Committee.
Members of the Political Bureau attended and discussed the lectures by two banking experts, Ba Shusong, a researcher from the State Council Research Center for Development, and Li Fu'an, a senior economist from the China Banking Regulatory Commission.
Hu pledged in his speech to push forward banking reform in an all-around way, focusing on building a modern banking system and innovating organization, service and administration of the sector.
He stressed to accelerate the banking reform for the countryside, and push forward the healthy development of the financial market.
OK, I don't know what these reforms are but the fact that the Finance Minister was suddenly demoted and kicked out the door right after the Bank of China opened its vault holding Americans certificates of deposit only to discover these were frauds, China has decided suddenly and unilaterally to change direction. We will see the increasing gale force winds from this change in the next year. I predict, this will overturn our expectations of eternal cheap prices and easy loans. I suspect the third part of the Great Plan To Bankrupt America will be set into motion. This plan was but a gleam in Chinese leadership's eyes back in the mid 1980's. But it is the long range plan.
China looked carefully at Japan's slavish dependence upon a consumerist American open door letting them have perpetual, increasingly big trade deficits so long as they loan Americans money at a very low rate and keep inflation at bay in Japan. The tool used for this was to deny credit to the vast majority of Japanese on top of cutting wages and rationing energy via heavy taxes. This was not working in the last year so the government suddenly unilaterally raised the value added taxes and this led to a voter backlash that is still playing out.
China is big. Its very size makes it quite different from Japan. Japan has to be a sucker on the US market, riding along while drawing blood. China joined Japan in doing this thank to the 'free trade' ideology which was cooked up the right wing in America. This 'free trade' sucker's game was devised to kill unions in America. Once upon a time, unions were blamed for inflation caused by audacious war spending coupled with tax cuts during the Vietnam War.
This scheme worked. The unions were broken and interest rates were dropped. At no time did inflation vanish, it grew. This was due to audacious war spending coupled with tax cuts! Again. This time around, Asia began to buy our government bonds and OPEC joined this game and both gave us loans, too. The more we had unbalanced trade, the more money they could loan us and the deeper into debt our government and the US consumer fell. Not one of the schemes cooked up this last 30 years has stopped our increasing debt loads. The Chinese know this. They also know something else: the US cannot run interest rates back down to 1% a la Japonaise. The US has to have it at least as high as China's interest rates.
Here is this weeks Bank of China's rates:
Note that the 3 months rate is only 2.61% while the 5 year note is 5.49%. Quite a spread. Do note that this is for savings, not lending. Lending is always higher than savings because it HAS to have a penalty since it is based on savings and one has to make a profit off of lending.
Here is a history of the Bank of Japan's Discount rates:
Note how the rates in Japan were comparable with the US and indeed, much of the world. The US was already in grave financial trouble in 1970. Our own rates were artificially kept low and inflation was beginning to seriously take off. The dollar was grossly over valued and already, Bretton Woods II was on the horizon as the US had to deal with all this internationally since we were the world's consumer.
Note how Japan's rates went up as the US began to depress the value of the dollar. The yen and the DM in Germany both more than doubled in value. Japan responded to this sudden hike in value of the yen by jumping interest rates very high, very fast. Japanese housewives hoarded toilet paper, for example. The wild financial games we play have rocked Japan more than once. Each one of these begins with the US negotiating a stronger yen. Each time, Japan tried a different system for re-weakening the yen.
This time around, they figured out a game the US can't help but play along: free money. Note how the Japanese don't even pretend to try to save anything. They don't need to save anything because...$165 billion flows into Japan every year from the world. They have the world's #1 biggest trade profit of any nation, by far! Their banking system is totally cockeyed and so long as this regime runs, we will see a messed up banking system because all the other major exporting nations can plainly see, killing the currency is good business so long as the US is buying more debt and more goods.
This is where the Chinese step in: they faithfully raised interest rates and the value of the yuan and Japan and the US have joined Europe in ganging up on China. Playing this game has earned them nothing at all. The Chinese are now having a brainstorm meeting to decide if it is time to change world banking systems. Already, we feel the effects of them withholding cheap loans to the US and sucking down US dollars in the form of FOREX reserves. The US rates dare not drop below Chinese rates. As I show here, the US rates are similar to the rates in China for 60 month CDs.
This is because we run in the red. We have to find buyers for our government bonds. Japan holds the world's biggest amount of US bonds. China is #2. The Chinese have ceased buying these. The US needs super-low interest rates so we can run up bigger debts but we can't do this if the world can buy higher-return rates in China! And China won't buy this from us if they make more money at home. Obviously. And if we are determined to have a trade war with China, then we will have to play the interest rate war, too. Chopping rates is not a great step forwards for the US. If the US imitates Japan even more and drived down inflation by crushing workers completely, this will not save us since this will cause Japan to collapse as buyers of goods in America vanish.
Already, the Chinese are beginning to bet that the free trade free ride of the US is pretty much over. They know that we can't borrow forever. In banking, if you run up too much in debt, banks and credit cards raise your interest rates because you become a risk for bankruptcy. This drives people into bankruptcy faster, of course, the snowball effect. But this is also true of nations. We can't stop spending suddenly. Yet our attempts at controlling our debts have failed. The 0% loans from Japan has wrecked our ability to control ourselves. This is super-free money when inflation is more than 5%! China has flooded us with goods only because they have cheap labor but China wants to improve the lot of the workers so they can be an internal economy. This sounds strange since we see many stories about the horrors of labor in China and the pollution, etc. This is true but then, this is typical of any nation that is industrializing. The US, Britain and Europe went through these same, exact stages. In Japan, anyone pointing out poisonous pollution was beaten or killed by goons working for the industrialists...in the 1970s! The pious chat about protecting workers is all garbage. After all, conditions here in America are so degraded, many citizens have been forced out of various jobs and replaced by illegal aliens working for less than former union wages.
Butler County Sheriff Richard Jones held a press conference this morning to discuss yesterdays immigration raid. The Butler County jail is currently housing 20 of the immigrants. There are 12 men and eight women and from Guatemala, Mexico and Peru. They are charged with forgery and identity theft.Jones said he has run ads for two and a half years warning business to not violate immigration laws. He added that this may be the first time state charges have accompanied an ICE investigation.
The investigation and processing of prisoners will continue today after a huge Immigrations and Customs Enforcement (ICE) raid at Koch Foods in Fairfield Tuesday. Nearly 200 people were picked up, although a number were released Tuesday night. Well over a hundred were in custody as of Wednesday morning.
The entire work force was illegal. Obviously, the Koch industry executives should all be arrested. When I belonged to a similar organization, they also hired illegal aliens because they were cheap. I warned them about this and they thought it didn't matter, they had the politicians in their back pockets. I reported in the past how a gang of lawyers out of Chicago go about the nation, teaching corporations how to hire foreign labor and not hire Americans! They love free trade and are traitors to this nation. Quietly, the US has exported pollution, often to Mexico, in order to comply with pollution laws and reduce inflation at home. The US government then enabled these things to return to the US which is why we have a huge trade deficit with a huge debt load. And China has announced they won't be the pollution dump of the world. The government said they will stop exporting the low-value added stuff and concentrate on imitating Toyota.
Barclays says that a "technical breakdown" in the UK's clearing system forced it to borrow £1.6bn from the Bank of England.It is the second time this month that the bank has tapped into the central bank's emergency credit line, sparking fears it is facing a cash crisis.
But the UK bank insisted it was "flush with liquidity".
They are full of shit. This is ridiculous. They have plenty of money so long as the government gives it to them. England has the identical housing situation as t he US and for the same reasons. The housing boom there is ending just like here, after a steady climb in interest rates. Why are interest rates climbing? Well, the price of raw materials and energy are both climbing and both are intertwinned and unlike in the 1990's, England is no longer getting huge amounts of energy from the off-shore North Sea oil rigs! The decline there has been tremendously fast! And this is why Europe has been barking at Putin, trying to terrorize him into dropping prices for them. But they have no leverage over Russia who has the world's #3 FOREX reserves and is working with China to turn the tables on the capitalist spending-wild wild West.
It is pretty clear that the US has passed the Hubbert Oil Peak in the early 1970's and now, just 5 years ago, Europe passed its peak. This is bad news for all of us. Europe and the US consume a lot of oil. This explains why both are attacking the Iranian kitty and why Saudi Arabia is scared. Saudi Arabia + oil profits= buying the US and Europe off. Iran + oil profits= war of liberation of all Shi'ites under Sunni rule. And this inflation of energy is at the root of all inflation in the world today. Without this, inflation could be tamed by some rough application of the whip on the workers as we see in Japan, for example. But if all nations whip their workers at the same time, we get a recession or depression.
This is the paradox. Somewhere, there MUST be some happy workers able to buy industrial output. The scheme of lending money to the fading work force in America is collapsing due to too much indebtedness. There are no replacements so we get a classic depression-style 'over-production' which is silly. There never is over-production, there is a lack of buyers due to dropping incomes or a sudden hike in interest rates or other things. Or there is over-extended indebtedness which is the blight upon the US.
Banks increased their borrowing from the Federal Reserve for a second straight week as the central bank worked to deal with a credit crunch that has roiled global financial markets.The Federal Reserve reported that the daily borrowing averaged $1.315 billion for the week ending Wednesday. That was the highest average borrowing since the attacks of Sept. 11, 2001. The average surpassed last week's average of $1.2 billion, which also had been the highest since the 2001 terrorist attacks.
The data released by the Fed offers a snapshot of how banks are responding to the Fed's encouragement for banks to borrow directly from the central bank through a loan facility known as the discount window.
The discount window is the way the central bank provides direct loans to banks. Fed officials announced Aug. 17 that they were cutting the interest charged for discount window loans by a half-percentage point, marking the most dramatic move they have made so far to deal with a spreading credit crisis.
So, Barclay didn't really need the money and the US bankers are liquid and have no problems yet the flow of money from the wand wavers at the top of the Western banking system continues. More money is flushed down the toilets which are now stopped up since the Chinese are beginning to flush wads of paper towels down the toilet. I used to be a super and I loved the show, 'TJ' which was a cartoon about a super in Chicago. At one point, the Eddie Murphy playing the super says, 'I have to blow up the toilet! How can I do this? Think like a tenant! Think like a tenant!' Then he flushes a roll of paper towels and I nearly died laughing (yes, this happens in reality, I have had to fix toilets after such events in the past!). Well, this is happening today and no matter how often the Western bankers flush the liquidity toilet, the shit won't go down! Shudder.
General Motors Corp., extending its cuts in light-truck production, will eliminate almost 1,100 jobs at an Ontario pickup plant in January as high fuel prices and competition hurt sales.The move to cut one of three shifts at the Oshawa factory follows a decision last week to end overtime for the rest of 2007 at six pickup and sport-utility vehicle plants, spokesman Tom Wickham said today. Under union rules, the workers still will be paid a majority of their salary, he said.
The largest U.S. automaker is offering no-interest loans for as long as five years, rebates as high as $4,000 and extra bonuses to dealers on light trucks after sales fell in July, including a 29 percent drop for Chevrolet Silverado large pickups.
The pain is spreading. Since we collectively decided to ignore the Hubbert Oil Peak and did the exact opposite of what we should have done from day one in 1974, we are now paying the price. It will be a race to see if we can catch up with ourselves in this race. The US built much of the new housing this time around in the most inappropriate places and now this will also hammer us hard. Canada is in much better financial shape than the US but they will be sucked down the same hole as us because of their proximity and the fact that we can unilaterally annex Canada's energy sources. Which is the plan, by the way. I have Canadian readers who give lots of great information and I personally, love Canada and would love to see Canada flourish, they are more socialist than the US. But in this case, it will be a loot and burn operation and Canada will not gain anything good from it, I am certain about this.
Gold prices advanced Wednesday, bolstered by rising oil prices and a weakening U.S. dollar, both of which are potential signals of inflation.Elsewhere, commodity prices finished mostly higher. Wheat prices logged a huge gain and record high in the agriculture futures market, while industrial metals recovered from early declines.
Inflation, inflation! And we shall see if this will shoot through the roof yet again as it ALWAYS does when oil trebles in price. Which it did this last 5 years! We always pay for our oil by debasing the currency. Always. And China will probably join ranks with the other bankrollers of America to do something about this for even Japan won't be able to handle a super-weak dollar with a super-duper weak yen since Japan has to buy oil and China will be outbidding Japan (is already happening) for oil. This is when Japan will be forced to cut off the carry trade.
Hedge funds doubled their share of U.S. fixed-income trading to 30 percent and dominated the market for some securities as debt-market volatility increased, according to a study by Greenwich Associates.``The recent expansion of hedge-fund positions and trading activity has been so rapid and consistent that it is now no exaggeration to say that hedge funds are no longer just an important part of the market in some fixed-income products; they are the market,'' according to the report, which covered the 12 months ended in April.
The Hell hounds, seeing death all around them, are rushing to safety. They have two wishes that clash now: they want super-cheap interest rates while wanting higher interest rates on their securities! Ouch. Everything contradicts everything else. This is the sign that we are in the Heart of the Darkness where the Minotaur lives, his sharp horns glinting in the dim, red light.
Bloomberg:
Trading by all institutions in distressed debt more than doubled to $42 billion in the 12-month period, according to the report. Leveraged-loan trading doubled to $241 billion. Total debt-trading volume increased 10 percent to $25 trillion.
Look at those numbers! UM, HELLO, HELL! $25 trillion = all the government debts of all the nations on earth. And what debts are being traded? HAHAHA. Guess! Wow. Heh. Oh no. Aren't we in trouble? What if all the governments decide to lower interest rates to Japanese levels? Oh, Japan owes $4 trillion, by the way. The US owes $9 trillion. Ouch. Ouch. You are hurting my head, thinking about this mess.
Leveraged-loan trades of a quarter trillion means they used loans from Japan to move loans along, most likely, taking a huge hit to unload those toxic little babies created by the Alt A mess in America. Whoopee.
Bloomberg:
Institutional investors, including corporate and public pension-fund managers and endowments, expected an average return of 5.2 percent from fixed-income assets over the five years starting in 2006, the firm said. Expectations for equities were 8.3 percent; 8.8 percent from hedge funds; and 11.7 percent from private-equity funds.
5.2% return is small if real inflation is over 4%. This is why equities and hedge funds have to do at least 8% and this means higher risks and bankruptcies and now it is near 12%? Impossible in a world undergoing yet another round of energy inflation.
Here is a local, small bank in NY:
Mortgages are still cheap as far as I am concerned. I have held mortgages of over 9%, for example. So 6% is a bargain. But not if everyone is used to 3% loans! Housing prices are determined by income, so if rates go up, house prices go down. Considering that savings have collapsed in America, I would assume that banks would be offering good deals in this field. But alas, for the last 5 long years, interest on savings has collapsed. I wonder why the Fed and the President don't focus on that. Yup. Savings, what is that???
Nothing. Nothing at all. look at this bank's figures for luring in money:
Pathetic, isn't it? Way, way below the rate of inflation. The Japanese don't care if we pay them only 3% interest, this is infinitely higher than they get at home!
Here is the Bank of America rates:
One should assume this is the floor for the future: 4%. If mortgages are lower than that, savings will be absolutely hammered. One thing everyone at the top dares not mention is the flood of refinances done at the cheapest point in all this. When Greenspan lowered rates to the floor, a host of homeowners refinanced at the new low rate. And many of them also added on value, tapping into whatever equity they had formerly built up. This caused two things: a tremendous, historic decline in equity in the US and it locked into place many new mortgages at an insane, low rate.
These are the ordinary mortgages. I know a number of people who did this. For the next 20-30 years, every time interest rates rise above 5%, these loans will hurt banks. For this means they will be repaid at a very low rate of return, namely, with cheap dollars. And this eats away at the foundations of a banking system. This is why banking systems can't endure sudden lurches in inflation. And certainly not sudden changed in rates of return that are totally fake like the Greenspan 1% rates in 2003-2005. This baby will haunt us for years and years. We cannot let inflation rage!
This is why I keep talking about those horns. They are not horns of plenty but horns of death. For we cannot relax and pay for energy via inflation caused by devaluing the dollar! We can't pay for all this by tapping Chinese savings or playing games with Japan that leads to the death of our own economic system.
Throughout the recent market turmoil, executives and directors of public companies have invested heavily in their own companies, according to a news report late Tuesday.
Total insider buying in the United States reached $252 million in August, the highest level since 2003, according to the Financial Times. The month normally averages $186 million in such trades.
Stocks didn't shoot up because of an army of outsiders buying in but insiders buying each other in that last-gasp series of deals whereby all these guys bought out each other or into each other. This used up a heroic amount of money, many trillions of dollars as each $10 billion buy-out deal jumped to $20 billion then to the heavens where it crashed, of course. They flew on Pegasus' back until he kicked them off.
Consumer spending in the U.S. accelerated in July, a sign wage gains helped lift demand before credit markets deteriorated this month, economists said ahead of a government report today.Personal spending increased 0.3 percent last month, three times more than in June, based on the median forecasts of 80 economists surveyed by Bloomberg News. Incomes rose 0.3 percent after a 0.4 percent June gain, according to the survey.
This story illustrates my earlier article about how we are the consumer, not the saver, society. This is bad news, not good news. Wall Streets want reckless spending, wild behavior, pure irresponsibility. They hate careful savings, wise spending. And they want the government to give them more wild spending and this means easy terms on easy loans which leads to inflation and bankruptcy which they don't want but can't get their minds made up which is worse.
Trust me, bankruptcy is much worse than careful spending.
Stocks: Surge On Reports About Bush Subprime Rescue PackageTOKYO (Kyodo)--Tokyo stocks surged Friday as media reports that U.S. President George W. Bush will propose measures to help homeowners with subprime loans avoid default brightened market sentiment that was hit hard by the recent financial market turmoil worldwide stemming from the mortgage woes.
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Bank Min Watanabe: To Watch Subprime Impact On EconomyTOKYO (Dow Jones)--Japan's new bank minister, Yoshimi Watanabe, said Friday that the Financial Services Agency will closely monitor the impact of the U.S. subprime-loan trouble on the Japanese economy.
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Toyota Aims To Sell 10.4mn Vehicles Globally In '09TOKYO (Dow Jones)--Toyota Motor Corp. (7203) Friday unveiled an ambitious global sales goal of 10.4 million vehicles for 2009, aiming to aggressively expand sales in overseas markets.
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Fujifilm Chief Sees Yen Rates Still Within Assumed RangeTOKYO (Nikkei)--The yen's exchange rates remain within the range assumed by Fujifilm Holdings Corp. (4901) despite fluctuations stemming from the subprime loan crisis, President Shigetaka Komori told The Nikkei recently in a wide-ranging conversation about the impact of the recent market turmoil on the firm's earnings.
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And here is a peek at the Japanese! Note how they are deliriously happy when we decide to do the wrong thing. And how they plan to expand their export empire. And how they are protecting the WEAKNESS of the yen and need to keep it down. Down, boy, down! We should not view this as friendly but as our most dangerous enemies. They are a danger to us, not a blessing. The carry trade is killing us, not saving us. And if the Japanese ruling class views today's news as good news, I can say very clearly, this is very bad news! Bad for us. And ultimately, bad for Japan. For if we sink, they will, like Captain Ahab in Moby Dick, be pinned to this Great White Whale is it bleeds to death and flounders off into the debts of the sea.
As if the mortgage-market meltdown wasn't enough to spook investors, some market players expressed concerns about unusual options bets that some observers have dubbed "Bin Laden Trades."
The blogosphere and options trading desks have been rife with speculation about these trades, which are unusually large bets that the market will make a huge move in the next month. Some entity, or entities, has taken a large position on extremely deep in the money S&P 500 options, both puts and calls, that won't pay off unless the market undergoes an extremely large price move between now and the options' expiration on Sept. 21.However, Dan Perper, a Partner at Peak 6, one of the largest option market makers and proprietary trading firms, has confirmed that the trades are part of a "box-spread trade."
"This was done as a package in which the box spread was used [as a] means of alternative financing at more attractive interest rates" explained Perper.
Ah, it twas just some hedge hell hounds having fun. They are betting we will fall apart. But they are not privvy to magic numbers sufficiently to understand, nothing will happen in September. Well, if Bin Laden attacks or Bush pays bin Laden to attack, then yes, we will see the market fall. But always, in history, it likes to fall around Halloween. This is because it is due to the predeliction of the fiends summoned by the wizards in the Finance World to appear suddenly in their natural forms. They dislike doing this in September. Note that the market collapse in September, 2001, didn't last very long.
But natural falls in Octobers always are nasty and often long. And this one could be quite long. We shall see. It is all up to China to decide if it happens this October or the October after the Olympics.
Culture of Life News Main Page
"...the fact that the Finance Minister was suddenly demoted and kicked out the door right after the Bank of China opened its vault holding Americans certificates of deposit only to discover these were frauds, China has decided suddenly and unilaterally to change direction."
Sounds like much of their clever investing in US notes has gone up in so much smoke, and some of the leverage that went with it.
Posted by: rousey | August 31, 2007 at 04:55 PM
I really don't understand why you continually champion socialism. Surely you realize that socialism only works in small homogenous populations. Even the much-vaunted socialist system of Norway started having problems when the immigrant population topped 20%. Rather than pull together in a lean year, the ethnic Norwegians fall to blaming "those damn foreigners" for their woes.
In a country as large and diverse as the US, the extremely low levels of shared experience make socialism an almost certain failure. Yet you keep on proclaiming that this is the only good way.
It's not.
Marxism operates on the principle that "the harder I work, the better my neigbor eats." But when my neigbor sleeps all day and still has the exact same standard of living that I do, I get discoraged and stop working hard; I wanna sleep all day and have someone else work to feed me, too! This is human nature. We are apex preditors; the lion sleeps in the shade of a tree when his belly is full, and the gazelles can walk by in complete safety. Lion = person! Gazelles = work!
It is a false dilemma to say that the only two options we have are 1) BushCo fascism or 2) Marxism. I'm frankly not interested in extending the foolish 'Great Society' policies that have filled countless ghettos and trailer parks with a torrential flood of functional idiots. And unless we're going to sterilize the baby-factory fools (of ALL races!!) before we start cutting them checks, socialism will kill us as quick or quicker than crony capitalism.
Posted by: John | August 31, 2007 at 07:54 PM
The people at the top spend a lot of money teaching others that the ideal is 'pure capitalism' yet the instant the rich need their lovely Nanny State, it appears like magic and saves them.
A world red in tooth and claw is one that is like Iraq and other states we invade: chaoe and death. If people can't be taken care of in one way, they find another. The rich always organize a fascist type state that sends the dissatisfied masses into wars of looting and ethnic cleansing. A social system that takes care of people so there isn't a need to organize into open civil war lasts much longer than tooth and claw capitalism.
I know I have many readers who are conservatives. I am very conservative in many ways which is why I talk about socialism; this grew not out of thin air or even industrialism but it is rather medieval in form. The ideal, that is, where the Church redistributed wealth.
Of course, this didn't happen because of people like my ancestors (nobility) who couldn't help but use the sword to get their own way.
There is no perfect system but in competition with the world, the nations that are cruellest to their people end up in even deeper trouble than ones that mess up by being too nice. Trust me on this, I have witnessed more than one revolt up close. In third world countries as well as Europe.
Posted by: Elaine Meinel Supkis | August 31, 2007 at 09:05 PM
Canadian socialism was born of the harsh climatic conditions that immigrants who were encouraged to repatriate from the old world found after they were dropped off at a rail depot. The sodbusters had no choice but to rely on their neighbors for survival let alone productive success at environmental manipulation with rudimentary hand tools. This neighborliness and friendly concern for fellow people is still commented on to this day as a Canadian trait even though consumerism has tarnished this to a large degree.
“Ethnic Bloc Settlements[8] dotted the prairies, as language groupings settled together on soil types of the Canadian Western prairie similar to agricultural land of their homeland. In this way immigration was successful; new settlements could grow because of common communication and learned agricultural methods.”
http://en.wikipedia.org/wiki/
History_of_immigration_to_Canada
These are grassroots socialist community constructs that formed independent of actions by the state, constructs I might add that were successful for their intended purpose. To say that they are unsuccessful is inaccurate because they’ve never really had a chance to develop beyond a certain level because the means of communications lends power to capitalists, dictators, world improvers or the dreaded land use bylaws which stratify society and force individuals to action for protection or advantage.
The extreme conditions brought about by the great depression and the dustbowl tragedies brought about by trying to overcome environmental and economic extremes of the time were the genesis of the concepts and proposals of Tommy Douglas (1944 – 1961).
http://en.wikipedia.org/wiki/Tommy_Douglas
“As a child, Douglas injured his leg and developed osteomyelitis. The leg would have been amputated were it not for a doctor who saw the condition as a good subject to teach his students and agreed to help for free. This rooted Douglas's belief that health care should be free to all, as he thought people shouldn't be dependent on generosity in order to get their health in good order”
Tommy Douglass was also present for another defining moment in Canadian Social conciousness;
“They came back to Winnipeg in 1919, in time for Douglas to witness the Winnipeg General Strike. From a rooftop vantage point on Main Street, he witnessed the police charging the strikers with clubs and guns, a streetcar being overturned and set on fire. He also witnessed the RCMP murder two men.[1]”
Tommy Douglas is regarded as the father of Canadian style socialistic health care with good reason, it’s considered he fought the good fight and indeed triumphed over private and governmental obstructions of all kinds to deliver a social contract in the form of an underlying theme that is unspoken and attended to within the population as a whole. This action found it’s culmination in the Canada Health Act, and although it’s government policy now and not without extreme challenges and harsh realities. It’s well to bear in mind that this was championed by one man and changed the face and nature of Canada, so much so that it’s the defining characteristic that a Canadian would first mark this as the differential societal effort from Americans.
So bear in mind that Tommy Douglas’s efforts were successful insofar that he as an individual was uncompromising in his care and faith of his fellow people, unassailable in his posture and purpose, uncorruptable in his approach, cantor and most importantly how he comported himself in his personal life.
So many people can play so easily play the critic over socialist constructs, to far removed from being turned away from a hospital, sick child in hand without proper documentation I say. I’ve got hugely capitalistic tendencies myself, but I was admonished by my Grandfather that I could accelerate my success and prosperity by standing on the necks of other people as a very young boy. It seemed repulsive so this is a path I’ve declined to venture.
The world is awash with moralistic imperatives that can only be addressed in shades of grey, stating absolutes concerning a supposed light of white Capitalism or the darkness of black Socialism only illustrates who you’re most willing to sell out.
Posted by: Canuck | September 01, 2007 at 02:01 AM
While skimming through the Wall Street Journal (what a completely parochial and self important outfit!! As bad as The New York Times, in it's own way) one writer stated that the United States has a "financial economy".
Oh, boy. Hubris. The pure thing.
That the United States is a "financial economy" is sure disaster. Even compared to "To each according to his need, and from each according to his ability."
I am a bit familiar with late Medieval European art, have studied images of the cloister capitals at the Abbey of Saint-Pierre at Moissac for instance. I know what you are driving at with your "social" ideas. One sees the same sort of idealism in Plutarch.
Certainly the root of socialism is much more Lycurgus than Marx. One is reminded of the extraordinarily perceptive and dark humor of Plato's "Republic". One wonders if our Pelopponesian War will be fought out here, within the boundaries of what is now the United States.
Posted by: Callihan | September 01, 2007 at 02:44 AM
I freely admit that pure capitalism does not work, mainly because of the innate selfishness of man. Only under conditions like those described in Canuck's post (harsh and unforgiving) do people voluntarily work together for the common good.
Socialism fails for the same reason: selfishness. The selfishness under capitalism is displayed when someone finds their way to the top of the economic pile, and immediately uses the wealth and power to not only advance themselves further, but also to victimize anyone beneath them. The selfishness under socialism is displayed by what I've termed the "slacker classes," and if you don't belive those exist, go work in a convenience store for a year! You'll see them on both sides of the counter. These people are always looking for a free ride, for someone else to pay their freight.
Om a related note, it occured to me yesterday afternoon to wonder if slackerism isn't also caused by seeing the people at the top of the capitalist pile continually rig the game to exclude everyone else, as well as by the availability of no-questions-asked/no-effort-required free money. For example, the potential high-tech entrepreneur who thinks "well, why bother? Even if I succeed, Bill Gates or Larry Ellison will just screw me over; they'll break evey law in the book killing my business, and because they're already stupidly rich and connected, they'll get away with it."
On one hand, the idea that some humans think they should be able to tell the rest of us what constitutes "enough" money and then take the rest away is as offensive as it can be. For instance, the guy who founded Hawaiian Tropic is worth nine figures, and he didn't screw anyone to get it, as far as I can tell. Same for the woman who invented "Topsy Tail."
On the other hand, one look at that douchebag George H.W. Bush (good ol' "Poppy") is enough to convince any honest person that unfettered capitalism is not the answer, either.
I think the real answer is to quit defining "rich" as making $200K/year. The high taxes need to be on those who make over about $1.5 million, and they ought to probably pay 75% of anything over that. Also, tax-exempt foundations ought to be outlawed, because the super-rich simply set up unpublicized foundations to shelter their wealth. They only pay themselves what they want to pay taxes on, and then use the rest of it to shape the world the way they want it, tax-free, under the guise of philanthropy.
I think the real answer is to take the ruling class out back and shoot them every four to six decades. However, there are some serious ethical problems with such a policy...
Posted by: John | September 01, 2007 at 05:35 AM
THE CODE OF BLUES:
(1) No family business shall own more that ten times the quantity of resources necessary to maintain its own basic requirements of living.
(2) An non-family industries shall be owned and operated by the districts in which they are located and shall hire only people who live within those districts. No unelected boss shall directly or indirectly manage more than ten subordinates.
(3) All local elections shall be held in districts of 800 to 1200 voters drawn up by randomly selected juries and shall be done using the 2-runoff approval method.
See:
((----- Copy & Paste -----))
http://wiki.electorama.com/wiki
/Consecutive_Runoff_Approval_Voting
Posted by: blues | September 01, 2007 at 08:22 AM
I lived outside the system most of my life. I am a real-life survivalist. I am the sort of person who would use a chainsaw to chop off my leg if a tree falls on me and my only tears would be because I would have to clean up the blood before the bears arrive!
Seriously, there are 'slackers' and there are rich 'slackers' and everyone wants a free ride even if they don't realize it. When I used to hike into the woods with the dog pulling a sled in -40 degree weather to saw up dead trees and haul them down because this was the only way to heat the house, I remember the joy of living. The sharp cold air in the nostrils, the sled dog waving his curled tail, ears alert for bears or deer, the snow falling suddenly off of pine tree canopies, sitting on a tree stump, I enjoy the sight of the mountains around me.
Platos's shadow world is TV. Most people live within that realm and can't escape. They think it is more real than life. Yet the smallest things, the hardest tasks in life are exactly the things that are life! We can't live unless we savor that which is, now. This is why I enjoy haying the pastures in summer. Watching the swallows swoop low to eat the bugs I raise, the horse running across the newly mowed grass, neighing, his white mane and tail flying, I do miss my sheep and the ox team...butterflies rise from the wild flowers that grow between the grasses and the great oak trees rustle in the summer's warm wind that rises every afternoon and I take a deep breath and enjoy the smell of the flowers, the cut grasses and the forest that looms to the north, rising up and up the mountainsides.
This is where I do my thinking about what to write, by the way. Thinking is best done when busy doing something physical. And is a major annoyance that I messed up my arthritic old knee. Slows me down, hugely.
Posted by: Elaine Meinel Supkis | September 01, 2007 at 09:21 AM
Canadian socialism is alive and well, the harsh and unforgiving circumstances which were the genesis are well past. Evidence it yet exists and is broadly interwoven in Canadian society is highlighted by Pat Buchanan’s derisive commentary “Soviet Canuckistan”
http://en.wikipedia.org/wiki/
Soviet_Canuckistan#United_States
The main pillars of Canadian socialism which gives right wing fits are not at risk from public rejection. The Canada Health Act, Social Security, welfare programs, unemployment insurance, transfer payments, immigration policies, tax law and rehabilitation centric criminal justice.
These policies have weathered attacks from the right wing demanding opportunity to intercede in the delivery of services (private profit – public risk) and the pressures from the recipients demanding increased services (slackers, freeloaders). The bottom line being that those who are paying the freight, the productive members of society are simply not clamoring for reform or rejection of the principals on which these programs are premised.
Most of the western industrial nations implement these types of social polices to some degree. I don’t see how this degree of influence and permanence can be construed as a failure. The policies continue even though the social conditions that spawned them have been alleviated and despite pressures from ”selfish” members of society. The fact that these policies continue lends credence to the idea that society is rather more unselfish than selfish, these policies are manifest of societies concern for itself and it’s weaker members.
http://www.canadiansocialresearch.net/
welref.htm
Posted by: Canuck | September 01, 2007 at 11:10 AM
John, maybe it's the other way around. Perhaps its pure capitalism that's better executed in small homogenous populations. Adam Smith's capitalism was best for merchants and small enterprises in Britain during his lifetime until the large stock companies came on the scene and grew predatory. Laisse faire capitalism especially left in the hands of multi-nation corporations and coupled with intrusive technologies invites totalitarianism.
We've all been indoctrinated in the virtues of capitalism. I think most in this large nation are ours have been open-minded about the benefits. That doesn't mean there aren't risks in going too far. Now it's time to mitigate the damage caused by a system run amuck and begin to operate like the concerned and intelligent society we claim to be.
Posted by: Cato | September 01, 2007 at 12:32 PM
Yet the smallest things, the hardest tasks in life are exactly the things that are life! We can't live unless we savor that which is, now. This is why I enjoy haying the pastures in summer. Watching the swallows swoop low to eat the bugs I raise, the horse running across the newly mowed grass, neighing, his white mane and tail flying, I do miss my sheep and the ox team...butterflies rise from the wild flowers that grow between the grasses and the great oak trees rustle in the summer's warm wind that rises every afternoon and I take a deep breath and enjoy the smell of the flowers, the cut grasses and the forest that looms to the north, rising up and up the mountainsides. — Elaine
You have no idea how long I have waited for you to become a poet.
Posted by: blues | September 01, 2007 at 04:14 PM
The problem facing all systems, capitalist or socialist or whatever, is basically the same: how do we ensure the honor and honesty of those in charge? My basic problem with socialism is that all some clod has to do is get elected, and poof! S/he's in charge of the lives of others, backed up by cops who have guns and the authority to use them. As bad as people like Gates are, nobody hold a gun on you to force you to buy MicroSoft products. But try refusing to pay an unreasonable tax, and see how far you get with that. Thus, between the two, I prefer my government to be as limited as possible.
I favor capitalism with strict controls to ensure that the top .01% don't run rough-shod over eveyone else, and swift, PUBLIC execution for officials who look the other way when such laws are broken.
Posted by: John | September 01, 2007 at 07:26 PM
Yes, that was a nice bit of prose, Elaine.
Posted by: John | September 01, 2007 at 07:27 PM
There is high volcanic dust in the stratosphere. We will have a hard winter. Will write about that later (my leg really hurts right now).
Posted by: Elaine Meinel Supkis | September 01, 2007 at 07:59 PM
John you’re first premise has you fall in the category of a libertarian your second premise for controls negates that standing.
Overall I think you’re desires could be adequately met by dissolving the legal status of the corporate “person” and through hard application of direct democracy. Of course everything the elite and their power ensconced minions tell us is that the hoi poli will run amok and minorities will be at unprecedented risk.
I don’t agree. If at that stage it’s decided that political transgressions require a capital solution so be it.
Posted by: Canuck | September 01, 2007 at 10:35 PM
I am a libertarian at heart. But I also deal with reality. And reality is that shitty people always manage to get themselves into positions of power—be it political, social or economic—and thus must be policed vigorously, and without remorse.
"It is not that power corrupts, it's that it is magnetic to the corruptable. Power draws pathological personalities like moths to a candle flame." - Frank Herbert, Dune
Posted by: John | September 01, 2007 at 11:24 PM
The US Congress is currently contemplating critical legislation aimed at remedying the huge US-China trade deficit. China and businesses that benefit from Chinese imports oppose this legislation, and to discourage action China has hinted at retaliation - including possibly selling its US treasury bond holdings. That threat has prompted some to argue against legislative action on grounds that risks of a trade war are too large and costly. Such thinking is mistaken. The reality is China's threats are empty, whereas its currency manipulation is wreaking significant, real damage on the US economy.
The Ryan-Hunter bill (HR 1498), now before the Congress, proposes treating currency manipulation as a form of illegal subsidy that would be subject to countervailing duties. In this fashion, Ryan-Hunter aims to offset China's undervalued currency and circumvent China's refusal to meaningfully revalue its exchange rate.
There is widespread agreement that China's currency is under-valued and harming the US economy. This harm works through the trade deficit and imports that displace spending on domestically produced goods, thereby injuring manufacturers. Additionally, the undervalued currency displaces investment by encouraging business to invest in China rather than the US. The challenge for the US is how to respond in light of China's exchange-rate intransigence.
Through its persistent trade surpluses China has accumulated over $400bn of treasury securities and it is now the second-largest foreign holder (after Japan) of government bonds. The fear is that China may retaliate against the US by selling bonds, causing the price of treasuries to fall and interest rates to rise. That in turn could trigger financial disruption, which in conjunction with higher rates could topple the economy into recession.
Such reasoning is deeply flawed for several reasons. First, China has little incentive to engage in such tactics. If it starts selling bonds that will drive prices down, causing large capital losses on its holdings. More importantly, China has no interest in playing Russian roulette with the US economy as that threatens its own economy. The reason China refuses to revalue its exchange rate is because it wants to retain a competitive advantage enabling it to sell in US markets. Causing a US recession would destroy the very market in which it wants to sell. Worse than that, a US recession could trigger a global recession, thereby undermining markets in Europe and elsewhere that China also relies on.
Second, the Federal Reserve can always intervene to mitigate the effect of any Chinese selling. Thus, were China to irrationally start selling, the Fed could step in and buy those bonds in so-called "sterilising operations". China would then be left holding lower-yielding bank deposits supplied by the Fed, and the Fed would hold the bonds sold by China. This would prevent interest rates from spiking and US taxpayers would actually benefit by saving the interest that would have been paid to China.
Thereafter, China could decide to sell its bank deposits and buy foreign currency. If it were to buy renminbi and repatriate its dollar holdings, that would cause China's exchange rate to rise, which is exactly what US policymakers desire. Alternatively, China could buy yen and euros, which would cause the dollar to depreciate against these currencies. That too would benefit the US, especially if the yen were to appreciate, as this would make US producers more competitive versus European and Japanese companies.
Appreciation of the euro and the yen would then shift America's exchange rate dispute with China to Europe and Japan. This would expose China to risk of retaliatory action from these countries, which are much more administratively aggressive in protecting their markets than is the US As a result, China could find itself at loggerheads with all its major customers (the US, Japan, and the EU), suggesting it will not go this route.
Meanwhile, passage of Ryan-Hunter would enable US manufacturers to seek countervailing duties offsetting the subsidy implicit in China's currency manipulation. That would raise Chinese product prices in the US and reduce Chinese imports, yet the benefit of higher prices would go to the US government rather than Chinese manufacturers. That again makes no sense for China, suggesting that Chinese policymakers would prefer exchange rate revaluation to tariffs. That way China at least gets the benefit of higher prices.
In sum, the US and China are currently engaged in a policy struggle that resembles the game of "chicken". Policy analysis can help disentangle the likely outcome of such a game by examining the credibility of each country's postures. Such analysis shows China's threats are empty. China relies on export-led growth to provide demand for its products and attract foreign direct investment. That means it cannot afford to destabilise the US economy or the global economy. And if it irrationally tries to do so, the Federal Reserve has the means to neutralise its actions.
Posted by: Sub-Optimus Prime | September 04, 2007 at 08:04 AM
Oh my god. This is too funny, Sub-Opt.
Pray tell, who is the biggest currency manipulator on earth?
China's interest rates is the same as ours. But Japan has it set at an insane .5%! Ever wonder why? And why does Japan, a small country, have the world's #2 FOREX reserves and the world's #1 trade surplus? Eh? How did this miracle in the midst of a supposed 'depression' happen?
If the US plays hardball with China, China will play hard ball with a bad with a nail in it and they won't throw balls, they will assail us with said bat.
On top of all this, the US is going bankrupt and has very greatly irritated China's biggest neighbor, Russia, who is now very friendly with China.
We better take China's threats very seriously. And the fix? We got to stop importing energy products. And Toyotas. Ain't gonna happen. So I expect WWIII or we disarm and give up control of the planet and live within our means.
Posted by: Elaine Meinel Supkis | September 04, 2007 at 10:14 PM
Thank you for the enlightening articles. They have been very educational. I feel the best defense is a small homestead/farm where a family can provide most of their food and heating. I see very dark days ahead similar to New Orleans after the flood.
Where can a wise squirrel put some money? Canadian currency CDs, gold, silver YEN ETFs, Euro ETFs, gold/silver ETFs. I feel this government will confiscate at least gold.
Outside the USA???
Posted by: DJ | September 24, 2007 at 05:16 PM
Alas, all the safe shores are out of the US. I have a small farm now, by the way. My own forest, my own heat, my own food.
Posted by: Elaine | September 24, 2007 at 07:54 PM