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By Diamela Eltit & Paz Errazuriz
A Worthy Legacy
Shroud of Beckoning
Shadows and Not
America’s Suicidal Statecraft
The End of the 19th Century
Up Close: A Mother’s View
A Case of Wild Justice
What Can We Do Next? The
My Angels Are Come
The Declaration of White Independence: The Founding Documents of Transudationism
Awaken and Arise!
One Time in Paris
The Eye of Icarus
Prodigal of the Pecos
Dolphins Under My Bed
What the Hell Is a Liberal?
We Are in Midst of the Great
By Rodrigue Tremblay
Banking establishments are more dangerous than standing armies.
… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.
While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.
Under a paper money system, a determined government can always generate higher spending and hence positive inflation.
Many observers think that “prosperity is around the corner” and that this recession, like others since World War II, will end as soon as the stock market, as a leading indicator, recovers and people start spending again. This is a myopic view of the current economic big picture.
In fact, since the peak of the housing bubble (in the U.S.) in 2005, the onslaught of the subprime financial crisis in August 2007 and the beginning of the recession in December 2007, the U. S. economy, and to a certain extent, the world economy, has entered a period of protracted adjustments. For sure, there will be some quarters of positive economic growth ahead and the recession may be declared officially over in the coming months, but the radical economic reorganization that is taking place will go on for years to come.
Why is this so?
Essentially, because we are at the very end of the 60-year inflation-disinflation-deflation Kondratieff cycle that began in 1949 when war-frozen prices were liberalized; and that powerful long cycle is ending now. The post 1980s era, i.e. the Reagan era, is over, but the excesses and bubbles of the last few decades have to be corrected, at a time when large population shifts are about to take place. Such adjustments will take years to unfold and this will entail a lot of efforts and a lot of changes.
Indeed, the era of excessive spending and of excessive debt is over. The era of excessive government economic disengagement and of financial deregulation is over. The era of irresponsible Ponzi-scheme finance is over. The era of unregulated derivatives is over. The era of greed as an ideology is over. The era of wild and predatory capitalism is over. The era of cheap oil, of cheap transportation, of cheap commodities and of cheap food is over. The era of excessive concentration of wealth and income is also over. However, the age of political corruption, of incompetent politicians and of destructive wars of aggression is not over. What has arrived is the age of hyper stagflation.
The central driving force behind most of these developments, besides the collapse of the financial sector, the debt pyramid and the derivative products structure, and irresponsible talk of larger wars by loose cannon politicians (as if there were not enough problems!) is going to be demographic. Indeed, we have entered a period during which the largest demographic cohort in the history of mankind, the post Word War II baby-boomer generation, has passed its spending peak. This is not something that can be reversed overnight. This is going to be a decade-long process of adjustment, of less spending, of more saving, and above all, of paying off excessive debt loads. Let’s keep in mind that consumer spending represents 70 percent of GDP.
The economic consequences are going to be profound and will affect all sectors of the economy. We only have to consider how the automobile industry, once a major engine of economic growth, is presently going through a fundamental reorganization and downsizing. Even computer-based industries have matured and cannot anymore be considered fast growing industries. The only growth sectors left in the U.S. seem to be the health services industry, as the population is aging, and the war-related industries, as the U.S. military-industrial complex keeps on expanding. But even those sectors will have to slow down; lest they bankrupt the entire economy.
That’s why I think these industrial and demographic trends herald a period of slower economic growth that could last many years. Governments better wake up to the challenges that such a slow growth environment entails. Very few people are prepared for such a prolonged period of economic stagnation that will be accompanied by forced debt liquidation, in a deflationary environment. This is particularly true of private pension plans that will have trouble paying pensions to recipients in the coming years. This is also true for employment that will expand at a slower pace than the working population, at least for a while, resulting in a rise in the level of unemployment.
Baby-boomers are those individuals who were born between 1946 and 1966. Because of its sheer size (more than 70 million people in the U.S.), this generation has been dominant in all spheres of life for the last fifty years. But now, it has passed its spending peak. This occurred in 2005-06, at the very top of the housing bubble. The average age of the baby-boomer demographic cohort was then 50, which is the age of top spending. At that time, the U.S. personal savings rate fell to a whopping minus 2.5 percent per year. As a comparison, it was 12.5 percent during the 1981-82 recession and it has now rebounded a phenomenal 5.7 percent in April 2009, and it’s climbing fast.
Indeed, the end of the housing bubble, the financial crisis, and the economic recession altogether has sent a clear signal to Baby Boomers. You’d better begin saving soon, or your retirement will have to be postponed. And saving means consuming and spending less, while paying up debts, in order to boost net current personal assets to a level that could sustain retirement needs. But if the largest cohort of consumers cuts down on its spending and borrowing, what does it mean for aggregate spending and economic growth? It can only mean slower overall economic growth and some painful economic adjustments. Therefore, there is a high probability that this recession will be a super one that may linger on for years, being interrupted by short-run upside bursts, but soon being followed by a return of stagnant conditions. In Japan, in the nineteen-nineties, a similar financially and demographically induced recession lingered on for an entire decade. And even after twenty years, it cannot be said that Japan is out of the woods yet. Read More
The Honduras Coup:
By Michael Parenti
Is President Obama innocent of the events occurring in Honduras, specifically the coup launched by the Honduran military resulting in the abduction and forced deportation of democratically elected President Manuel Zelaya? Obama has denounced the coup and demanded that the rules of democracy be honored. Still, several troubling questions remain.
First, almost all the senior Honduran military officers active in the coup are graduates of the Pentagon’s School of the Americas (known to many of us as “School of the Assassins”). The Honduran military is trained, advised, equipped, indoctrinated, and financed by the United States national security state. The generals would never have dared to move without tacit consent from the White House or the Pentagon and CIA.
Second, if Obama was not directly involved, then he should be faulted for having no firm command over those US operatives who were. The US military must have known about the plot and US military intelligence must have known and must have reported it back to Washington. Why did Obama’s people who had communicated with the coup leaders fail to blow the whistle on them? Why did they not expose and denounce the plot, thereby possibly foiling the entire venture? Instead the US kept quiet about it, a silence that in effect, even if not in intent, served as an act of complicity.
Third, immediately after the coup, Obama stated that he was against using violence to effect change and that it was up to the various parties in Honduras to resolve their differences. His remarks were a rather tepid and muted response to a gangster putsch.
Fourth, Obama never expected there would be an enormous uproar over the Honduras coup. He hastily joined the outcry against the perpetrators only when it became evident that opposition to the putschists was nearly universal throughout Latin America and elsewhere in the world.
Fifth, Obama still has had nothing to say about the many other acts of repression attendant with the coup perpetrated by Honduran military and police: kidnappings, beatings, disappearances, attacks on demonstrators, shutting down the internet and suppressing the few small critical media outlets that exist in Honduras.
Sixth, as James Petras reminded me, Obama has refused to meet with President Zelaya. He dislikes Zelaya mostly for his close and unexpected affiliation with Venezuela’s Hugo Chavez. And because of his egalitarian reformist efforts Zelaya is hated by the Honduran oligarchs, the same oligarchs who for many years have been close to and splendidly served by the US empire builders.
Seventh, under a law passed by the US Congress, any democratic government that is the victim of a military takeover is to be denied US military and economic aid. Obama still has not cut off the economic and military aid to Honduras as he is required to do under this law. This is perhaps the most telling datum regarding whose side he is on. (His Secretary of State, Hillary Clinton, is even worse. She refuses to call it a coup and states that there are two sides to this story.)
As president, Obama has considerable influence and immense resources that might well have thwarted the perpetrators and perhaps could still be applied against them with real effect. As of now he seems more inclined to take the insider track rather than an actively democratic stance. On Honduras he is doing too little too late–as is the case with many other things he does.
Michael Parenti’s recent books include: Contrary Notions (City Lights); and God and His Demons (Prometheus, forthcoming). For further information, visit his website: www.michaelparenti.org
A bone-chilling political
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