THIS WEEK’S SYNDICATED COLUMN: New Year’s Revolutions?

There’s Plenty of Money Around. Let’s Take It.

What’s the difference between you and a corpse? You both contain the same organs, the same fluids–all the same stuff. Inside you, stuff moves around. That’s the difference between life and death.

What’s the difference between economic boom and bust? Again: movement. The United States of America is just as rich today as it was a year or, for that matter, ten years ago. It still possesses the same rich natural resources, the same enviable geography, and the same productive, innovative and energetic workforce. Our country still has enormous intrinsic value. But money, the lifeblood of any economy, has stopped moving around.

Wealth is still here. But the economy has flat-lined.

We know what caused the problem–the double bursting of the dot-com and housing bubbles, coupled with government regulators who took the last three decades off from work and financial analysts who said the old rules no longer applied. (The old rules always apply.) The underlying meta causes of the Crash of ’08 were an unholy trinity of stagnating wages, easy credit and brilliantly executed consumer propaganda that convinced people they were lame unless they bought all the latest stuff. But that’s a discussion for another time. This week, let’s think about how to escape the deflationary spiral that will reduce the world’s richest nation to penury unless something is done soon.

The Fed, having reduced interest rates to zero, is out of ammo. Banks are using the $700 billion bailout to buy each other up, enriching only themselves and a few hundred investment bankers. (In all fairness, Treasury Secretary Henry Paulson told them to do just that.)

President-Elect Obama’s plan blends George W. Bush and FDR’s greatest hits: a symbolic Bush-style tax cut of $500 per person ($1,000 per couple) and a $850 billion infrastructure construction bonanza reminiscent of the WPA projects of the 1930s. Obama’s tax cut won’t stimulate the economy; they never do. Due to the “multiplier effect,” Obama’s economists predict that his public works projects will create 3.2 million new jobs by the first quarter of 2011. “Peter Morici, economist at the University of Maryland, projects that $100 spent on a bridge or school boosts economic activity by about $200,” reports the Associated Press. (That doesn’t count the benefit of improving Americans’ longer-term productivity. For instance, better roads could reduce commuting times or help get goods to customers more efficiently.)”

A public works program is a good idea. But Obama’s plan won’t be enough to put a dent in the skyrocketing unemployment rate. 3.2 million jobs would be barely enough to replace six months worth of job losses at current rates. And most analysts think those rates will rise. With the federal budget continuing to sink $9 billion a month into the fiscal sinkhole of Iraq, there isn’t much cash to make the plan bigger.

“With negative or low economic growth projected well into the future, the economy needs a long-term fix,” says Stanford economist John Taylor, who worked in Bush’s Treasury Department. Definitely. But what?

Unless something big happens (like every pundit, I should predicate every prognostication with the acronym USH for “unless something happens”), the depression will deepen quickly. Our economy is two-thirds dependent on consumer spending, but consumers are stone cold broke. Decades of attacks on labor and free trade agreements caused wages to stagnate as inflation raged, so Americans have no savings to draw upon. Credit is no longer available as a back-up.

The American consumer has left the building.

Demand will keep shrinking, forcing companies to lay more people off, which will accelerate the shrinkage of their customer bases. Prices will drop to chase the few dollars left in the economy, triggering deflation. It’s already begun: Prices fell 1.7 percent in November (20 percent on an annualized basis). Debtors will try to pay off inflated credit card bills and mortgages with deflated money. They will fail. Misery will spread.

What happens next, I think, is that people will do what large numbers of people always do when they need money and food but can’t find a job. They will start to think about the rich, who still have all the wealth they accumulated while money was still circulating. And they will take it from them. It might be the easy way, through liberal-style income redistribution. Or it might be the hard way. Either way, it goes against the laws of nature to expect starving people to allow a few individuals to sit on vast aggregations of wealth.

When I was young, I assumed that revolutions resulted from ideology, because idealists wanted a fairer world. Now, as we stare down the barrel of economic apocalypse, I realize that they’re carried out by desperate people who have nothing to lose, in Marx’s words, and everything to gain. They take stuff from the rich and write the ideological tracts after the fact.

With the economic distress we’re likely to see in the coming year or two or three, revolution will become increasingly likely unless money starts coursing through the nation’s economic veins, and soon. Will it be a soft revolution of government-mandated wealth distribution through radical changes in the tax structure and the construction of a European-style safety net, as master reformer FDR presided over when he saved capitalism from itself? Or will the coming revolution be something harder and bloodier, like the socioeconomic collapse that destroyed Russia after the fall of the Soviet Union? To a great extent, what happens next will depend on how Barack Obama proceeds in his first weeks as president.

COPYRIGHT 2009 TED RALL

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20 Responses to “THIS WEEK’S SYNDICATED COLUMN: New Year’s Revolutions?”

  1. Anonymous Says:

    So far FuturePrez has decided to follow the Bush course on foreign affairs; he’s backing the latest Israeli atrocity in Gaza, still wants that New, Improved war in Afghanistan, and wants to pull a 1973 in Iraq (leave “trainer” US soldiers to guide the Iraqi Army and guard the air bases while we bomb the sh@* out of Iraq) so he can staff his Afghan adventure. Hopefully reality will slap him around and he gives up trying to win the Imbecile’s wars.

    – mr. mike

  2. Incitatus Says:

    Ted, baby, don’t you worry about that deflationary bugaboo, ’cause Paulson and Bernanke are cranking that printing press red-hot to prevent it. Obama’s white elephants, excuse me, “public works” are also going help bring a measure of Zimbabwean recovery to the US.

    I gotta take issue with the line about revolutions being started about “desperate people who have nothing to lose”. That was certainly not the case in Russia, China, Vietnam, Cambodia or Cuba, and if you go further back, it wasn’t the case in France as well.

    Or were you trying to trick the boobs that might happen to read the column on dead-tree media? You must have, ’cause you wrote “liberal-style income redistribution” instead of socialist, which is what it is.

    PS: A boom is more like a coma, stuff keeps moving inside you, but doing nothing constructive.

  3. Incitatus Says:

    Ted, baby, don’t you worry about that deflationary bugaboo, ’cause Paulson and Bernanke are cranking that printing press red-hot to prevent it. Obama’s white elephants, excuse me, “public works” are also going help bring a measure of Zimbabwean recovery to the US.

    I gotta take issue with the line about revolutions being started about “desperate people who have nothing to lose”. That was certainly not the case in Russia, China, Vietnam, Cambodia or Cuba, and if you go further back, it wasn’t the case in France as well.

    Or were you trying to trick the boobs that might happen to read the column on dead-tree media? You must have, ’cause you wrote “liberal-style income redistribution” instead of socialist, which is what it is.

    PS: A boom is more like a coma, stuff keeps moving inside you, but doing nothing constructive.

  4. Anonymous Says:

    Maybe the Russian model is what they are trying to repeat.

    taking money from the people then setting up fiefdoms er new banks. “opening China”. nothing fancy no new ideas just the same old. Lord we don’t expect them to really work at it do we? Barrons oops barons to WWII. CIA er Yeltsin no gorby, Obama fdr, Please.

    Obama could be their greatestt pr coup yet. Although at some cost. Clinton anyone?

  5. Cliff Says:

    I disagree with this article’s opening.

    The United States does lack the wealth it had in past years, because such “wealth” was illusory in the first place. Our economic actors at all levels subsidized our growth with money they didn’t have; when it came time to reckon with their obligations, they went caput.

    During the dot-com bust, it was bogus earnings reports in the tech sector, largely the result of corruption. Commercial banks doubled as investment houses, creating an obvious conflict of interest: banks were underwriting the stock of companies their stockbrokers were pushing. Everything became overpriced.

    During our recent bubble growth, our human energy was diverted into financial engineering. The financial sector even invited physicists and mathematicians to design investment schemes! Obviously, the sector became so insular and self-important that it became involved in gratuitous and ultimately destructive services, instead of old-fashioned lending/borrowing. Jobs were created that should not have existed. This should not be considered “wealth” or “growth.”

    In the mean time, our human, infrastructural and natural capital–the basis of wealth creation–have been neglected. This is something not readily-visible in the economic indicators the financial sector hucksters sponsor.

    And I disagree about your theory of revolution. Relative, not absolute, deprivation causes them. The French Revolution occurred not because Louis XVI was a tyrant, but because prior to a period of recession/low crop yields in the late 1780’s, France experienced growth and political openings. People will endure unspeakable misery if they don’t have any frame of reference.

  6. Anonymous Says:

    Ted is likely right. When rich bankers cause a collapse, and then further enrich themselves by looting the Treasury, people are not left with any other recourse. When the government will not listen, and will not pursue the thieves, the people have no choice left but to implement “Cheaters Justice”. For those who don’t know, the movie “Casino” had a very effective demonstration of “Cheaters Justice”. A couple of clowns (i.e. – Wall Street bankers) decided to cheat the casino, only to be caught red-handed. One of the culprits had his hand summarily smashed with a hammer. The cheats were told that if they came back to the Casino, their hands would be removed completely with a circular saw.

    Hopefully, it doesn’t come to this – but it may.

  7. peejay3 Says:

    ted, you must’ve been reading this: http://online.wsj.com/article/SB123051100709638419.html

    it’s possible!

  8. Anonymous Says:

    It is time to strike against the rich elite. They cause wars, poverty, starvation to enrich themselves. They have a hole in their hearts and can never have enough.

    The important thing now is to “Spread the word” that the rich elite have caused all this and shield themselves in cities worth of mansions and mountains of yachts while we literally worry if we’ll be eating regularly. Make it clear: It is not your fault you don’t have/might lose your job. It is not your fault you have debt. It is the fault of the rich elite who have assaulted your wages and waved credit to replace it in front of your face while taking over the government to make sure their ends are always met. As society crumbles, we must make sure they are blamed every way so they don’t just re-hire some of us as slaves while having the army murder the rest of us, as I’ve heard they plan to. Something else to use, look it up, there are lots of ready-made ‘extermination camps’ and mountains of crates containing body bags and port-a-coffins waiting for when they bring the army home and brainwash them to murder us.

    It’s time to take back what the rich elite have stolen. They have their puppet toads on radio dare us to do this. They think if we just do a “Robin hood” they’ll end up back on top because they are cold, greedy pigs who’ll rob and steal and hoard their way back up.

    Not this time.

    I don’t even mean kill them. That would be too kind.

    To have any chance of man somehow maturing and surviving, we need to change the way we think, what our priorities are, how we value things. The prophet Mohamed said the greater Jihad is that within. We need to abandon both the sin of Usury -and- the belief that a mountain of personal wealth and opulence is anything other than contemptible. The rich elite are proof of this, as they lead vapid empty lives of gross indulgence, family infighting or soulless struggle for even more wealth and power. We need to make a society where the wealth is the sense of community and family and accomplishment. Our ‘luxury’ should more be free time to relax and enjoy life. What does man truly need? Simple. Man needs food, shelter, companionship -and- first and last a sense of purpose in life, a place in society, a reason to exist. Nowhere is wealth beyond reasonable comfort required, nor ‘power’ have any real need.

    And let the rich live in this society as pariahs, hated from the day they are born till the day they die. Let them live a thousand years outside the gates, shouted at and hated, living off scraps and knowing they’ll never ever be able to hoard anything.

  9. Susan Stark Says:

    Incitatus said:

    >>"Ted, baby, don't you worry about that deflationary bugaboo, 'cause Paulson and Bernanke are cranking that printing press red-hot to prevent it."<<

    Yes, and that is exactly the problem.

    >>"Obama's white elephants, excuse me, "public works" are also going help bring a measure of Zimbabwean recovery to the US.<<

    You are half-right here. These types of jobs are inadequate without rebuilding industry (industry, as in MAKING THINGS, not service sector crap jobs). On the other hand, we need infrastructure repair.

    >>"I gotta take issue with the line about revolutions being started about "desperate people who have nothing to lose". That was certainly not the case in Russia, China, Vietnam, Cambodia or Cuba, and if you go further back, it wasn't the case in France as well.">>

    Here is where you are being dishonest. In Russia's case, and in France, people were starving to death.

    >>"Or were you trying to trick the boobs that might happen to read the column on dead-tree media? You must have, 'cause you wrote "liberal-style income redistribution" instead of socialist, which is what it is.">>

    There is a difference between "reform" income redistribution, and "socialist" income redistribution. The reformist type is done periodically in order to protect capitalism from itself. This is what FDR did in the New Deal. But reformism is limited distribution, it doesn't eliminate wealth. This is the type Ted is talking about in the article.

    Socialist redistribution of income is permanent and severe–it eliminates any type of wealth, and enforces income equality across the board. This is the type practiced in Cuba.

  10. Always Right Says:

    Taking $850 billion from one group of Americans, and giving it to another group of Americans to “improve infrastructure” does nothing to improve the underlying problems in the economy. Lowering taxes at the personal and corporate level will give individuals and corporations more money to spend. And getting rid of “mark to market” will help the flow of currency.

    However, in the long run, the dollar is doomed. The government will need to print more and more money to cover the current debt plus the 100 trillion in unfunded mandates for Social Security and Medicare eventually making the dollar worthless.

    Invest in gold and silver, you’ll be glad you did.

  11. Anonymous Says:

    Sarkozy had the right idea: He went to the banks and said (I’m paraphrasing): “Look, start lending all this money we gave you, or we will nationalize you and start the lending ourselves.” I’m really hoping Obama has the balls to do something similar.

    Oh, and to the gentleman above me: Invest in canned food and shotguns instead, as gold and silver can’t be eaten.

  12. Always Right Says:

    Sarkozy had the right idea: He went to the banks and said (I’m paraphrasing): “Look, start lending all this money we gave you, or we will nationalize you and start the lending ourselves.” I’m really hoping Obama has the balls to do something similar.

    This is how we got into the real estate mess. Forcing banks to lend to almost anyone with “no-docs”.

  13. Angelo Says:

    three cheers for deregulation

  14. Anonymous Says:

    Always Right-

    Your name must be ironic, because I have yet to see a single post by you that is anywhere close to correct, and the one here is wider off the mark than most.

    This mess started when deregulation allowed the creation of the giant schemes named CDS and CDO’s, not because a few people got houses they couldn’t afford; the actual mortgage values are – well, I forget the exact amount but I know its less than 5% of the “money” lost.

    And I never said to lend without standards, but the banks are hoarding money, and not lending AT ALL. Obama needs to get them to start lending or the economy crashes a lot harder than it needs /was going to.

  15. Incitatus Says:

    Getting back at this a little late:

    Quoth Comrade Stark:

    >>> You are half-right here. These types of jobs are inadequate without rebuilding industry (industry, as in MAKING THINGS, not service sector crap jobs). On the other hand, we need infrastructure repair.

    I might be leaping at conclusions here, but you're longing for industry might be more of a longing for unionized industry labour (the cannon fodder of the Revolution). You know there's a reason those jobs fled the US, right? About infrastructure, I travel to the US regularly and it doesn't look like the airports, interstates etc are in that bad shape. Would you care to enlighten me what infrastructure do you need repaired?

    >>> Here is where you are being dishonest. In Russia's case, and in France, people were starving to death.

    Thanks for the kind words, but i must throw them back at you: it wasn't starved masses that kicked Kerensky's butt out in October. If we examine it with rigour, neither did they kick the Tsar's butt.

    >>> Socialist redistribution of income is permanent and severe–it eliminates any type of wealth, and enforces income equality across the board. This is the type practiced in Cuba.

    Severe it is, but it should be referred to with more exactness – especially in the Cuban case – as "poverty spreading", rather than "income redistribution". "Across the board" is also relative term, since touristic outlets employees and, of course, party officials are somewhat shielded from its effects. Equal indeed…

  16. Kurt Says:

    Incitatus,

    I happen to work in economic development in California and know a little about the infrastructure. California right now has about $300,000,000,000 in deferred maintenance, and another $200,000,000,000 in basic transportation needs (not even including transit operating costs). In Sacramento alone there are 12 bridges that need major repairs, 8 of which are on major interstates. All 3 major west coast ports are over subscribed (Long Beach can’t figure out what to do with all the excess shipping containers they have, Oakland cannot get goods across the Sierra’s efficiently, Seattle’s bulk operations are in trouble due to aging port infrastructure), and the smaller ports such as Sacramento and Stockton need improvements to their facilities, access and shipping channels. You may travel the country, but you are apparently ill informed about the issues with aging infrastructure and inadequate infrastructure.

    California (and I would argue the easter seaboard and the upper midwest area) need High Speed Rail on par with the TVG. Oil is running out, and Rail is much easier to be flexible about fuel. We are about 20th in the world in passenger rail service. We should be first.

    One big reason for job flight to India and Indonesia is that both countries kick our ass on telecommunications networks. We are 17th in the world in broadband deployment. We invented the stuff… we should be first. Instead, we subsidize comcast and ATT to provide crappy, slow broadband and to force our best countries to flee the SF Bay Area and Austin to Bangalore so that they can get the broadband they need. Add into that that we subsidized Apple through the U.S. tax code to encourage them to move their call center from Elk Grove to Mombai (along with a number of other good companies) and a pattern emerges.

    Our school funding is the smallest of any industrialized nation on a pure pupil basis. We are not graduating engineers, scientists, social scientists, and everything else we need to compete in this country because we have had a war on teachers since Ronald Reagan. Its the teachers fault, of course, that the federal government has spent more on funding Texas based testing companies than schools. Our failures as a nation can be traced to our priorities over the last 3 decades. You want great schools… Pay for them. You want the crappy districts to get better, give them more money (and watch how it gets spent).

    On another note, the biggest cause of our current economic plight is price instability in the housing and oil markets. Right now, the housing market in California is getting multiple offers for the current asking price on most homes, yet due to foreclosures (most of which wouldn’t happen if banks would work out loans) and psychological factors, the average asking price drops about 4-5% each week. Normally, if the “free market” were working, the price would go up. There isn’t a housing shortage either. In Santa Cruz county, it isn’t uncommon for 5-8 families to live in a house designed for a single family. Oil price instability is contributing to this because most middle class americans cannot budget because we don’t know if oil will be $2 or $5 next week. Oil price instability, since it is the biggest cost for transportation is fuel.

    Now, onto your assertion that the revolutions that resulted in massive wealth redistribution were not due to the fact that people were starving… I think you are making a spurious comparison. In France, Russia and Cuba, the REASON for the revolution was that the ruling class had allowed most people to be unable to live in adequate living conditions. That the people in charge in all three revolutions were members of the upper classes (although not ones participating in the ruling class) does not change the reasons the revolution occurred.

    Lastly, US policy did and continues to radicalize Cuba. Batista was no picnic and to pretend that the living conditions for Cuban’s declined enormously for the average cuban since the revolution is dishonest. In fact, most honest economic analysis of what happened in Cuba would conclude that the US trade embargo and travel embargo were the reason for Cuba’s decline. Since the embargo also put pressure on Castro to consolidate power, I would also argue that it was an equal evil to the socialism there. If you would like to discuss the evils of socialism there are plenty to discuss, but trying to ignore the natural outcomes of US policy (and all capitalism for that matter) as they relate to the outcomes of socialism is dishonest.

    Lastly, redistribution by spending on infrastructure to fuel future economic growth is not make-work socialism. It is pragmatic. Private individuals don’t build roads, rail and communications networks. They never have. We have a system of roads, rails, electrical systems and communications due to government investment, not due to private investment. Government does well at infrastructure investment.

  17. don Says:

    Good show, Kurt. You can lecture libertardian/con buffoons like this with facts and reason until you’re blue in the face- but they’ll never, ever admit they’re wrong…

    We’ve seen this movie before, of course, circa 1929…but instead of running the Hoovers out on a rail, we continue to give them a ‘fair say’ in the affairs of our nation, despite the damage they have done, and continue to do.

  18. Incitatus Says:

    Kurt,

    For what it’s worth, I’m against the embargo, for two good reasons: one, it hurts the Cubans more than it hurts the Party faithful; and two, it gives the Castro Bros and their sycophants an excuse for the poor state in which Cuba is in.

    Even with the embargo, though, the US is the Cuba’s 4th largest trade partner (mostly food and medicine exports). The American embargo doesn’t stop Canada, the EU and the rest of Latin America trading with Cuba, but somehow the one economic activity that these countries sustain in Cuba is tourism, not a little of it, of a sexual nature. Which is ironic, ’cause one the rallying cries of El Comandante in his his long, boring speeches was Cuba’s status as America’s brothel, pre-Revolution. I guess being Germany’s brothel is A-Ok.

    Prior to the Revolution, Cuba traded with the US, but it was “exploitation”. After the Revolution, the embargo hurts Cuba. Which on is it, mac? You can’t have it both ways. Two final notes:
    – Compared to Trujillo, Pinochet, Somoza and a host of other Latin American butchers, Castro included, Batista was certainly a walk in the park;
    – In 1956, accroding to UN data, Cuba had the best human development indicators in Latin America. Some of them improved with the Revolution, but not as much as in the rest of the continent, or some Asian countries like South Korea, which didn’t have to endure a Communist dictatorship for 50 years;

    When I was young, and a leftist, we mocked Stroessner for being the king-like, long-lasting strongman in Paraguay. Somehow, Fidel’s image, even when he outlasted Stroessner by a decade or so, is untouchable to the keepers of his cult. This makes me sick.

  19. Kurt Says:

    You are missing some facts again Incitatus. The exploitation in Cuba during Batista is that Batista took property by force and gave it to U.S. companies. Our own beloved Ernest Hemmingway wrote several nice little articles on this. Furthermore, I don’t remember writing that US tourism was exploitation. Our sugar farming operations were (since we stole land to do it), but not tourism. Also, the trade embargo with Cuba absolutely does include our neighbors and allies. Just because they have not prevented tourism does not mean that they are allowed to freely trade with Cuba.

    I also didn’t defend Castro. Castro is/was an asshole and totalitarianism is not something worth defending. It also isn’t socialism or democratic socialism. I have never defended Castro or Che and never will. He isn’t untouchable and even Sean Penn, to pick the most used example of a Castro apologist, doesn’t defend him but rather encourages a hands off U.S. policy towards Cuba (despite what Bill O’Reilly told you).

    Where you libertarians often go wrong in your analysis is that you claim that Hitler, Stalin, Mao and Castro are examples of what happens under socialism as opposed to France, Sweden, Germany and Belgium. You use extreme examples of despotic rule (one could argue that Hitler was a libertarian too, you know) as your baseline for examining socialism or hybrid socialist/capitalist economies which destroys any credibility that you may have had. The common thread between Hitler, Castro, Stalin and Mao is not communism, but totalitarianism. You also ignore real examples of libertarianism such as Brazil and pre-drug war Columbia and the living conditions of most people in those systems.

    On the other “dictators” that you mentioned, nearly all of them were victims of the U.S. trying to overthrow their democratically elected governments because a U.S. based stateless corporation was pissed that they were taking “their” property/extraction/enslavement rights. I suppose you also think that Oliver North is a great American hero, and that Diem was freely elected in Vietnam and not assassinated by the CIA? Somoza is my favorite of your examples since he was a CIA puppet and a right wing extremist up until the Carter presidency. Did it occur to you that what all those banana republic dictators have in common is that the U.S. was fucking with their right to self-determination either through corporate or governmental imperialism? Did it further occur to you that the U.S. fucking with them may have encouraged them to be more radical in order to consolidate power against foreign aggression? It isn’t an excuse for what they did, but another sovereign nation should not have to bow to our hubris or corporate hubris. I sometimes think that you righties and libertarians would have corporate interests (which are by nature anti-free market) take over everything world wide. That is the only reason I can come up with for your defense of Batista.

    Lastly, did it occur to you that the nature U.S. involvement in Cuba since 1961 is the number 1 reason there is still a Castro dictatorship in Cuba?

  20. Incitatus Says:

    Kurt said:

    Just because they have not prevented tourism does not mean that they are allowed to freely trade with Cuba.

    Dude, that is just factually wrong. Nothing prevents Brazilian, German or Venezuelan companies from doing business with Cuba.

    Thanks for patronizing me, but I think I wrote this a couple of times now, but you lefties just won’t listen: I am not your proverbial drooling Fox News spectator. I post from an undisclosed location in South America where, yes Virginia, a lot of the left-wing glitterati still defend the Cuban regime, just like they do it in Europe.

    About the claim that Brazil is some sort of libertarian paradise, you are just hallucinating.

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