Greetings and salutations from the sand, sun and surf of Cape Cod, Martha’s Vineyard and Nantucket! Good to be with you on this Tuesday morning, day after the long week end. To be quite frank with you, I’m glad. Full disclosure, I am a news junkie and can’t seem to gleen enough information from the week end news cycle. The Cape and Islands were humming though, with summer in full gear. The boats in East Bay, Crosby Yacht, Wianno and Oyster Harbors enjoy the ambivalence of sitting by and watching the Osprey, as they hover over head, waiting for a fish to appear… Charlie Rose had an interesting guest that we all know, Paul Krugman, Nobel Laureate winner in economics, columnist for the New York Times and professor at Princeton University. The discussion revolved around “austerity” and it’s nemesis, unemployment benefits– yes, those unemployment benefits that will bury us as a nation, financially. To use Paul’s words, “providing unemployment benefits now has nothing to do with how we are going to pay for medicare ten years from now.” When asked about the economy in general, Mr. Krugman believes that we are not making any progress, while he implores us to look at the real numbers–58 percent of the population is actually working. We have taken a few steps away from the abyss, but because of the fact big banks are not lending, we cannot seem to get a foothold on the mountain we are climbing. Businesses are sitting on a lot of cash, not investing, not spending–due to the fact that they are awash with excess capacity. Why would you build an office when there is so much vacant office space? That goes double for a factory. So, businesses are waiting for some reason to invest, consumers are waiting for jobs and thus the vicious cycle of stagnation continues, where nothing is moving, save the hot air coming from the mouths of puppets in Washington D.C.. “The myth of austerity” is basically that most of what serious people believe rests on prejudice–subject to fad and fashions. Krugman contends that what surprises him the most is, “what’s happening now, is that a few months ago, it was in the news that interest rates were rising, just a little bit, and all of the important people said, well, the markets are going to turn on us, so we better have austerity.” The idea that we are all Greece (recently bailed out by the EU), that Greece’s problems are somehow contagious, and the idea of punishing ourselves in order to deal with long term deficit problems, and thus, keeping us from having a Greek style financial crisis (with the only real problem and the one’s being “punished” being the poor, the children and their crumbling schools, municipal workers, the environment, minorities, oh, I could go on…), is the new austerity cliche. Combine that “idea” with one more “superstition”, the idea that punishing ourselves (with the battle cry of the p.o.h.n., “the American people WANT us to reign in spending”, when the American people are told what toothpaste to buy) will not hurt that much because we are boosting confidence (on Wall Street), and therefore, the economy and jobs will magically appear again. Voodoo economics indeed. “The invisible bond vigilantes”, as Krugman calls them, wraps around the idea that people are going to attack the U.S. by losing their confidence in our debt, but by their actions have done the opposite–lending the U.S. government money at 3 percent interest for long term loans. Thus far, in Obama’s term, there have been four such instances of these vigilantes, but they were false alarms, or rather members of the p.o.h.n. crying wolf at the behest of their corporate overlords. Most economists will contend that the greatest cost to future generations (besides Global Warming) will be health care, and the ever increasing costs of caring for an aging population. Passing the health care LAW was a step in the right direction, but more is needed to be done in cost containment via efficiency and cutting out the middle man–the insurance industry, that represents the largest “fleecing of America” out there. “The point is”, say Krugman, “that what the austerity people want us to do, has nothing to do with that problem,” (using it to promote their agenda, while alarming the general public). Denying unemployment benefits to people who have exhausted them in the middle of a deeply depressed economy, has absolutely nothing to do with whether we will be able to do the things we need to do to control medicare costs ten years from now. So what “people” are saying is this generalized “feeling of pain”, this willingness to demonstrate your undying devotion to endure pain now, is a “good thing”, and that by doing so, you are demonstrating your willingness and devotion to endure pain ten years from now–break out the champagne boys, we have the “American people” locked up in a Stockholm Syndrome–a creepy psychological trick played by captors who make their prisoners not only feel sorry for them, but moreover, trick them into thinking that it is their fault. Then, just to nail it down, they degrade them, literally on the Senate and House floors, by calling the unemployed “hobos”, a term the p.o.h.n. may be projecting from themselves. This “trick” by the p.o.h.n. has not fooled Wall Street, for this was not really an exercise to fool the investors (who run the show), rather it was a calculated move by the republicans to keep the masses down and angry, so come the fall, they will be in a position to have their “captive” audience (the disgruntled American people) elect as many puppets as they can to fill the few remaining seats of republican Senators like Bob Bennett of Utah, who did not pass the new acid test of purity thrust on any “thinking” independent minds that may have been left. Take a look at Ireland and the savage austerity that they face daily. The point is, if austerity brings confidence from investors, then you would believe Ireland must be back to being able to borrow money at a reasonably low rate, right? Some people have reported this to be true when it is not. In fact, the Irish have been glumly and “doggedly” going about the austerity, but still has not gained access to markets. Why is this so? According to Krugman, “it is the sheer power of current behavior.” These are the contradictions that John Maynard Keynes spoke of at length in his long books about economics in the 1930’s, when he disagreed with the rantings of Herbert Hoover in 1932. Hoover contended the same exact message that the p.o.h.n. now embodies, “the American people want to balance the budget (austerity) in order to restore confidence in the markets.” Sound familiar? Hoover was not interested in the “small people”. His interests, like the p.o.h.n. were elsewhere, and it was his “belief”, like that of Ronald Reagan’s “trickle down” theory, that if the markets are happy, then everybody will prosper. Thirty years of that kind of philosophy (deregulation included) has gotten us to where we are today. “If you don’t learn the lessons from macro economics in the past 78 years, you will revert back to the instinctive things that Hoover was saying in ‘32. Look at Japan in the 1990’s, economic stagnation and 0 growth, who made the mistake of not hitting the crisis hard, instead of in dribs and drabs, with a really strong, monitored fiscal stimulus program. Instead, they opted to allow it to drift into this deflationary quick sand,” Krugman added. There have been two great depressions in this country, and we all know about the first one. Actually, the first one occurred in the 1800’s, the Long Depression, consisting of short recoveries and long recessions that was ended by a giant leap in technology in the form of a railway boom. Could we not make it our collective call as a species to stop burning fossil fuels (that are destroying our planet and all who live here) and turn to alternative energy before it’s too late? Could this not be the greatest chapter in American history as we face our behavior head on and change our ways? Changing our infrastructure and the way of life will be hard, but the alternative is far worse. As the non-biodegradable Corexit 3500 binds with the millions of barrels of oil floating in the Gulf of Mexico, choking our wildlife in a painful reminder of mankind’s folly, can we not turn to our brothers and sisters and agree we are not headed in the RIGHT direction?–a direction towards harmony with the earth and an ever lasting peace with everyone who lives here? As we saw in the ending of the Great Depression via the stimulus of World War II, destructive spending (albeit for a good cause), and the polar opposite of that, the Long Depression, where technology (railroads) brought an end to the “deflationary quicksand” in the 1880’s, you might see the advantage of spending more wisely in our future–that won’t include fossil fuels for that much longer (peak oil)– such as a massive new green project (s) that truly offer a light at the end of a very dark tunnel. Unfortunately, we as a nation are always prone, as Mr. Krugman said, “to destructive spending” over the more constructive variety. Food for thought. GOD’S SPEED to the GULF–all of the people, dolphins, whales, sea turtles, BROWN PELICANS and marsh lands therein, may the miracle happen for you all soon. Have a nice week folks! Peace~M
July 6, 2010
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