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House of Cards
by Jim Miles
America today is not the only empire, but it is one that has consistently formulated itself around the ideologies of corporate business, the military, big government, and religious self-righteousness, mass marketing itself and mass exploiting others with military back-up when needed to make itself the biggest and most powerful ever known.
Superficially, the empire has used the media interface of corporate business, the well known media companies themselves such as Time-Warner, to keep the general public ill-advised and readily entertained with pulp writing, pulp broadcasting, and computer activities and internet surfing.
The government and military combine to provide “reliable
information” from “reliable sources” who wish to remain “anonymous” and
thus create a mystique of underhanded cleverness and consequently
apparent correctness of information.
The CIA along with other putative non-governmental organizations
operates ‘think tanks’ and ‘institutes’ to disseminate stories and
scare tactics (and significant amounts of money) within America and
offshore. Religious groups, now fully into the swing of projecting
their interests into the corridors of power, have become more and more
publicly involved in the political process, allowing their messianic
beliefs and self-righteousness to carry the balance of power,
especially within the half of government known as the Republican party,
with the other half, the Democrats, mentally supining themselves in
order to appear no less patriotic in their pummelling of the world.
The
American image still remains strong around the world, and that is
readily understood as an image created by a massive corporate and
government propaganda effort that displays the finest of American
tinsel and glitter and gloss. It would be wonderful but highly
unrealistic to imagine a world without that advertising, without the
constant images that subtly extol the virtues of American freedoms and
purchasing power, the easy life with powerful cars, sexy women, and all
the glamour of Hollywood and all the techno-glitter of Apple i-pods.
It is a society built upon these images, upon the instant gratification
and apparent wealth that is created in this wonderful entity called the
United States of America.
The mythologies of ‘rugged
individualism’ (as compared to corporate welfare), of Disneyesque
happy-ever-after-lands (now found within gated communities and barred
roads that keep the uglies out), of ‘free markets’ (as compared to
agricultural subsidies and illegal immigrants), of ‘productivity and
growth’ (while many OECD countries have higher productivity working
less time with better benefits), of a classless society (fully debunked
by anyone looking at crime statistics, incarceration rates, educational
levels, and many other demographic factors), of ‘rule of law’ and
‘transparency of government’ (when most military contracts are no bids,
and the executive is run by a group of unelected patronage and
corporate power positions) are readily bought into by a largely
complacent public and accepted worldwide, at least with the powerful
elites in governments, with the idealized transparency and rule of law
delivered mostly through economic coercion by way of the fully
non-democratic and non-transparent WTO, IMF, World Bank and various
other trade agreements not supported by the populace.
Conversely,
the propaganda constantly reduces the rest of the world as being ‘old’
(as in Europe), or lacking in ‘modernity’ (as in the Middle East), or
being ‘corrupted cronyism’ (as in Africa and Asia), or more basically,
simply the ‘other’, a lesser breed of humanity to be looked down upon,
creatures that may or may not be able to uplift themselves to American
standards of institutional and personal excellence, but either way are
useful commodities as labourers, extractors of wealth, and maybe but
not paramount, as consumers. Anything that touches upon the horrors of
‘socialism’ or ‘social democracy’ anything that denies the
commodification of essentials to life, now extending to genetically
modified foods, water, and the basic genetic structures of indigenous
plants and animals including human genetics as well, anything that
denies ownership of resources to the ‘forces of the market’ rather than
to the benefit of the workers that produce the wealth or the nation
that possesses it – all this is considered sacrilege to the American
controlled global financial gurus and prophets.
The ‘neutral’
market must rule everything, unsullied by morals, allowing ‘la crème de
la crème’ to rise to the top while the rest are uplifted by the
‘trickle down’ effect, whereas the reality shows that markets are
anything but neutral, never truly free, and from many of the court
cases seen as with Enron, and Arthur Andersen, highly immoral.
The
rich take care of themselves first, witness the savings and loans
scandal of the 1980s, and Bush’s failed business attempts and the
buyout of Harken Oil, and the interactions of the Saudis with BCCI, the
Bank of Credit and Commerce International, and the billions of dollars
made by Prince Bandar and the Saudi government, who supported the
Wahhabi fundamentalist sect within their own Islamic theocracy.
Nothing neutral or free, or transparent or under rule of law with these
operators. The poor, those stuck in Katrina’s aftermath in New
Orleans, the blacks segregated by white emigration out of Detroit, the
40 million without medical coverage, all know the lie about trickle
down economics and the supposed uplifting effects of neutral market
forces.
The trickle down effect is negated by the sucking sound of the
wealthy absorbing the profits from the huge consumer appetites created
in the American public, and from the huge government demands for more
money to pursue its military efforts around the world, and from laws
and taxes that are written by the wealthy, for the wealthy.
This
wonderful financial powerhouse unfortunately relies now more than ever
before on the creation of debt to supply the wealth and keep the
economy ‘growing’. It is a financial institute built with the strength
of a house of cards, susceptible to any stray currents within the
financial markets of the world, or susceptible to some other marketers
destabilizing it all with a few puffs of air, a whisper or rumour of
‘selling’ American owned debt, causing the cards to tumble and scatter
uncontrollably. Globalization has come home to roost (pardon the mixed
metaphor, but perhaps one can consider the ‘house of cards’ to be the
‘roost’, a very shaky, unsteady one).
“The economy, stupid.”
Bill
Clinton’s electoral campaign targeted economic factors as a crucial
point in deciding the outcome of his presidential campaign. The phrase
is still applicable and probably will be for a while in one manner or
another. But I also relate to it on a personal basis.
Economists
live in a wonderfully purified world of jargon that most outside the
economic literati, such as myself, have a great deal of trouble
understanding what they are truly saying. This study, the ‘science’ of
money and men has been called a “ a dreary, desolate and, indeed, quite
abject and distressing one; what we might call, by way of eminence, the
dismal science." [emphasis added]
Coined at a time when economics was
encountering emancipation, the relationship would end up giving “birth
to progenies and prodigies; dark extensive moon-calves, unnameable
abortions, wide-coiled monstrosities, such as the world has not seen
hitherto!”[1]
More applicable today it is a dismal science because in
all reality there is nothing scientific about it.
Economists do
use mathematics a lot, especially statistics, but there is no
scientific method of experimental deconstruction that relates to what
they do, which is mostly talk about the wonderful statistics they
create. Statistics, for those who have studied them without delving
into the details, can be used for both sides of many arguments,
according to the manner in which a phrase is turned around that
statistic and what supporting data are included or left out. Opinion
polls are example of statistics that are meaningless in the ‘real’
world as they are exactly that, an opinion, not reality, although the
opinions on diverse topics are often represented as great truths.
The
GDP is the most obvious statistical effort to hide what is happening in
the world, as most countries do have increases in their GDP when they
encounter the IMF, and the World Bank, as in Mexico where the statistic
does not reveal the increasing gap between rich and poor, the
impoverishment of the farmers as American subsidized corn destroys
their markets, and an economy that relies on the billions of dollars in
remittances from illegal immigrants to support those left at home. It
is all a wonderful economic fairy tale that allows the IMF and World
Bank to rationalize their own economic goodness and continue on with a
losing cause with no apparent remorse for the damages incurred along
the way.
Trying to understand what the economic problems of the
United States are took some time for me to get through the jargon, but
it reduces down to a few simple applications that any householder
running an intelligent monthly budget based on money in and money out
can understand.
The basis of the problem is that U.S. industrial
production has declined significantly over the past two decades, while
the service sector has grown immensely to become the “new dominant
economic sector. Debt was a critical enabler.”[2] In other words,
economic ‘wealth’ and ‘growth’ in America has been created by the
manipulations of a huge debt; wealth and growth are flimsy statistical
apparitions that could vanish quickly if someone shouted “boo” at the
appropriate time. The economy is financed by debt, and “this debt and
credit revolution constitutes the third major peril hanging over the
future of the United States” (the other two being the military/oil
connection and the rise of the Republican theocracy).[3]
The U.S.
economy has always been based on consumption as previous historical
events have attested to, leading to the first level of debt, that of
the consumers. Americans have kept their economy rolling as “consumer
spending accounted for more than two-thirds of the $11 trillion
national economy” with “many consumers unable to resist the
overpowering mantra: spend, spend, spend…” that comes “pouring out of
Madison Avenue’s American dream machine.” [4]
As an aside, but a
significant one, it should be noted that war is also a major
‘consumptive’ enterprise, consuming large amounts of raw materials and
human resources for production, consuming lives and their future
contributions to a whole society on a large scale, and consuming the
environment through chemical weapons and land-mines/cluster bombs left
behind to consume even more after the war is ‘over’. Direct military
expenditures are 4 per cent of the GDP,[5] but an accounting of all
other ‘militarized’ damages as above and other militarized budgets (war
in Iraq/Afghanistan, the CIA, anything related to ‘homeland terror’,
aid to Israel and other countries) would raise this proportion
significantly.
Consumption truly is an American way of life and
death. The cost of war in Iraq alone - and not including costs to Iraq
per se, but costs incurred by America - is conservatively estimated at
1.2 trillion dollars[6] – a figure largely and truly unimaginable – it
is simply a grotesquely big number that defies comprehension of its
consequences.
But to continue with the ‘average’ American, any
individual catastrophe, with the average American having a negative
saving rate, can tip any particular individual into poverty: a work
disability, or a medical emergency can quickly destroy a family. On a
broader scale, if interest rates are allowed to increase too much, and
the over-extended mortgages and huge credit card debts become too much
to manage, and with the no-escape bankruptcy laws now in effect, broad
swaths of the middle and working class could quickly become
impoverished.
Americans have used the increased value of their
homes, artificially inflated to keep the economy rolling, withdrawing
over $600 billion to pay off credit card debt and for personal
spending.[7] As the housing market flattens out, with the bubble burst
now well under way, and as wages continue to stay flat, the economic
house of cards becomes less and less stable. It is not just the
consumer at fault as corporate America has financed itself as well
largely through debt.
The highly volatile money markets, stock
markets, and corporate financings, the deregulation that has allowed
all kinds of new and complex financial structures to develop is a
second major factor in the frailty of the U.S. economy. Trillions of
dollars have been placed into “such opaque standards as credit
derivatives, credit derivative futures, and collateralized debt
obligations.”[8]
Those are terms that I have yet been able to
understand clearly, along with others, “even more opaque, such as split
capital trusts, collateralized debt obligations, and market credit
default swaps.”[9]
These wonderful new enterprises in the jargon of
economics – with some degree of intention – keep it a mystery except to
a few acolytes who profess to actually understand it, although along
the way I have come across those much more immersed in economics than
myself, who were intelligent enough to admit they could not truly
fathom what the terms meant either.
At any rate, they appear to be
high-risk management items of various kinds for buying and selling
other peoples debt – to the amount of “a whopping $17.3 trillion,
enough to sink the entire economy if the market takes a nosedive.”
[10]
These debt structures of course are all inter-twined, with
personal debt beholden to the corporations, and the corporation
beholden to each other and various governments, the whole structure
riding along comfortably so long as no ill wind blows.
- “Banks simply
do not understand the chain of exposure and who owns what. Senior
financial regulators and bankers now admit as much.”[11]
An aspect
of debt that is readily understood is the national debt – at least
readily understood for its definition, but again using numbers with
place values well beyond the visualizing ken of most everyone,
including, I would argue, most economists who bandy the amount around
with great pride in their use of truly large but objectively
meaningless large numbers.
The understood part is that the nation owes
a ton of money to other nations from whom they have borrowed money to
finance their ongoing consumption, and the other nations so far are
willing to carry the debt. However, if they decide they no longer want
to carry that debt, if they stop purchasing the bonds and debentures
(the latter being unsecured bonds relying on the goodwill of the
government to repay them, if no way else other than to print more
money, or raise more taxes, and it is obvious what the American
government prefers), then the value and goodwill of the dollar will
collapse.
The majority of this debt is owned by international
central banks in China, Japan, Taiwan and South Korea who have their
own motives for “purchasing short-term Treasuries [bonds and
debentures] with negative real returns, their obvious motivation was to
keep lucrative export markets open.”[12]
In common terms, they are
trading off investment losses in order to sustain their profit making
exports to the over-consuming Americans, who no longer manufacture many
of the products they want to buy.
There is a fourth aspect to
debt, that of the current account deficit, simply defined as “money
transactions with the rest of the world.”[13] It is “the broadest
measurement of how much more Americans buy…than they sell.”[14] The
current account problem is tied in with the national debt.
The
amount borrowed is staggering, as “the US has to borrow from foreign
lenders (mostly Japan and China) $900 billion annually or nearly $2.5
billion every single day to finance the gap between payments and
receipts from the rest of the world”[15] My simplest definition,
economics for dummies, arrives at this: Americans buy more than they
sell in a year (current account); year over year, Americans have to
borrow money to continue that buying spree (national debt).
All
these debts added up are more than staggering, and they defy all the
precepts about fiscal prudence that has ever been preached to the
average working layperson, yet it is okay for the government to
encourage this debt policy. Taken all in total, "All Uncle Sam's debt,
including private household consumer credit-card, mortgage etc debt of
about $10 trillion, plus corporate and financial, with options,
derivatives and the like, and state and local government debt comes to
an unvisualizable, indeed unimaginable, $37 trillion, which is nearly
four times Uncle Sam's GDP [gross domestic product – emphasis
added]"[16]
Perhaps it is just all numbers and the economy can
once again go percolating along as the economists juggle their
statistics and print more money and everyone believes that the
financial house is stronger than a house of cards.
In my daily
transactions, the run of the mill ordinary life I lead, which in itself
is a blessing compared to the majority of the rest of the world upon
whose labour this wealth has been built, these thoughts rest unquietly
not so far in the back of my mind anymore. War and nuclear devastation
are one thing, economic collapse, while not as disastrous for the
environment and the third world (I imagine Cuba and Venezuela might
actually weather the financial storm, being financially isolated as
they are anyway – how ironic) would certainly affect my life and those
of millions of other working people.
The poor would not see much
change; they have next to nothing anyway. The truly wealthy might not
be quite so wealthy, but they always seem to hang onto their ill-gotten
gains, or conversely, perhaps go on a buying spree of now cheap
enterprises within which they could employ dirt-cheap labour.
It is
the hundreds of millions in the middle who would be affected most. The
end result might just be the military application of nuclear weapons on
a chosen target, as the wounded economic beast strikes out at its media
created imaginary foes, blaming the rest of the world for their own
stupid culpability.
That, of course, is paranoid conjecture. Only
time will tell, but in the meantime, hopefully some solutions, some
soft landings, will avail themselves in order that the economic puzzle
of huge debts – the house of cards - resolves itself rather than
collapsing into its empty basement.
The American empire is based on
this house of cards, the borrowing of huge sums of money to keep the
consumptive engines burning up as many commodities as can be created.
The disasters of the IMF and the World Bank and the many free trade
negotiations and agreements, instruments of the empire along with the
military that I have previously examined, have negatively affected
hundreds of millions of people globally.
Something as apparently
simple as a change from American petrodollars to the Euro petrodollar
(one of the reasons, not stated, that the U.S. invaded Iraq, with one
of its first actions being to restore Iraqi oil to the dollar base from
the euro) or the hint to the central banks that China is disposing of
its American reserves, or a drastic increase and sustaining of oil
prices resulting in high inflation, could pull a keystone card out of
the imperial arch. Ironically it was a homebuilt housing mortgage
market that seems to have triggered the stock market collapse.
If
it were simply a housing market collapse, with the rest of the economy
still relatively strong, it might be a short-term milder recession.
The efforts of the administration to help the situation do nothing but
aggravate it. The 145 billion being returned to the taxpayer has to be
borrowed from foreign sources, simply adding to that debt. The
spending that the Americans will do with their magnificent $800 rebate
is also money that is being spent on foreign goods.
Consider that
“According to reports, 70% of the goods on Wal-Mart shelves are made in
China.” In reference to the number of manufactured goods being
produced in the U.S. it is also important to note, ”In 2007, prior to
the onset of the 2008 recession, 217,000 manufacturing jobs were lost.
The US now has fewer manufacturing jobs than it had in 1950 when the
population was half the current size.” [17]
In an economy
defined as “military keynesianism”, Chalmers Johnson writes of the
necessity of “liquidating the global empire” and bringing the defence
budget into line with actual need, much less than the 55 per cent of
global military expenditures that it now spends. Otherwise: “If we do
these things we have a chance of squeaking by. If we don't, we face
probable national insolvency and a long depression.” [18]
With
the enormous debt at all levels, intertwined throughout various
corporations and governments, with a senseless war for strategic oil
control costing billions of dollars daily and creating overwhelming
negative response to the American way, the world could be in for a long
haul where major restructuring of the global markets might take decades
to work out. Pessimistic? For sure, but the market collapse has been
foreseen as a possible/probable event by alternate media for some time,
while all the local financial advisors still run the tired and true
mantra of “holding on” and “riding it out”.
Be prepared for a long
ride.
Jim
Miles is a Canadian educator and a regular contributor/columnist of
opinion pieces and book reviews for The Palestine Chronicle. His
interest in this topic stems originally from an environmental
perspective, which encompasses the militarization and economic
subjugation of the global community and its commodification by
corporate governance and by the American government. Miles’ work is
also presented globally through other alternative websites and news
publications.
Notes
[1] Levy, David M. and Peart, Sandra J. “The Secret
History of the Dismal Science: Economics, Religion and Race in the 19th
Century.” The Library of Economics and Liberty.
http://www.econlib.org/LIBRARY/Columns/LevyPeartdismal.html
[2]
Phillips, Kevin. American Theocracy – The Peril and Politics of Radical
Religion, Oil, and Borrowed Money in the 21st Century. Viking,
Penguin, N.Y. 2006. p. 266.
[3] Ibid, p. 268.
[4]
Ibid, p. 294, p. 271. Debt represents 70% of U.S. GDP as per Mike
Whitney, “Preparing for the Economic Typhoon. Counterpunch. April 25,
2006. http://www.counterpunch.org/whitney04252006.html
[5] ( est. 2005).
[6]
Bilmes, Linda and Stiglitz, Joseph. “T he Economic Costs of the Iraq
War: An Appraisal Three Years After The Beginning of the Conflict.”
[7] Whitney, ibid.
[8] Whitney, Mike. “Days of Reckoning”. Counterpunch. September 9/10, 2006. http://www.counterpunch.org/whitney09092006.html
[9]
Kolko, Gabriel. “Why a Global Economic Deluge Looms,” Counterpunch.
June 15, 2006. http://www.counterpunch.org/kolko06152006.html
[10] Whitney, ibid.
[11] Kolko, ibid.
[12] Phillips, ibid, p. 336.
[13]
Heakal, Reem. “Understanding The Current Account In The Balance Of
Payments.” June 18, 2003. |
http://www.investopedia.com/articles/03/061803.asp
[14] Phillips, ibid, p. 334.
[15]
Corpus, Victor N. “America’s Acupuncture Points Part 1: Striking the
US where it hurts,” Asia Times. October 19, 2006.
http://www.atimes.com/atimes/China/HJ19Ad01.html
[16] Andre
Gunder Frank, cited in Auerback, Marshall. “Giant in decline,” Asia
Times. January 25, 2005.
www.atimes.com/atimes/Global_Economy/GA25Dj01.html
[17]
Roberts, Paul Craig. “Farewell to Old Economic Nostrums - Neither
Supply-Side Theory Nor Keynesian Remedies Can Save Us Now.”
Counterpunch. January 22, 2008.
http://www.counterpunch.org/roberts01222008.html
[18] Johnson,
Chalmers. “Going bankrupt: The US's greatest threat,” Asia Times.
January 23, 2008.
http://www.atimes.com/atimes/Middle_East/JA24Ak04.html
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