Centrifugal Forces

Centrifugal Forces

In a report issued Wednesday, the (IMF) emphasized that flatter tax rates across income scales and lower rates for the highest earners could exacerbate a troubling trend toward growing inequality in the United States and around the world.

-       I.M.F. Cautions Against Tax Cuts for Wealthy… NY Times

During the campaign, Trump said that Republican rivals who attended secretive donor summits sponsored by the Kochs were “puppets.”

-       The Danger of President Pence… The New Yorker

By J.M. Hamilton (10-15-2017)

What do the following countries - or regions or states w/in states - have in common: The U.K., Scotland, Basque Country, Catalonia, Spain, Brazil, Canada, Quebec, Italy, Venice, Wallonia, Belgium, Kurdistan, and Iraq?

Answer:  These are just some of the countries - or regions/states within states - either facing breakaway movements or seeking to secede from their existing governmental arrangement.  

Not only are countries, states, or regions around the globe seeking to secede from their existing political arrangement, and establish their own governments, but there also has been a noticeable rejection of establishment (center right and left) political parties in many additional countries:  Austria, the Czech Republic, France, Germany, Poland, and the United States, just to name several.  More frightening still, parts of Europe - and even in the U.S. - have seen fascist/nationalist movements on the rise.

What is driving this political upheaval or centrifugal force away from the center?  The answer is both economic - as in globalization - and governmental.

Let's start with economics or globalization first.  Globalization or free trade was sold to many citizens throughout the West as an economic panacea.  Globalization - by allowing each country to specialize in the products & services it produced best - was supposed to bring political stability, a rising global middle class, and inexpensively produced goods and services.  Unfortunately, but for inexpensive goods & services, very little of globalizations promises have come to pass.

As for political stability, globalization has created political instability, see the aforementioned countries facing political revolt and secessionist movements.

As for a rising middle class, the middle class has nearly been obliterated in the West, and ask any day laborer in China, Mexico, or Indochina if they feel that they have achieved middle class success?  I can assure my readers many have not achieved middle class success, by any standard we would recognize w/in the West.  Instead globalization has created a global billionaire class that have exploited free trade agreements for their own ends. Namely, the billionaire class engages in currency, labor, regulatory, and tax arbitrage... which contributes greatly to ever growing wage & wealth inequality and wage stagnation for the 99%.  

This, in turn, has created a global race to the bottom among nation states, a reduction in tax revenue from corporations & multinationals in many countries, countries deeply mired in debt…  followed by austerity and a growing reduction in governmental services for the 99%.

Yes, “free trade” products & services are often cheaper, fueled by globalization, AI, automation, and slave labor from EM (such as Asia, India, and Mexico).  But for a dying middle class w/in the West, inexpensive goods and services are of no value, if the price paid is lost jobs and wages.

Catalan independence referendum  --- CreditEmilio Morenatti/Associated Press

Which brings us to Western governments and democracy, and its role in the rebellion and secessionist aims around the globe.  Many so-called democracies are democracies in name only.  The billionaire class - thanks to the outsized role money plays in the political process - confirms, nominates, pays for, and provides the talking points for many establishment politicians.  So that on matters concerning business interests, there is often very limited difference between center right and center left political parties. These elites have failed the middle class and the poor, and operate government almost exclusively for the oligarchy. 

That is to say, power corrupts and absolute power corrupts absolutely.  The secessionists clearly want their government local and accountable.

Hence, a powder keg of rebellion around the world. There is little doubt culture and race - at times - plays a role in some nationalist movements.  But ask yourself, if there was truly a thriving middle class around the globe would "democratic government," globalization, and neoliberalism be faced with the current threat list?  Ask yourself again, would fascist and nationalist movements rise, if the U.S. policy of endless war in the Middle East (and the West's policies that support climate change & fossil fuels) didn't send millions of refugees and migrants into Europe?

The elite and the oligarchy’s immediate reaction to the growing rebellion is to lash out, insist their ways are best, and use police state tactics to control and contain the rebellion.  

But these strong-arm tactics are bound to fail.  Police state tactics didn’t stop the former Soviet Union, and its satellites, from failing and surrendering to centrifugal forces, and they certainly won’t contain a growing number of independence movements.

Only real reforms will turn these centrifugal – economic & political - forces around.  Reforms that recognize both the economy and government must work for all, not just an elite cadre of insiders, are clearly needed.

Copyright JM Hamilton Publishing 2017

Wage & Price Controls

Wage & Price Controls

If you can’t treat someone with dignity and respect, get out.

-      Lt. General Jay Silveria – U.S. Air Force Academy

This year the shortfall of inflation from 2 per cent, when none of those factors is operative, is more of a mystery.  I will not say that the committee clearly understands what the causes of that are.

-      Chairwoman Janet Yellen – Federal Reserve

By J.M. Hamilton  (9-30-2017)

Ten thousand salutes to Lt. General Jay Silveria, who reminded the Air Force Academy - and a great many Americans - that racism is unacceptable in American society. If you haven’t had an opportunity to watch the General’s speech, please watch it here.

Many Americans – quite a few w/in Trump’s base – have confused flag waving NFL games, and peaceful player protest over the abhorrent treatment of minorities in America with a lack of patriotism.  A few Americans – especially establishment Republicans – have confused unlimited war, and a lack of support for endless war by a great many Americans, as being disloyal to U.S. troops.

General Silveria certainly disabused all Americans of the former belief on Thursday.  When faced w/ racism at the Air Force Academy’s preparatory school, he wanted to send an entirely different message.  The message was simple: if you’re racist or a misogynist, or can’t show respect for others, “get out.”

JMH has always believed that two to three years of compulsory military service (like that which exists in Israel) would do this nation a great deal of good.  Not only would it unite all Americans with a common experience and bond, but it would also make Americans more aware of U.S. foreign policy, our global empire, endless war, and the cost of our empire.  Moreover, compulsory service would help instill a sense of sacrifice and perhaps unity.

The U.S. military’s early training – like high-grade psychedelics – has a unique way of atomizing the ego, crushing the lizard id, and making recruits realize they are apart of something far greater than themselves.  Talk about being born again... this is the place.

Or so I have read.

Wouldn’t it be wonderful if General Silveria could share his message with the Republican led House of Representatives, and many of the GOP held state legislatures?  Better still, wouldn’t it be great to see General Silveria in the U.S. Senate or White House some day?  

The nation just might be well served in seeing such events come to fruition.

 Lt. Gen. Jay Silveria, superintendent of the U.S. Air Force Academy

If this blog has been good at nothing else, JMH would like to think this experiment has been good at exposing the hypocrisy of many of the elites within our society, and upon the world stage.

Common stories and themes, pointed out on this site over the years, are:

How capitalism is good and socialism is bad, until it comes time to bailout the Wall Street banking cartel w/ trillions and trillions of dollars.

How no business in America could possibly think a revenue loss would be good.  And yet, Republicans like to trot out a tired trickle down tax policy to this very day, where – magically – cuts in taxes for the rich will create government budget surpluses (thirty-seven years of evidence to the contrary notwithstanding).

And the manner in which private equity - which strips businesses of labor, front loads profits for an elite few, and loads companies up with a debt chokehold – is the antithesis of capitalism (not capitalism defined, as the Robber Barons would have us believe).  Moreover, the private equity business model kills jobs, opportunity, innovation, the tax base, businesses, leads to consolidation & monopoly, and curtails investment options. 

Meanwhile, the Congress and POTUS do nothing.

Today, we touch on wage and price controls.  For free market & capitalism enthusiasts, nothing could be more abhorrent or sketchy than government intervening into the market place to set price.  President Nixon was the last politician to attempt wage and price controls on a grand scale, and it did not end well.  But magically and mysteriously, when major corporations intervene into the market place – collusively, and as an entire industry – to contain labor’s wages so as to maximize management’s, ownership’s, and stockholder’s profits…. It’s all good.

Consider the following:

During the Obama years, the Justice Department busted the elite of Silicon Valley for colluding not to compete for labor.  Hence suppressing wages.  How many more industries are engaged in these nefarious practices?  We don’t know.  The investigations conveniently ceased.

Noncompete clauses are pervasive throughout the economy, so that people attempting to apply their skills at a different company willing to pay a higher wage, are effectively kidnapped.  Capitalism is good when your employer is engaged in it, but workers shouldn’t dream of making employers compete for their labor.

And the NY Times did an outstanding piece this week on how fast food franchises – who sponge off the government by failing to pay a living wage – are allegedly, contractually, colluding not to hire employees from one another.  This matter is now before the courts.

There’s that hypocrisy again, and yes, the system is rigged, Big Time.  If the government attempts to hold wages in check, say to contain inflation, it’s bad.  But if the private sector shafts employees to maximize returns, and keep the Fed’s easy money spigot wide open… It’s all good.

In a piece written earlier this year, JMH pointed out how – despite massive bailouts and exorbitant Fed largesse showered upon the Wall Street banking cartel, post-crash – mysteriously, the Fed or none of the Goldman alums w/in government, saw fit to tie caveats & conditions on the use of bailout money by the major banks.  Such caveats & conditions might have kick-started the economy, helped distressed homeowners, and reined in derivatives and the collateralization of debt.  Who knows, TBTF institutions might have been required to spinoff as a condition to the bailout.

(It should come as no surprise then that POTUS Obama – with the Democratic Party a smoking wreck - is on his world vindication tour, and collecting checks of up to $400,000, perhaps higher, from Wall Street for speaking engagements.)

Meanwhile, through interest rate suppression and quantitative easing, the Federal Reserve has kept the cash spigot turned way up, so that the stock market has climbed to record heights; debt yields no longer come close to correctly valuing the risks involved; and many corporations & governments around the globe remain leveraged to the hilt (their bankrupt balance sheets covered up w/ central bank easy money policies).  Retirees, pension funds, savers, fixed income investors … out of luck.

The Fed likes to say its mandate is price stability and maximum employment; and the Fed was hoping see inflation hit two percent before ending QE and raising interest rates.  Per Ms. Yellen, the lack of inflation is a complete “mystery.”

And yet, once we get past the structural impact of globalization, AI, automation, and the failure of a cartels and monopolies to create enough jobs w/in the neoliberal economy… we are left with the fact that major corporations & multinationals have set up wage controls throughout broad swaths of the U.S. economy, so as to maximize management and shareholder returns.

There’s your inflation, Ms. Yellen, or the lack thereof. 

Neatly controlled by the Oligarchy.  To recap, suppressing U.S. wages serves two purposes: one, it cuts down on a large source of expense, enhancing income statements; and two, knowing that the Fed’s easy money policies are tied to inflation, corporate wage controls effectively insure that central bank easy money policies continue unabated.

(Low inflation aside, Ms. Yellen appears to see though the smoke, and will begin to end QE in October of this year.)

Where else in history have we seen labor oppression on this scale? 

Oh yes, post- Civil War, there were sharecroppers.  There were company towns and company stores, in the 19^th and 20^th centuries.  And there has been indentured servitude and slavery around the globe, since before Biblical times and up to the present day.

Through its hyper-accommodative policies, the Fed, itself, has intervened into the market place and set the price of the greatest commodity of all w/in the financial economy, the price of money.  Yet another, double standard: capitalism and rugged individualism for the people, and social welfare for the Oligarchy, courtesy of central banks.

The Federal Reserve and central bank policies have had a hand in creating a great many distortions throughout the financial markets, w/in the global economy, and have created a Neo-Gilded Age.

The ramifications of this Neo-Gilded Age are being felt in elections throughout the West, and via global political instability.

Just ask our Teutonic friends from across the pond.

Copyright JM Hamilton Publishing 2017